Allied World Reports 4.2% Growth in Diluted Book Value per Share with Strong First Quarter 2013 Results
-- Underwriting income increases 16.1% compared to the first quarter of 2012
ZUG, Switzerland, April 24, 2013 /PRNewswire/ -- Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported net income of $159.0 million, or $4.49 per diluted share, for the first quarter of 2013 compared to net income of $218.2 million, or $5.70 per diluted share, for the first quarter of 2012. Operating income was $84.2 million, or $2.38 per diluted share, for the first quarter of 2013, compared to operating income of $91.5 million, or $2.39 per diluted share, for the first quarter of 2012.
President and Chief Executive Officer Scott Carmilani commented, "Allied World is off to a strong start in 2013. We produced solid underwriting and investment results, and our diversified platform continues to deliver growth across each of our segments. In U.S. insurance, our casualty business continues to grow gross premiums written amid a rising rate environment. We experienced growth across our international segment, driven by business lines including healthcare and general casualty. In our reinsurance business, we benefitted from our investment into new business lines, including crop and had a successful January 1 renewal season, constructing an attractive portfolio of business."
"Management's focus on generating strong and consistent book value growth continues to be supported by solid underwriting, investment and reserving expertise and efficient management of capital. The company generated $159.0 million of quarterly net income and achieved an 85.1% combined ratio, growing diluted book value per share 4.2% to $96.50. We are encouraged by conditions across our business and are well positioned to take advantage of market opportunities."
Underwriting Results
Gross premiums written were $837.1 million in the first quarter of 2013, a 22.9% increase compared to $680.9 million in the first quarter of 2012. Net premiums written were $695.1 million in the first quarter of 2013, an 18.0% increase compared to $588.9 million in the first quarter of 2012. Net premiums earned in the first quarter of 2013 were $463.2 million, a 15.3% increase compared to $401.9 million in the first quarter of 2012.
The combined ratio was 85.1% in the first quarter of 2013 compared to 85.2% in the first quarter of 2012. The loss and loss expense ratio was 55.1% in the first quarter of 2013 compared to 56.0% in the first quarter of 2012. During the first quarter of 2013, the company recorded net favorable reserve development on prior loss years of $44.1 million. This favorable reserve development resulted in a benefit of 9.5 percentage points to the company's loss and loss expense ratio for the quarter. This compares to the first quarter of 2012, when the company recorded net favorable reserve development on prior loss years of $39.5 million, a benefit of 9.8 percentage points to the company's loss and loss expense ratio for that quarter. Absent these adjustments, the loss and loss expense ratio for the first quarter of 2013 was 64.6% compared to 65.8% for the first quarter of 2012. The company did not record any catastrophe losses for the current accident year.
The company's expense ratio was 30.0% for the first quarter of 2013 compared to 29.2% for the first quarter of 2012. The expense ratio includes the impact of the increase in the company's stock price reflected in equity-based incentive compensation.
Investment Results
The total return on the company's investment portfolio for the three months ended March 31, 2013 was 1.3% compared to 2.0% for the three months ended March 31, 2012. See the table below for the components of our investment returns:
Quarter Ended | ||||
March 31, 2013 | March 31, 2012 | |||
(expressed in millions of U.S. Dollars) | ||||
Net investment income | $ 33.4 | $ 47.2 | ||
Net realized investment gains | 79.6 | 133.6 | ||
Change in unrealized gains | - | (14.0) | ||
Net investment income, realized gains and unrealized gains | $ 113.0 | $ 166.8 | ||
Average invested assets | $ 8,471.6 | $ 8,159.2 | ||
Financial statement portfolio return | 1.3% | 2.0% | ||
Note: investment income, net realized gains / losses and change in unrealized gains / losses are disclosed on a pre-tax basis. | ||||
Shareholders' Equity
As of March 31, 2013, our total shareholders' equity was $3,432.0 million, compared to $3,326.3 million as of December 31, 2012.
