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	y87523e8vk.htm
EX-99.1 - EX-99.1 - Allied World Assurance Co Holdings, AG	y87523exv99w1.htm
EX-99.3 - EX-99.3 - Allied World Assurance Co Holdings, AG	y87523exv99w3.htm

Exhibit 99.2

INVESTOR FINANCIAL SUPPLEMENT

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
3^rd Quarter Ended September 30, 2010


		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.

Investor Contact:
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; 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 Statements of Operations — Year to Date		7
	- Consolidated Premium Distribution Analysis by Segment and Geographic Location — Current Quarter		8
	- Consolidated Premium Distribution Analysis by Line of Business — Current Quarter		9
	- Consolidated Premium Distribution Analysis by Segment and Geographic Location — 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
	- Share Repurchase Detail — Year to Date		22
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Consecutive Quarters		23
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Year to Date		24
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Consecutive Quarters		25
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Year to Date		26
	- Diluted Book Value per Share		27
	- Annualized Investment Book Yield		28
	- Financial Statement Portfolio Return — Current Quarter and Year to Date		30
	- Regulation G		31

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 31 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS


		THREE MONTHS ENDED						NINE MONTHS ENDED						Previous			Previous
		SEPTEMBER 30,						SEPTEMBER 30,						Quarter			Year to Date
		2010			2009			2010			2009			Change			Change
HIGHLIGHTS	Gross premiums written	$	378,445		$	401,837		$	1,376,455		$	1,374,216			(5.8	%)		0.2	%
	Net premiums written		302,169			320,956			1,105,256			1,087,431			(5.9	%)		1.6	%
	Net premiums earned		339,496			328,771			1,016,744			986,411			3.3	%		3.1	%
	Net investment income		59,479			73,032			193,975			227,423			(18.6	%)		(14.7	%)
	Net income		254,520			200,554			572,219			445,632			26.9	%		28.4	%
	Operating income		143,552			155,373			300,543			405,806			(7.6	%)		(25.9	%)
	Total investments and cash & cash equivalents		8,082,961			7,554,159			8,082,961			7,554,159			7.0	%		7.0	%
	Total assets		10,216,461			9,641,257			10,216,461			9,641,257			6.0	%		6.0	%
	Total shareholders’ equity		3,341,314			3,078,894			3,341,314			3,078,894			8.5	%		8.5	%
	Cash flows from operating activities		113,589			164,818			419,191			567,200			(31.1	%)		(26.1	%)

PER SHARE AND SHARE DATA	Basic earnings per share
	Net income	$	5.59		$	4.05		$	11.78		$	9.01			38.0	%		30.7	%
	Operating income	$	3.15		$	3.13		$	6.19		$	8.21			0.6	%		(24.6	%)
	Diluted earnings per share
	Net income	$	5.21		$	3.83		$	11.03		$	8.62			36.0	%		28.0	%
	Operating income	$	2.94		$	2.97		$	5.79		$	7.85			(1.0	%)		(26.2	%)
	Weighted average common shares outstanding
	Basic		45,544,060			49,574,266			48,580,541			49,449,809
	Diluted		48,839,991			52,345,913			51,887,390			51,676,006
	Book value per share	$	78.81		$	62.07		$	78.81		$	62.07			27.0	%		27.0	%
	Diluted book value per share	$	72.40		$	57.20		$	72.40		$	57.20			26.6	%		26.6	%


FINANCIAL RATIOS	Annualized return on average equity (ROAE), net income		31.0	%		28.7	%		24.2	%		22.8	%		2.3	pts		1.4	pts
	Annualized ROAE, operating income		17.5	%		22.2	%		12.7	%		20.8	%		(4.7)	pts		(8.1)	pts
	Annualized investment book yield		2.9	%		4.1	%		3.4	%		4.3	%		(1.2)	pts		(0.9)	pts

	Loss and loss expense ratio		37.4	%		41.5	%		53.9	%		46.9	%		(4.1)	pts		7.0	pts
	Acquisition cost ratio		12.3	%		11.1	%		11.9	%		11.2	%		1.2	pts		0.7	pts
	General and administrative expense ratio		20.6	%		17.5	%		19.8	%		17.9	%		3.1	pts		1.9	pts

	Expense ratio		32.9	%		28.6	%		31.7	%		29.1	%		4.3	pts		2.6	pts

	Combined ratio		70.3	%		70.1	%		85.6	%		76.0	%		0.2	pts		9.6	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
	SEPTEMBER 30, 2010			JUNE 30, 2010			MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009
Revenues
Gross premiums written	$	378,445		$	493,847		$	504,163		$	322,129		$	401,837
Net premiums written	$	302,169		$	369,795		$	433,292		$	233,694		$	320,956

Net premiums earned	$	339,496		$	338,924		$	338,324		$	330,481		$	328,771
Net investment income		59,479			65,594			68,902			73,252			73,032
Net realized investment gains		116,930			94,933			77,487			37,796			46,861
Net impairment charges recognized in earnings		—			—			(168	)		(187	)		(1,953	)
Other income		—			616			297			373			298

Total revenues	$	515,905		$	500,067		$	484,842		$	441,715		$	447,009

Expenses
Net losses and loss expenses:
Current year	$	228,362		$	252,816		$	297,246		$	219,065		$	209,971
Prior years		(101,374	)		(64,094	)		(65,092)	*		(77,662	)		(73,530	)

