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Allied World Reports Strong 4th Quarter 2011 Results; Grows Diluted Book Value per Share 8% in 2011


News provided by

Allied World Assurance Company Holdings, AG

15 Feb, 2012, 21:35 GMT

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ZUG, Switzerland, February 15, 2012 /PRNewswire/ --

Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported operating income of $94.7 million, or $2.40 per diluted share, for the fourth quarter of 2011 compared to operating income of $97.3 million, or $2.24 per diluted share, for the fourth quarter of 2010. Operating income for the year ended December 31, 2011 was $183.7 million, or $4.63 per diluted share, compared to operating income of $397.8 million, or $7.97 per diluted share, for the year ended December 31, 2010.

The company reported net income of $183.1 million, or $4.63 per diluted share, for the fourth quarter of 2011 compared to net income of $92.8 million, or $2.13 per diluted share, for the fourth quarter of 2010. Net income for the year ended December 31, 2011 was $274.5 million, or $6.92 per diluted share, compared to net income of $665.0 million, or $13.32 per diluted share, for the year ended December 31, 2010.

President and Chief Executive Officer Scott Carmilani commented, "In the face of a number of challenges that confronted our company and the insurance industry globally, Allied World continues to generate solid profitability and growth in book value. Our three operating segments all contributed, with each experiencing premium growth in 2011. We again benefited from focusing our efforts on targeted lines and select geographies throughout the world. Collectively, our gross production was up by 10% for the year with our new business initiatives driving the increase."

"The company had a strong fourth quarter of 2011, producing operating income of $95 million and net income of $183 million. For the full year, we made $275 million in net income in spite of it being the costliest catastrophe year in history. We benefited from continued favorable loss reserve emergence that significantly offset our catastrophe losses for the year as well as from a merger breakup fee. The investment returns underperformed 2010 due to lower interest rates and a weaker overall investment environment."

Mr. Carmilani concluded, "Ultimately, we judge ourselves by our ability to build shareholder value, and we grew diluted book value per share by 8% in what was a volatile 2011. This reflects our robust risk management controls, strong ratings and a healthy capital base. The company is well positioned as we move forward into 2012."

Underwriting Results

Gross premiums written were $416.5 million in the fourth quarter of 2011, a 9.1% increase compared to $381.9 million in the fourth quarter of 2010. For the year ended December 31, 2011, gross premiums written totaled $1,939.5 million, a 10.3% increase compared to $1,758.4 million for the year ended December 31, 2010. Net premiums written were $306.8 million in the fourth quarter of 2011, a 6.8% increase compared to $287.2 million in the fourth quarter of 2010. For the year ended December 31, 2011, net premiums written totaled $1,533.8 million, a 10.1% increase compared to $1,392.5 million for the year ended December 31, 2010.

The combined ratio was 83.5% in the fourth quarter of 2011 compared to 82.8% in the fourth quarter of 2010. The loss and loss expense ratio was 53.9% in the fourth quarter of 2011 compared to 46.7% in the fourth quarter of 2010. During the fourth quarter of 2011, the company recorded net favorable reserve development on prior loss years of $92.4 million. This favorable reserve development resulted in a benefit of 23.4 percentage points to the company's loss and loss expense ratio for the quarter. This compares to the fourth quarter of 2010, where the company recorded net favorable reserve development on prior loss years of $73.9 million, a benefit of 21.6 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 fourth quarter of 2011 was 77.3% compared to 68.3% for the fourth quarter of 2010. The fourth quarter 2011 loss and loss expense ratio was impacted by $59.1 million of net losses, or 14.9 percentage points, from the flooding in Thailand that occurred in the fourth quarter of 2011 and from other catastrophes that occurred earlier in 2011. These catastrophe losses were comprised of $23.6 million from our international insurance segment and $35.8 million from our reinsurance segment and were modestly offset by a $0.3 million reduction for prior quarter catastrophe losses recorded in our U.S. insurance segment. The fourth quarter 2010 loss and loss expense ratio was impacted by $21.4 million of net losses, or 6.2 percentage points, from major loss events occurring during 2010.