The company's annualized net income return on average shareholders' equity for the three months ended March 31, 2013 was 18.8%. The company's annualized operating return on average shareholders' equity for the three months ended March 31, 2013 was 10.0%.
As of March 31, 2013, diluted book value per share was $96.50, an increase of 4.2% compared to $92.59 as of December 31, 2012.
Capital Management
During the first quarter 2013, the company repurchased 432,117 of its common shares at an average price of $83.88 per share for an aggregate cost of $36.2 million. The company announced last month that its Board of Directors has proposed an increase in its quarterly dividend from $0.375 to $0.50 per share. This proposed increase in the quarterly dividend is subject to approval by the company's shareholders at the Allied World 2013 Annual Shareholder Meeting to be held on May 2, 2013.
Supplementary Information
Allied World will be providing a Financial Supplement relating to first quarter 2013 and an Investment Supplement as of March 31, 2013. This information will be available in the "Investor Relations" section of the company's website at www.awac.com.
Conference Call
Scott Carmilani, President and Chief Executive Officer, Thomas Bradley, Chief Financial Officer, and other members of the company's executive management team will host a conference call on Thursday, April 25, 2013 at 8:30 am (Eastern Time) to discuss the first quarter 2013 financial results. The public may access a live webcast of the conference call at the "Investor Relations" section of the company's website at www.awac.com. In addition, the conference call can be accessed by dialing (888) 317-6003 (U.S. and Canada callers) or +1-412-317-6061 (international callers) and entering the passcode 4957452 approximately ten minutes prior to the call. A live webcast of the call will be available online at www.awac.com. Following the conclusion of the presentation, a replay of the call will be available through Thursday, May 9, 2013 by dialing (877) 344-7529 (U.S. and Canada callers) or +1-412-317-0088 (international callers) and entering the passcode 10026618. In addition, the webcast will remain available online through Thursday, May 9, 2013 at www.awac.com.
Non-GAAP Financial Measures
In presenting the company's results, management has included and discussed in this press release 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 in the management of the company's operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses, net impairment charges recognized in earnings, net foreign exchange gain or loss, and other non-recurring items. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings, net foreign exchange gain or loss, and other non-recurring items from the 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 U.S. GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of the company's financial information to more easily analyze our results of operations and 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 net income return on average shareholders' equity" ("ROAE") is calculated using average shareholders' 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 U.S. 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 net income return on average shareholders' equity explanation above.
Reconciliations of these financial measures to their most directly comparable U.S. GAAP measures are included in the attached tables.
About Allied World Assurance Company
Allied World Assurance Company Holdings, AG, through its subsidiaries and brand known as Allied World, is a global provider of innovative property, casualty and specialty insurance and reinsurance solutions. Allied World offers superior client service through a global network of offices and branches. All of Allied World's rated insurance and reinsurance subsidiaries are rated A by A.M. Best Company, A by Standard & Poor's, and A2 by Moody's, and our Lloyd's Syndicate 2232 is rated A+ by Standard & Poor's and Fitch.
Please visit the following for further information on Allied World: Web: www.awac.com | Facebook: www.facebook.com/alliedworld | LinkedIn: http://www.linkedin.com/company/Allied-World.
Cautionary Statement Regarding Forward-Looking Statements
Any forward-looking statements made in this press release 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.
