2014

Allied World Reports 3.2% Quarterly Growth in Diluted Book Value Per Share with Strong Second Quarter 2012 Results

ZUG, Switzerland, July 31, 2012 /PRNewswire/ -- Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported net income of $96.4 million, or $2.59 per diluted share, for the second quarter of 2012 compared to net income of $93.8 million, or $2.36 per diluted share, for the second quarter of 2011.  Net income for the six months ended June 30, 2012 was $314.5 million, or $8.41 per diluted share, compared to net income of $102.4 million, or $2.57 per diluted share, for the first six months of 2011.

The company reported operating income of $87.3 million, or $2.35 per diluted share, for the second quarter of 2012, compared to operating income of $44.2 million, or $1.11 per diluted share, for the second quarter of 2011.  Operating income for the six months ended June 30, 2012 was $178.8 million, or $4.78 per diluted share, compared to operating income of $2.8 million, or $0.07 per diluted share, for the first six months of 2011.

President and Chief Executive Officer Scott Carmilani commented, "Allied World continues to build across our operating platforms, and the momentum in our premium growth is a direct result of our expansion efforts and new business initiatives over the last few years.  Gross premiums written were up by almost 25% for the quarter, surpassing the $1.3 billion mark for the first half of 2012."

"The company had strong underwriting performance and solid investment returns resulting in $96.4 million of net income for the quarter.  These results combined with the accretive benefits from our share repurchase program resulted in our diluted book value per share growing by 3.2% for the quarter, to $88.24.  For the first half of 2012, our diluted book value per share grew by a robust 10%."

Underwriting Results

Gross premiums written were $646.9 million in the second quarter of 2012, a 24.5% increase compared to $519.6 million in the second quarter of 2011.  For the six months ended June 30, 2012, gross premiums written totaled $1,327.8 million, a 22.9% increase compared to $1,080.3 million in the first six months of 2011.  Net premiums written were $494.7 million in the second quarter of 2012, a 25.0% increase compared to $395.8 million in the second quarter of 2011.  For the six months ended June 30, 2012, net premiums written totaled $1,083.7 million, a 23.6% increase compared to $876.7 million in the first six months of 2011.  

Net premiums earned in the second quarter of 2012 were $429.7 million, a 21.0% increase compared to $355.3 million in the second quarter of 2011.  For the six months ended June 30, 2012, net premiums earned totaled $831.6 million, a 20.5% increase compared to $690.2 million in the first six months of 2011.  

The combined ratio was 85.1% in the second quarter of 2012 compared to 97.4% in the second quarter of 2011.  The loss and loss expense ratio was 55.9% in the second quarter of 2012 compared to 66.4% in the second quarter of 2011.  During the second quarter of 2012, the company recorded net favorable reserve development on prior loss years of $41.9 million.  This favorable reserve development resulted in a benefit of 9.8 percentage points to the company's loss and loss expense ratio for the quarter.  This compares to the second quarter of 2011, when the company recorded net favorable reserve development on prior loss years of $55.2 million, a benefit of 16.1 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 second quarter of 2012 was 65.7% compared to 82.5% for the second quarter of 2011.  The company experienced no significant catastrophe losses for the current accident year.  The second quarter 2011 loss and loss expense ratio was impacted by $67.5 million of net losses, or 19.7 percentage points, from global catastrophe events during the quarter.

For the six months ended June 30, 2012, the combined ratio was 85.2% compared to 109.6% for the first six months of 2011.  For the six months ended June 30, 2012, the company recorded net favorable reserve development on prior loss years of $81.4 million, a benefit of 9.8 percentage points to the company's loss and loss expense ratio.  For the six months ended June 30, 2011, the company recorded net favorable reserve development on prior loss years of $99.6 million, a benefit of 14.7 percentage points to the company's loss and loss expense ratio.  Absent prior year reserve adjustments, the loss and loss expense ratio for the six months ended June 30, 2012 was 65.8% compared to 93.0% for 2011.  The company experienced no significant catastrophe losses for the current accident year.  The loss and loss expense ratio for the first half of 2011 was impacted by $199.7 million of net losses, or 29.5 percentage points, from global catastrophes occurring during the first half of 2011.  

The company's expense ratio was 29.2% for the second quarter of 2012 compared to 31.0% for the second quarter of 2011.   The expense ratio was 29.2% for the six months ended June 30, 2012 compared to 31.3% for the first six months of 2011. 