For the year ended December 31, 2011, the combined ratio was 95.9% compared to 84.9% for the year ended December 31, 2010. For the year ended December 31, 2011, the company recorded net favorable reserve development on prior loss years of $253.5 million, a benefit of 17.4 percentage points to the company's loss and loss expense ratio. For the year ended December 31, 2010, the company recorded net favorable reserve development on prior loss years of $313.3 million, a benefit of 23.1 percentage points to the company's loss and loss expense ratio. Absent prior year reserve adjustments, the loss and loss expense ratio related to 2011 was 83.2% compared to 75.2% for 2010. The 2011 loss and loss expense ratio was impacted by $292.2 million of net losses, or 20.1 percentage points, from global catastrophes occurring during 2011. This compares to 2010 which was impacted by $164.6 million of net losses, or 12.1 percentage points, from major loss events occurring during 2010.

The company's expense ratio was 29.6% for the fourth quarter of 2011 compared to 36.1% for the fourth quarter of 2010. The expense ratio was 30.1% for the year ended December 31, 2011 compared to 32.8% for the year ended December 31, 2010. The decreases in these ratios for the three months and year ended December 31, 2011 were driven by increases in earned premiums and decreases in performance-based incentive compensation expenses. In 2010, we also incurred one-time expenses in connection with our redomestication to Switzerland.

Investment Results

The total return on the company's investment portfolio for the three months and year ended December 31, 2011 was 0.9% and 2.0%, respectively. See the table below for the components of our investment returns for the three months and year ended December 31, 2011:

                   ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
                      FINANCIAL STATEMENT PORTFOLIO RETURN

 
    (expressed in thousands of      THREE MONTHS ENDED         YEAR ENDED 
          U.S. Dollars)             DECEMBER 31, 2011       DECEMBER 31, 2011

 
    Net investment income                     $ 45,489              $ 195,948
    Net realized investment gains               31,632                 10,077
    Decrease in unrealized investment gains     (3,297)               (45,686)
    Net investment income, realized
     gains and unrealized gains               $ 73,824              $ 160,339
 
    Average invested assets                $ 8,062,561            $ 7,902,633
 
    Financial statement portfolio
     return                                       0.9%                   2.0%

 
    Note: net investment income, net realized gains/losses and change in
    unrealized gains/losses are disclosed on a pre-tax basis.
 

Other Income

Other income for the three months and year ended December 31, 2011 was $66.7 million and $101.7 million, respectively. This represented the termination fee resulting from our previously announced merger agreement with Transatlantic Holdings, Inc., which was terminated on September 15, 2011. Given the non-recurring nature of this item, it has been excluded from the computation of the company's operating returns.

Shareholders' Equity

As of December 31, 2011, our total shareholders' equity was $3,149.0 million, compared to $3,075.8 million as of December 31, 2010.

The company's annualized net income return on average shareholders' equity for the three months and year ended December 31, 2011 was 23.9% and 8.9%, respectively. The company's annualized operating return on average shareholders' equity for the three months and year ended December 31, 2011 was 12.4% and 6.0%, respectively.

As of December 31, 2011, diluted book value per share was $80.11, an increase of 5.7% and 7.8% compared to $75.82 and $74.29, respectively, as of September 30, 2011 and December 31, 2010.

Share Repurchase Program

During the fourth quarter 2011, the company repurchased 450,000 of its common shares through its share repurchase program in the open market at an average repurchase price of $59.33 per share for an aggregate cost of $26.7 million. For the year ended December 31, 2011, the company repurchased 1,419,163 of its common shares through its program in the open market at an average repurchase price of $61.09 per share for an aggregate cost of $86.7 million. As of December 31, 2011, the company had $174.2 million of remaining capacity available under its share repurchase program.

Investment Supplement

Allied World will be providing additional information on its investment portfolio as of December 31, 2011. This information will be available at the "Investor Relations" section of the company's website at http://www.awac.com.

Financial Supplement

A financial supplement relating to the fourth quarter and year ended December 31, 2011 will be available at the "Investor Relations" section of the company's website at http://www.awac.com.

