Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Allied World Assurance Co Holdings, AG | y92542e8vk.htm |
Exhibit 99.1
| INVESTOR PRESENTATION 2nd Quarter 2011 |
| Forward-Looking Statements & Safe Harbor This presentation contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are "forward-looking statements". In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "might," "will," "should," "expect," "plan," "intend," "estimate," "anticipate," "believe," "predict," "potential" or "continue" or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements. As a result, there can be no assurance that the forward-looking statements included in this presentation will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this presentation might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements that may be made from time to time. We are under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. 2 |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 3 |
| Allied World's Franchise Consistently strong / industry leading results Experienced executive management team Diversified mix of business with global operations Strong risk management culture Excellent capitalization / active capital management Significant investment income returns Rated "A" (Strong) by S&P and "A" (Excellent) by AM Best Highly Rated, Well-diversified Property and Casualty Insurer and Reinsurer with Significant Geographic Reach 4 |
| Operating Segments U.S. Insurance Major Product Lines: Healthcare: Strong primary presence with healthcare facilities and managed care organizations General Casualty & Product Liability: Specialty insurance products; Professional Liability: D&O, employment practices, fiduciary and E&O; Property: Cat and non-cat exposed International Insurance Major Product Lines: General & Product Liability: Specialty insurance products; Professional Liability: D&O, employment practices, fiduciary and E&O; Property: Physical property and business interruption coverage for commercial risks; Healthcare: Strong provider of excess coverages to healthcare facilities Reinsurance Major Product Lines: General Casualty Professional Liability Property per Risk Property Catastrophe International Global Marine & Specialty PA / WC Catastrophe Operating platforms in Bermuda, Europe, Hong Kong, Lloyd's, Singapore and the United States Total TTM June 30, 2011 Gross Premiums Written $1,841 MM 5 |
| Customer focus Moving closer to clients in certain lines and markets Demonstrate expertise in markets in which we underwrite Become "go to" market for targeted lines and classes of business such as healthcare and construction Diversified insurance and reinsurance products offered across global platform with operations in the U.S., Bermuda, Lloyd's, Europe, Hong Kong and Singapore Insurance and casualty emphasis with strong reinsurance and property capabilities Strong risk management controls Our Key Business Strategies Leading specialty insurance company with broad range of product offerings, global capabilities and significant U.S. focus 6 * Includes healthcare-related program business TTM June 2011 GPW: $ 1,841 MM 70% Insurance / 30% Reinsurance 75% Casualty / 25% Property |
| (CHART) Active Capital Management Improves Shareholder Value * Excludes $243.8 million syndicated loan which was repaid on February 23, 2009 7 Diluted book value per share has more than doubled since 2006 Capital Management History $167 million of common dividends paid since going public in 2006 $563 million of shares repurchased from AIG in December 2007 $500 million share repurchase program $299 million of shares repurchased through June 2011 $201 million remaining capacity $505 million of shares and warrants repurchased from founders in 2010 $300 million in ten-year senior notes issued in November 2010 $53.6 million warrant repurchased from founder in first quarter 2011 (In millions, except for per share amounts) |
| Superior Execution in a Challenging Marketplace Consistently Strong Operating Performance Strong Operating Income - Operating return on equity of 20.3% over last five calendar years, $3 million positive operating income in first half of 2011 despite impact from catastrophic events ($200 million) Favorable Reserve Development - Each of last 7 years, $88 million in first half of 2011 Solid Investment Returns - $469 million, 6.1%, total net investment return1 in 2010, $175 million, 2.2%, in first half of 2011 Operating Cash Flows - $451 million in 2010, $362 million in first half of 2011 Book Value Growth - Book value per share has increased 140% since the company went public in 2006 8 1 Total net investment return includes net investment income, net realized gains, net change in unrealized gains and net impairment charges recognized in earnings. The percentage return is calculated by taking the total net investment return for the year divided by the average aggregate invested assets for the year. 2 Financial leverage calculated by dividing debt by total capital at 06/11. 3Operating leverage calculated by net premium leverage (TTM 06/11 NPW divided by 06/11 total shareholders' equity) and 06/11 net reserve leverage (6/11 net loss reserves divided by 6/11 ending shareholders' equity). Strong Capital Base Total capital base of $3.8 billion at June 2011, with moderate financial leverage2 of 20.8% and conservative operating leverage3 of 1.87x |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 9 |
