Allied World Reports $86.2 Million Operating Income in Third Quarter 2011; Quarterly Gross Premiums Up 17% Driven By Targeted Lines

By Allied World Assurance Company Holdings Ag, PRNE
Wednesday, November 2, 2011

ZUG, Switzerland, November 3, 2011 -

Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported operating income of $86.2 million, or $2.19 per diluted share, for the third quarter of 2011 compared to operating income of $143.6 million, or $2.94 per diluted share, for the third quarter of 2010. Operating income for the nine months ended September 30, 2011 was $89.0 million, or $2.24 per diluted share, compared to operating income of $300.5 million, or $5.79 per diluted share, for the first nine months of 2010.

President and Chief Executive Officer Scott Carmilani commented, “Allied World is pleased to report strong operating returns in the third quarter of 2011. Despite the catastrophe activity in the quarter, the company was able to generate operating income of $2.19 per diluted share which equates to 11.5% operating return on equity on an annualized basis.

Also noteworthy is the favorable premium growth experienced in each of our operating segments during the quarter. This growth was led by our international reinsurance business written out of our Lloyd’s platform where we are participating in the rate increases experienced in the territories impacted by global catastrophe activity over the last two years. On the insurance side, we continue to gain more traction in the new specialty classes that we are targeting in both our U.S. and international insurance platforms.”

The company reported a net loss of $11.0 million, or $0.29 per diluted share, for the third quarter of 2011 compared to net income of $254.5 million, or $5.21 per diluted share, for the third quarter of 2010. Net income for the nine months ended September 30, 2011 was $91.4 million, or $2.30 per diluted share, compared to net income of $572.2 million, or $11.03 per diluted share, for the first nine months of 2010.

Mr. Carmilani continued, “When including mark-to-market losses on investments, we are reporting a net loss for the quarter driven by market losses taken against our trading investment portfolio. Despite these losses for the quarter, our investment returns have continued to outperform many of our peers and our benchmarks over the last several years and we continue to actively manage our portfolio with a bias towards a shorter duration and diversification into non-fixed income asset classes.”

Mr. Carmilani concluded, “Growing diluted book value per share by 2.1% year to date despite the catastrophe activity and the volatility in the equity markets is a strong accomplishment for our company. Given the current valuation of our stock price, we are pleased to announce the resumption of our share repurchase program which has $201 million of remaining capacity.”

Underwriting Results

Gross premiums written were $442.7 million in the third quarter of 2011, a 17.0% increase compared to $378.5 million in the third quarter of 2010. For the nine months ended September 30, 2011, gross premiums written totaled $1,523.0 million, a 10.6% increase compared to $1,376.5 million in the first nine months of 2010.

Net premiums written were $350.3 million in the third quarter of 2011, a 15.9% increase compared to $302.2 million in the third quarter of 2010. For the nine months ended September 30, 2011, net premiums written totaled $1,226.9 million, an 11.0% increase compared to $1,105.3 million in the first nine months of 2010.

The combined ratio was 83.9% in the third quarter of 2011 compared to 70.3% in the third quarter of 2010. The loss and loss expense ratio was 55.4% in the third quarter of 2011 compared to 37.4% in the third quarter of 2010. During the third quarter of 2011, the company recorded net favorable reserve development on prior loss years of $61.5 million. This favorable reserve development resulted in a benefit of 16.6 percentage points to the company’s loss and loss expense ratio for the quarter. This compares to the third quarter of 2010, where the company recorded net favorable reserve development on prior loss years of $101.4 million, a benefit of 29.9 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 third quarter of 2011 was 72.0% compared to 67.3% for the third quarter of 2010. The third quarter 2011 loss and loss expense ratio was impacted by $33.5 million of net losses, or 9.0 percentage points, from Hurricane Irene during the quarter and additional losses developing from catastrophes occurring in the first half of 2011. These catastrophe losses were comprised of $3.5 million from our U.S. insurance segment, $10.5 million from our international insurance segment and $19.5 million from our reinsurance segment. The third quarter 2010 loss and loss expense ratio was impacted by losses of $25.0 million, or 7.4 percentage points, from major loss events during that quarter.