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | ||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
(Expressed in thousands of United States dollars, except share and per share amounts) | ||||||||||
Quarter Ended March 31, | ||||||||||
2013 | 2012 | |||||||||
Revenues: | ||||||||||
Gross premiums written | $ | 837,081 | $ | 680,929 | ||||||
Premiums ceded | (142,029) | (91,976) | ||||||||
Net premiums written | 695,052 | 588,953 | ||||||||
Change in unearned premiums | (231,824) | (187,063) | ||||||||
Net premiums earned | 463,228 | 401,890 | ||||||||
Net investment income | 33,388 | 47,209 | ||||||||
Net realized investment gains | 79,637 | 133,581 | ||||||||
Total revenue | 576,253 | 582,680 | ||||||||
Expenses: | ||||||||||
Net losses and loss expenses | 255,178 | 225,202 | ||||||||
Acquisition costs | 56,685 | 47,138 | ||||||||
General and administrative expenses | 82,680 | 70,366 | ||||||||
Amortization of intangible assets | 633 | 633 | ||||||||
Interest expense | 14,134 | 13,756 | ||||||||
Foreign exchange loss (gain) | 2,518 | (81) | ||||||||
Total expenses | 411,828 | 357,014 | ||||||||
Income before income taxes | 164,425 | 225,666 | ||||||||
Income tax expense | 5,433 | 7,510 | ||||||||
NET INCOME | $ | 158,992 | $ | 218,156 | ||||||
PER SHARE DATA: | ||||||||||
Basic earnings per share | $ | 4.59 | $ | 5.86 | ||||||
Diluted earnings per share | $ | 4.49 | $ | 5.70 | ||||||
Weighted average common shares outstanding | 34,613,606 | 37,205,166 | ||||||||
Weighted average common shares and common share equivalents outstanding | 35,431,843 | 38,284,635 | ||||||||
Dividends paid per share | $ | 0.375 | $ | 0.375 | ||||||
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | ||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Expressed in thousands of United States dollars, except share and per share amounts) | ||||||||
As of | As of | |||||||
March 31, | December 31, | |||||||
ASSETS: | 2013 | 2012 | ||||||
Fixed maturity investments trading, at fair value | $ | 6,458,614 | $ | 6,626,454 | ||||
Equity securities trading, at fair value | 593,562 | 523,949 | ||||||
Other invested assets | 838,603 | 783,534 | ||||||
Total investments | 7,890,779 | 7,933,937 | ||||||
Cash and cash equivalents | 729,281 | 865,364 | ||||||
Insurance balances receivable | 667,499 | 510,532 | ||||||
Funds held | 370,580 | 336,368 | ||||||
Prepaid reinsurance | 292,574 | 277,406 | ||||||
Reinsurance recoverable | 1,163,503 | 1,141,110 | ||||||
Accrued investment income | 28,436 | 29,135 | ||||||
Net deferred acquisition costs | 142,151 | 108,010 | ||||||
Goodwill | 268,376 | 268,376 | ||||||
Intangible assets | 50,732 | 51,365 | ||||||
Balances receivable on sale of investments | 219,260 | 418,879 | ||||||
Net deferred tax assets | 27,737 | 25,580 | ||||||
Other assets | 65,170 | 63,884 | ||||||
Total assets | $ | 11,916,078 | $ | 12,029,946 | ||||
LIABILITIES: | ||||||||
Reserve for losses and loss expenses | $ | 5,673,220 | $ | 5,645,549 | ||||
Unearned premiums | 1,465,013 | 1,218,021 | ||||||
Reinsurance balances payable | 118,461 | 136,264 | ||||||
Balances due on purchases of investments | 354,289 | 759,934 | ||||||
Senior notes | 798,284 | 798,215 | ||||||
Accounts payable and accrued liabilities | 74,848 | 145,628 | ||||||
Total liabilities | 8,484,115 | 8,703,611 | ||||||
SHAREHOLDERS' EQUITY: | ||||||||
Common shares, 2013: par value CHF 12.30 per share and 2012: par value CHF 12.64 per share (2013: 35,937,751; 2012: 36,369,868 shares issued and 2013: 34,626,361; 2012: 34,797,781 shares outstanding) | 436,587 | 454,980 | ||||||