Investment Results

The total return on the company's investment portfolio for the three months ended June 30, 2012 was 0.6% compared to 1.3% for the three months ended June 30, 2011.  See the table below for the components of our investment returns:


Three Months Ended


Three Months Ended


June 30, 2012


June 30, 2011


 (Expressed in millions of U.S. Dollars) 

 Net investment income 

$                           42.5


$                           52.4

 Net realized investment gains 

8.6


58.9

 Change in unrealized gains 

(1.4)


(11.4)

 Net investment income, realized gains and unrealized gains 

49.7


99.9





Average invested assets

$                      8,276.1


$                      7,922.5





Financial statement portfolio return

0.6%


1.3%


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

Shareholders' Equity

As of June 30, 2012, our total shareholders' equity was $3,283.9 million, compared to $3,149.0 million as of December 31, 2011.

As of June 30, 2012, diluted book value per share was $88.24, an increase of 10.1% compared to $80.11 as of December 31, 2011.  

Share Repurchase Program

During the second quarter of 2012, the company repurchased 905,383 of its common shares through its share repurchase program in the open market at an average price of $73.38 per share for an aggregate cost of $66.4 million.  

Investment Supplement

Allied World will be providing additional information on its investment portfolio as of June 30, 2012.  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 second quarter of 2012 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 Wednesday, August 1, 2012 at 9:00 a.m. (Eastern Time) to discuss the results for the second quarter ended June 30, 2012.  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 (866) 843-0890 (U.S. and Canada callers) or (412) 317-9250 (international callers) and entering the passcode 1080909 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Wednesday, August 15, 2012 by dialing (877) 344-7529 (U.S. and Canada callers) or (412) 317-0088 (international callers) and entering the passcode 10015330. In addition, the webcast will remain available online through Wednesday, August 15, 2012 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 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 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 June 30,


Six Months Ended June 30,




2012


2011


2012


2011















Revenues:














Gross premiums written


$

646,870


$

519,598


$

1,327,799


$

1,080,286


Premiums ceded



(152,160)



(123,795)



(244,136)



(203,612)
















Net premiums written



494,710



395,803



1,083,663



876,674


Change in unearned premiums



(64,963)



(40,496)



(252,026)



(186,491)


Net premiums earned



429,747



355,307



831,637



690,183
















Net investment income



42,451



52,368



89,660



102,576


Net realized investment gains



8,663



58,878



142,244



109,254





Total revenue



480,861



466,553



1,063,541



902,013

Expenses:














Net losses and loss expenses



240,380



235,813



465,582



540,265


Acquisition costs



51,588



42,971



98,726



81,053


General and administrative expenses



73,979



67,201



144,345



135,157


Amortization of intangible assets



634



766



1,267



1,533


Interest expense



14,001



13,745



27,757



27,487


Foreign exchange (gain) loss



(1,019)



1,184



(1,100)



742





Total expenses



379,563



361,680



736,577



786,237

Income before income taxes



101,298



104,873



326,964



115,776


Income tax expense



4,947



11,073



12,457



13,356

NET INCOME


$

96,351


$

93,800


$

314,507


$

102,420















PER SHARE DATA:














Basic earnings per share


$

2.66


$

2.45


$

8.56


$

2.69


Diluted earnings per share


$

2.59


$

2.36


$

8.41


$

2.57
















Weighted average common shares outstanding



36,288,596



38,346,489



36,746,881



38,061,724


Weighted average common shares and common share equivalents outstanding



37,189,722



39,800,753



37,395,559



39,873,418
















Dividends paid per share


$

0.375


$

-


$

0.750


$

-


 

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



June 30,


December 31,

ASSETS:


2012


2011

Fixed maturity investments available for sale, at fair value


$

30,214



$

244,016


Fixed maturity investments trading, at fair value



6,796,109




6,254,686


Equity securities trading, at fair value



454,205




367,483


Other invested assets trading, at fair value



520,890




540,409











Total investments



7,801,418




7,406,594


Cash and cash equivalents



1,103,826




716,604


Insurance balances receivable



845,663




652,158


Prepaid reinsurance



259,289




226,721


Reinsurance recoverable



1,073,612




1,002,919


Accrued investment income



30,117




38,263


Net deferred acquisition costs



129,818




100,334


Goodwill



268,376




268,376


Intangible assets



52,631




53,898


Balances receivable on sale of investments



635,727




580,443


Net deferred tax assets



28,477




22,646


Other assets



48,697




53,202











Total assets


$

12,277,651



$

11,122,158











LIABILITIES:









Reserve for losses and loss expenses


$

5,377,518



$

5,225,143


Unearned premiums



1,363,006




1,078,412


Reinsurance balances payable



128,306




124,539


Balances due on purchases of investments



1,220,246




616,728


Senior notes



798,080




797,949


Dividends payable



-




14,302


Accounts payable and accrued liabilities



106,594




116,063


Total liabilities



8,993,750




7,973,136











SHAREHOLDERS' EQUITY:









Common shares, 2012: par value CHF 13.69 per share and 2011: par value CHF 14.03 per share (2012 and 2011: 40,003,642 shares issued and 2012: 35,942,964; 2011: 37,742,131 shares outstanding)



543,452




557,153


Additional paid-in capital



52,815




78,225


Treasury shares, at cost (2012: 4,060,678; 2011: 2,261,511)



(264,037)




(136,590)


Retained earnings



2,950,257




2,635,750


Accumulated other comprehensive income



1,414




14,484


Total shareholders' equity



3,283,901




3,149,022











Total liabilities and shareholders' equity


$

12,277,651



$

11,122,158



 

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 June 30, 2012

Insurance


Insurance


Reinsurance


Total














Gross premiums written

$

 

265,974


$

 

183,593


$

 

197,303


 

$

 

646,870

Net premiums written


196,661



111,342



186,707



494,710

Net premiums earned


162,785



82,605



184,357



429,747

Net losses and loss expenses


(103,074)



(22,233)



(115,073)



(240,380)

Acquisition costs


(21,250)



582



(30,920)



(51,588)

General and administrative expenses


(34,730)



(21,648)



(17,601)



(73,979)

Underwriting income


3,731



39,306



20,763



63,800

Net investment income











42,451

Net realized investment gains











8,663

Amortization of intangible assets











(634)

Interest expense











(14,001)

Foreign exchange gain











1,019

Income before income taxes










$

101,298














GAAP Ratios:












Loss and loss expense ratio


63.3%



26.9%



62.4%



55.9%

Acquisition cost ratio


13.1%



(0.7%)



16.8%



12.0%

General and administrative expense ratio


21.3%



26.2%



9.5%



17.2%

Combined ratio


97.7%



52.4%



88.7%



85.1%
















U.S.


International







Quarter Ended June 30, 2011

Insurance


Insurance


Reinsurance


Total














Gross premiums written

$

226,738


$

178,593


$

114,267


$

519,598

Net premiums written


172,887



108,985



113,931



395,803

Net premiums earned


145,857



79,956



129,494



355,307

Net losses and loss expenses


(92,595)



(72,082)



(71,136)



(235,813)

Acquisition costs


(18,876)



747



(24,842)



(42,971)

General and administrative expenses


(31,253)



(20,653)



(15,295)



(67,201)

Underwriting income (loss)


3,133



(12,032)



18,221



9,322

Net investment income











52,368

Net realized investment gains











58,878

Amortization of intangible assets











(766)

Interest expense











(13,745)

Foreign exchange loss











(1,184)

Income before income taxes










$

104,873














GAAP Ratios:












Loss and loss expense ratio


63.5%



90.2%



54.9%



66.4%

Acquisition cost ratio


12.9%



(0.9%)



19.2%



12.1%

General and administrative expense ratio


21.4%



25.8%



11.8%



18.9%

Combined ratio


97.8%



115.1%



85.9%



97.4%















 

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG












UNAUDITED CONSOLIDATED SEGMENT DATA












(Expressed in thousands of United States dollars, except for ratio information)

























U.S.


International







Six Months Ended June 30, 2012

Insurance


Insurance


Reinsurance


Total














Gross premiums written

$

470,185


$

297,183


$

560,431


$

1,327,799

Net premiums written


350,507



183,951



549,205



1,083,663

Net premiums earned


316,143



162,476



353,018



831,637

Net losses and loss expenses


(200,778)



(60,333)



(204,471)



(465,582)

Acquisition costs


(41,222)



1,110



(58,614)



(98,726)

General and administrative expenses


(65,774)



(44,049)



(34,522)



(144,345)

Underwriting income


8,369



59,204



55,411



122,984

Net investment income











89,660

Net realized investment gains











142,244

Amortization of intangible assets











(1,267)

Interest expense











(27,757)

Foreign exchange gain











1,100

Income before income taxes










$

326,964














GAAP Ratios:












Loss and loss expense ratio


63.5%



37.1%



57.9%



56.0%

Acquisition cost ratio


13.0%



(0.7%)



16.6%



11.9%

General and administrative expense ratio


20.8%



27.1%



9.8%



17.3%

Combined ratio


97.3%



63.5%



84.3%



85.2%
















U.S.