The company’s expense ratio was 28.5% for the third quarter of 2011 compared to 32.9% for the third quarter of 2010. The expense ratio was 30.4% for the nine months ended September 30, 2011 compared to 31.7% in the first nine months of 2010. The decreases in these ratios for the three and nine months ended September 30, 2011 were driven by increases in earned premiums and reductions in general and administrative expenses primarily due to a decrease in performance-based compensation expenses.

Investment Results

The total return on the company’s investment portfolio for the three and nine months ended September 30, 2011 was negative 1.1% and positive 1.1%, respectively. For the third quarter 2011, the company reported net realized investment losses of $130.8 million resulting from mark-to-market losses of $139.2 million and gains from the sale of securities of $8.4 million. See the table below for the components of our investment returns for the three and nine months ended September 30, 2011:


    (expressed in thousands of      THREE MONTHS ENDED      NINE MONTHS ENDED
          U.S. Dollars)             SEPTEMBER 30, 2011     SEPTEMBER 30, 2011

    Net investment income                     $ 47,883              $ 150,459
    Net realized investment losses           (130,809)               (21,555)
    Decrease in unrealized
    investment gains                           (5,924)               (42,389)
    Net investment income, realized
    gains and unrealized gains              $ (88,850)               $ 86,515

    Average invested assets                $ 8,048,140            $ 7,878,280

    Financial statement portfolio
    return                                       -1.1%                   1.1%
    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 and nine months ended September 30, 2011 was $35.0 million. This represented a 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 September 30, 2011, our total shareholders’ equity was $3.0 billion, compared to $3.1 billion as of December 31, 2010.

The company’s annualized net (loss) income return on average shareholders’ equity for the three and nine months ended September 30, 2011 was (1.5%) and 4.1%, respectively. The company’s annualized operating return on average shareholders’ equity for the three and nine months ended September 30, 2011 was 11.5% and 4.0%, respectively.

Share Repurchase Program

The company is announcing the resumption of its share repurchase program which was inactive in the second and third quarters of 2011 because of our merger agreement with Transatlantic Holdings, Inc., which was subsequently terminated. As of September 30, 2011, the company had $200.9 million of remaining capacity available under the share repurchase program.

As of September 30, 2011, diluted book value per share was $75.82, an increase of 2.1% compared to $74.29 as of December 31, 2010. For the first nine months of 2011, the company repurchased 969,163 of its common shares under its share repurchase program at an average repurchase price of $61.91 per share for an aggregate cost of $60.0 million.

Investment Supplement

Allied World will be providing additional information on its investment portfolio as of September 30, 2011. This information will be available at the “Investor Relations” section of the company’s website at www.awac.com.

Financial Supplement

A financial supplement relating to the third quarter of 2011 will be available at the “Investor Relations” section of the company’s website at www.awac.com.

Conference Call

Allied World will host a conference call on Friday, November 4, 2011 at 9:00 a.m. (Eastern Time) to discuss the third quarter 2011 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 +1-866-843-0890 (U.S. and Canada callers) or +1-412-317-9250 (international callers) and entering the passcode 0137127 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Friday, November 18, 2011 by dialing +1-877-344-7529 (U.S. and Canada callers) or +1-412-317-0088 (international callers) and entering the passcode 10004958. In addition, the webcast will remain available online through Friday, November 18, 2011 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, foreign exchange gain or loss and impairment of intangible assets, and any 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 any 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 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         Nine Months Ended
                                    September 30,           September 30,
                                   2011       2010        2011        2010

    Revenues:
          Gross premiums
          written              $ 442,698  $ 378,445   $ 1,522,984 $1,376,455
          Premiums ceded         (92,438)   (76,276)     (296,050)  (271,199)