Conference Call

Allied World will host a conference call on Thursday, February 16, 2012 at 9:00 a.m. (Eastern Time) to discuss the results for the fourth quarter and year ended December 31, 2011. The public may access a live webcast of the conference call at the "Investor Relations" section of the company's website at http://www.awac.com. In addition, the conference call can be accessed by dialing (866) 843-0890 (U.S. and Canada callers) or +1-412-317-9250 (international callers) and entering the passcode 6211936 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Thursday, March 1, 2012 by dialing (877) 344-7529 (U.S. and Canada callers) or +1-412-317-0088 (international callers) and entering the passcode 10008556. In addition, the webcast will remain available online through Thursday, March 1, 2012 at http://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 impairment of intangible assets, 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. 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 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, is a global provider of innovative property, casualty and specialty insurance and reinsurance solutions, offering 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 http://www.awac.com for further information on 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            Year Ended 
                                      December 31,           December 31,
                                     2011       2010       2011        2010
 
    Revenues:
              Gross premiums                                               
               written             $ 416,537  $ 381,942  $ 1,939,521  $ 1,758,397
              Premiums ceded       (109,705)   (94,743)    (405,755)    (365,942)
 
              Net premiums
               written               306,832    287,199    1,533,766    1,392,455
              Change in unearned
               premiums               88,637     55,605     (76,774)     (32,907)
              Net premiums
               earned                395,469    342,804    1,456,992    1,359,548
 
              Net investment
               income                 45,489     50,168      195,948      244,143
              Net realized
               investment gains
               (losses)               31,632    (3,738)       10,077      285,612
              Net impairment
               charges recognized
               in earnings                 -          -            -        (168)
              Other income            66,744          -      101,744          913
                   Total revenue     539,334    389,234    1,764,761    1,890,048
    Expenses:
              Net losses and
               loss expenses         213,345    160,019      959,156      707,883
              Acquisition costs       46,562     38,848      167,295      159,489
              General and
               administrative
               expenses               70,492     85,134      271,656      286,557
              Amortization and
               impairment of
               intangible assets         678        808       2.978        3.483
              Interest expense        13,754     11,650      54,989       40.242
              Foreign exchange
               (gain) loss             (549)        196        3,159          444
                  Total expenses     344,282    296,655    1,459,233    1,198,098
    Income before income
     taxes                           195,052     92,579      305,528      691,950
              Income tax expense
               (benefit)              11,952      (207)       30,980       26,945
    NET INCOME                     $ 183.100   $ 92.786    $ 274.548    $ 665.005
 
    PER SHARE DATA:
              Basic earnings per
               share                  $ 4.80     $ 2.30       $ 7.21      $ 14.30
              Diluted earnings
               per share              $ 4.63     $ 2.13       $ 6.92      $ 13.32
 
              Weighted average
               common shares
               outstanding        38,138,558 40,291,620   38,093,351   46,491,279
              Weighted average
               common shares and
               common share
               equivalents
               outstanding        39,524,273 43,501,068   39,667,905   49,913,317
 
              Dividends paid per
               share                 $ 0.375     $ 0.45       $ 0.75       $ 1.05
 
    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
                                                   December 31,   December 31,
    ASSETS:                                            2011           2010
    Fixed maturity investments available for
     sale, at fair value (amortized cost: 2011:
     $226,397; 2010: $828,544)                       $ 244,016      $ 891,849
    Fixed maturity investments trading, at fair
     value (amortized cost: 2011: $6,207,991;
     2010: $5,714,322)                               6,254,686      5,769,097
    Equity securities trading, at fair value
     (cost: 2011: $356,370; 2010: $160,513)            367,483        174,976
    Other invested assets trading, at fair
     value                                             540,409        347,632
 