Total net losses and loss expenses		126,988		$	188,722		$	232,154		$	141,403		$	136,441
Acquisition costs		41,919			37,938			40,784			38,126			36,630
General and administrative expenses		69,871			68,089			63,463			72,212			57,521
Amortization and impairment of intangible assets		892			891			892			7,856			1,065
Interest expense		9,533			9,531			9,528			9,527			9,523
Foreign exchange (gain) loss		(1,387	)		559			1,076			1,408			(273	)

Total expenses	$	247,816		$	305,730		$	347,897		$	270,532		$	240,907


Income before income taxes	$	268,089		$	194,337		$	136,945		$	171,183		$	206,102
Income tax expense		13,569			10,378			3,205			9,928			5,548

Net income	$	254,520		$	183,959		$	133,740		$	161,255		$	200,554


GAAP Ratios
Loss and loss expense ratio		37.4	%		55.7	%		68.6	%		42.8	%		41.5	%
Acquisition cost ratio		12.3	%		11.2	%		12.1	%		11.5	%		11.1	%
General and administrative expense ratio		20.6	%		20.1	%		18.8	%		21.9	%		17.5	%

Expense ratio		32.9	%		31.3	%		30.9	%		33.4	%		28.6	%

Combined ratio		70.3	%		87.0	%		99.5	%		76.2	%		70.1	%


Per Share Data
Basic earnings per share
Net income	$	5.59		$	3.66		$	2.67		$	3.25		$	4.05
Operating income	$	3.15		$	1.90		$	1.23		$	2.66		$	3.13
Diluted earnings per share
Net income	$	5.21		$	3.47		$	2.52		$	3.05		$	3.83
Operating income	$	2.94		$	1.80		$	1.16		$	2.49		$	2.97


*		Includes prior year reserve development of $73.9 million and 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 STATEMENTS OF OPERATIONS — YEAR TO DATE


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2010			SEPTEMBER 30, 2009
Revenues
Gross premiums written	$	1,376,455		$	1,374,216
Net premiums written		1,105,256			1,087,431

Net premiums earned	$	1,016,744		$	986,411
Net investment income		193,975			227,423
Net realized investment gains		289,350			88,556
Net impairment charges recognized in earnings		(168	)		(49,390	)
Other income		913			1,133

Total revenues	$	1,500,814		$	1,254,133

Expenses
Net losses and loss expenses:
Current year	$	778,424		$	632,988
Prior years		(230,560)	*		(170,331	)

Total net losses and loss expenses		547,864			462,657
Acquisition costs		120,641			110,721
General and administrative expenses		201,423			176,380
Amortization and impairment of intangible assets		2,675			3,195
Interest expense		28,592			29,492
Foreign exchange loss (gain)		248			(660	)

Total expenses	$	901,443		$	781,785


Income before income taxes	$	599,371		$	472,348
Income tax expense		27,152			26,716

Net income	$	572,219		$	445,632


GAAP Ratios
Loss and loss expense ratio		53.9	%		46.9	%
Acquisition cost ratio		11.9	%		11.2	%
General and administrative expense ratio		19.8	%		17.9	%

Expense ratio		31.7	%		29.1	%

Combined ratio		85.6	%		76.0	%


Per Share Data
Basic earnings per share
Net income	$	11.78		$	9.01
Operating income	$	6.19		$	8.21
Diluted earnings per share
Net income	$	11.03		$	8.62
Operating income	$	5.79		$	7.85


*		Includes prior year reserve development of $239.4 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million.

Page 7

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


THREE MONTHS ENDED SEPTEMBER 30, 2010		THREE MONTHS ENDED SEPTEMBER 30, 2009

Gross Premiums Written = $378,445		Gross Premiums Written = $401,837

Page 8

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


THREE MONTHS ENDED SEPTEMBER 30, 2010		THREE MONTHS ENDED SEPTEMBER 30, 2009

Gross Premiums Written = $378,445		Gross Premiums Written = $401,837


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

Page 9

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


NINE MONTHS ENDED SEPTEMBER 30, 2010		NINE MONTHS ENDED SEPTEMBER 30, 2009

Gross Premiums Written = $1,376,455		Gross Premiums Written = $1,374,216

Page 10

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


NINE MONTHS ENDED SEPTEMBER 30, 2010		NINE MONTHS ENDED SEPTEMBER 30, 2009

Gross Premiums Written = $1,376,455		Gross Premiums Written = $1,374,216


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

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	181,232		$	100,858		$	96,355		$	378,445
Net premiums written	$	140,481		$	65,520		$	96,168		$	302,169

Net premiums earned	$	129,650		$	80,557		$	129,289		$	339,496
Other income	$	—		$	—		$	—		$	—

Total revenues	$	129,650		$	80,557		$	129,289		$	339,496


Expenses
Net losses and loss expenses:
Current year	$	80,622		$	71,810		$	75,930		$	228,362
Prior years		(25,478	)		(60,770	)		(15,126	)		(101,374	)

Total net losses and loss expenses	$	55,144		$	11,040		$	60,804		$	126,988
Acquisition costs		18,081			(29	)		23,867			41,919
General and administrative expenses		31,781			22,819			15,271			69,871

Total expenses	$	105,006		$	33,830		$	99,942		$	238,778


Underwriting income	$	24,644		$	46,727		$	29,347		$	100,718

Net investment income											59,479
Net realized investment gains											116,930
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(892	)
Interest expense											(9,533	)
Foreign exchange gain											1,387


Income before income taxes										$	268,089


GAAP Ratios
Loss and loss expense ratio		42.5	%		13.7	%		47.0	%		37.4	%
Acquisition cost ratio		13.9	%		0.0	%		18.5	%		12.3	%
General and administrative expense ratio		24.5	%		28.3	%		11.8	%		20.6	%

