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

Attached files

file	filename
EX-99.1 - PRESS RELEASE - Allied World Assurance Co Holdings, AG	awh-20160719x8kexhibit991.htm
8-K - 8-K - Allied World Assurance Co Holdings, AG	form8-kx2q2016earningsrele.htm

Exhibit 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

2nd Quarter Ended June 30, 2016

Investor Contact: This report is for informational purposes only. It should be read in conjunction with documents filed by

Sarah Doran Allied World Assurance Company Holdings, AG with the U.S. Securities and Exchange Commission.

Phone: (646)794-0590

Email: sarah.doran@awac.com

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 adequacy of our loss reserves; negative rating agency actions; greater frequency or severity of unpredictable catastrophic events; the impact of acts of terrorism and acts of war; 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.



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

		Page

	Basis of Presentation	4

I.	Financial Highlights
	- Consolidated Financial Highlights	5

II.	Consolidated Financial Statements
	- Consolidated Statements of Operations	6
	- Consolidated Balance Sheets	7
	- Consolidated Statements of Cash Flows	8

III.	Segment Results
	- Consolidated Segment Results - Current Quarter	9
	- Consolidated Segment Results - Prior Quarter	10
	- Consolidated Segment Results - Current Year to Date	11
	- Consolidated Segment Results - Prior Year to Date	12
	- Gross Premiums Written by Line of Business	13

IV.	Incurred Losses, Loss Reserves and PMLs
	- Consolidated Incurred Loss Analysis by Segment	14
	- Net Loss Reserve Development by Loss Year - Current Quarter	15
	- Net Loss Reserve Development by Loss Year - Prior Year Quarter	16
	- Net Loss Reserve Development by Loss Year - Current Year to Date	17
	- Net Loss Reserve Development by Loss Year - Prior Year to Date	18
	- Reinsurance Recoverable	19
	- Probable Maximum Losses	20

V.	Investment Portfolio
	- Consolidated Total Investment Portfolio	21
	- Investment Income, Book Yield and Portfolio Return	22
	- Additional Investment Detail	23

VI.	Capital Structure
	- Share Repurchase Detail	24
	- Capital Structure and Leverage Ratios	25

VII.	Non-GAAP Reconciliations
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share	26
	- Return on Average Shareholders' Equity and Reconciliation of Average Shareholders' Equity	27
	- Reconciliation of Diluted Book Value and Tangible Book Value per Share	28
	- Regulation G	29

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

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

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED FINANCIAL HIGHLIGHTS



			Three Months Ended										Six Months Ended
			June 30,							$	%		June 30,							$	%
			2016			2015				Difference	Difference		2016			2015				Difference	Difference
HIGHLIGHTS
	Gross premiums written		$	800,294		$	825,970		$	(25,676)	(3.1	)%	$	1,663,839		$	1,706,584		$	(42,745)	(2.5	)%
	Net premiums written			578,137			603,669			(25,532)	(4.2	)%		1,282,183			1,376,197			(94,014)	(6.8	)%
	Net premiums earned			602,968			646,376			(43,408)	(6.7	)%		1,183,090			1,214,924			(31,834)	(2.6	)%
	Underwriting income			45,393			5,874			39,519	672.8	%		68,489			73,409			(4,920)	(6.7	)%
	Net investment income			55,839			42,760			13,079	30.6	%		109,092			87,311			21,781	24.9	%
	Net income			153,410			9,458			143,952	1522.0	%		227,509			133,814			93,695	70.0	%
	Operating income			82,681			25,835			56,846	220.0	%		141,690			117,516			24,174	20.6	%
	Total shareholders' equity			3,584,452			3,624,801			(40,349)	(1.1	)%		3,584,452			3,624,801			(40,349)	(1.1	)%
	Cash flows provided by operating activities			152,620			109,826			42,794	39.0	%		500,029			427,402			72,627	17.0	%

PER SHARE AND SHARE DATA
	Basic earnings per share
		Net income	$	1.73		$	0.10		$	1.63	1,630.0	%	$	2.54		$	1.42		$	1.12	78.9	%
		Operating income	$	0.93		$	0.28		$	0.65	232.1	%	$	1.58		$	1.25		$	0.33	26.4	%
	Diluted earnings per share
		Net income	$	1.70		$	0.10		$	1.60	1,600.0	%	$	2.50		$	1.40		$	1.10	78.6	%
		Operating income		0.91			0.27			0.64	237.0	%		1.56			1.23			0.33	26.8	%
	Basic book value per share			40.98			39.92			1.06	2.7	%		40.98			39.92			1.06	2.7	%
	Diluted book value per share			39.70			38.75			0.95	2.5	%		39.70			38.75			0.95	2.5	%
	Diluted tangible book value per share			34.10			33.47			0.63	1.9	%		34.10			33.47			0.63	1.9	%

FINANCIAL RATIOS
	Annualized return on average equity (ROAE), net income			17.2	%		1.0	%			16.2 pts			12.8	%		7.2	%			5.6 pts
	Annualized ROAE, operating income			9.3	%		2.8	%			6.5 pts			7.9	%		6.3	%			1.6 pts
	Financial statement portfolio return			1.4	%		0.3	%			1.1 pts			2.2	%		1.3	%			0.9 pts

	GAAP Ratios
	Loss and loss expense ratio			60.6	%		66.8	%			6.2 pts			62.4	%		62.3	%			(0.1) pts
	Acquisition cost ratio			14.5	%		15.6	%			1.1 pts			14.9	%		14.8	%			(0.1) pts
	General and administrative expense ratio			17.4	%		16.8	%			(0.6) pts			17.0	%		16.9	%			(0.1) pts
	Expense ratio			31.9	%		32.4	%			0.5 pts			31.9	%		31.7	%			(0.2) pts
	Combined ratio			92.5	%		99.2	%			6.7 pts			94.3	%		94.0	%			(0.3) pts

Page 5

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF OPERATIONS



			Three Months Ended															Six Months Ended

			June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
			2016			2016			2015			2015			2015			2016			2015
Revenues
	Gross premiums written		$	800,294		$	863,545		$	632,357		$	754,062		$	825,970		$	1,663,839		$	1,706,584
	Net premiums written		$	578,137		$	704,046		$	464,818		$	606,992		$	603,669		$	1,282,183		$	1,376,197
	Net premiums earned		$	602,968		$	580,122		$	622,809		$	650,653		$	646,376		$	1,183,090		$	1,214,924
	Net investment income			55,839			53,253			49,099			45,667			42,760			109,092			87,311
	Net realized investment gains (losses)			74,493			18,858			(38,849)			(113,626)			(20,182)			93,351			24,843
	Other income			5,177			565			982			735			924			5,742			1,778
		Total revenues	$	738,477		$	652,798		$	634,041		$	583,429		$	669,878		$	1,391,275		$	1,328,856

Expenses
	Net losses and loss expenses		$	365,443		$	372,366		$	412,756		$	416,881		$	431,521		$	737,809		$	756,697
	Acquisition costs			87,403			88,308			95,938			100,101			100,618			175,711			179,317
	General and administrative expenses			104,729			96,352			95,025			105,798			108,363			201,081			205,501
	Other expense			1,682			1,134			1,907			1,245			1,235			2,816			3,058
	Amortization of intangible assets			2,501			2,500			3,668			2,639			2,819			5,001			3,452
	Interest expense			19,879			19,949			18,126			14,469			14,466			39,828			28,803
	Foreign exchange (gain) loss			(2,887)			(3,011)			920			(793)			1,265			(5,898)			11,162
		Total expenses	$	578,750		$	577,598		$	628,340		$	640,340		$	660,287		$	1,156,348		$	1,187,990