Treasury shares, at cost (2013: 1,311,390; 2012: 1,572,087) | (96,353) | (113,818) | ||||||
Retained earnings | 3,091,729 | 2,985,173 | ||||||
Total shareholders' equity | 3,431,963 | 3,326,335 | ||||||
Total liabilities and shareholders' equity | $ | 11,916,078 | $ | 12,029,946 | ||||
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | ||||||||||||||
UNAUDITED CONSOLIDATED SEGMENT DATA | ||||||||||||||
(Expressed in thousands of United States dollars, except for ratio information) | ||||||||||||||
U.S. | International | |||||||||||||
Quarter Ended March 31, 2013 | Insurance | Insurance | Reinsurance | Total | ||||||||||
Gross premiums written | $ | 256,018 | $ | 128,516 | $ | 452,547 | $ | 837,081 | ||||||
Net premiums written | 192,253 | 77,745 | 425,054 | 695,052 | ||||||||||
Net premiums earned | 188,439 | 84,214 | 190,575 | 463,228 | ||||||||||
Net losses and loss expenses | (133,324) | (28,935) | (92,919) | (255,178) | ||||||||||
Acquisition costs | (23,128) | 849 | (34,406) | (56,685) | ||||||||||
General and administrative expenses | (39,596) | (24,789) | (18,295) | (82,680) | ||||||||||
Underwriting (loss) income | (7,609) | 31,339 | 44,955 | 68,685 | ||||||||||
Net investment income | 33,388 | |||||||||||||
Net realized investment gains | 79,637 | |||||||||||||
Amortization of intangible assets | (633) | |||||||||||||
Interest expense | (14,134) | |||||||||||||
Foreign exchange loss | (2,518) | |||||||||||||
Income before income taxes | $ | 164,425 | ||||||||||||
GAAP Ratios: | ||||||||||||||
Loss and loss expense ratio | 70.8% | 34.4% | 48.8% | 55.1% | ||||||||||
Acquisition cost ratio | 12.3% | (1.0%) | 18.1% | 12.2% | ||||||||||
General and administrative expense ratio | 21.0% | 29.4% | 9.6% | 17.8% | ||||||||||
Combined ratio | 104.1% | 62.8% | 76.5% | 85.1% | ||||||||||
U.S. | International | |||||||||||||
Quarter Ended March 31, 2012 | Insurance | Insurance | Reinsurance | Total | ||||||||||
Gross premiums written | $ | 204,211 | $ | 113,590 | $ | 363,128 | $ | 680,929 | ||||||
Net premiums written | 153,846 | 72,609 | 362,498 | 588,953 | ||||||||||
Net premiums earned | 153,358 | 79,871 | 168,661 | 401,890 | ||||||||||
Net losses and loss expenses | (97,704) | (38,100) | (89,398) | (225,202) | ||||||||||
Acquisition costs | (19,972) | 528 | (27,694) | (47,138) | ||||||||||
General and administrative expenses | (31,044) | (22,401) | (16,921) | (70,366) | ||||||||||
Underwriting income | 4,638 | 19,898 | 34,648 | 59,184 | ||||||||||
Net investment income | 47,209 | |||||||||||||
Net realized investment gains | 133,581 | |||||||||||||
Amortization of intangible assets | (633) | |||||||||||||
Interest expense | (13,756) | |||||||||||||
Foreign exchange gain | 81 | |||||||||||||
Income before income taxes | $ | 225,666 | ||||||||||||
GAAP Ratios: | ||||||||||||||
Loss and loss expense ratio | 63.7% | 47.7% | 53.0% | 56.0% | ||||||||||
Acquisition cost ratio | 13.0% | (0.7%) | 16.4% | 11.7% | ||||||||||
General and administrative expense ratio | 20.2% | 28.0% | 10.0% | 17.5% | ||||||||||
Combined ratio | 96.9% | 75.0% | 79.4% | 85.2% | ||||||||||
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | ||||||||
UNAUDITED OPERATING INCOME RECONCILIATION | ||||||||
(Expressed in thousands of United States dollars, except share and per share amounts) | ||||||||
Quarter Ended March 31, | ||||||||
2013 | 2012 | |||||||
Net income | $ | 158,992 | $ | 218,156 | ||||
Add after tax effect of: | ||||||||
Net realized investment gains | (77,342) | (126,570) | ||||||
Foreign exchange loss (gain) | 2,518 | (81) | ||||||
Operating income | $ | 84,168 | $ | 91,505 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 34,613,606 | 37,205,166 | ||||||
