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

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8-K - FORM 8-K - Allied World Assurance Co Holdings, AG	y84357e8vk.htm
EX-99.3 - EX-99.3 - Allied World Assurance Co Holdings, AG	y84357exv99w3.htm
EX-99.1 - EX-99.1 - Allied World Assurance Co Holdings, AG	y84357exv99w1.htm

Exhibit 99.2

INVESTOR FINANCIAL SUPPLEMENT

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
1^st Quarter Ended March 31, 2010


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; 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 Premium Distribution Analysis by Segment and Geographic Location — Current Quarter		7
	- Consolidated Premium Distribution Analysis by Line of Business — Current Quarter		8

III.	Segment Results
	- Consolidated Segment Results — Current Quarter		9
	- Consolidated Segment Results — Prior Year Quarter		10

IV.	Balance Sheet Details
	- Condensed Consolidated Balance Sheets		11
	- Consolidated Investment Portfolio		12
	- Consolidated Investment Portfolio — Additional Detail		13
	- Reserves for Losses and Loss Expenses		15
	- Capital Structure and Leverage Ratios		16

V.	Other
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Consecutive Quarters		17
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Consecutive Quarters		18
	- Diluted Book Value per Share		19
	- Annualized Investment Book Yield		20
	- Regulation G		22

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 22 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS


		THREE MONTHS ENDED						Previous
		MARCH 31,						Quarter
		2010			2009			Change
HIGHLIGHTS	Gross premiums written	$	504,163		$	479,597			5.1	%
	Net premiums written		433,292			405,038			7.0	%
	Net premiums earned		338,324			323,972			4.4	%
	Net investment income		68,902			77,854			(11.5	%)
	Net income		133,740			131,408			1.8	%
	Operating income		61,323			137,604			(55.4	%)
	Total investments and cash & cash equivalents		7,855,437			6,710,099			17.1	%
	Total assets		10,012,727			8,892,255			12.6	%
	Total shareholders’ equity		3,338,807			2,491,860			34.0	%
	Cash flows from operating activities		85,300			143,519			(40.6	%)

PER SHARE AND SHARE DATA	Basic earnings per share
	Net income	$	2.67		$	2.67			0.0	%
	Operating income	$	1.23		$	2.79			(55.9	%)
	Diluted earnings per share
	Net income	$	2.52		$	2.57			(1.9	%)
	Operating income	$	1.16		$	2.69			(56.9	%)
	Weighted average common shares outstanding
	Basic		50,023,816			49,248,118
	Diluted		53,115,756			51,120,049
	Book value per share	$	66.17		$	50.32			31.5	%
	Diluted book value per share	$	61.59		$	47.40			29.9	%

FINANCIAL RATIOS	Annualized return on average equity (ROAE), net income		17.1	%		22.1	%		(5.0	)pts
	Annualized ROAE, operating income		7.8	%		23.2	%		(15.4	)pts
	Annualized investment book yield		3.7	%		4.6	%		(0.9	)pts

	Loss and loss expense ratio		68.6	%		45.8	%		22.8	pts
	Acquisition cost ratio		12.1	%		11.5	%		0.6	pts
	General and administrative expense ratio		18.8	%		17.7	%		1.1	pts

	Expense ratio		30.9	%		29.2	%		1.7	pts

	Combined ratio		99.5	%		75.0	%		24.5	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
	MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009
Revenues
Gross premiums written	$	504,163		$	322,129		$	401,837		$	492,782		$	479,597
Net premiums written	$	433,292	*	$	233,694		$	320,956		$	361,438		$	405,038

Net premiums earned	$	338,324	*	$	330,481		$	328,771		$	333,668		$	323,972
Net investment income		68,902			73,252			73,032			76,537			77,854
Net realized investment gains		77,487			37,796			46,861			5,093			36,602
Net impairment charges recognized in earnings		(168	)		(187	)		(1,953	)		(5,474	)		(41,963	)
Other income		297			373			298			369			466

Total revenues	$	484,842		$	441,715		$	447,009		$	410,193		$	396,931

Expenses
Net losses and loss expenses:
Current year	$	297,246		$	219,065		$	209,971		$	214,334		$	208,683

Prior years		(65,092	)**		(77,662	)		(73,530	)		(36,615	)		(60,186	)