          Net premiums
          written                350,260    302,169     1,226,934  1,105,256
          Change in
          unearned
          premiums                21,080     37,327      (165,411)   (88,512)
          Net premiums
          earned                 371,340    339,496     1,061,523  1,016,744

          Net investment
          income                  47,883     59,479       150,459    193,975
          Net realized
          investment
          (losses) gains        (130,809)    116,930      (21,555)   289,350
          Net impairment
          charges recognized
          in earnings                  -          -             -       (168)
          Other income            35,000          -        35,000        913
           Total revenue         323,414    515,905     1,225,427  1,500,814
    Expenses:
          Net losses and
          loss expenses          205,546    126,988       745,811    547,864
          Acquisition
          costs                   39,680     41,919       120,733    120,641
          General and
          administrative
          expenses                66,007     69,871       201,164    201,423
          Amortization and
          impairment of
          intangible assets          767        892         2,300      2,675
          Interest
          expense                 13,748      9,533        41,235     28,592
          Foreign
          exchange loss
          (gain)                   2,966     (1,387)        3,708        248
          Total expenses         328,714    247,816     1,114,951    901,443
    (Loss) Income
    before income taxes           (5,300)   268,089       110,476    599,371
          Income tax
          expense                  5,672     13,569        19,028     27,152
    NET (LOSS) INCOME          $ (10,972) $ 254,520      $ 91,448  $ 572,219

    PER SHARE DATA:
          Basic (loss)
          earnings per
          share                  $ (0.29)    $ 5.59        $ 2.40    $ 11.78
          Diluted (loss)
          earnings per
          share                  $ (0.29)    $ 5.21        $ 2.30    $ 11.03

          Weighted
          average common
          shares
          outstanding         38,110,368 45,544,060    38,078,116 48,580,541
          Weighted
          average common
          shares and
          common share
          equivalents
          outstanding         38,110,368 48,839,991    39,759,780 51,887,390

          Dividends paid
          per share              $ 0.375     $ 0.20       $ 0.375     $ 0.60
    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
                                                   September 30,  December 31,
    ASSETS:                                             2011          2010
    Fixed maturity investments available for
    sale, at fair value (amortized cost:
    2011: $264,050; 2010: $828,544)                  $ 284,966     $ 891,849
    Fixed maturity investments trading, at
    fair value                                       6,279,615     5,769,097
    Equity securities trading, at fair value           424,104       174,976
    Other invested assets trading, at fair
    value                                              552,074       347,632

    Total investments                                7,540,759     7,183,554
    Cash and cash equivalents                          902,573       853,368
    Insurance balances receivable                      607,270       529,927
    Prepaid reinsurance                                218,514       187,287
    Reinsurance recoverable                          1,009,643       927,588
    Accrued investment income                           39,743        40,520
    Net deferred acquisition costs                     115,070        96,803
    Goodwill                                           268,376       268,376
    Intangible assets                                   54,576        56,876
    Net deferred tax assets                             26,872        19,740
    Other assets                                        50,424        75,184
                                 Total assets     $ 10,833,820  $ 10,239,223

    LIABILITIES:
    Reserve for losses and loss expenses           $ 5,245,553   $ 4,879,188
    Unearned premiums                                1,158,842       962,203
    Reinsurance balances payable                        95,463        99,732
    Net balances payable on purchases and
    sales of investments                               405,124       318,570
    Senior notes                                       797,885       797,700
    Accounts payable and accrued liabilities           127,879       106,010
                            Total liabilities      $ 7,830,746   $ 7,163,403