Income (loss) before income taxes			$	159,727		$	75,200		$	5,701		$	(56,911)		$	9,591		$	234,927		$	140,866
	Income tax expense (benefit)			6,317			1,101			3,994			(5,281)			133			7,418			7,052
Net income (loss)			$	153,410		$	74,099		$	1,707		$	(51,630)		$	9,458		$	227,509		$	133,814

GAAP Ratios
Loss and loss expense ratio				60.6	%		64.2	%		66.3	%		64.1	%		66.8	%		62.4	%		62.3	%
Acquisition cost ratio				14.5	%		15.2	%		15.4	%		15.4	%		15.6	%		14.9	%		14.8	%
General and administrative expense ratio				17.4	%		16.6	%		15.3	%		16.3	%		16.8	%		17.0	%		16.9	%
Expense ratio				31.9	%		31.8	%		30.7	%		31.7	%		32.4	%		31.9	%		31.7	%
Combined ratio				92.5	%		96.0	%		97.0	%		95.8	%		99.2	%		94.3	%		94.0	%

Per Share Data
Diluted earnings (loss) per share
	Net income (loss)		$	1.70		$	0.81		$	0.02		$	(0.56)		$	0.10		$	2.50		$	1.40
	Operating income		$	0.91		$	0.65		$	0.47		$	0.55		$	0.27		$	1.56		$	1.23

Page 6

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED BALANCE SHEETS



		As of		As of
		June 30, 2016		December 31, 2015
ASSETS
Fixed maturity investments trading, at fair value		$	7,794,198	$	7,201,538
Equity securities trading, at fair value			202,331		403,022
Other invested assets			939,771		966,709
	Total investments		8,936,300		8,571,269
Cash and cash equivalents			584,503		607,983
Restricted cash			78,210		60,629
Insurance balances receivable			960,978		745,888
Funds held			279,136		640,819
Prepaid reinsurance			430,071		392,265
Reinsurance recoverable			1,516,741		1,479,959
Reinsurance recoverable on paid losses			73,809		96,437
Accrued investment income			38,739		38,304
Net deferred acquisition costs			168,918		165,206
Goodwill			392,643		388,127
Intangible assets			113,473		116,623
Balances receivable on sale of investments			114,602		36,889
Net deferred tax assets			21,208		24,401
Other assets			158,023		147,149
TOTAL ASSETS		$	13,867,354	$	13,511,948

LIABILITIES
Reserve for losses and loss expenses		$	6,623,152	$	6,456,156
Unearned premiums			1,822,074		1,683,274
Reinsurance balances payable			227,693		214,369
Balances due on purchases of investments			155,016		125,126
Senior notes			1,293,703		1,292,907
Other long-term debt			23,122		23,033
Accounts payable and accrued liabilities			138,142		184,541
TOTAL LIABILITIES		$	10,282,902	$	9,979,406

SHAREHOLDERS' EQUITY
Common shares: 2016 and 2015: par value CHF 4.10 per share (2016: 93,586,418; 2015: 95,523,230 shares issued and 2016: 87,463,950; 2015: 90,959,635 shares outstanding)		$	366,726	$	386,702
Treasury shares, at cost (2016: 6,122,468; 2015: 4,563,595)			(216,710)		(155,072)
Accumulated other comprehensive loss			(6,024)		(9,297)
Retained earnings			3,440,460		3,310,209
TOTAL SHAREHOLDERS' EQUITY		$	3,584,452	$	3,532,542
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	13,867,354	$	13,511,948

Basic book value per share		$	40.98	$	38.84
Diluted book value per share		$	39.70	$	37.78
Diluted tangible book value per share		$	34.10	$	32.38

Page 7

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF CASH FLOWS



			Three Months Ended										Six Months Ended

			June 30,		March 31,		December 31,		September 30,		June 30,		June 30,		June 30,
			2016		2016		2015		2015		2015		2016		2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)			$	153,410	$	74,099	$	1,708	$	(51,630)	$	9,458	$	227,509	$	133,814
Adjustments to reconcile net income (loss) to cash
	provided by operating activities:
		Net realized (gains) losses on sales of investments		(19,174)		(12,025)		(32,710)		17,039		(25,688)		(31,199)		(58,224)
		Mark to market adjustments		(62,210)		(27,088)		77,340		76,829		58,286		(89,298)		35,592
		Stock compensation expense		4,757		3,881		3,949		3,934		3,869		8,638		7,871
		Undistributed income of equity method investments		5,993		9,207		3,365		3,257		6,220		15,200		15,987
Changes in:
		Reserve for losses and loss expenses, net of reinsurance recoverables		43,293		86,922		(12,907)		55,908		119,037		130,215		132,927
	Unearned premiums, net of prepaid reinsurance			(24,538)		125,533		(157,271)		(47,057)		(43,543)		100,995		160,437
	Insurance balances receivable			(76,919)		(139,527)		160,141		39,138		(53,734)		(216,446)		(162,313)
	Reinsurance recoverable on paid losses			8,853		13,775		20,673		(28,689)		18,650		22,628		(2,346)
	Funds held			74,020		287,663		(197,149)		18,823		17,416		361,683		261,528
	Reinsurance balances payable			6,060		7,264		(45,917)		28,875		7,217		13,324		11,479
	Net deferred acquisition costs			17,960		(21,672)		27,913		6,721		18,078		(3,712)		(17,622)
	Net deferred tax assets			3,764		(571)		7,399		(7,450)		(6,384)		3,193		(2,691)
	Accounts payable and accrued liabilities			2,220		(50,128)		28,914		15,557		20,405		(47,908)		(54,603)
	Other items, net			15,131		(9,924)		35,904		32,729		(39,461)		5,207		(34,434)
		Net cash provided by (used in) operating activities		152,620		347,409		(78,648)		163,984		109,826		500,029		427,402

CASH FLOWS (USED IN) PROVIDED BY INVESTING ACTIVITIES:
Net (purchases) sales of investments				(236,688)		(84,779)		(475,234)		(135,672)		449,477		(321,467)		111,207
Purchases of fixed assets				(1,351)		(560)		(8,041)		(5,814)		(9,610)		(1,911)		(17,984)
Change in restricted cash				9,216		(26,797)		99,234		(52,794)		(57,138)		(17,581)		(26,098)
Net cash paid for acquisitions				(1,244)		0		17,083		—		(137,960)		(1,244)		(141,503)
		Net cash (used in) provided by investing activities		(230,067)		(112,136)		(366,958)		(194,280)		244,769		(342,203)		(74,378)

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid				(22,839)		(23,359)		(47,287)		(23,593)		(21,522)		(46,198)		(43,191	)
Proceeds from the exercise of stock options				2,757		358		954		1,795		3,166		3,115		7,389
Proceeds from senior notes				—		—		496,705		—		—		—		—
(Repayment) proceeds from other long-term debt				(75)		(76)		(72)		(79)		3,928		(151)		3,928
Share repurchases				(89,491)		(50,000)		—		—		(196,170)		(139,491)		(246,443)
		Net cash (used in) provided by financing activities		(109,648)		(73,077)		450,300		(21,877)		(210,598)		(182,725)		(278,317)
Effect of exchange rate changes on foreign currency cash				(433)		1,852		(521)		(5,864)		2,780		1,419		(2,199)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS				(187,528)		164,048		4,173		(58,037)		146,777		(23,480)		72,508
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				772,031		607,983		603,810		661,847		515,070		607,983		589,339
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	584,503	$	772,031	$	607,983	$	603,810	$	661,847	$	584,503	$	661,847