Total net losses and loss expenses		232,154		$	141,403		$	136,441		$	177,719		$	148,497
Acquisition costs		40,784			38,126			36,630			36,963			37,129
General and administrative expenses		63,463			72,212			57,521			61,495			57,365
Amortization and impairment of intangible assets		892			7,856			1,065			1,065			1,065
Interest expense		9,528			9,527			9,523			9,522			10,447
Foreign exchange loss (gain)		1,076			1,408			(273	)		(1,222	)		835

Total expenses	$	347,897		$	270,532		$	240,907		$	285,542		$	255,338


Income before income taxes	$	136,945		$	171,183		$	206,102		$	124,651		$	141,593
Income tax expense		3,205			9,928			5,548			10,981			10,185

Net income	$	133,740		$	161,255		$	200,554		$	113,670		$	131,408


GAAP Ratios
Loss and loss expense ratio		68.6	%		42.8	%		41.5	%		53.3	%		45.8	%
Acquisition cost ratio		12.1	%		11.5	%		11.1	%		11.1	%		11.5	%
General and administrative expense ratio		18.8	%		21.9	%		17.5	%		18.4	%		17.7	%

Expense ratio		30.9	%		33.4	%		28.6	%		29.5	%		29.2	%

Combined ratio		99.5	%		76.2	%		70.1	%		82.8	%		75.0	%


Per Share Data
Basic earnings per share
Net income	$	2.67		$	3.25		$	4.05		$	2.30		$	2.67
Operating income	$	1.23		$	2.66		$	3.13		$	2.28		$	2.79
Diluted earnings per share
Net income	$	2.52		$	3.05		$	3.83		$	2.22		$	2.57
Operating income	$	1.16		$	2.49		$	2.97		$	2.20		$	2.69


*		Includes the impact of a commutation, which increased net premiums written and net premiums earned each by $9.3 million.

**		Includes the impact of a commutation, which increased prior years’ net losses and loss expenses by $8.9 million.

Page 6

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


THREE MONTHS ENDED MARCH 31, 2010		THREE MONTHS ENDED MARCH 31, 2009
Gross Premiums Written = $504,163		Gross Premiums Written = $479,597

Page 7

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


THREE MONTHS ENDED MARCH 31, 2010		THREE MONTHS ENDED MARCH 31, 2009
Gross Premiums Written = $504,163		Gross Premiums Written = $479,597


*		Includes gross premiums written in our energy line of business.

Page 8

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2010


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	162,085		$	121,422		$	220,656		$	504,163
Net premiums written	$	131,555	*	$	81,081		$	220,656		$	433,292	*

Net premiums earned	$	129,205	*	$	87,043		$	122,076		$	338,324	*
Other income	$	297		$	—		$	—		$	297

Total revenues	$	129,502		$	87,043		$	122,076		$	338,621


Expenses
Net losses and loss expenses:
Current year	$	93,252		$	115,064		$	88,930		$	297,246
Prior years		5,173	**		(57,615	)		(12,650	)		(65,092	)**

Total net losses and loss expenses	$	98,425		$	57,449		$	76,280		$	232,154
Acquisition costs		16,960			66			23,758			40,784
General and administrative expenses		27,114			21,845			14,504			63,463

Total expenses	$	142,499		$	79,360		$	114,542		$	336,401


Underwriting (loss) income	$	(12,997	)	$	7,683		$	7,534		$	2,220

Net investment income											68,902
Net realized investment gains											77,487
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(892	)
Interest expense											(9,528	)
Foreign exchange loss											(1,076	)


Income before income taxes										$	136,945


GAAP Ratios
Loss and loss expense ratio		76.2	%		66.0	%		62.5	%		68.6	%
Acquisition cost ratio		13.1	%		0.1	%		19.5	%		12.1	%
General and administrative expense ratio		21.0	%		25.1	%		11.9	%		18.8	%

Expense ratio		34.1	%		25.2	%		31.4	%		30.9	%

Combined ratio		110.3	%		91.2	%		93.9	%		99.5	%


*		Includes the impact of a commutation, which increased net premiums written and net premiums earned each by $9.3 million.