    Total investments                                7,406,594      7,183,554
    Cash and cash equivalents                          716,604        853,368
    Insurance balances receivable                      652,158        529,927
    Prepaid reinsurance                                226,721        187,287
    Reinsurance recoverable                          1,002,919        927,588
    Accrued investment income                           38,263         40,520
    Net deferred acquisition costs                     100,334         96,803
    Goodwill                                           268,376        268,376
    Intangible assets                                   53,898         56,876
    Net deferred tax assets                             22,646         19,740
    Other assets                                        53,202         75,184
                                   Total assets   $ 10,541,715   $ 10,239,223
 
    LIABILITIES:
    Reserve for losses and loss expenses           $ 5,225,143    $ 4,879,188
    Unearned premiums                                1,078,412        962,203
    Reinsurance balances payable                       124,539         99,732
    Net balances payable on purchases and sales
     of investments                                     36,285        318,570
    Dividends payable                                   14,302              -
    Senior notes                                       797,949        797,700
    Accounts payable and accrued liabilities           116,063        106,010
                              Total liabilities    $ 7,392,693    $ 7,163,403
 
    SHAREHOLDERS' EQUITY:
    Common shares: 2011: par value CHF 14.03
     per share and 2010: par value CHF 15.00 per
     share (2011: 40,003,642; 2010: 40,003,642
     shares issued and 2011: 37,742,131; 2010:
     38,089,226 shares outstanding)                    557,153        600,055
    Additional paid-in capital                          78,225        170,239
    Treasury shares, at cost (2011: 2,261,511;
     2010: 1,914,416)                                (136,590)      (112,811)
    Retained earnings                                2,635,750      2,361,202
    Accumulated other comprehensive income, net
     of tax                                             14,484         57,135
                     Total shareholders' equity      3,149,022      3,075,820
 
     Total liabilities and shareholders' equity   $ 10,541,715   $ 10,239,223
 
    ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
    UNAUDITED CONSOLIDATED SEGMENT DATA
    (Expressed in thousands of United States dollars, except for ratio information)

 
    Quarter Ended             U.S.       International
    December 31, 2011      Insurance       Insurance     Reinsurance    Total

 
    Gross premiums
     written              $ 227,005       $ 130,920      $ 58,612   $ 416,537
    Net premiums written    169,097          79,813        57,922     306,832
    Net premiums earned     152,491          80,585       162,393     395,469
    Net losses and loss
     expenses              (92,953)        (19,661)     (100,731)   (213,345)
    Acquisition costs      (18,449)           (165)      (27,948)    (46,562)
    General and
     administrative
     expenses              (33,437)        (21,351)      (15,704)    (70,492)
    Underwriting income       7,652          39,408        18,010      65,070
    Net investment
     income                                                            45,489
    Net realized
     investment gains                                                  31,632
    Other income -
     termination fee                                                   66,744
    Amortization and
     impairment of
     intangible assets                                                  (678)
    Interest expense                                                 (13,754)
    Foreign exchange
     gain                                                                 549
    Income before income
     taxes                                                          $ 195,052
 
    GAAP Ratios:
     Loss and loss
     expense ratio            61.0%           24.4%         62.0%       53.9%
    Acquisition cost
     ratio                    12.1%            0.2%         17.2%       11.8%
    General and
     administrative
     expense ratio            21.9%           26.5%          9.7%       17.8%
    Combined ratio            95.0%           51.1%         88.9%       83.5%
 
                 
    Quarter Ended             U.S.       International
    December 31, 2010      Insurance       Insurance    Reinsurance     Total

 
    Gross premiums
     written              $ 196,287       $ 115,056      $ 70,599   $ 381,942
    Net premiums written    143,789          73,973        69,437     287,199
    Net premiums earned     133,930          81,764       127,110     342,804
    Net losses and loss
     expenses              (74,750)        (27,084)      (58,185)  -(160,019)
    Acquisition costs      (16,902)             431      (22,377)    (38,848)
    General and
     administrative
     expenses              (38,978)        (26,905)      (19,251)    (85,134)
    Underwriting income       3,300          28,206        27,297      58,803
    Net investment
     income                                                            50,168
    Net realized
     investment losses                                                (3,738)
    Amortization and
     impairment of
     intangible assets                                                  (808)
    Interest expense                                                 (11,650)
    Foreign exchange
     loss                                                               (196)
    Income before income
     taxes                                                           $ 92,579
 