Page 8

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT QUARTER



			Three Months Ended June 30, 2016

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	508,382		$	125,436		$	166,476		$	800,294
	Net premiums written		$	330,766		$	88,223		$	159,148		$	578,137
	Net premiums earned		$	329,642		$	94,156		$	179,170		$	602,968
		Total revenues	$	329,642		$	94,156		$	179,170		$	602,968

Expenses
	Net losses and loss expenses		$	(209,943)		$	(61,091)		$	(94,409)		$	(365,443)
	Acquisition costs			(37,435)			(16,270)			(33,698)			(87,403)
	General and administrative expenses			(56,840)			(31,528)			(16,361)			(104,729)
		Total expenses	$	(304,218)		$	(108,889)		$	(144,468)		$	(557,575)

Underwriting income (loss)			$	25,424		$	(14,733)		$	34,702		$	45,393
		Other insurance-related income		914			—			4,263			5,177
		Other insurance-related expenses		(599)			—			(1,083)			(1,682)
Segment income (loss)			$	25,739		$	(14,733	)	$	37,882		$	48,888

	Net investment income												55,839
	Net realized investment gains												74,493
	Amortization of intangible assets												(2,501)
	Interest expense												(19,879)
	Foreign exchange gain												2,887
Income before income taxes												$	159,727

GAAP Ratios
Loss and loss expense ratio				63.7	%		64.9	%		52.7	%		60.6	%
Acquisition cost ratio				11.4	%		17.3	%		18.8	%		14.5	%
General and administrative expense ratio				17.2	%		33.5	%		9.1	%		17.4	%
Expense ratio				28.6	%		50.8	%		27.9	%		31.9	%
Combined ratio				92.3	%		115.7	%		80.6	%		92.5	%

Page 9

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR QUARTER



			Three Months Ended June 30, 2015

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	517,483		$	134,997		$	173,490		$	825,970
	Net premiums written		$	372,193		$	69,260		$	162,216		$	603,669
	Net premiums earned		$	328,541		$	102,626		$	215,209		$	646,376
		Total revenues	$	328,541		$	102,626		$	215,209		$	646,376

Expenses
	Net losses and loss expenses		$	(237,747)		$	(65,754)		$	(128,020)		$	(431,521)
	Acquisition costs			(34,201)			(24,337)			(42,080)			(100,618)
	General and administrative expenses			(58,144)			(30,724)			(19,495)			(108,363)
		Total expenses	$	(330,092)		$	(120,815)		$	(189,595)		$	(640,502)

Underwriting (loss) income			$	(1,551)		$	(18,189)		$	25,614		$	5,874
		Other insurance-related income		924			—			—			924
		Other insurance-related expenses		(591)			(644)			—			(1,235)
Segment (loss) income			$	(1,218)		$	(18,833)		$	25,614		$	5,563

	Net investment income												42,760
	Net realized investment losses												(20,182)
	Amortization of intangible assets												(2,819)
	Interest expense												(14,466)
	Foreign exchange loss												(1,265)
Income before income taxes												$	9,591

GAAP Ratios
Loss and loss expense ratio				72.4	%		64.1	%		59.5	%		66.8	%
Acquisition cost ratio				10.4	%		23.7	%		19.6	%		15.6	%
General and administrative expense ratio				17.7	%		29.9	%		9.1	%		16.8	%
Expense ratio				28.1	%		53.6	%		28.7	%		32.4	%
Combined ratio				100.5	%		117.7	%		88.2	%		99.2	%

Page 10

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT YEAR TO DATE



			Six Months Ended June 30, 2016

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	887,565		$	240,964		$	535,310		$	1,663,839
	Net premiums written		$	597,013		$	175,835		$	509,335		$	1,282,183
	Net premiums earned		$	645,911		$	188,364		$	348,815		$	1,183,090
		Total revenues	$	645,911		$	188,364		$	348,815		$	1,183,090

Expenses
	Net losses and loss expenses		$	(426,161)		$	(128,890)		$	(182,758)		$	(737,809)
	Acquisition costs			(71,319)			(34,176)			(70,216)			(175,711)
	General and administrative expenses			(109,009)			(60,557)			(31,515)			(201,081)
		Total expenses	$	(606,489)		$	(223,623)		$	(284,489)		$	(1,114,601)

Underwriting income (loss)			$	39,422		$	(35,259)		$	64,326		$	68,489
		Other insurance-related income		1,479			—			4,263			5,742
		Other insurance-related expenses		(1,305)			(5)			(1,506)			(2,816)
Segment income (loss)			$	39,596		$	(35,264)		$	67,083		$	71,415

	Net investment income												109,092
	Net realized investment gains												93,351
	Amortization of intangible assets												(5,001)
	Interest expense												(39,828)
	Foreign exchange gain												5,898
Income before income taxes												$	234,927

GAAP Ratios
Loss and loss expense ratio				66.0	%		68.4	%		52.4	%		62.4	%
Acquisition cost ratio				11.0	%		18.1	%		20.1	%		14.9	%
General and administrative expense ratio				16.9	%		32.1	%		9.0	%		17.0	%
Expense ratio				27.9	%		50.2	%		29.1	%		31.9	%
Combined ratio				93.9	%		118.6	%		81.5	%		94.3	%

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR TO DATE



			Six Months Ended June 30, 2015

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	898,249		$	195,559		$	612,776		$	1,706,584
	Net premiums written		$	669,075		$	112,155		$	594,967		$	1,376,197
	Net premiums earned		$	641,511		$	152,666		$	420,747		$	1,214,924
		Total revenues	$	641,511		$	152,666		$	420,747		$	1,214,924

Expenses
	Net losses and loss expenses		$	(433,226)		$	(86,264)		$	(237,207)		$	(756,697)
	Acquisition costs			(65,233)			(31,345)			(82,739)			(179,317)
	General and administrative expenses			(117,432)			(48,749)			(39,320)			(205,501)
		Total expenses	$	(615,891)		$	(166,358)		$	(359,266)		$	(1,141,515)

Underwriting income (loss)			$	25,620		$	(13,692)		$	61,481		$	73,409
		Other insurance-related income		1,778			—			—			1,778
		Other insurance-related expenses		(1,445)			(1,613)			—			(3,058)
Segment income (loss)			$	25,953		$	(15,305)		$	61,481		$	72,129

	Net investment income												87,311
	Net realized investment gains												24,843
	Amortization of intangible assets												(3,452)
	Interest expense												(28,803)
	Foreign exchange loss												(11,162)
Income before income taxes												$	140,866

GAAP Ratios
Loss and loss expense ratio				67.5	%		56.5	%		56.4	%		62.3	%
Acquisition cost ratio				10.2	%		20.5	%		19.7	%		14.8	%
General and administrative expense ratio				18.3	%		31.9	%		9.3	%		16.9	%
Expense ratio				28.5	%		52.4	%		29.0	%		31.7	%
Combined ratio				96.0	%		108.9	%		85.4	%		94.0	%

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS



	Three Months Ended								Six Months Ended

	June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
North American Insurance
Casualty	$	167,231	32.9	%	$	181,557	35.1	%	$	271,976	30.7	%	$	305,035	34.0	%
Professional liability		118,544	23.3	%		120,580	23.3	%		214,967	24.2	%		216,814	24.1	%
Property		87,687	17.2	%		104,811	20.3	%		145,933	16.4	%		166,289	18.5	%
Other specialty⁽¹⁾		53,015	10.5	%		37,121	7.2	%		88,234	9.9	%		61,521	6.8	%
Programs		48,177	9.5	%		40,090	7.7	%		100,159	11.3	%		80,611	9.0	%
Healthcare⁽²⁾		33,728	6.6	%		33,324	6.4	%		66,296	7.5	%		67,979	7.6	%
Total	$	508,382	100.0	%	$	517,483	100.0	%	$	887,565	100.0	%	$	898,249	100.0	%