Expense ratio		38.4	%		28.3	%		30.3	%		32.9	%

Combined ratio		80.9	%		42.0	%		77.3	%		70.3	%

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	169,629		$	107,768		$	124,440		$	401,837
Net premiums written	$	126,600		$	69,939		$	124,417		$	320,956

Net premiums earned	$	111,558		$	97,705		$	119,508		$	328,771
Other income	$	298		$	—		$	—		$	298

Total revenues	$	111,856		$	97,705		$	119,508		$	329,069


Expenses
Net losses and loss expenses:
Current year	$	69,641		$	71,029		$	69,301		$	209,971
Prior years		(27,570	)		(42,728	)		(3,232	)		(73,530	)

Total net losses and loss expenses	$	42,071		$	28,301		$	66,069		$	136,441
Acquisition costs		14,354			516			21,760			36,630
General and administrative expenses		25,929			19,866			11,726			57,521

Total expenses	$	82,354		$	48,683		$	99,555		$	230,592


Underwriting income	$	29,502		$	49,022		$	19,953		$	98,477

Net investment income											73,032
Net realized investment gains											46,861
Net impairment charges recognized in earnings											(1,953	)
Amortization and impairment of intangible assets											(1,065	)
Interest expense											(9,523	)
Foreign exchange gain											273


Income before income taxes										$	206,102


GAAP Ratios
Loss and loss expense ratio		37.7	%		29.0	%		55.3	%		41.5	%
Acquisition cost ratio		12.9	%		0.5	%		18.2	%		11.1	%
General and administrative expense ratio		23.2	%		20.3	%		9.8	%		17.5	%

Expense ratio		36.1	%		20.8	%		28.0	%		28.6	%

Combined ratio		73.8	%		49.8	%		83.3	%		70.1	%

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	532,980		$	389,881		$	453,594		$	1,376,455
Net premiums written		407,274			245,110			452,872		$	1,105,256

Net premiums earned		384,514			257,027			375,203		$	1,016,744
Other income		913			—			—		$	913

Total revenues	$	385,427		$	257,027		$	375,203		$	1,017,657


Expenses
Net losses and loss expenses:
Current year	$	263,978		$	274,629		$	239,817		$	778,424
Prior years		(41,211)	*		(141,560	)		(47,789	)		(230,560)	**

Total net losses and loss expenses	$	222,767		$	133,069		$	192,028		$	547,864
Acquisition costs		50,895			(29	)		69,775			120,641
General and administrative expenses		89,578			67,321			44,524			201,423

Total expenses	$	363,240		$	200,361		$	306,327		$	869,928


Underwriting income	$	22,187		$	56,666		$	68,876		$	147,729

Net investment income											193,975
Net realized investment gains											289,350
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(2,675	)
Interest expense											(28,592	)
Foreign exchange loss											(248	)


Income before income taxes										$	599,371


GAAP Ratios
Loss and loss expense ratio		57.9	%		51.8	%		51.2	%		53.9	%
Acquisition cost ratio		13.2	%		0.0	%		18.6	%		11.9	%
General and administrative expense ratio		23.3	%		26.2	%		11.9	%		19.8	%

Expense ratio		36.5	%		26.2	%		30.5	%		31.7	%

Combined ratio		94.4	%		78.0	%		81.7	%		85.6	%


*		Includes prior year development of $50.1 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million.

**		Includes prior year development of $239.4 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million.

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	505,710		$	425,672		$	442,834		$	1,374,216
Net premiums written	$	369,912		$	275,066		$	442,453		$	1,087,431

Net premiums earned	$	327,850		$	320,706		$	337,855		$	986,411
Other income	$	1,133		$	—		$	—		$	1,133

Total revenues	$	328,983		$	320,706		$	337,855		$	987,544


Expenses
Net losses and loss expenses:
Current year	$	198,739		$	231,727		$	202,522		$	632,988
Prior years		(55,649	)		(90,132	)		(24,550	)		(170,331	)

Total net losses and loss expenses	$	143,090		$	141,595		$	177,972		$	462,657
Acquisition costs		42,308			3,243			65,170			110,721
General and administrative expenses		83,323			58,599			34,458			176,380

Total expenses	$	268,721		$	203,437		$	277,600		$	749,758


Underwriting income	$	60,262		$	117,269		$	60,255		$	237,786

Net investment income											227,423
Net realized investment gains											88,556
Net impairment charges recognized in earnings											(49,390	)
Amortization and impairment of intangible assets											(3,195	)
Interest expense											(29,492	)
Foreign exchange gain											660


Income before income taxes										$	472,348


GAAP Ratios
Loss and loss expense ratio		43.6	%		44.2	%		52.7	%		46.9	%
Acquisition cost ratio		12.9	%		1.0	%		19.3	%		11.2	%
General and administrative expense ratio		25.4	%		18.3	%		10.2	%		17.9	%

Expense ratio		38.3	%		19.3	%		29.5	%		29.1	%

Combined ratio		81.9	%		63.5	%		82.2	%		76.0	%

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

CONDENSED CONSOLIDATED BALANCE SHEETS


	SEPTEMBER 30, 2010			DECEMBER 31, 2009
ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2010: $1,445,143 2009: $4,260,844)	$	1,570,144		$	4,427,072
Fixed maturity investments trading, at fair value		5,231,358			2,544,322
Other invested assets trading, at fair value		450,015			184,869