**		Includes the impact of a commutation, which increased prior years’ net losses and loss expense by $8.9 million.

Page 9

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


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	153,369		$	125,919		$	200,309		$	479,597
Net premiums written	$	115,844		$	88,957		$	200,237		$	405,038

Net premiums earned	$	105,267		$	111,194		$	107,511		$	323,972
Other income	$	466		$	—		$	—		$	466

Total revenues	$	105,733		$	111,194		$	107,511		$	324,438


Expenses
Net losses and loss expenses:
Current year	$	61,688		$	79,818		$	67,177		$	208,683
Prior years		(7,511	)		(40,625	)		(12,050	)		(60,186	)

Total net losses and loss expenses	$	54,177		$	39,193		$	55,127		$	148,497
Acquisition costs		14,411			1,060			21,658			37,129
General and administrative expenses		27,399			18,819			11,147			57,365

Total expenses	$	95,987		$	59,072		$	87,932		$	242,991


Underwriting income	$	9,746		$	52,122		$	19,579		$	81,447

Net investment income											77,854
Net realized investment gains											36,602
Net impairment charges recognized in earnings											(41,963	)
Amortization and impairment of intangible assets											(1,065	)
Interest expense											(10,447	)
Foreign exchange loss											(835	)


Income before income taxes										$	141,593


GAAP Ratios
Loss and loss expense ratio		51.5	%		35.2	%		51.3	%		45.8	%
Acquisition cost ratio		13.7	%		1.0	%		20.1	%		11.5	%
General and administrative expense ratio		26.0	%		16.9	%		10.4	%		17.7	%

Expense ratio		39.7	%		17.9	%		30.5	%		29.2	%

Combined ratio		91.2	%		53.1	%		81.8	%		75.0	%

Page 10

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONDENSED CONSOLIDATED BALANCE SHEETS


	MARCH 31, 2010		DECEMBER 31, 2009
ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2010: $3,069,009; 2009: $4,260,844)	$	3,227,889	$	4,427,072
Fixed maturity investments trading, at fair value		3,868,044		2,544,322
Other invested assets trading, at fair value		261,930		184,869

Total investments		7,357,863		7,156,263
Cash and cash equivalents		497,574		379,751
Insurance balances receivable		493,775		395,621
Prepaid reinsurance		170,948		186,610
Reinsurance recoverable		920,480		919,991
Accrued investment income		54,532		53,046
Net deferred acquisition costs		97,429		87,821
Goodwill		268,376		268,376
Intangible assets		59,467		60,359
Net balances on purchases and sales of investments		—		184
Net deferred tax assets		16,897		21,895
Other assets		75,386		67,566

TOTAL ASSETS	$	10,012,727	$	9,597,483


LIABILITIES
Reserve for losses and loss expenses	$	4,853,359	$	4,761,772
Unearned premiums		1,007,926		928,619
Reinsurance balances payable		82,541		102,837
Net balances payable on purchases and sales of investments		172,797
Dividends payable		10,092		—
Senior notes		498,951		498,919
Accounts payable and accrued liabilities		48,254		92,041

TOTAL LIABILITIES	$	6,673,920	$	6,384,188


SHAREHOLDERS’ EQUITY
Common shares, par value $0.03 per share: issued and outstanding 2010: 50,459,000 shares; 2009: 49,734,487 shares	$	1,514	$	1,492
Additional paid-in capital		1,369,341		1,359,934
Retained earnings		1,825,668		1,702,020
Accumulated other comprehensive income: net unrealized gains on investments, net of tax		142,284		149,849

TOTAL SHAREHOLDERS’ EQUITY	$	3,338,807	$	3,213,295

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,012,727	$	9,597,483


Book value per share	$	66.17	$	64.61
Diluted book value per share	$	61.59	$	59.56

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED TOTAL INVESTMENT PORTFOLIO


	MARCH 31, 2010					DECEMBER 31, 2009					SEPTEMBER 30, 2009					JUNE 30, 2009					MARCH 31, 2009
	FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET
	VALUE					VALUE					VALUE					VALUE					VALUE
MARKET VALUE
Fixed maturities available for sale	$	3,227,889		41.1	%	$	4,427,072		58.7	%	$	5,673,793		75.1	%	$	6,286,561		87.6	%	$	5,808,176		86.5	%
Fixed maturities trading		3,868,044		49.2	%		2,544,322		33.8	%		1,372,287		18.2	%		233,583		3.2	%		—		—
Other invested assets trading		261,930		3.4	%		184,869		2.5	%		162,125		2.1	%		132,694		1.8	%		139,199		2.1	%
Other invested assets available for sale		—		—			—		—			—		—			4		0.0	%		58,305		0.9	%
Cash and cash equivalents		497,574		6.3	%		379,751		5.0	%		345,954		4.6	%		534,742		7.4	%		704,419		10.5	%