    SHAREHOLDERS' EQUITY:
    Common shares: 2011: par value CHF 14.38
    per share and 2010: par value CHF 15.00
    per share (2011: 40,003,642; 2010:
    40,003,642 shares issued and 2011:
    38,145,557; 2010: 38,089,226 shares
    outstanding)                                       571,455       600,055
    Additional paid-in capital                          73,797       170,239
    Treasury shares, at cost (2011:
    1,858,085; 2010: 1,914,416)                       (112,624)     (112,811)
    Retained earnings                                2,452,650     2,361,202
    Accumulated other comprehensive income,
    net of tax                                          17,796        57,135
                   Total shareholders' equity        3,003,074     3,075,820

          Total liabilities and shareholders'
                                       equity     $ 10,833,820  $ 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 September      U.S.    International
    30, 2011                   Insurance   Insurance   Reinsurance   Total

    Gross premiums
    written                   $ 201,522     $ 109,612   $ 131,564 $ 442,698
    Net premiums written        157,310        61,386     131,564   350,260
    Net premiums earned         150,474        80,175     140,691   371,340
    Net losses and loss
    expenses                    (85,720)      (43,666)    (76,160) (205,546)
    Acquisition costs           (19,549)          343     (20,474)  (39,680)
    General and
    administrative
    expenses                    (28,945)      (21,558)    (15,504)  (66,007)
    Underwriting income          16,260        15,294      28,553    60,107
    Net investment income                                            47,883
    Net realized
    investment losses                                              (130,809)
    Other income -
    termination fee                                                  35,000
    Amortization and
    impairment of
    intangible assets                                                  (767)
    Interest expense                                                (13,748)
    Foreign exchange loss                                            (2,966)
    Loss before income
    taxes                                                          $ (5,300)

    GAAP Ratios:
    Loss and loss expense
    ratio                          57.0%         54.5%       54.1%     55.4%
    Acquisition cost
    ratio                          13.0%         (0.4%)      14.6%     10.7%
    General and
    administrative
    expense ratio                  19.2%         26.9%       11.0%     17.8%
    Combined ratio                 89.2%         81.0%       79.7%     83.9%

    Quarter Ended September       U.S.     International
    30, 2010                    Insurance   Insurance    Reinsurance   Total

    Gross premiums
    written                    $ 181,232     $ 100,858    $ 96,355 $ 378,445
    Net premiums written         140,481        65,520      96,168   302,169
    Net premiums earned          129,650        80,557     129,289   339,496
    Net losses and loss
    expenses                     (55,144)      (11,040)    (60,804) (126,988)
    Acquisition costs            (18,081)           29     (23,867)  (41,919)
    General and
    administrative
    expenses                     (31,781)      (22,819)    (15,271)  (69,871)
    Underwriting income           24,644        46,727      29,347   100,718
    Net investment income                                             59,479
    Net realized
    investment gains                                                 116,930
    Amortization and
    impairment of
    intangible assets                                                   (892)
    Interest expense                                                  (9,533)
    Foreign exchange gain                                              1,387
    Income before income
    taxes                                                          $ 268,089

    GAAP Ratios:
    Loss and loss expense
    ratio                           42.5%         13.7%       47.0%     37.4%
    Acquisition cost
    ratio                           13.9%          0.0%       18.5%     12.3%
    General and
    administrative
    expense ratio                   24.5%         28.3%       11.8%     20.6%
    Combined ratio                  80.9%         42.0%       77.3%     70.3%
    ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
    UNAUDITED CONSOLIDATED SEGMENT DATA
    (Expressed in thousands of United States dollars, except for ratio
    information)

    Nine Months Ended           U.S.    International
    September 30, 2011        Insurance   Insurance   Reinsurance    Total