Total investments		7,251,517			7,156,263
Cash and cash equivalents		831,444			379,751
Insurance balances receivable		466,887			395,621
Prepaid reinsurance		187,292			186,610
Reinsurance recoverable		939,956			919,991
Accrued investment income		43,286			53,046
Net deferred acquisition costs		102,300			87,821
Goodwill		268,376			268,376
Intangible assets		57,684			60,359
Net balances receivable on purchases and sales of investments		—			184
Net deferred tax assets		9,633			21,895
Other assets		58,086			67,566

TOTAL ASSETS	$	10,216,461		$	9,597,483


LIABILITIES
Reserve for losses and loss expenses	$	4,889,825		$	4,761,772
Unearned premiums		1,017,814			928,619
Reinsurance balances payable		97,147			102,837
Net balances payable on purchases and sales of investments		307,140			—
Senior notes		499,017			498,919
Accounts payable and accrued liabilities		64,204			92,041

TOTAL LIABILITIES	$	6,875,147		$	6,384,188


SHAREHOLDERS’ EQUITY
Common shares, par value $0.03 per share (2010: 50,793,902; 2009: 49,734,487 shares issued and 2010: 42,394,576; 2009: 49,734,487 shares outstanding)	$	1,524		$	1,492
Additional paid-in capital		1,355,685			1,359,934
Treasury shares, at cost (2010: 8,399,326; 2009: nil)		(415,009	)		—
Retained earnings		2,287,354			1,702,020
Accumulated other comprehensive income: net unrealized gains on investments, net of tax		111,760			149,849

TOTAL SHAREHOLDERS’ EQUITY	$	3,341,314		$	3,213,295

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,216,461		$	9,597,483


Book value per share	$	78.81		$	64.61
Diluted book value per share	$	72.40		$	59.56

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED TOTAL INVESTMENT PORTFOLIO


	SEPTEMBER 30, 2010						JUNE 30, 2010					MARCH 31, 2010					DECEMBER 31, 2009					SEPTEMBER 30, 2009
	FAIR VALUE						FAIR VALUE					FAIR VALUE					FAIR VALUE					FAIR VALUE

FAIR VALUE
Fixed maturities available for sale	$	1,570,144		19.4	%		$	2,755,934		34.6	%	$	3,227,889		41.1	%	$	4,427,072		58.7	%	$	5,673,793		75.1	%
Fixed maturities trading		5,231,358		64.7	%			4,275,893		53.7	%		3,868,044		49.2	%		2,544,322		33.8	%		1,372,287		18.2	%
Other invested assets trading		450,015		5.6	%			388,761		4.9	%		261,930		3.4	%		184,869		2.5	%		162,125		2.1	%
Cash and cash equivalents		831,444		10.3	%			543,895		6.8	%		497,574		6.3	%		379,751		5.0	%		345,954		4.6	%

Total	$	8,082,961		100.0	%		$	7,964,483		100.0	%	$	7,855,437		100.0	%	$	7,536,014		100.0	%	$	7,554,159		100.0	%


ASSET ALLOCATION BY MARKET VALUE
U.S. government and agencies	$	1,206,987		14.9	%		$	1,769,987		22.2	%	$	2,065,913		26.3	%	$	1,378,565		18.3	%	$	1,364,043		18.1	%
Non-U.S. government securities		388,262		4.8	%			386,786		4.9	%		395,558		5.0	%		511,001		6.8	%		454,676		6.0	%
Corporate securities		2,539,994		31.5	%			2,392,033		30.0	%		2,337,172		29.8	%		2,584,585		34.3	%		2,410,484		31.9	%
State, municipalities and political subdivisions		240,348		3.0	%			249,010		3.1	%		231,694		2.9	%		243,218		3.2	%		323,916		4.3	%
Mortgage-backed securities		1,749,598		21.6	%			1,564,077		19.7	%		1,590,033		20.2	%		1,721,254		22.8	%		2,043,514		27.1	%
Asset-backed securities		676,313		8.3	%			669,934		8.4	%		475,563		6.1	%		532,771		7.1	%		449,447		5.9	%

Fixed income sub-total		6,801,502		84.1	%			7,031,827		88.3	%		7,095,933		90.3	%		6,971,394		92.5	%		7,046,080		93.3	%
Hedge funds		328,275		4.1	%			319,592		4.0	%		242,135		3.1	%		184,725		2.5	%		161,840		2.1	%
Equity securities		121,740		1.5	%			69,169		0.9	%		19,795		0.3	%		144		0.0	%		285		0.0	%
Cash & cash equivalents		831,444		10.3	%			543,895		6.8	%		497,574		6.3	%		379,751		5.0	%		345,954		4.6	%

Total	$	8,082,961		100.0	%		$	7,964,483		100.0	%	$	7,855,437		100.0	%	$	7,536,014		100.0	%	$	7,554,159		100.0	%


FIXED INCOME CREDIT QUALITY BY MARKET VALUE
U.S. government and agencies	$	1,206,987		17.8	%		$	1,769,987		25.2	%	$	2,065,913		29.1	%	$	1,378,565		19.8	%	$	1,364,043		19.4	%
AAA/Aaa		2,968,935		43.7	%			2,754,502		39.2	%		2,600,412		36.6	%		3,076,133		44.1	%		3,314,343		47.0	%
AA/Aa		562,112		8.3	%			580,084		8.2	%		635,938		9.0	%		684,291		9.8	%		571,871		8.1	%
A/A		1,404,202		20.6	%			1,327,374		18.9	%		1,265,421		17.8	%		1,347,557		19.3	%		1,323,415		18.8	%
BBB/Baa		366,685		5.4	%			336,284		4.8	%		296,284		4.2	%		318,253		4.6	%		324,007		4.6	%
BB		30,707		0.5	%			28,172		0.4	%		20,016		0.3	%		34,843		0.5	%		29,082		0.4	%
B/B		63,892		0.8	%			59,795		0.8	%		42,533		0.6	%		24,393		0.4	%		29,248		0.4	%
CCC+ and below		197,982		2.9	%			175,629		2.5	%		169,416		2.4	%		107,359		1.5	%		90,071		1.3	%