Global Markets Insurance
Professional liability	$	41,038	32.8	%	$	36,606	27.1	%	$	67,980	28.3	%	$	63,050	32.2	%
Other specialty⁽³⁾		37,178	29.6	%		43,228	32.0	%		73,940	30.6	%		58,996	30.2	%
Casualty		26,464	21.1	%		30,511	22.6	%		56,211	23.3	%		39,252	20.1	%
Property		20,756	16.5	%		24,652	18.3	%		42,833	17.8	%		34,261	17.5	%
Total	$	125,436	100.0	%	$	134,997	100.0	%	$	240,964	100.0	%	$	195,559	100.0	%

Reinsurance
Property	$	96,248	57.8	%	$	112,769	65.0	%	$	291,053	54.4	%	$	343,911	56.1	%
Specialty		37,096	22.3	%		28,495	16.4	%		162,303	30.3	%		174,572	28.5	%
Casualty⁽⁴⁾		33,132	19.9	%		32,226	18.6	%		81,954	15.3	%		94,293	15.4	%
Total	$	166,476	100.0	%	$	173,490	100.0	%	$	535,310	100.0	%	$	612,776	100.0	%

⁽¹⁾ Includes the construction, environmental, surety and trade credit lines of business.
⁽²⁾ Includes the medical malpractice line of business. The healthcare management liability line of business previously included in the healthcare line of business is
included in the professional liability line of business. The comparative period was updated to reflect the current presentation.
⁽³⁾ Includes accident and health, aviation, construction, marine and trade credit lines of business.
⁽⁴⁾ Includes the professional liability reinsurance line of business.

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED INCURRED LOSS ANALYSIS BY SEGMENT



	Three Months Ended								Six Months Ended

	June 30, 2016				June 30, 2015				June 30, 2016				June 30, 2015
	Amount		% of NPE⁽¹⁾		Amount		% of NPE⁽¹⁾		Amount		% of NPE⁽¹⁾		Amount			% of NPE⁽¹⁾
North American Insurance
Current year - non-catastrophe	$	221,419	67.2	%	$	226,994	69.1	%	$	437,732	67.9	%	$	447,679		69.9	%
Current year - property catastrophe		4,600	1.4	%		—	0.0	%		4,600	0.7	%		—		0.0	%
Prior year - increase (decrease)		(16,076)	(4.9	)%		10,753	3.3	%		(16,171)	(2.6	)%		(14,453)		(2.4	)%
Net losses and loss expenses	$	209,943	63.7	%	$	237,747	72.4	%	$	426,161	66.0	%	$	433,226		67.5	%

Global Markets Insurance
Current year - non-catastrophe	$	67,172	71.4	%	$	63,973	62.4	%	$	139,157	73.9	%	$	99,706		65.3	%
Current year - property catastrophe		—	0.0	%		4,000	3.9	%		—	0.0	%		4,000		2.6	%
Prior year - increase (decrease)		(6,081)	(6.5	)%		(2,219)	(2.2	)%		(10,267)	(5.5	)%		(17,442)		(11.4	)%
Net losses and loss expenses	$	61,091	64.9	%	$	65,754	64.1	%	$	128,890	68.4	%	$	86,264		56.5	%

Reinsurance
Current year - non-catastrophe	$	93,809	52.3	%	$	137,393	63.8	%	$	203,312	58.3	%	$	269,792		64.1	%
Current year - property catastrophe		16,275	9.1	%		21,000	9.8	%		16,275	4.7	%		21,000		5.0	%
Prior year - increase (decrease)		(15,675)	(8.7	)%		(30,373)	(14.1	)%		(36,829)	(10.6	)%		(53,585)		(12.7	)%
Net losses and loss expenses	$	94,409	52.7	%	$	128,020	59.5	%	$	182,758	52.4	%	$	237,207		56.4	%

Consolidated
Current year - non-catastrophe	$	382,400	63.4	%	$	428,360	66.3	%	$	780,201	65.9	%	$	817,177		67.2	%
Current year - property catastrophe		20,875	3.5	%		25,000	3.9	%		20,875	1.8	%		25,000		2.1	%
Prior year - increase (decrease)		(37,832)	(6.3	)%		(21,839)	(3.4	)%		(63,267)	(5.3	)%		(85,480	)	(7.0	)%
Net losses and loss expenses	$	365,443	60.6	%	$	431,521	66.8	%	$	737,809	62.4	%	$	756,697		62.3	%

(1) "NPE" means net premiums earned.

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – CURRENT QUARTER



	Three Months Ended June 30, 2016
(Favorable) Unfavorable Development ($ in millions)	2010 and Prior		2011			2012		2013		2014		2015		Total

North American Insurance
Casualty	$	(13.5)	$	(2.3)		$	2.1	$	1.6	$	4.5	$	0.4	$	(7.2)
Professional liability		(7.5)		(0.9)			(3.0)		2.4		(0.1)		0.1		(9.0)
Property		(0.4)		0.1			(0.1)		(0.3)		(3.3)		4.0		0.0
Programs		0.1		1.2			1.0		(0.4)		(1.9)		1.0		1.0
Healthcare		0.0		0.0			0.0		0.0		0.0		0.0		0.0
Other specialty		0.0		0.0			0.0		0.0		0.3		(1.2)		(0.9)
Total	$	(21.3)	$	(1.9)		$	0.0	$	3.3	$	(0.5)	$	4.3	$	(16.1)

Global Markets Insurance
Casualty	$	(1.2)	$	0.0		$	(0.2)	$	(1.5)	$	0.4	$	0.0	$	(2.5)
Professional liability		1.9		(0.7)			(0.9)		0.6		(0.5)		0.0		0.4
Property		(1.9)		(0.6)			(0.1)		0.3		(0.9)		(0.1)		(3.3)
Other specialty		(0.1)		0.3			0.0		0.8		0.1		(1.9)		(0.8)
Total	$	(1.3)	$	(1.0)		$	(1.2)	$	0.2	$	(0.9)	$	(2.0)	$	(6.2)

Reinsurance
Property	$	(0.7)	$	(0.1)		$	—	$	(1.1)	$	(6.7)	$	(4.7)	$	(13.3)
Casualty		1.3		(4.0)			1.3		1.5		(0.3)		(0.1)		(0.3)
Specialty		(0.5)		(0.6	)		0.8		(0.3)		0.5		(1.9)		(2.0)
Total	$	0.1	$	(4.7)		$	2.1	$	0.1	$	(6.5)	$	(6.7)	$	(15.6)

Consolidated
North American Insurance	$	(21.3)	$	(1.9)		$	0.0	$	3.3	$	(0.5)	$	4.3	$	(16.1)
Global Markets Insurance		(1.3)		(1.0)			(1.2)		0.2		(0.9)		(2.0)		(6.2)
Reinsurance		0.1		(4.7)			2.1		0.1		(6.5)		(6.7)		(15.6)
Total	$	(22.5)	$	(7.6)		$	0.9	$	3.6	$	(7.9)	$	(4.4)	$	(37.9)

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – PRIOR YEAR QUARTER



	Three Months Ended June 30, 2015
(Favorable) Unfavorable Development ($ in millions)	2009 and Prior		2010		2011		2012		2013		2014		Total