Total	$	7,855,437		100.0	%	$	7,536,014		100.0	%	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%


ASSET ALLOCATION BY MARKET VALUE
U.S. government and agencies	$	2,065,913		26.3	%	$	1,378,565		18.3	%	$	1,364,043		18.1	%	$	1,514,542		21.1	%	$	1,474,343		22.0	%
Non-U.S. government securities		395,558		5.0	%		511,001		6.8	%		454,676		6.0	%		384,531		5.3	%		297,258		4.4	%
Corporate securities		2,337,172		29.8	%		2,584,585		34.3	%		2,410,484		31.9	%		2,129,275		29.6	%		1,643,561		24.5	%
State, municipalities and political subdivisions		231,694		2.9	%		243,218		3.2	%		323,916		4.3	%		343,382		4.8	%		374,504		5.6	%
Mortgage-backed securities		1,590,033		20.2	%		1,721,254		22.8	%		2,043,514		27.1	%		1,918,539		26.7	%		1,843,933		27.5	%
Asset-backed securities		475,563		6.1	%		532,771		7.1	%		449,447		5.9	%		229,875		3.2	%		174,577		2.5	%

Fixed income sub-total		7,095,933		90.3	%		6,971,394		92.5	%		7,046,080		93.3	%		6,520,144		90.7	%		5,808,176		86.5	%
Global high-yield bond fund		—		—			—		—			—		—			4		0.0	%		58,305		0.9	%
Hedge funds		242,135		3.1	%		184,725		2.5	%		161,840		2.1	%		132,560		1.8	%		120,708		1.8	%
Equity securities		19,795		0.3	%		144		0.0	%		285		0.0	%		134		0.0	%		18,491		0.3	%
Cash & cash equivalents		497,574		6.3	%		379,751		5.0	%		345,954		4.6	%		534,742		7.5	%		704,419		10.5	%

Total	$	7,855,437		100.0	%	$	7,536,014		100.0	%	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%


FIXED INCOME CREDIT QUALITY BY MARKET VALUE
U.S. government and agencies	$	2,065,913		29.1	%	$	1,378,565		19.8	%	$	1,364,043		19.4	%	$	1,514,542		23.2	%	$	1,474,343		25.4	%
AAA/Aaa		2,600,412		36.6	%		3,076,133		44.1	%		3,314,343		47.0	%		3,081,380		47.3	%		2,734,874		47.1	%
AA/Aa		635,938		9.0	%		684,291		9.8	%		571,871		8.1	%		465,556		7.1	%		444,081		7.6	%
A/A		1,265,421		17.8	%		1,347,557		19.3	%		1,323,415		18.8	%		1,159,173		17.8	%		882,140		15.2	%
BBB/Baa		296,284		4.2	%		318,253		4.6	%		324,007		4.6	%		283,552		4.4	%		265,541		4.6	%
BB		20,016		0.3	%		34,843		0.5	%		29,082		0.4	%		1,499		0.0	%		3,709		0.1	%
B/B		42,533		0.6	%		24,393		0.4	%		29,248		0.4	%		11,395		0.2	%		2,172		0.0	%
CCC+ and below		169,416		2.4	%		107,359		1.5	%		90,071		1.3	%		3,047		0.0	%		1,316		0.0	%

Total	$	7,095,933		100.0	%	$	6,971,394		100.0	%	$	7,046,080		100.0	%	$	6,520,144		100.0	%	$	5,808,176		100.0	%


STATISTICS
Annualized financial statement portfolio return*		7.3	%
Annualized book yield, year to date		3.7	%				4.2	%				4.3	%				4.4	%				4.6	%
Duration	3.5 years					3.0 years					3.2 years					3.0 years					2.8 years
Average credit quality (S&P)		AA					AA					AA					AA+					AA+


*	Calculated as the sum of annualized investment income, realized gains or losses and the change in unrealized gains or losses divided by average aggregate invested assets for the period.