    GAAP Ratios:
    Loss and loss
     expense ratio            55.8%           33.1%         45.8%       46.7%
    Acquisition cost
     ratio                    12.6%          (0.5%)         17.6%       11.3%
    General and
     administrative
     expense ratio            29.1%           32.9%         15.1%       24.8%
    Combined ratio            97.5%           65.5%         78.5%       82.8%
 
    ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
    UNAUDITED CONSOLIDATED SEGMENT DATA
    (Expressed in thousands of United States dollars, except for ratio information)

 
    Year Ended                  U.S.       International
    December 31, 2011       Insurance       Insurance     Reinsurance     Total

 
    Gross premiums
     written               $ 838,567       $ 530,450     $ 570,504 $ 1,939,521
    Net premiums written     639,196         325,094       569,476   1,533,766
    Net premiums earned      584,303         317,006       555,683   1,456,992
    Net losses and loss
     expenses              (387,099)       (206,593)     (365,464)   (959,156)
    Acquisition costs       (74,976)           2,781      (95,100)   (167,295)
    General and
     administrative
     expenses              (124,434)        (84,290)      (62,932)   (271,656)
    Underwriting (loss)
     income                  (2,206)          28,904        32,187      58,885
    Net investment
     income                                                            195,948
    Net realized
     investment gains                                                   10,077
    Other income -
     termination fee                                                   101,744
    Amortization and
     impairment of
     intangible assets                                                 (2,978)
    Interest expense                                                  (54,989)
    Foreign exchange
     loss                                                              (3,159)
    Income before income
     taxes                                                           $ 305,528
 
    GAAP Ratios:
    Loss and loss
     expense ratio             66.2%           65.2%         65.8%       65.8%
    Acquisition cost
     ratio                     12.8%          (0.9%)         17.1%       11.5%
    General and
     administrative
     expense ratio             21.3%           26.6%         11.3%       18.6%
    Combined ratio            100.3%           90.9%         94.2%       95.9%

                       
    Year Ended                U.S.      International
    December 31, 2010      Insurance      Insurance     Reinsurance     Total

 
    Gross premiums
     written               $ 729,267       $ 504,937     $ 524,193 $ 1,758,397
    Net premiums written     551,063         319,083       522,309   1,392,455
    Net premiums earned      518,444         338,791       502,313   1,359,548
    Other income                 913               -             -         913
    Net losses and loss
     expenses              (297,517)       (160,153)     (250,213)   (707,883)
    Acquisition costs       (67,797)             460      (92,152)   (159,489)
    General and
     administrative
     expenses              (128,556)        (94,226)      (63,775)   (286,557)
    Underwriting income       25,487          84,872        96,173     206,532
    Net investment
     income                                                            244,143
    Net realized
     investment gains                                                  285,612
    Net impairment
     charges recognized
     in earnings                                                         (168)
    Amortization and
     impairment of
     intangible assets                                                 (3,483)
    Interest expense                                                  (40,242)
    Foreign exchange
     loss                                                                (444)
    Income before income
     taxes                                                           $ 691,950
 
    GAAP Ratios:
    Loss and loss
     expense ratio             57.4%           47.3%         49.8%       52.1%
    Acquisition cost
     ratio                     13.1%          (0.1%)         18.3%       11.7%
    General and
     administrative
     expense ratio             24.8%           27.8%         12.7%       21.1%
    Combined ratio             95.3%           75.0%         80.8%       84.9%
 
    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           Year Ended 
                                        December 31,          December 31,
                                      2011       2010       2011       2010

 
    Net income                     $ 183,100   $ 92,786  $ 274,548  $ 665,005
    Add after tax affect of:
              Net realized
               investment (gains)
               losses                (26,332)      4,306      (213)  (267,727)
              Net impairment
               charges recognized
               in earnings                  -          -          -        109
              Other Income -
               termination fee       (61,538)          -   (93,808)          -
              Foreign exchange
               (gain) / loss            (549)        196      3,159        444
    Operating income                 $ 94,681   $ 97,288  $ 183,686  $ 397,831
 