Total	$	6,801,502		100.0	%		$	7,031,827		100.0	%	$	7,095,933		100.0	%	$	6,971,394		100.0	%	$	7,046,080		100.0	%


STATISTICS
Annualized book yield, year to date		3.4	%					3.6	%				3.7	%				4.2	%				4.3	%
Duration*	2.5 years					2.6 years						3.5 years					3.0 years					3.2 years
Average credit quality (S&P)	AA						AA					AA					AA					AA


*		Includes only cash and cash equivalents and fixed maturity investments

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
SEPTEMBER 30, 2010


			AVERAGE	PORTFOLIO
	FAIR VALUE		RATING	PERCENTAGE
Cash & cash equivalents	$	831,444	AAA		10.3	%
U.S. government securities		1,033,756	AAA		12.8	%
U.S. government agencies		173,231	AAA		2.1	%
Non-U.S. government securities		388,262	AAA		4.8	%
Mortgage-backed securities:
Agency MBS		1,112,192	AAA		13.8	%
Non-agency RMBS		178,155	AA-		2.2	%
Non-agency RMBS — Non investment grade strategy		245,969	CCC+		3.0	%
CMBS		213,282	AAA		2.6	%
Total mortgage-backed securities		1,749,598			21.6	%
Corporate securities:
Financials		1,243,965	AA-		15.4	%
Industrials		1,046,877	A-		13.0	%
Utilities		249,152	A-		3.1	%
Total corporate securities		2,539,994			31.5	%
Asset-backed securities
Credit cards		35,215	AAA		0.4	%
Auto receivables		108,540	AAA		1.3	%
Student Loans		270,535	AAA		3.4	%
Collateralized loan obligations		196,386	AA+		2.4	%
Other		65,637	AAA		0.8	%
Total asset-backed securities		676,313			8.3	%
State, municipalities and political subdivisions		240,348	AA		3.0	%
Hedge Funds		328,275	N/A		4.1	%
Equities		121,740	N/A		1.5	%

Total Investment Portfolio	$	8,082,961			100.0	%

TOP 10 CORPORATE EXPOSURES


			PORTFOLIO
CORPORATE	FAIR VALUE		PERCENTAGE
JPMorgan Chase & Co	$	83,850		1.0	%
Bank of Nova Scotia		77,526		1.0	%
Morgan Stanley		61,160		0.8	%
General Electric Co		58,379		0.7	%
Verizon Communications Inc		57,299		0.7	%
Citigroup Inc		52,093		0.6	%
HSBC Holdings PLC		52,031		0.6	%
Wells Fargo & Co		47,276		0.6	%
Enel SpA		45,734		0.6	%
AT&T Inc		45,565		0.6	%


					LONG			SHORT
	FAIR VALUE		UNFUNDED		EXPOSURE⁽¹⁾			EXPOSURE⁽²⁾			GROSS			NET
HEDGE FUND TYPE	SEPTEMBER 30, 2010		COMMITMENTS		(% OF FUNDED)			(% OF FUNDED)			EXPOSURE⁽³⁾			EXPOSURE⁽⁴⁾
Secondary private equity funds	$	20,470	$	41,546		100	%		0	%		100	%		100	%
Distressed		70,309		38,192		66	%		9	%		75	%		57	%
Equity long/short		78,330		—		75	%		44	%		119	%		31	%
Multi-strategy		108,029		—		129	%		64	%		193	%		65	%
Event driven		51,137		—		114	%		66	%		180	%		48	%

Total hedge funds	$	328,275	$	79,738


(1)		Long exposure represents the ratio of the fund’s equity to investments in securities (over 100% may denote explicit borrowing).

(2)		Short exposure represents the ratio of the fund’s equity to securities sold short.

(3)		Gross exposure is the addition of the long and short exposures.

(4)		Net exposure is the subtraction of the short exposure from the long exposure.

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
SEPTEMBER 30, 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	$	—	$	—	$	—	$	—	$	—	$	7,591	$	52,559	$	13,014	$	7,112	$	80,276		30.1	%
2006		—		6,171		2,633		—		—		25,342		50,050		—		30,783		114,979		25.0	%
2005 and prior		15,591		485		308		—		—		8,610		15,182		10,538		—		50,714		27.2	%

Total*	$	15,591	$	6,656	$	2,941	$	—	$	—	$	41,543	$	117,791	$	23,552	$	37,895	$	245,969		27.1	%


*		Included in the above is fair value of $5.4 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	$	—	$	—	$	—	$	—	$	1,154	$	—	$	1,061	$	—	$	—	$	2,215		2.1	%
2006		126		—		9,459		—		—		1,958		—		356		—		11,899		13.3	%
2005 and prior		114,807		7,887		6,083		—		19,703		14,429		1,132		—		—		164,041		11.2	%

Total*	$	114,933	$	7,887	$	15,542	$	—	$	20,857	$	16,387	$	2,193	$	356	$	—	$	178,155		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**
2010	$	11,393	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	11,393		100.0	%
2006		21,089		—		—		466		—		—		—		—		—		21,555		30.5	%
2005 and prior		180,334		—		—		—		—		—		—		—		—		180,334		22.2	%