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
MARCH 31, 2010



	FAIR MARKET		AVERAGE	PORTFOLIO
	VALUE		RATING	PERCENTAGE
Cash & cash equivalents	$	497,574	AAA		6.3	%
U.S. government securities		1,744,548	AAA		22.2	%
U.S. government agencies		321,365	AAA		4.1	%
Non-U.S. government securities		395,558	AAA		5.0	%
Mortgage-backed securities:
Agency MBS		925,157	AAA		11.8	%
Non-agency RMBS		231,593	AA		2.9	%
Non-agency RMBS — Non investment grade strategy		227,160	B-		2.9	%
CMBS		206,123	AAA		2.6	%
Total mortgage-backed securities		1,590,033			20.2	%
Corporate securities:
Financials		1,095,667	AA-		13.9	%
Industrials		1,009,698	A		12.9	%
Utilities		231,807	A-		3.0	%
Total corporate securities		2,337,172			29.8	%
Asset-backed securities
Credit cards		28,397	AAA		0.4	%
Auto receivables		137,275	AAA		1.7	%
Other		155,962	AAA		1.9	%
Collateralized loan obligations		153,929	AA		2.0	%
Total asset-backed securities		475,563			6.1	%
State, municipalities and political subdivisions		231,694	AA		2.9	%
Hedge Funds		242,135	N/A		3.1	%
Equities		19,795	N/A		0.3	%

Total Investment Portfolio	$	7,855,437			100.0	%


TOP 10 CORPORATE EXPOSURES
	FAIR MARKET		PORTFOLIO
	VALUE		PERCENTAGE
JP Morgan Chase & Co	$	77,709		1.0	%
Wells Fargo & Co		72,857		0.9	%
Morgan Stanley		59,627		0.8	%
Verizon Communications Inc		57,408		0.7	%
AT&T Inc		56,705		0.7	%
HSBC Holdings PLC		53,638		0.7	%
Enel SpA		43,793		0.6	%
Westpac Banking Corp		42,871		0.5	%
Microsoft Corp		41,014		0.5	%
Pfizer Inc		39,377		0.5	%

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
MARCH 31, 2010

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	$	—	$	—	$	—	$	—	$	—	$	6,678	$	50,710	$	14,040	$	8,187	$	79,615		30.8	%
2006		—		6,312		2,451		—		—		24,633		48,936		17,793		2,224		102,349		25.4	%
2005 and prior		14,575		—		327		—		—		7,938		13,172		9,184		—		45,196		27.7	%

Total*	$	14,575	$	6,312	$	2,778	$	—	$	—	$	39,249	$	112,818	$	41,017	$	10,411	$	227,160		27.8	%


*		Included in the above is fair value of $4.7 million of subprime mortgages with an average rating of B-.

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	$	435	$	—	$	—	$	—	$	14	$	—	$	—	$	—	$	—	$	449		3.0	%
2006		32,259		—		10,084		—		—		—		—		—		—		42,343		18.7	%
2005 and prior		146,238		3,229		1,081		14,624		18,679		2,115		2,461		374		—		188,801		10.4	%

Total*	$	178,932	$	3,229	$	11,165	$	14,624	$	18,693	$	2,115	$	2,461	$	374	$	—	$	231,593		12.0	%


*		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**
2010	$	10,873	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	10,873		100.0	%
2006		3,722		—		—		198		—		—		—		—		—		3,920		30.0	%
2005 and prior		191,330		—		—		—		—		—		—		—		—		191,330		21.4	%

Total	$	205,925	$	—	$	—	$	198	$	—	$	—	$	—	$	—	$	—	$	206,123		25.7	%


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

Page 14

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


				AT MARCH 31, 2010
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL
Case reserves (net of reinsurance recoverable)	$	212,144		$	361,430		$	313,212		$	886,786
IBNR (net of reinsurance recoverable)		759,799			1,414,509			871,785			3,046,093

Total	$	971,943		$	1,775,939		$	1,184,997		$	3,932,879
IBNR/Total reserves (net of reinsurance recoverable)		78.2	%		79.6	%		73.6	%		77.5	%


				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	%

Page 15

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


	MARCH 31,			DECEMBER 31,			SEPTEMBER 30,			JUNE 30,			MARCH 31,
	2010			2009			2009			2009			2009
Senior notes	$	498,951		$	498,919		$	498,888		$	498,857		$	498,826
Shareholders’ equity		3,338,807			3,213,295			3,078,894			2,741,427			2,491,860

Total capitalization	$	3,837,758		$	3,712,214		$	3,577,782		$	3,240,284		$	2,990,686


Leverage ratios
Debt to total capitalization		13.0	%		13.4	%		13.9	%		15.4	%		16.7	%