North American Insurance
Casualty	$	(3.2)	$	(2.7)	$	(2.2)	$	4.0	$	4.8	$	0.0	$	0.7
Professional liability		22.7		(7.9)		(6.8)		0.0		0.3		5.5		13.8
Property		(0.8)		0.0		(0.7)		(0.7)		(0.1)		(2.0)		(4.3)
Programs		(0.7)		(1.4)		(1.9)		(2.5)		0.7		(0.1)		(5.9)
Healthcare		(3.5)		1.8		2.4		2.1		3.1		0.0		5.9
Other specialty		0.0		0.0		0.0		0.0		0.0		0.5		0.5
Total	$	14.5	$	(10.2)	$	(9.2)	$	2.9	$	8.8	$	3.9	$	10.7

Global Markets Insurance
Casualty	$	(4.1)	$	(2.4)	$	0.4	$	2.0	$	0.0	$	(1.2)	$	(5.3)
Professional liability		4.4		(1.3)		(0.7)		(0.9)		(0.5)		0.4		1.4
Property		(1.8)		0.4		(0.4)		0.0		(0.6)		(0.5)		(2.9)
Other specialty		(0.1)		(0.2)		(0.2)		(0.4)		2.2		3.3		4.6
Total	$	(1.6)	$	(3.5)	$	(0.9)	$	0.7	$	1.1	$	2.0	$	(2.2)

Reinsurance
Property	$	(0.2)	$	1.7	$	3.8	$	(7.0)	$	9.6	$	(33.2)	$	(25.3)
Casualty		(2.1)		(5.3)		1.2		3.1		1.4		0.9		(0.8)
Specialty		(0.2)		0.0		(0.3)		0.4		(1.5)		(2.7)		(4.3)
Total	$	(2.5)	$	(3.6)	$	4.7	$	(3.5)	$	9.5	$	(35.0)	$	(30.4)

Consolidated
North American Insurance	$	14.5	$	(10.2)	$	(9.2)	$	2.9	$	8.8	$	3.9	$	10.7
Global Markets Insurance		(1.6)		(3.5)		(0.9)		0.7		1.1		2.0		(2.2)
Reinsurance		(2.5)		(3.6)		4.7		(3.5)		9.5		(35.0)		(30.4)
Total	$	10.4	$	(17.3)	$	(5.4)	$	0.1	$	19.4	$	(29.1)	$	(21.9)

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – CURRENT YEAR TO DATE



	Six Months Ended June 30, 2016
(Favorable) Unfavorable Development ($ in millions)	2010 and Prior		2011		2012		2013		2014		2015		Total

North American Insurance
Casualty	$	(27.3)	$	(0.1)	$	13.2	$	6.3	$	6.4	$	0.4	$	(1.1)
Professional liability		(16.8)		(3.3)		(4.8)		7.0		3.7		0.1		(14.1)
Property		(0.7)		(0.1)		0.1		0.1		(4.9)		5.8		0.3
Programs		1.1		1.2		4.5		(3.5)		(3.3)		(0.5)		(0.5)
Healthcare		0.2		(0.2)		0.0		0.0		0.0		0.0		0.0
Other specialty		0.0		0.0		0.0		0.0		0.4		(1.2)		(0.8)
Total	$	(43.5)	$	(2.5)	$	13.0	$	9.9	$	2.3	$	4.6	$	(16.2)

Global Markets Insurance
Casualty	$	(3.3)	$	(0.3)	$	(0.8)	$	(0.2)	$	0.5	$	2.7	$	(1.4)
Professional liability		1.3		0.5		(1.1)		0.7		0.8		0.4		2.6
Property		(7.0)		0.5		0.7		0.1		(3.2)		4.8		(4.1)
Other specialty		(0.2)		0.4		0.0		0.8		0.0		(8.4)		(7.4)
Total	$	(9.2)	$	1.1	$	(1.2)	$	1.4	$	(1.9)	$	(0.5)	$	(10.3)

Reinsurance
Property	$	0.8	$	3.0	$	(3.8)	$	(9.5)	$	(4.4)	$	(23.3)	$	(37.2)
Casualty		(9.4)		(3.4)		12.0		10.5		4.4		(6.1)		8.0
Specialty		(0.4)		(1.3)		0.2		2.5		(6.6)		(2.0)		(7.6)
Total	$	(9.0)	$	(1.7)	$	8.4	$	3.5	$	(6.6)	$	(31.4)	$	(36.8)

Consolidated
North American Insurance	$	(43.5)	$	(2.5)	$	13.0	$	9.9	$	2.3	$	4.6	$	(16.2)
Global Markets Insurance		(9.2)		1.1		(1.2)		1.4		(1.9)		(0.5)		(10.3)
Reinsurance		(9.0)		(1.7)		8.4		3.5		(6.6)		(31.4)		(36.8)
Total	$	(61.7)	$	(3.1)	$	20.2	$	14.8	$	(6.2)	$	(27.3)	$	(63.3)

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – PRIOR YEAR TO DATE



	Six Months Ended June 30, 2015
(Favorable) Unfavorable Development ($ in millions)	2009 and Prior		2010		2011		2012		2013		2014		Total

North American Insurance
Casualty	$	(11.7)	$	(2.3)	$	(7.1)	$	6.2	$	7.0	$	0.3	$	(7.6)
Professional liability		15.0		(16.2)		(10.4)		2.3		0.3		5.5		(3.5)
Property		(0.7)		0.0		(0.5)		(2.4)		(2.5)		0.1		(6.0)
Programs		(2.9)		(3.2)		(2.2)		(2.5)		0.7		(0.4)		(10.5)
Healthcare		(4.9)		(0.3)		5.5		7.4		3.1		0.0		10.8
Other specialty		0.0		(0.1)		0.0		0.5		0.0		1.9		2.3
Total	$	(5.2)	$	(22.1)	$	(14.7)	$	11.5	$	8.6	$	7.4	$	(14.5)

Global Markets Insurance
Casualty	$	(6.5)	$	(2.6)	$	0.1	$	2.1	$	(0.5)	$	(1.2)	$	(8.6)
Professional liability		0.3		(4.7)		(0.9)		4.3		(0.5)		0.4		(1.1)
Property		(1.7)		0.2		(0.4)		(0.2)		(4.3)		(3.8)		(10.2)
Other specialty		(0.1)		(0.2)		(0.2)		(0.4)		1.0		2.4		2.5
Total	$	(8.0)	$	(7.3)	$	(1.4)	$	5.8	$	(4.3)	$	(2.2)	$	(17.4)

Reinsurance
Property	$	(1.5)	$	1.6	$	4.0	$	(7.6)	$	8.9	$	(44.5)	$	(39.1)
Casualty		(12.8)		(12.9)		0.5		4.8		4.7		1.4		(14.3)
Specialty		(0.3)		0.0		(0.3)		0.3		(1.8)		1.9		(0.2)
Total	$	(14.6)	$	(11.3)	$	4.2	$	(2.5)	$	11.8	$	(41.2)	$	(53.6)

Consolidated
North American Insurance	$	(5.2)	$	(22.1)	$	(14.7)	$	11.5	$	8.6	$	7.4	$	(14.5)
Global Markets Insurance		(8.0)		(7.3)		(1.4)		5.8		(4.3)		(2.2)		(17.4)
Reinsurance		(14.6)		(11.3)		4.2		(2.5)		11.8		(41.2)		(53.6)
Total	$	(27.8)	$	(40.7)	$	(11.9)	$	14.8	$	16.1	$	(36.0)	$	(85.5)

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

REINSURANCE RECOVERABLE



	June 30, 2016							December 31, 2015

	A.M. Best	Reinsurance						A.M. Best	Reinsurance
Top Ten Reinsurers	Rating(1)	Recoverable		Percentage		Collateral		Rating	Recoverable		Percentage		Collateral