Total	$	212,816	$	—	$	—	$	466	$	—	$	—	$	—	$	—	$	—	$	213,282		27.2	%


**		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 SEPTEMBER 30, 2010
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL
Case reserves (net of reinsurance recoverable)	$	205,801		$	392,738		$	346,069		$	944,608
IBNR (net of reinsurance recoverable)		796,231			1,344,352			864,678			3,005,261

Total	$	1,002,032		$	1,737,090		$	1,210,747		$	3,949,869

IBNR/Total reserves (net of reinsurance recoverable)		79.5	%		77.4	%		71.4	%		76.1	%


	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 20

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


	SEPTEMBER 30,			JUNE 30,			MARCH 31,			DECEMBER 31,			SEPTEMBER 30,
	2010			2010			2010			2009			2009
Senior notes	$	499,017		$	498,984		$	498,951		$	498,919		$	498,888
Shareholders’ equity		3,341,314			3,468,543			3,338,807			3,213,295			3,078,894

Total capitalization	$	3,840,331		$	3,967,527		$	3,837,758		$	3,712,214		$	3,577,782


Leverage ratios
Debt to total capitalization		13.0	%		12.6	%		13.0	%		13.4	%		13.9	%

Closing shareholders’ equity	$	3,341,314		$	3,468,543		$	3,338,807		$	3,213,295		$	3,078,894
Deduct: accumulated other comprehensive income		(111,760	)		(138,245	)		(142,284	)		(149,849	)		(185,043	)

Adjusted shareholders’ equity	$	3,229,554		$	3,330,298		$	3,196,523		$	3,063,446		$	2,893,851

Net premiums written (trailing 12 months)	$	1,338,950		$	1,357,737		$	1,349,380		$	1,321,125		$	1,313,935
Net premiums written (trailing 12 months) to adjusted shareholders’ equity		0.41			0.41			0.42			0.43			0.45

Total investments and cash & cash equivalents	$	8,082,961		$	7,964,483		$	7,855,437		$	7,536,014		$	7,554,159
Total investments and cash & cash equivalents to adjusted shareholders’ equity		2.50			2.39			2.46			2.46			2.61

Reserve for losses and loss expenses	$	4,889,825		$	4,920,435		$	4,853,359		$	4,761,772		$	4,749,602
Deduct: reinsurance recoverable		(939,956	)		(932,435	)		(920,480	)		(919,991	)		(913,964	)

Net reserve for losses and loss expenses	$	3,949,869		$	3,988,000		$	3,932,879		$	3,841,781		$	3,835,638
Net reserve for losses and loss expenses to adjusted shareholders’ equity		1.22			1.20			1.23			1.25			1.33

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
SHARE REPURCHASE DETAIL


							Maximum Dollar Value (or
	Total Number of Shares		Average Price Paid				Approximate Dollar Value) of
Period	Purchased		per Share		Total Actual Cost		Shares that May Yet Be Purchased
April 1-30, 2010		—	$	—	$	—	$	—
May 1-31, 2010		666,700		44.75		29,832		470,168
June 1-30, 2010		414,341		46.48		19,257		450,911

Total June 30, 2010		1,081,041	$	45.41	$	49,089	$	450,911

July 1-31, 2010		855,987	$	47.43	$	40,604	$	410,307
August 1-31, 2010		881,971		50.12		44,207		366,100
September 1-30, 2010		580,327		53.61		31,109		334,991

Total September 30, 2010		2,318,285	$	50.00	$	115,920	$	334,991


	CUMULATIVE		CUMULATIVE
	JUNE 30, 2010		SEPTEMBER 30, 2010
Effect of share repurchases:
Aggregate cost of shares repurchased	$	49,089	$	415,009	*
Shares repurchased		1,081,041		8,399,326	*

Average price per share repurchased	$	45.41	$	49.41
Estimated net accretive impact on basic book value per common share	$	0.53	$	4.86

Estimated net accretive impact on dilutive book value per common share	$	0.40	$	3.54


*		Includes the repurchase of 5,000,000 non-voting common shares from affiliates of The Goldman Sachs Group, Inc. for $250,000.

Page 22

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
	SEPTEMBER 30, 2010			JUNE 30, 2010			MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009
Net income	$	254,520		$	183,959		$	133,740		$	161,255		$	200,554
Add after tax affect of:
Net realized investment gains		(109,581	)		(88,850	)		(73,602	)		(37,796	)		(46,861	)
Net impairment charges recognized in earnings		—			—			109			187			1,953
Impairment of intangible assets		—			—			—			6,866			—
Foreign exchange (gain) loss		(1,387	)		559			1,076			1,408			(273	)

Operating income	$	143,552		$	95,668		$	61,323		$	131,920		$	155,373


Weighted average common shares outstanding
Basic		45,544,060			50,222,974			50,023,816			49,662,575			49,574,266
Diluted		48,839,991			52,974,410			53,115,756			52,880,733			52,345,913

Basic per share data
Net income	$	5.59		$	3.66		$	2.67		$	3.25		$	4.05
Add after tax affect of:
Net realized investment gains		(2.41	)		(1.77	)		(1.47	)		(0.76	)		(0.95	)
Net impairment charges recognized in earnings		—			—			—			—			0.04
Impairment of intangible assets		—			—			—			0.14			—
Foreign exchange (gain) loss		(0.03	)		0.01			0.03			0.03			(0.01	)