| Our U.S. Insurance Operating Segment - A significant U.S.- based specialty franchise with diversified offerings Direct property and casualty insurance for small and middle-market non-Fortune 1000 companies Expanding small account primary franchise Focus on servicing products for select industry classes including construction and public entity Leading healthcare facility market Expanding presence in specialty casualty and private and not-for-profit D&O Admitted and excess & surplus lines (E&S) capabilities in all 50 states Approved Defense Base Act underwriter Recently began writing environmental and inland marine business Program business initiative * Includes healthcare-related program business Allied World U.S. Insurance Segment TTM June 2011 Product Mix 10 Total TTM June 2011 GPW: $788 MM |
| Expanding U.S. Direct Operating Platform Nine branch offices in strategic locations throughout the U.S. Dedicated U.S. management team with significant industry experience Significantly increased submission activity throughout the country Up over 50% in all regions since 2008 429 staff count, 62% of Allied World group Significant IT infrastructure in place Allied World's expanded presence in U.S. has significantly enhanced the market profile of our domestic operations San Francisco Los Angeles Costa Mesa Dallas Chicago Atlanta Boston Farmington New York 11 |
| International Insurance Operating Segment Bermuda A leading direct writer of Fortune 1000 North American domiciled property and casualty risks Strong diversity of industries covered including manufacturing, chemicals, transportation, real estate, consumer products, medical and healthcare products and construction Recently began writing trade credit and political risk products Europe Focus predominantly on mid-sized to large non-North American domiciled accounts Offers broad range of casualty & property insurance products for multi-national corporations worldwide Lloyd's Syndicate expands insurance product capabilities in Latin America and the Asia Pacific region Recently launched SME and healthcare initiatives Asia Offers professional lines, healthcare and general casualty business Allied World International Insurance Operating Segment TTM June 2011 Product Mix 12 Global diversification and expansion Total TTM June 2011 GPW: $506 MM |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 13 |
| Reinsurance Operating Platforms 14 |
| Reinsurance Operating Segment Casualty Presence Established in U.S. Underwriting teams closer to "decision makers" which provides greater access to information Accessing clients and lines that do not typically access the Bermuda marketplace, including U.S. regional company multi-line business, super regional, middle-market business and stand-alone casualty-clash business Broaden product selection when market conditions improve Strategic Bermuda Platform Property catastrophe, property per risk, workers' compensation catastrophe, accident & health, specialty casualty and international Expanded Global Presence Swiss and Singapore offices Lloyd's Syndicate established in June 2010 Allied World Reinsurance Segment TTM June 2011 Product Mix 15 Flexibility to take advantage of reinsurance opportunities in the global marketplace Total TTM June 2011 GPW: $547 MM |
| Expanded Reinsurance Capabilities 16 U.S. Initiatives In 2009, added property reinsurance that focuses on small and medium account regional carriers Recently launched Global Marine and Specialty unit that offers marine, aviation and satellite coverages, as well as crop and hail business International Initiatives Swiss office opened in 2008 offers property, general casualty and professional liability products throughout Europe Singapore office opened in 2009 as Allied World's hub for all classes of treaty business in Asia Pacific, Middle East and Africa Established Lloyd's Syndicate 2232 in June 2010, which significantly expands reinsurance products throughout Europe, Latin American and the Asia Pacific region |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 17 |