International







Six Months Ended June 30, 2011

Insurance


Insurance


Reinsurance


Total














Gross premiums written

$

410,040


$

289,918


$

380,328


$

1,080,286

Net premiums written


312,789



183,895



379,990



876,674

Net premiums earned


281,338



156,246



252,599



690,183

Net losses and loss expenses


(208,426)



(143,266)



(188,573)



(540,265)

Acquisition costs


(36,978)



2,603



(46,678)



(81,053)

General and administrative expenses


(62,052)



(41,381)



(31,724)



(135,157)

Underwriting loss


(26,118)



(25,798)



(14,376)



(66,292)

Net investment income











102,576

Net realized investment gains











109,254

Amortization of intangible assets











(1,533)

Interest expense











(27,487)

Foreign exchange loss











(742)

Income before income taxes










$

115,776














GAAP Ratios:












Loss and loss expense ratio


74.1%



91.7%



74.7%



78.3%

Acquisition cost ratio


13.1%



(1.7%)



18.5%



11.7%

General and administrative expense ratio


22.1%



26.5%



12.6%



19.6%

Combined ratio


109.3%



116.5%



105.8%



109.6%


 

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 June 30,



Six Months Ended June 30,




2012



2011



2012



2011














Net income

$

96,351


$

93,800


$

314,507


$

102,420

Add after tax effect of:













Net realized investment gains


(8,014)



(50,795)



(134,584)



(100,320)


Foreign exchange (gain) loss


(1,019)



1,184



(1,100)



742

Operating income

$

87,318


$

44,189


$

178,823


$

2,842














Weighted average common shares outstanding:












Basic


36,288,596



38,346,489



36,746,881



38,061,724

Diluted


37,189,722



39,800,753



37,395,559



39,873,418














Basic per share data:












Net income

$

2.66


$

2.45


$

8.56


$

2.69

Add after tax effect of:













Net realized investment gains


(0.22)



(1.32)



(3.66)



(2.64)


Foreign exchange (gain) loss


(0.03)



0.02



(0.03)



0.03

Operating income

$

2.41


$

1.15


$

4.87


$

0.08














Diluted per share data:












Net income

$

2.59


$

2.36


$

8.41


$

2.57

Add after tax effect of:













Net realized investment gains


(0.22)



(1.28)



(3.60)



(2.52)


Foreign exchange (gain) loss


(0.02)



0.03



(0.03)



0.02

Operating income

$

2.35


$

1.11


$

4.78


$

0.07















 

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


June 30,


December 31,


June 30,


2012


2011


2011

Price per share at period end

$

79.47



$

62.93



$

57.58














Total shareholders' equity

$

3,283,901



$

3,149,022



$

3,044,417














Basic common shares outstanding


35,942,964




37,742,131




37,945,043














Add: unvested restricted share units


185,809




249,251




473,967














Add: performance based equity awards


510,530




889,939




920,164














Add: employee share purchase plan





11,053

















Add: dilutive options/warrants outstanding


1,365,245




1,525,853




1,124,438


  Weighted average exercise price per share

$

46.04



$

45.72



$

38.83


Deduct: options bought back via treasury method


(790,888)




(1,108,615)




(758,342)














Common shares and common share












equivalents outstanding


37,213,660




39,309,612




39,705,270














Basic book value per common share

$

91.36



$

83.44



$

80.23


Diluted book value per common share

$

88.24



$

80.11



$

76.68















 

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 June 30,




Six Months Ended June 30,



2012


2011


2012


2011

















Opening shareholders' equity

$

3,245,821



$

2,950,953



$

3,149,022



$

3,075,820


Deduct: accumulated other comprehensive income


(2,325)




(32,963)




(14,484)




(57,135)


Adjusted opening shareholders' equity


3,243,496




2,917,990




3,134,538




3,018,685


















Closing shareholders' equity

$

3,283,901



$

3,044,417



$

3,283,901



$

3,044,417


Deduct: accumulated other comprehensive income


(1,414)




(23,095)




(1,414)




(23,095)


Adjusted closing shareholders' equity


3,282,487




3,021,322




3,282,487




3,021,322


















Average shareholders' equity

$

3,262,992



$

2,969,656



$

3,208,513



$

3,020,004


















Net income available to shareholders

$

96,351



$

93,800



$

314,507



$

102,420


Annualized net income available to shareholders


385,404




375,200




629,014




204,840


















Annualized return on average shareholders' equity - net income available to shareholders


11.8%




12.6%




19.6%




6.8%


















Operating income available to shareholders

$

87,318



$

44,190



$

178,823



$

2,842


Annualized operating income available to shareholders


349,272




176,760




357,646




5,684


















Annualized return on average shareholders' equity - operating income available to shareholders


10.7%




6.0%




11.1%




0.2%


 

 

SOURCE Allied World Assurance Company Holdings, AG



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