Munich Re	A+	$	319,517	21.1	%	$	90,381	A+	$	307,865	20.8	%	$	90,393
Axis Capital	A+		148,923	9.8	%		7,122	A+		150,832	10.2	%		7,122
Swiss Re	A+		117,171	7.7	%		6,088	A+		103,872	7.0	%		6,088
Arch Re	A+		107,314	7.1	%		2,894	A+		115,330	7.8	%		2,894
Markel	A		95,819	6.3	%		25,804	A		90,105	6.1	%		25,232
RenaissanceRe	A+		90,170	5.9	%		—	A+		93,991	6.4	%		—
XL Group	A		83,520	5.5	%		794	A		87,132	5.9	%		794
Odyssey Reinsurance	A		74,675	4.9	%		—	A		77,203	5.2	%		—
Everest Re	A+		57,557	3.8	%		19,017	A+		51,006	3.4	%		19,017
Transatlantic	A		53,939	3.6	%		—	A		55,336	3.7	%		—
Top ten reinsurers			1,148,605	75.7	%		152,100			1,132,672	76.5	%		151,540
Other reinsurers' balances			368,136	24.3	%		28,902			347,287	23.5	%		27,183
Total reinsurance recoverable		$	1,516,741	100.0	%	$	181,002		$	1,479,959	100.0	%	$	178,723

		Reinsurance							Reinsurance
A.M Best Rating⁽¹⁾		Recoverable		Percentage		Collateral			Recoverable		Percentage		Collateral

A++		$	89,358	5.9	%	$	1,513		$	81,374	5.5	%	$	1,399
A+			898,493	59.2	%		125,502			896,981	60.6	%		125,514
A			512,861	33.8	%		29,697			486,344	32.9	%		28,871
A-			5,437	0.4	%		—			4,408	0.3	%		—
Total "A-" or higher			1,506,149	99.3	%		156,712			1,469,107	99.3	%		155,784
B++			—	0.0	%		—			4	0.0	%		—
NR			10,592	0.7	%		24,290			10,848	0.7	%		22,939
Total reinsurance recoverable		$	1,516,741	100.0	%	$	181,002		$	1,479,959	100.0	%	$	178,723

⁽¹⁾ A.M. Best rating is used to the extent available, otherwise its equivalent Standard & Poor's rating is used.

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

PROBABLE MAXIMUM LOSSES



Consolidated Estimated Net Loss as of June 1, 2016
		1-in-100 Year		1-in-250 Year				1-in-100 Year		1-in-250 Year
		($ in millions)						($ in millions)
Zone	Peril	PML		PML		Zone	Peril	PML		PML


U.S. total	Hurricane	$	410	$	555	California	Earthquake	$	300	$	424

U.S. total	Earthquake	$	372	$	480	U.S. Southeast⁽¹⁾	Hurricane	$	358	$	410

						U.S. Gulf Coast⁽²⁾	Hurricane	$	270	$	375

						U.S. Northeast⁽³⁾	Hurricane	$	230	$	385

PMLs Over the Most Recent Six Quarters as a % of Total Capital⁽⁴⁾

(1) Florida, Georgia, North Carolina and South Carolina.

(2) Alabama, Louisiana, Mississippi and Texas.

(3) Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

(4) Total capital combines shareholders' equity, other long-term debt and senior notes adjusted for the repayment of the senior notes due in August 2016 with the senior notes issued in October 2015.

Note: We develop the estimates of losses expected from certain catastrophes for our portfolio of (re)insurance contracts using commercially available catastrophe models, including RMS and AIR. The above tables show our largest Probable Maximum Losses ("PMLs") from a single catastrophic event (1) within a specific peril which corresponds to peak industry catastrophe exposures and (2) within a defined zone which corresponds to peak industry catastrophe exposures at June 1, 2016. A zone is a geographic area in which the insurance risks are considered to be correlated to a single catastrophic event. Net loss estimates and zonal aggregates are before income tax and net of reinsurance and retrocessional recoveries. The 1-in-100 year and 1-in-250 year return periods refer to the frequency with which losses of a given amount or greater are expected to occur.

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED TOTAL INVESTMENT PORTFOLIO



				As of June 30, 2016												As of December 31, 2015


							Average	Portfolio		Investment		Non-Investment
				Fair Value			Rating	Percentage		Grade		Grade		Total			Fair Value
Cash and cash equivalents				$	662,713		AAA	6.9	%	$	662,713	$	—	$	662,713	$	668,612
U.S. government and agency securities					1,805,505		AA+	18.7	%		1,805,505		—		1,805,505		1,434,048
Non-U.S. government and government agencies					469,524		AA	4.9	%		442,192		27,332		469,524		556,758
State, municipalities and political subdivisions					504,619		AA	5.3	%		458,212		46,407		504,619		413,473
Mortgage-backed securities:
	Agency MBS				757,046		AA+	7.9	%		757,046		—		757,046		751,838
	Non-agency RMBS				24,047		BB+	0.3	%		12,849		11,198		24,047		34,015
	CMBS				604,174		BB	6.3	%		263,934		340,240		604,174		582,785
		Total mortgage-backed securities			1,385,267			14.5	%		1,033,829		351,438		1,385,267		1,368,638
Corporate securities⁽¹⁾:
	Financials				1,223,579		A	12.7	%		1,184,729		38,850		1,223,579		1,275,408
	Industrials				1,476,802		BBB+	15.4	%		1,301,202		175,600		1,476,802		1,308,093
	Utilities				140,366		BBB	1.5	%		136,915		3,451		140,366		118,945
		Total corporate securities			2,840,747			29.6	%		2,622,846		217,901		2,840,747		2,702,446
Asset-backed securities					788,534		AA+	8.2	%		738,750		49,784		788,534		726,175
Equities					202,331		N/A	2.1	%		—		202,331		202,331		403,022
Other invested assets:
	Private equity				497,600		N/A	5.2	%		—		497,600		497,600		447,455
	Hedge funds				322,438		N/A	3.4	%		—		322,438		322,438		378,988
	Other private securities				119,734		N/A	1.2	%		—		119,734		119,734		126,492
	High yield loan fund				—		N/A	0.0	%		—		—		—		13,774
		Total other invested assets			939,772			9.8	%		—		939,772		939,772		966,709
			Total investment portfolio	$	9,599,012			100.0	%	$	7,764,047	$	1,834,965	$	9,599,012	$	9,239,881

Annualized book yield, year to date					2.3	%											2.1	%
Duration⁽²⁾					2.8 years												2.6 years
Average credit quality (S&P)					A+												A+


⁽¹⁾ Includes floating rate bank loans.
⁽²⁾ Includes only fixed maturity investments and cash and cash equivalents.