Closing shareholders’ equity	$	3,338,807		$	3,213,295		$	3,078,894		$	2,741,427		$	2,491,860
Add/deduct: accumulated other comprehensive income		(142,284	)		(149,849	)		(185,043	)		(48,669	)		(48,204	)

Adjusted shareholders’ equity	$	3,196,523		$	3,063,446		$	2,893,851		$	2,692,758		$	2,443,656

Net premiums written (trailing 12 months)	$	1,349,380		$	1,321,125		$	1,313,935		$	1,226,882		$	1,185,694
Net premiums written (trailing 12 months) to adjusted shareholders’ equity		0.42			0.43			0.45			0.46			0.49

Total investments and cash & cash equivalents	$	7,855,437		$	7,536,014		$	7,554,159		$	7,187,584		$	6,710,099
Total investments and cash & cash equivalents to adjusted shareholders’ equity		2.46			2.46			2.61			2.67			2.75

Reserve for losses and loss expenses	$	4,853,359		$	4,761,772		$	4,749,602		$	4,713,727		$	4,603,078
Deduct: reinsurance recoverable		(920,480	)		(919,991	)		(913,964	)		(909,716	)		(880,390	)

Net reserve for losses and loss expenses	$	3,932,879		$	3,841,781		$	3,835,638		$	3,804,011		$	3,722,688
Net reserve for losses and loss expenses to adjusted shareholders’ equity		1.23			1.25			1.33			1.41			1.52

Page 16

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
	MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009
Net income	$	133,740		$	161,255		$	200,554		$	113,670		$	131,408
Add:
Net realized investment gains		(73,602	)		(37,796	)		(46,861	)		(5,093	)		(36,602	)
Net impairment charges recognized in earnings		109			187			1,953			5,474			41,963
Impairment of intangible assets		—			6,866			—			—			—
Foreign exchange loss (gain)		1,076			1,408			(273	)		(1,222	)		835

Operating income	$	61,323		$	131,920		$	155,373		$	112,829		$	137,604


Weighted average common shares outstanding
Basic		50,023,816			49,662,575			49,574,266			49,523,459			49,248,118
Diluted		53,115,756			52,880,733			52,345,913			51,257,887			51,120,049

Basic per share data
Net income	$	2.67		$	3.25		$	4.05		$	2.30		$	2.67
Add:
Net realized investment gains		(1.47	)		(0.76	)		(0.95	)		(0.10	)		(0.74	)
Net impairment charges recognized in earnings		—			—			0.04			0.11			0.85
Impairment of intangible assets		—			0.14			—			—			—
Foreign exchange loss (gain)		0.03			0.03			(0.01	)		(0.03	)		0.01

Operating income	$	1.23		$	2.66		$	3.13		$	2.28		$	2.79


Diluted per share data
Net income	$	2.52		$	3.05		$	3.83		$	2.22		$	2.57
Add:
Net realized investment gains		(1.38	)		(0.72	)		(0.89	)		(0.10	)		(0.71	)
Net impairment charges recognized in earnings		—			—			0.04			0.11			0.82
Impairment of intangible assets		—			0.13			—			—			—
Foreign exchange loss (gain)		0.02			0.03			(0.01	)		(0.03	)		0.01

Operating income	$	1.16		$	2.49		$	2.97		$	2.20		$	2.69

Page 17

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
	MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009
Opening shareholders’ equity	$	3,213,295		$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862
Deduct: accumulated other comprehensive income		(149,849	)		(185,043	)		(48,669	)		(48,204	)		(105,632	)

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

Closing shareholders’ equity	$	3,338,807		$	3,213,295		$	3,078,894		$	2,741,427		$	2,491,860
Deduct: accumulated other comprehensive income		(142,284	)		(149,849	)		(185,043	)		(48,669	)		(48,204	)

Adjusted closing shareholders’ equity	$	3,196,523		$	3,063,446		$	2,893,851		$	2,692,758		$	2,443,656

Average shareholders’ equity	$	3,129,985		$	2,978,649		$	2,793,305		$	2,568,207		$	2,377,443

Net income available to shareholders	$	133,740		$	161,255		$	200,554		$	113,670		$	131,408
Annualized net income available to shareholders		534,960			645,020			802,216			454,680			525,632

Annualized return on average shareholders’ equity — net income available to shareholders		17.1	%		21.7	%		28.7	%		17.7	%		22.1	%