Operating income	$	3.15		$	1.90		$	1.23		$	2.66		$	3.13


Diluted per share data
Net income	$	5.21		$	3.47		$	2.52		$	3.05		$	3.83
Add after tax affect of:
Net realized investment gains		(2.24	)		(1.68	)		(1.38	)		(0.72	)		(0.89	)
Net impairment charges recognized in earnings		—			—			—			—			0.04
Impairment of intangible assets		—			—			—			0.13			—
Foreign exchange (gain) loss		(0.03	)		0.01			0.02			0.03			(0.01	)

Operating income	$	2.94		$	1.80		$	1.16		$	2.49		$	2.97

Page 23

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


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2010			SEPTEMBER 30, 2009
Net income	$	572,219		$	445,632
Add after tax affect of:
Net realized investment gains		(272,033	)		(88,556	)
Net impairment charges recognized in earnings		109			49,390
Foreign exchange loss (gain)		248			(660	)

Operating income	$	300,543		$	405,806


Weighted average common shares outstanding
Basic		48,580,541			49,449,809
Diluted		51,887,390			51,676,006

Basic per share data
Net income	$	11.78		$	9.01
Add after tax affect of:
Net realized investment gains		(5.60	)		(1.79	)
Net impairment charges recognized in earnings		—			1.00
Foreign exchange loss (gain)		0.01			(0.01	)

Operating income	$	6.19		$	8.21


Diluted per share data
Net income	$	11.03		$	8.62
Add after tax affect of:
Net realized investment gains		(5.24	)		(1.72	)
Net impairment charges recognized in earnings		—			0.96
Foreign exchange loss (gain)		—			(0.01	)

Operating income	$	5.79		$	7.85

Page 24

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
	SEPTEMBER 30, 2010			JUNE 30, 2010			MARCH 31, 2010			DECEMBER 31, 2009			SEPTEMBER 30, 2009
Opening shareholders’ equity	$	3,468,543		$	3,338,807		$	3,213,295		$	3,078,894		$	2,741,427
Deduct: accumulated other comprehensive income		(138,245	)		(142,284	)		(149,849	)		(185,043	)		(48,669	)

Adjusted opening shareholders’ equity	$	3,330,298		$	3,196,523		$	3,063,446		$	2,893,851		$	2,692,758

Closing shareholders’ equity	$	3,341,314		$	3,468,543		$	3,338,807		$	3,213,295		$	3,078,894
Deduct: accumulated other comprehensive income		(111,760	)		(138,245	)		(142,284	)		(149,849	)		(185,043	)

Adjusted closing shareholders’ equity	$	3,229,554		$	3,330,298		$	3,196,523		$	3,063,446		$	2,893,851

Average shareholders’ equity	$	3,279,926		$	3,263,411		$	3,129,985		$	2,978,649		$	2,793,305

Net income available to shareholders	$	254,520		$	183,959		$	133,740		$	161,255		$	200,554
Annualized net income available to shareholders		1,018,080			735,836			534,960			645,020			802,216

Annualized return on average shareholders’ equity — net income available to shareholders		31.0	%		22.5	%		17.1	%		21.7	%		28.7	%


Operating income available to shareholders	$	143,552		$	95,668		$	61,323		$	131,920		$	155,373
Annualized operating income available to shareholders		574,208			382,672			245,292			527,680			621,492

Annualized return on average shareholders’ equity — operating income available to shareholders		17.5	%		11.7	%		7.8	%		17.7	%		22.2	%

Page 25

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


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2010			SEPTEMBER 30, 2009
Opening shareholders’ equity	$	3,213,295		$	2,416,862
Deduct: accumulated other comprehensive income		(149,849	)		(105,632	)

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

Closing shareholders’ equity	$	3,341,314		$	3,078,894
Deduct: accumulated other comprehensive income		(111,760	)		(185,043	)

Adjusted closing shareholders’ equity	$	3,229,554		$	2,893,851

Average shareholders’ equity	$	3,146,500		$	2,602,541

Net income available to shareholders	$	572,219		$	445,632
Annualized net income available to shareholders		762,959			594,176

Annualized return on average shareholders’ equity — net income available to shareholders		24.2	%		22.8	%


Operating income available to shareholders	$	300,543		$	405,806
Annualized operating income available to shareholders		400,724			541,075

Annualized return on average shareholders’ equity — operating income available to shareholders		12.7	%		20.8	%

Page 26

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


	SEPTEMBER 30,			DECEMBER 31,			SEPTEMBER 30,
	2010			2009			2009
Price per share at period end	$	56.59		$	46.07		$	47.93

Total shareholders’ equity	$	3,341,314		$	3,213,295		$	3,078,894

Basic common shares outstanding		42,394,576			49,734,487			49,602,354

Add: unvested restricted share units		580,706			915,432			925,437

Add: performance based equity awards		1,409,984			1,583,237			1,329,661

Add: dilutive options/warrants outstanding		4,563,380			6,805,157			6,951,447
Weighted average exercise price per share	$	34.69		$	34.44		$	34.34
Deduct: options bought back via treasury method		(2,797,512	)		(5,087,405	)		(4,980,125	)


Common shares and common share equivalents outstanding		46,151,134			53,950,908			53,828,774

Basic book value per common share	$	78.81		$	64.61		$	62.07
Year-to-date percentage increase in basic book value per common share		22.0	%

Diluted book value per common share	$	72.40		$	59.56		$	57.20
Year-to-date percentage increase in dilutive book value per common share		21.6	%