    Weighted average common
     shares outstanding:
    Basic                          38,138,558 40,291,620 38,093,351 46,491,279
    Diluted                        39,524,273 43,501,068 39,667,905 49,913,317
 
    Basic per share data:
     Net income                        $ 4.80     $ 2.30     $ 7.21    $ 14.30
    Add after tax affect of:
              Net realized
               investment (gains)
               losses                  (0.69)       0.11     (0.01)     (5,75)
              Net impairment
               charges recognized
               in earnings                  -          -          -          -
              Other Income -
               termination fee         (1.62)          -     (2.46)          -
              Foreign exchange
               (gain) / loss           (0.01)          -       0.08       0,01
    Operating income                   $ 2.48     $ 2.41     $ 4.82     $ 8.56
 
    Diluted per share data
    Net income                         $ 4.63     $ 2.13     $ 6.92    $ 13.32
    Add after tax affect of:
              Net realized
               investment (gains)
               losses                  (0.67)       0.10     (0.01)     (5,36)
              Net impairment
               charges recognized
               in earnings                  -          -          -          -
              Other Income -
               termination fee         (1.56)          -     (2.36)          -
              Foreign exchange
               (gain) / loss                -       0.01       0.08       0,01
    Operating income                   $ 2.40     $ 2.24     $ 4.63     $ 7.97
 
    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
                                                      December 31,    December 31,
                                                         2011            2010


    Price per share at period end                      $ 62.93        $ 59.44
 
    Total shareholders' equity                     $ 3,149,022    $ 3,075,820
 
    Basic common shares outstanding                 37,742,131     38,089,226
 
    Add: unvested restricted share units               249,251        571,178
 
    Add: Performance based equity awards               889,939      1,440,017
 
    Add: employee share purchase plan                   11,053         10,576
 
    Add: dilutive options/warrants outstanding       1,525,853      3,272,739
    Weighted average exercise price per share          $ 45.72        $ 35.98
    Deduct: options bought back via treasury
     method                                        (1,108,615)    (1,980,884)
 
    Common shares and common share
     equivalents outstanding                        39,309,612     41,402,852
 
    Basic book value per common share                  $ 83.44        $ 80.75
    Diluted book value per common share                $ 80.11        $ 74.29
 
    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 December 31,   Year Ended December 31,
                              2011          2010          2011         2010

 
    Opening
     shareholders'
     equity               $ 3,003,074   $ 3,341,314  $ 3,075,820  $ 3,213,295
    Deduct: accumulated
     other comprehensive
     income                   (17,796)     (111,760)     (57,135)    (149,849)
    Adjusted opening
     shareholders'
     equity                  2,985,278     3,229,554    3,018,685    3,063,446
                                    -             -
    Closing
     shareholders'
     equity                $ 3,149,022   $ 3,075,820  $ 3,149,022  $ 3,075,820
    Deduct: accumulated
     other comprehensive
     income                   (14,484)      (57,135)     (14,484)     (57,135)
    Adjusted closing
     shareholders'
     equity                  3,134,538     3,018,685    3,134,538    3,018,685
 
    Average
     shareholders'
     equity                $ 3,059,908   $ 3,124,120  $ 3,076,612  $ 3,041,066
 
    Net income
     available to
     shareholders            $ 183,100      $ 92,786    $ 274,548    $ 665,005
    Annualized net
     income available to
     shareholders              732,400       371,144      274,548      665,005
 
    Annualized return
     on average
     shareholders'
     equity - net income
     available to
     shareholders                23.9%         11.9%         8.9%        21.9%
 
    Operating income
     available to
     shareholders             $ 94,681      $ 97,288    $ 183,686    $ 397,831
    Annualized
     operating income
     available to
     shareholders              378,724       389,152      183,686      397,831
 
    Annualized return
     on average
     shareholders'
     equity - operating
     income available to
     shareholders                12.4%         12.5%         6.0%        13.1%
 

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