    Gross premiums
    written                 $ 611,562     $ 399,530   $ 511,892 $ 1,522,984
    Net premiums
    written                   470,099       245,281     511,554   1,226,934
    Net premiums
    earned                    431,812       236,421     393,290   1,061,523
    Net losses and
    loss expenses            (294,146)     (186,932)   (264,733)   (745,811)
    Acquisition costs         (56,527)        2,946     (67,152)   (120,733)
    General and
    administrative
    expenses                  (90,997)      (62,939)    (47,228)   (201,164)
    Underwriting
    (loss) income              (9,858)      (10,504)     14,177      (6,185)
    Net investment
    income                                                          150,459
    Net realized
    investment losses                                               (21,555)
    Other income -
    termination fee                                                  35,000
    Amortization and
    impairment of
    intangible assets                                                (2,300)
    Interest expense                                                (41,235)
    Foreign exchange
    loss                                                             (3,708)
    Income before
    income taxes                                                  $ 110,476

    GAAP Ratios:
    Loss and loss
    expense ratio                68.1%         79.1%       67.3%       70.3%
    Acquisition cost
    ratio                        13.1%         (1.2%)      17.1%       11.4%
    General and
    administrative
    expense ratio                21.1%         26.6%       12.0%       19.0%
    Combined ratio              102.3%        104.5%       96.4%      100.7%

    Nine Months Ended           U.S.     International
    September 30, 2010        Insurance   Insurance    Reinsurance    Total

    Gross premiums
    written                 $ 532,980     $ 389,881   $ 453,594 $ 1,376,455
    Net premiums
    written                   407,274       245,110     452,872   1,105,256
    Net premiums
    earned                    384,514       257,027     375,203   1,016,744
    Other income                  913             -           -         913
    Net losses and
    loss expenses            (222,767)     (133,069)   (192,028)   (547,864)
    Acquisition costs         (50,895)           29     (69,775)   (120,641)
    General and
    administrative
    expenses                  (89,578)      (67,321)    (44,524)   (201,423)
    Underwriting
    income                     22,187        56,666      68,876     147,729
    Net investment
    income                                                          193,975
    Net realized
    investment gains                                                289,350
    Net impairment
    charges recognized
    in earnings                                                        (168)
    Amortization and
    impairment of
    intangible assets                                                (2,675)
    Interest expense                                                (28,592)
    Foreign exchange
    loss                                                               (248)
    Income before
    income taxes                                                  $ 599,371

    GAAP Ratios:
    Loss and loss
    expense ratio                57.9%         51.8%       51.2%       53.9%
    Acquisition cost
    ratio                        13.2%          0.0%       18.6%       11.9%
    General and
    administrative
    expense ratio                23.3%         26.2%       11.9%       19.8%
    Combined ratio               94.4%         78.0%       81.7%       85.6%
    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            Nine Months Ended
                                  September  30,             September 30,
                               2011          2010           2011      2010

    Net (loss) income      $ (10,972)     $ 254,520      $ 91,448  $ 572,219
    Add after tax affect
    of:
           Net realized
           investment
           losses (gains)    126,440       (109,581)       26,119   (272,033)
           Net impairment
           charges
           recognized in
           earnings                -              -             -        109
           Other Income -
           termination fee   (32,270)             -       (32,270)         -
           Foreign
           exchange loss /
           (gain)              2,966         (1,387)        3,708        248
    Operating income        $ 86,164      $ 143,552      $ 89,005  $ 300,543

    Weighted average
    common shares
    outstanding:
    Basic                 38,110,368     45,544,060    38,078,116 48,580,541
    Diluted               39,340,710 *   48,839,991    39,759,780 51,887,390

    Basic per share data:
    Net (loss) income        $ (0.29)        $ 5.59        $ 2.40    $ 11.78
    Add after tax affect
    of:
           Net realized
           investment
           losses (gains)       3.32          (2.41)         0.69      (5.60)
           Net impairment
           charges
           recognized in
           earnings                -              -             -          -
           Other Income -
           termination fee     (0.85)             -         (0.85)         -
           Foreign
           exchange loss /
           (gain)               0.08          (0.03)         0.10       0.01
    Operating income          $ 2.26         $ 3.15        $ 2.34     $ 6.19