Page 27

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CALCULATION OF ANNUALIZED INVESTMENT BOOK YIELD


	THREE MONTHS ENDED			THREE MONTHS ENDED			NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2010			SEPTEMBER 30, 2009			SEPTEMBER 30, 2010			SEPTEMBER 30, 2009
Net investment income	$	59,479		$	73,032		$	193,975		$	227,423
Deduct: annual and non-recurring items		6,438			N/A			6,438			880

Net investment income, recurring	$	53,041		$	73,032		$	187,537		$	226,543

Annualized net investment income, recurring	$	212,164		$	292,128		$	250,049		$	302,057

Add: annual and non-recurring items		6,438			N/A			6,438			880

Normalized net investment income	$	218,602		$	292,128		$	256,487		$	302,937

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,804,813		$	6,456,549		$	6,792,563		$	5,872,031
Other invested assets, available for sale, cost		—			4			—			89,229
Equity securities, cost		73,786			46			309			21,493
Other invested assets, at cost		315,906			146,485			184,237			100,198
Cash and cash equivalents		543,895			534,742			379,751			706,267
Net balances on purchases and sales of investments		(26,107	)		(92,606	)		184			12,371

Opening aggregate invested assets	$	7,712,293		$	7,045,220		$	7,357,044		$	6,801,589

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,529,858		$	6,815,658		$	6,529,858		$	6,815,658
Other invested assets, available for sale, cost		—			—			—			—
Equity securities, cost		117,599			46			117,599			46
Other invested assets, cost		322,486			168,704			322,486			168,704
Cash and cash equivalents		831,444			345,954			831,444			345,954
Net balances on purchases and sales of investments		(307,140	)		(110,040	)		(307,140	)		(110,040	)

Closing aggregate invested assets	$	7,494,247		$	7,220,322		$	7,494,247		$	7,220,322

Average aggregate invested assets	$	7,603,270		$	7,132,771		$	7,425,646		$	7,010,956

Annualized investment book yield		2.9	%		4.1	%		3.4	%		4.3	%

Page 28

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CALCULATION OF ANNUALIZED INVESTMENT BOOK YIELD


	SIX MONTHS ENDED			THREE MONTHS ENDED			TWELVE MONTHS ENDED
	JUNE 30, 2010			MARCH 31, 2010			DECEMBER 31, 2009
Net investment income	$	134,496		$	68,902		$	300,675
Deduct: annual and non-recurring items		N/A			N/A			880

Net investment income, recurring	$	134,496		$	68,902		$	299,795

Annualized net investment income, recurring	$	268,992		$	275,608		$	299,795

Add: annual and non-recurring items		N/A			N/A			880

Normalized net investment income	$	268,992		$	275,608		$	300,675

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

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

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,804,813		$	6,896,718		$	6,792,563
Other invested assets, available for sale, cost		—			—			—
Equity securities, cost		73,786			19,826			309
Other invested assets, at cost		315,906			237,285			184,237
Cash and cash equivalents		543,895			497,574			379,751
Net balances on purchases and sales of investments		(26,107	)		(172,797	)		184

Closing aggregate invested assets	$	7,712,293		$	7,478,606		$	7,357,044

Average aggregate invested assets	$	7,534,669		$	7,417,825		$	7,079,317

Annualized investment book yield		3.6	%		3.7	%		4.2	%

Page 29

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
FINANCIAL STATEMENT PORTFOLIO RETURN


	THREE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2010			SEPTEMBER 30, 2010
Net investment income	$	59,479		$	193,975
Net realized investment gains	$	116,930		$	289,350

Opening net unrealized gains on investments:
Net unrealized gains on fixed maturities	$	160,963		$	166,187
Net unrealized (losses)/gains on foreign exchange		(7,029	)		41

Opening net unrealized gains on investments	$	153,934		$	166,228

Closing net unrealized gains on investments:
Net unrealized gains on fixed maturities	$	170,160	*	$	170,160	*
Net unrealized losses on foreign exchange		(3,270	)		(3,270	)

Closing net unrealized gains on investments	$	166,890		$	166,890

Net investment income, realized gains and unrealized gains	$	189,365		$	483,987

Opening aggregate invested assets, at fair value:
Fixed maturities available for sale	$	2,755,934		$	4,427,072
Fixed maturities trading		4,275,893			2,544,322
Other invested assets trading		388,761			184,869
Cash and cash equivalents		543,895			379,751

Total investments and cash		7,964,483			7,536,014
Net balances on purchases and sales of investments		(26,107	)		184

Opening aggregate invested assets, at fair value	$	7,938,376		$	7,536,198

Closing aggregate invested assets, at fair value:
Fixed maturities available for sale	$	1,570,144		$	1,570,144
Fixed maturities trading		5,231,358			5,231,358
Other invested assets trading		450,015			450,015
Cash and cash equivalents		831,444			831,444

Total investments and cash		8,082,961			8,082,961
Net balances on purchases and sales of investments		(307,140	)		(307,140	)

Closing aggregate invested assets, at fair value	$	7,775,821		$	7,775,821

Average invested assets	$	7,857,099		$	7,656,010

Financial statement portfolio return		2.4	%		6.3	%


*		Excludes reclassification of net unrealized gains of $41,889 related to the adoption of ASU 2010-11.

Page 30

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 and the company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. See pages 23 and 24 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 credit spread 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 25 and 26 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 23 and 24 for the reconciliation of net income to operating income and pages 25 and 26 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 an important measure of calculating shareholder returns. See page 27 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 28 and 29 for reconciliation of annualized investment book yield.

Page 31

Attached files

Allied World Assurance Co Holdings, AG Reports

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