Diluted | 35,431,843 | 38,284,635 | ||||||
Basic per share data: | ||||||||
Net income | $ | 4.59 | $ | 5.86 | ||||
Add after tax effect of: | ||||||||
Net realized investment gains | (2.23) | (3.40) | ||||||
Foreign exchange loss (gain) | 0.07 | - | ||||||
Operating income | $ | 2.43 | $ | 2.46 | ||||
Diluted per share data: | ||||||||
Net income | $ | 4.49 | $ | 5.70 | ||||
Add after tax effect of: | ||||||||
Net realized investment gains | (2.18) | (3.31) | ||||||
Foreign exchange loss (gain) | 0.07 | - | ||||||
Operating income | $ | 2.38 | $ | 2.39 | ||||
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | ||||||||||
UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION | ||||||||||
(Expressed in thousands of United States dollars, except share and per share amounts) | ||||||||||
As of | As of | As of | ||||||||
March 31, | December 31, | March 31, | ||||||||
2013 | 2012 | 2012 | ||||||||
Price per share at period end | $ | 92.72 | $ | 78.80 | $ | 68.67 | ||||
Total shareholders' equity | $ | 3,431,963 | $ | 3,326,335 | $ | 3,245,821 | ||||
Basic common shares outstanding | 34,626,361 | 34,797,781 | 36,786,067 | |||||||
Add: unvested restricted share units | 91,159 | 135,123 | 187,623 | |||||||
Add: performance based equity awards | 272,062 | 485,973 | 524,888 | |||||||
Add: employee share purchase plan | 5,616 | 10,750 | - | |||||||
Add: dilutive options/warrants outstanding | 1,166,137 | 1,224,607 | 1,429,333 | |||||||
Weighted average exercise price per share | $ | 47.34 | $ | 47.02 | $ | 45.98 | ||||
Deduct: options bought back via treasury method | (595,451) | (730,652) | (957,064) | |||||||
Common shares and common share | ||||||||||
equivalents outstanding | 35,565,884 | 35,923,582 | 37,970,847 | |||||||
Basic book value per common share | $ | 99.11 | $ | 95.59 | $ | 88.24 | ||||
Diluted book value per common share | $ | 96.50 | $ | 92.59 | $ | 85.48 | ||||
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG | |||||||
UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS' EQUITY RECONCILIATION | |||||||
(Expressed in thousands of United States dollars, except for percentage information) | |||||||
Quarter Ended March 31, | |||||||
2013 | 2012 | ||||||
Opening shareholders' equity | $ | 3,326,335 | $ | 3,149,022 | |||
Deduct: accumulated other comprehensive income | - | (14,484) | |||||
Adjusted opening shareholders' equity | 3,326,335 | 3,134,538 | |||||
Closing shareholders' equity | $ | 3,431,963 | $ | 3,245,821 | |||
Deduct: accumulated other comprehensive income | - | (2,325) | |||||
Adjusted closing shareholders' equity | 3,431,963 | 3,243,496 | |||||
Average shareholders' equity | $ | 3,379,149 | $ | 3,189,017 | |||
Net income available to shareholders | $ | 158,992 | $ | 218,156 | |||
Annualized net income available to shareholders | 635,968 | 872,624 | |||||
Annualized return on average shareholders' equity - | |||||||
net income available to shareholders | 18.8% | 27.4% | |||||
Operating income available to shareholders | $ | 84,168 | $ | 91,505 | |||
Annualized operating income available to shareholders | 336,672 | 366,020 | |||||
Annualized return on average shareholders' equity - | |||||||
operating income available to shareholders | 10.0% | 11.5% | |||||
Media:
Noelle Campbell
Manager, Corporate Communications
+1-646-794-0544
Noelle.campbell@awacservices.com
OR
Faye Cook
SVP, Marketing & Communications
+1-441-278-5406
faye.cook@awac.com
Investors:
Sarah Doran
SVP, Investor Relations
+1-646-794-0590
sarah.doran@awac.com
Website: www.awac.com
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