    Diluted per share
    data
    Net (loss) income        $ (0.29) *      $ 5.21        $ 2.30    $ 11.03
    Add after tax affect
    of:
           Net realized
           investment
           losses (gains)       3.21          (2.24)         0.66      (5.24)
           Net impairment
           charges
           recognized in
           earnings                -              -             -          -
           Other Income -
           termination fee     (0.82)             -         (0.81)         -
           Foreign
           exchange loss /
           (gain)               0.09          (0.03)         0.09          -
    Operating income          $ 2.19         $ 2.94        $ 2.24     $ 5.79

    *Diluted weighted average common shares outstanding were only used
     in the calculation of diluted operating income per share. There
     were no common share equivalents included in calculating diluted
     earnings per share as there was a net loss and any additional
     shares would prove to be anti-dilutive.
    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
                              September 30,     December 31,     September 30,
                                  2011              2010             2010
    Price per share at
    period end                    $ 53.71          $ 59.44           $ 56.59

    Total shareholders'
    equity                    $ 3,003,074      $ 3,075,820       $ 3,341,314

    Basic common shares
    outstanding                38,145,557       38,089,226        42,394,576

    Add: unvested restricted
    share units                   256,672          571,178           580,706

    Add: Performance based
    equity awards                 898,014        1,440,017         1,409,984

    Add: employee share
    purchase plan                   1,215           10,576                 -

    Add: dilutive
    options/warrants
    outstanding                 1,107,305        3,272,739         4,563,380
    Weighted average
    exercise price per share      $ 38.80          $ 35.98           $ 34.69
    Deduct: options bought
    back via treasury method     (799,914)      (1,980,884)       (2,797,512)

    Common shares and common
    share
    equivalents outstanding    39,608,849       41,402,852        46,151,134

    Basic book value per
    common share                  $ 78.73          $ 80.75           $ 78.81
    Diluted book value per
    common share                  $ 75.82          $ 74.29           $ 72.40
    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               Nine Months Ended
                            September 30,                 September 30,
                          2011        2010             2011          2010

    Opening
    shareholders'
    equity            $ 3,044,417 $ 3,468,543       $ 3,075,820  $ 3,213,295
    Deduct:
    accumulated other
    comprehensive
    income                (23,095)   (138,245)          (57,135)    (149,849)
    Adjusted opening
    shareholders'
    equity              3,021,322   3,330,298         3,018,685    3,063,446
                                -           -
    Closing
    shareholders'
    equity            $ 3,003,074 $ 3,341,314       $ 3,003,074  $ 3,341,314
    Deduct:
    accumulated other
    comprehensive
    income                (17,796)   (111,760)          (17,796)    (111,760)
    Adjusted closing
    shareholders'
    equity              2,985,278   3,229,554         2,985,278    3,229,554

    Average
    shareholders'
    equity            $ 3,003,300 $ 3,279,926       $ 3,001,982  $ 3,146,500

    Net (loss) income
    available to
    shareholders        $ (10,972)  $ 254,520          $ 91,448    $ 572,219
    Annualized net
    (loss) income
    available to
    shareholders          (43,888)  1,018,080           121,931      762,959

    Annualized return
    on average
    shareholders'
    equity - net
    (loss) income
    available to
    shareholders             (1.5%)      31.0%              4.1%        24.2%

    Operating income
    available to
    shareholders         $ 86,164    $ 143,552         $ 89,005    $ 300,543
    Annualized
    operating income
    available to
    shareholders          344,656      574,208          118,673      400,724

    Annualized return
    on average
    shareholders'
    equity - operating
    income available
    to shareholders          11.5%        17.5%             4.0%        12.7%

Media: Faye Cook, Vice President, Marketing & Communications, +1-441-278-5406, faye.cook at awac.com, or Investors: Keith J. Lennox, Investor Relations Officer, +1-646-794-0750, keith.lennox at awac.com, www.awac.com

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