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

INVESTMENT INCOME, BOOK YIELD AND PORTFOLIO RETURN



		Three Months Ended						Six Months Ended

			June 30,			June 30,			June 30,			June 30,
			2016			2015			2016			2015
NET INVESTMENT INCOME
Fixed maturity investments		$	48,918		$	41,205		$	96,887		$	77,463
Equity securities			1,424			4,862			3,251			8,425
Other invested assets: hedge funds and private equity			7,572			4,583			12,273			12,963
Other invested assets: other private securities			1,674			(3,789)			4,725			(2,923)
Cash and cash equivalents			849			439			1,317			901
Expenses			(4,598)			(4,540)			(9,361)			(9,518)
Net investment income		$	55,839		$	42,760		$	109,092		$	87,311

NET REALIZED INVESTMENT GAINS (LOSSES)
Net realized gains (losses) on sale:
	Fixed maturity investments	$	14,063		$	4,865		$	16,819		$	10,313
	Equity securities		(5,783)			12,608			454			27,154
	Other invested assets: hedge funds and private equity		10,988			8,547			14,121			20,838
	Derivatives		(6,988)			12,441			(27,341)			2,235
Mark-to-market gains (losses):
	Fixed maturity investments		55,397			(52,688)			117,719			(27,171)
	Equity securities		916			(329)			(14,183)			5,091
	Other invested assets: hedge funds and private equity		(1,128)			(7,105)			(18,680)			(13,670)
	Derivatives		7,028			1,479			4,442			53
Net realized investment gains (losses)		$	74,493		$	(20,182)		$	93,351		$	24,843

TOTAL FINANCIAL STATEMENT PORTFOLIO RETURN		$	130,332		$	22,578		$	202,443		$	112,154

ANNUALIZED INVESTMENT BOOK YIELD
Net investment income, recurring		$	55,839		$	42,760		$	109,092		$	87,311
Annualized net investment income			223,356			171,040			218,184			174,622
Average aggregate invested assets, at cost		$	9,454,944		$	8,554,297		$	9,323,389		$	8,544,369
Annualized investment book yield			2.4	%		2.0	%		2.3	%		2.0	%

FINANCIAL STATEMENT PORTFOLIO RETURN
Total financial statement portfolio return		$	130,332		$	22,578		$	202,443		$	112,154
Average aggregate invested assets, at fair value		$	9,337,574		$	8,601,785		$	9,355,122		$	8,705,417
Financial statement portfolio return			1.4	%		0.3	%		2.2	%		1.3	%

Page 22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL



Other Invested Assets:								Top 10 Corporate Fixed Income and Equity Exposures:

			Carrying Value		Unfunded								Fair Value		Portfolio
Fund Details			June 30, 2016		Commitments			Corporate					June 30, 2016		Percentage
Private Equity:								Wells Fargo & Co					$	94,147		1.0	%
Primary and secondary			$	248,808	$	245,697		JP Morgan Chase & Co						60,159		0.6	%
Levered credit				218,384		200,623		Morgan Stanley						54,723		0.6	%
Distressed				5,151		3,805		Bank of America Corp						51,883		0.5	%
Real Estate				25,257		189,343		Oracle Corp						39,104		0.4	%
	Total private equity			497,600		639,468		PNC Financial Services Group						39,003		0.4	%
Hedge Funds:								US Bancorp						38,276		0.4	%
Distressed				168,486		—		General Electric Co						36,725		0.4	%
Relative value credit				81,829		—		Royal Bank of Canada						34,087		0.4	%
Equity long/short				62,251		—		Intel Corp						32,473		0.3	%
Fund of funds				9,870		—
	Total hedge funds			322,436		—
Other private securities				119,734		—
		Total other invested assets	$	939,770	$	639,468


Fixed Income Credit Quality:			June 30, 2016					December 31, 2015

Rating			Fair Value		Percentage			Fair Value		Percentage
U.S. government and agencies			$	1,805,505		23.2	%	$	1,434,049		19.9	%
AAA/Aaa				1,499,694		19.2	%		1,572,212		21.8	%
AA/Aa				1,607,606		20.6	%		1,484,109		20.6	%
A/A				1,226,244		15.7	%		1,083,257		15.0	%
BBB/Baa				962,287		12.3	%		920,220		12.8	%
	Total BBB/Baa and above			7,101,336		91.0	%		6,493,847		90.1	%
BB/Ba				95,392		1.2	%		88,708		1.2	%
B/B				176,840		2.3	%		232,070		3.3	%
CCC+ and below				420,630		5.5	%		386,913		5.4	%
		Total	$	7,794,198		100.0	%	$	7,201,538		100.0	%

Page 23

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

SHARE REPURCHASE DETAIL



					Average				Average		Remaining
		Aggregate Cost		Number of	Price Paid		Average		Repurchase		Share
		of Shares		Shares	Per Share		Diluted Book		Price to Diluted		Repurchase
Period		Repurchased		Repurchased	Repurchased		Value Per Share⁽¹⁾		Book Value		Authorization

Three Months Ended:
	March 31, 2015	$	50,949	1,271,213	$	40.08	$	38.63	103.8	%
	June 30, 2015		194,352	4,776,224		40.69		39.45	103.1	%
	September 30, 2015		—	—		—		38.97	—
	December 31, 2015		—	—		—		37.90	—
	Total - 2015	$	245,301	6,047,437	$	40.56	$	38.03	106.7	%

Three Months Ended:
	March 31, 2016	$	50,000	1,460,888	$	34.23	$	37.96	90.2	%
	June 30, 2016		90,022	2,491,355		36.13		38.92	92.8	%
	Total - 2016	$	140,022	3,952,243	$	35.43	$	38.74	91.5	%	$	426,645

⁽¹⁾ Average of beginning and ending diluted book value per share for each period presented and weighted average total.

Page 24

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CAPITAL STRUCTURE AND LEVERAGE RATIOS



	As of			As of
	June 30, 2016			December 31, 2015

Senior notes	$	1,293,703		$	1,292,907
Other long-term debt		23,122			23,033
Shareholders' equity		3,584,452			3,532,542
Total capitalization	$	4,901,277		$	4,848,482

Leverage Ratios
Debt to total capitalization⁽¹⁾		26.9	%		27.1	%

Net premiums written (trailing 12 months)	$	2,353,993		$	2,448,007
Net premiums written (trailing 12 months) to shareholders' equity		0.66x			0.69x

Total investments and cash & cash equivalents	$	9,599,013		$	9,239,881
Total investments and cash & cash equivalents to shareholders' equity		2.68x			2.62x

Reserve for losses and loss expenses	$	6,623,152		$	6,456,156
Deduct: reinsurance recoverable		(1,516,741)			(1,479,959)
Net reserve for losses and loss expenses	$	5,106,411			4,976,197
Net reserve for losses and loss expenses to shareholders' equity		1.42x			1.41x

⁽¹⁾ Includes $500 million 4.35% senior notes issued in October 2015 to refinance the $500 million 7.50% senior notes due in August 2016.




Fixed Charge Coverage Ratio	Three Months Ended						Six Months Ended

		June 30,			June 30,			June 30,			June 30,
		2016			2015			2016			2015

Interest expense	$	19,879		$	14,466		$	39,828		$	28,803

Income before income taxes		159,727			9,591			234,927			140,866
Interest expense		19,879			14,466			39,828			28,803
Earnings for calculation of fixed coverage ratio	$	179,606		$	24,057		$	274,755		$	169,669

Fixed charge coverage ratio		9.0	x		1.7	x		6.9	x		5.9	x

Page 25

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

OPERATING INCOME RECONCILIATION AND

BASIC AND DILUTED EARNINGS PER SHARE INFORMATION



		Three Months Ended										Six Months Ended

		June 30,		March 31,		December 31,		September 30,		June 30,		June 30,		June 30,
		2016		2016		2015		2015		2015		2016		2015

Net income (loss)		$	153,410	$	74,099	$	1,707	$	(51,630)	$	9,458	$	227,509	$	133,814
Add pre-tax effect of:
	Net realized investment (gains) losses		(74,493)		(18,858)		38,849		113,626		20,182		(93,351)		(24,843)
	Foreign exchange (gain) loss		(2,887)		(3,011)		920		(793)		1,265		(5,898)		11,162
Income tax expense (benefit)⁽¹⁾			6,651		6,779		1,536		(9,764)		(5,070)		13,430		(2,617)
Operating income		$	82,681	$	59,009	$	43,012	$	51,439	$	25,835	$	141,690	$	117,516