Operating income available to shareholders	$	61,323		$	131,920		$	155,373		$	112,829		$	137,604
Annualized operating income available to shareholders		245,292			527,680			621,492			451,316			550,416

Annualized return on average shareholders’ equity — operating income available to shareholders		7.8	%		17.7	%		22.2	%		17.6	%		23.2	%

Page 18

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


	MARCH 31,			DECEMBER 31,			MARCH 31,
	2010			2009			2009
Price per share at period end	$	44.85		$	46.07		$	38.03

Total shareholders’ equity	$	3,338,807		$	3,213,295		$	2,491,860

Basic common shares outstanding		50,459,000			49,734,487			49,522,766

Add: unvested restricted share units		801,540			915,432			954,292

Add: performance based equity awards		1,409,984			1,583,237			1,332,161

Add: dilutive options/warrants outstanding		6,702,546			6,805,157			6,268,818
Weighted average exercise price per share	$	34.53		$	34.44		$	33.42
Deduct: options bought back via treasury method		(5,159,746	)		(5,087,405	)		(5,509,056	)


Common shares and common share equivalents outstanding		54,213,324			53,950,908			52,568,981

Basic book value per common share	$	66.17		$	64.61		$	50.32
Diluted book value per common share	$	61.59		$	59.56		$	47.40

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	THREE MONTHS ENDED			THREE MONTHS ENDED
	MARCH 31, 2010			MARCH 31, 2009
Net investment income	$	68,902		$	77,854
Deduct: annual and non-recurring items		N/A			N/A

Net investment income, recurring	$	68,902		$	77,854

Annualized net investment income, recurring	$	275,608		$	311,416

Add: annual and non-recurring items		N/A			N/A

Normalized net investment income	$	275,608		$	311,416

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,792,563		$	5,872,031
Other invested assets, available for sale, cost		—			89,229
Equity securities, cost		309			21,493
Other invested assets, at cost		184,237			70,198
Cash and cash equivalents		379,751			706,267
Net balances on purchases and sales of investments		184			12,371

Opening aggregate invested assets	$	7,357,044		$	6,771,589

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,896,718		$	5,712,331
Other invested assets, available for sale, cost		—			89,250
Equity securities, cost		19,826			20,985
Other invested assets, cost		237,285			139,790
Cash and cash equivalents		497,574			704,419
Net balances on purchases and sales of investments		(172,797	)		3,654

Closing aggregate invested assets	$	7,478,606		$	6,670,429

Average aggregate invested assets	$	7,417,825		$	6,721,009

Annualized investment book yield		3.7	%		4.6	%

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	YEAR ENDED			NINE MONTHS ENDED			SIX MONTHS ENDED
	DECEMBER 31, 2009			SEPTEMBER 30, 2009			JUNE 30, 2009
Net investment income	$	300,675		$	227,423		$	154,391
Deduct: annual and non-recurring items		880			880			880

Net investment income, recurring	$	299,795		$	226,543		$	153,511

Annualized net investment income, recurring	$	299,795		$	302,057		$	307,022

Add: annual and non-recurring items		880			880			880

Normalized net investment income	$	300,675		$	302,937		$	307,902

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
Equity securities, cost		21,493			21,493			21,493
Other invested assets, at cost		100,198			100,198			100,198
Cash and cash equivalents		706,267			706,267			706,267
Balances receivable on sale 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	$	6,792,563		$	6,815,658		$	6,456,549
Other invested assets, available for sale, cost		—			—			4
Equity securities, cost		309			46			46
Other invested assets, at cost		184,237			168,704			146,485
Cash and cash equivalents		379,751			345,954			534,742
Net balances on purchases and sales of investments		184			(110,040	)		(92,606	)

Closing aggregate invested assets	$	7,357,044		$	7,220,322		$	7,045,220

Average aggregate invested assets	$	7,079,317		$	7,010,956		$	6,923,405

Annualized investment book yield		4.2	%		4.3	%		4.4	%

Page 21

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, impairment of intangible assets and foreign exchange gain or loss. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings 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 page 17 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 page 18 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 page 17 for the reconciliation of net income to operating income and page 18 for the reconciliation 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 19 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 20 and 21 for reconciliation of annualized investment book yield.

Page 22

Attached files

Allied World Assurance Co Holdings, AG Reports

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