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

31 Jul, 2012, 16:30 ET from Allied World Assurance Company Holdings, AG

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



RELATED LINKS

http://www.awac.com