Weighted average common shares outstanding
Basic			88,742,484		90,254,512		90,934,107		90,882,511		92,441,730		89,495,564		94,178,989
Diluted			90,040,509		91,559,225		92,422,422		92,440,277*		93,984,226		90,830,814		95,830,455

Basic per share data
Net income (loss)		$	1.73	$	0.82	$	0.02	$	(0.57)	$	0.10	$	2.54	$	1.42
Add pre-tax effect of:
	Net realized investment (gains) losses		(0.84)		(0.21)		0.43		1.25		0.22		(1.04)		(0.26)
	Foreign exchange (gain) loss		(0.03)		(0.03)		0.01		(0.01)		0.02		(0.07)		0.12
Income tax expense (benefit)⁽¹⁾			0.07		0.08		0.01		(0.11)		(0.06)		0.15		(0.03)
Operating income		$	0.93	$	0.66	$	0.47	$	0.56	$	0.28	$	1.58	$	1.25

Diluted per share data
Net income (loss)		$	1.70	$	0.81	$	0.02	$	(0.56)*	$	0.10	$	2.50	$	1.40
Add pre-tax effect of:
	Net realized investment (gains) losses		(0.83)		(0.21)		0.42		1.23		0.21		(1.03)		(0.26)
	Foreign exchange (gain) loss		(0.03)		(0.03)		0.01		(0.01)		0.01		(0.06)		0.12
Income tax expense (benefit)⁽¹⁾			0.07		0.08		0.02		(0.11)		(0.05)		0.15		(0.03)
Operating income		$	0.91	$	0.65	$	0.47	$	0.55	$	0.27	$	1.56	$	1.23

⁽¹⁾ Represents the tax expense or benefit associated with the specific country to which the pre-tax adjustment related to.

* Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share, and not in the calculation of diluted earnings per share,
as there was a net loss during the three months ended September 30, 2015.

Page 26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY



		Three Months Ended															Six Months Ended

		June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
		2016			2016			2015			2015			2015			2016			2015

Opening shareholders' equity		$	3,535,463		$	3,532,542		$	3,555,405		$	3,624,801		$	3,829,067		$	3,532,542		$	3,778,291
Add: accumulated other comprehensive loss			6,168			9,297			4,265			3,272			—			9,297			—
Adjusted opening shareholders' equity		$	3,541,631		$	3,541,839		$	3,559,670		$	3,628,073		$	3,829,067		$	3,541,839		$	3,778,291

Closing shareholders' equity		$	3,584,452		$	3,535,463		$	3,532,542		$	3,555,405		$	3,624,801		$	3,584,452		$	3,624,801
Add: accumulated other comprehensive loss			6,024			6,168			9,297			4,265			3,272			6,024			3,272
Adjusted closing shareholders' equity		$	3,590,476		$	3,541,631		$	3,541,839		$	3,559,670		$	3,628,073		$	3,590,476		$	3,628,073

Average adjusted shareholders' equity		$	3,566,054		$	3,541,735		$	3,550,755		$	3,593,872		$	3,728,570		$	3,566,158		$	3,703,182

Net income (loss) available to shareholders		$	153,410		$	74,099		$	1,707		$	(51,630)		$	9,458		$	227,509		$	133,814

	Annualized net income (loss) available to shareholders	$	613,640		$	296,396		$	6,828		$	(206,520)		$	37,832		$	455,018		$	267,628

Annualized return on average shareholders' equity -
	net income (loss) available to shareholders		17.2	%		8.4	%		0.2	%		(5.7	)%		1.0	%		12.8	%		7.2	%

Operating income available to shareholders		$	82,681		$	59,009		$	43,012		$	51,439		$	25,835		$	141,690		$	117,516

Annualized operating income available to
	shareholders	$	330,724		$	236,036		$	172,048		$	205,756		$	103,340		$	283,380		$	235,032

Annualized return on average shareholders' equity -
	operating income available to shareholders		9.3	%		6.7	%		4.8	%		5.7	%		2.8	%		7.9	%		6.3	%

Page 27

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RECONCILIATION OF DILUTED BOOK VALUE AND TANGIBLE BOOK VALUE PER SHARE



		As of			As of			As of			As of
		June 30,			March 31,			December 31,			June 30,
		2016			2016			2015			2015

Price per share at period end		$	35.14		$	34.94		$	37.19		$	43.22

Total shareholders' equity		$	3,584,452		$	3,535,463		$	3,532,542		$	3,624,801
Deduct:
	Goodwill		392,643			389,695			388,127			357,729
	Intangible assets		113,473			115,719			116,623			136,368
Total tangible shareholders' equity		$	3,078,336		$	3,030,049		$	3,027,792		$	3,130,704

Basic common shares outstanding			87,463,950			89,840,448			90,959,635			90,796,360

Add: unvested restricted stock units			1,215,116			1,243,533			819,309			829,622

Add: performance based equity awards			594,240			595,572			591,683			591,683

Add: employee purchase plan			62,451			38,885			53,514			43,538

Add: dilutive stock options outstanding			1,833,830			1,947,836			1,968,607			2,096,048
	Weighted average exercise price per share	$	16.96		$	16.88		$	16.87		$	16.66
Deduct: stock options bought back via treasury method			(885,060)			(941,259)			(892,993)			(807,727)

Common shares and common share equivalents outstanding			90,284,527			92,725,015			93,499,755			93,549,524

Basic book value per common share		$	40.98		$	39.35		$	38.84		$	39.92
Year-to-date percentage change in basic book value per common share			5.5	%		1.3	%		(2.7	)%

Diluted book value per common share		$	39.70		$	38.13		$	37.78		$	38.75
Year-to-date percentage change in diluted book value per common share			5.1	%		0.9	%		(2.5	)%

Basic tangible book value per common share		$	35.20		$	33.73		$	33.29		$	34.48
Year-to-date percentage change in basic tangible book value per common share			5.7	%		1.3	%		(3.5	)%

Diluted tangible book value per common share		$	34.10		$	32.68		$	32.38		$	33.47
Year-to-date percentage change in diluted tangible book value per common share			5.3	%		0.9	%		(3.3	)%

Page 28

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

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 foreign exchange gain or loss, impairment of intangible assets and other non-recurring items. The company excludes net realized investment gains or losses, net foreign exchange gain or loss and other non-recurring items from its calculation of operating income because these amounts are heavily influenced by and fluctuate in part according to the availability of market opportunities and other factors. 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 page 26 for the reconciliation of net income to operating income.

ANNUALIZED RETURN ON AVERAGE SHAREHOLDERS' EQUITY ("ROAE")

Annualized return on average shareholders' equity is calculated using average shareholders’ equity, excluding the average after tax unrealized gains (losses) on investments and currency translation adjustment gains (losses). Unrealized gains (losses) on investments are primarily the result of interest rate and credit spread movements and the resultant impact on fixed income securities. These 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 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 27 for the 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 or currency translation adjustment gains (losses). Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average shareholders' equity explanation above. See page 26 for the reconciliation of net income to operating income and page 27 for the reconciliation of average shareholders’ equity.

TANGIBLE SHAREHOLDERS' EQUITY AND DILUTED BOOK VALUE PER SHARE

The company has included tangible shareholders' equity, which is total shareholders' equity excluding goodwill and intangible assets, because it represents a more liquid measure of the company's net assets than total shareholders' equity. The company also 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 28 for the 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. Aggregate invested assets includes cash and cash equivalents, fixed maturity securities, equity securities, other invested assets and the net balances receivable or payable on purchases and sales of investments. 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 page 22 for the calculation of annualized investment book yield.

Page 29

Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT - July 19, 2016

Attached files

Allied World Assurance Co Holdings, AG Reports