| Financial Highlights Operating Results Q2 2011 YTD 2010 2009 2008 Net Income $102 MM $665 MM $607 MM $108 MM Operating Income $3 MM $398 MM $538 MM $455 MM Annualized Net Income Return on Average Equity 6.8% 21.9% 22.6% 8.3% Annualized Operating Return on Average Equity 0.2% 13.1% 20.0% 20.6% Combined Ratio 109.6% 84.9% 76.1% 84.1% Cash flow from Operations $362 MM $451 MM $668 MM $657 MM Operating Earnings Per Diluted Share $0.08 $7.97 $10.34 $8.90 Ending Diluted Book Value per Share $76.68 $74.29 $59.56 $46.05 Growth in Diluted Book Value Per Share 3.2% 25% 29% 8% Allied World has reported very strong results despite competitive landscape, financial turbulence and catastrophe activity 18 |
| Annualized Operating ROE 25.8% 22.1% 20.6% 20.0% 13.1% Full year combined ratios below 85% and better than peer group Full year operating income in $400 million range or higher despite industry challenges Strong full year operating return on average equity 19 Consistent Operating Performance - Over our first five calendar years as a public company * Peers include ALTE, ACGL, AGII, AHL, AXS, ENH, HCC, MKL, OB, RLI, THG, NAVG, and WRB. Source: SNL Financial Operating Income and Combined Ratio |
| Strong Underwriting Results Underwriting performance has been strong since our inception (1) Pro-forma including Darwin development since inception (2) Case incurred ratios by year are not directly comparable to our financial statements as reinsurance case incurred losses shown above are on a treaty year basis 20 Historical Loss Ratios Through June 30, 2011 ($MM) 1 2 |
| Net reserves about 4.9% above mid-point of range at June 30, 2011 $1.4 billion net favorable reserve development since inception (including Darwin development) 72% of reserves are IBNR Net Loss & LAE Reserve Mix at June 30, 2011 Case U.S. Insurance, 6% IBNR International Insurance 30% Case International Insurance, 12% IBNR Reinsurance 21% Case Reinsurance, 10% IBNR U.S. Insurance 21% June 30, 2011 Total: $4.2B Net Prior Year Reserve Releases* ($MM) Range of Net Reserves at June 30, 2011 ($MM) Prudent Reserving Philosophy * Pro-forma including Darwin development since inception 21 |
| Investment Portfolio: Active Management 22 We have actively managed the portfolio exposures, including: Exposure to rates Exposure to spread assets Exposure to non-fixed income assets Always within stated risk appetite (CHART) |
| (CHART) Portfolio remains high quality 95% of our fixed income portfolio consists of investment grade securities The average credit quality is AA Portfolio remains well diversified amongst asset classes, sectors and issuers Largest sector exposure is in corporate bonds at 31% of portfolio Largest single-issuer exposure is less than 1% Duration of portfolio remains well short of long term target at 2.3 years U.S. Treasury market vulnerable with U.S. Government financing needs Risk asymmetry remains in place Portfolio Summary - June 30, 2011 Conservative, yet Opportunistic Investment Strategy Total : $8.3 B Portfolio Yield: 2.7% Duration: 2.3 years YTD Total Portfolio Return: 2.2% 23 |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 24 |
| Conclusion Allied World Expects to Generate a Mid-teen ROE Over the Cycle, Assuming Normalized Catastrophe Activity Strong underwriting franchise diversified by product and geography Experienced executive management team in place Excellent capitalization, strong balance sheet and financial flexibility Enhanced by recent capital management initiatives Significant infrastructure investments made since 2008 Strengthened U.S. specialty franchise and global capabilities Well positioned to capitalize on market opportunities Current valuation inconsistent with history of strong returns 25 |
| Agenda Executive Summary Direct Insurance Reinsurance Financial Results and Strength Conclusion Appendix 26 |
| Non-GAAP Financial Measures In presenting the company's results, management has included and discussed in this presentation certain non generally accepted accounting principles ("non- GAAP") financial measures within the meaning of Regulation G as promulgated by the U.S. Securities and Exchange Commission. 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 ("U.S. GAAP"). "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. In addition to presenting net income determined in accordance with U.S. 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 U.S. GAAP net income. 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. "Annualized return on average shareholders' equity" ("ROAE") 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. "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 slides 28 - 30 for a reconciliation of non-GAAP measures used in this presentation to their most directly comparable GAAP measures. 27 |
| Non-GAAP Financial Measures - Reconciliations 28 |
| Non-GAAP Financial Measures - Reconciliations 29 |
| Non-GAAP Financial Measures - Reconciliations 30 |