Allied World Assurance 8-K Results of Operations and Financial Condition

EXHIBIT 99.1

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD REPORTS FIRST
QUARTER 2007 OPERATING RESULTS; DECLARES QUARTERLY DIVIDEND
OF $0.15 PER COMMON SHARE

PEMBROKE, BERMUDA,May 8, 2007- Allied World Assurance Company Holdings, Ltd (NYSE: AWH) today reported net income of $113.9 million, or $1.83 per diluted share, for the first quarter 2007 compared to net income of $98.1 million, or $1.94 per diluted share, for the first quarter 2006.

The company reported operating income of $120.4 million, or $1.94 per diluted share, for the first quarter 2007 compared to operating income of $103.9 million, or $2.06 per diluted share, for the first quarter 2006. The decrease in diluted earnings per share amounts reflects the increase in the number of shares outstanding resulting primarily from the company’s initial public offering in July 2006.

President and Chief Executive Officer Scott Carmilani commented, “We are very pleased with Allied World’s performance for the quarter. We have grown net income by 16% over the prior year and achieved an annualized operating return on equity of 21.2%. Gross premiums for the quarter were down 12% primarily due to our having recorded upward premium adjustments in our reinsurance segment in the first quarter of 2006. Without these adjustments, gross premiums declined by about 5% quarter over quarter. Our emphasis continues to be on sustaining underwriting profitability, especially in the face of softening market conditions.”

Mr. Carmilani concluded, “Notwithstanding current market conditions, we continue to leverage our diverse and seasoned books of business, strong financial strength ratings and growing asset base and expect to continue to generate strong results.”

Underwriting Results

Gross premiums written were $438.4 million in the first quarter 2007, a 12% decrease compared to $498.1 million in the first quarter 2006. Of this decrease, approximately $37.8 million, or 7.2%, was due to a reduction in estimated premium adjustments recorded in the reinsurance segment in the first quarter of 2007 as compared to the first quarter of 2006. The remaining 4.8% decrease was primarily the result of non-renewal of business that did not meet our underwriting requirements, increased competition and decreasing rates for new and renewal business.

Net premiums written were $357.8 million in the first quarter 2007, a 16.3% decrease compared to $427.5 million in the first quarter 2006. Net premiums earned in the first quarter 2007 were $286.6 million, a 7.2% decrease compared to $308.9 million for the first quarter 2006. These decreases were primarily driven by the decrease in gross premiums written.

The combined ratio was 79.7% in the first quarter 2007 compared to 85.1% in first quarter 2006. The loss and loss expense ratio was 57.9% in the first quarter 2007 compared to 66.7% in the first quarter 2006. During the first quarter 2007, the company recorded net favorable reserve development on prior accident years of $26.1 million, a benefit of 9.1 percentage points to the company’s loss ratio for this quarter. Of this development, net favorable development of $12.6 million relates to the windstorms of 2005.

Investment Results

Net investment income in the first quarter 2007 was $72.6 million, an increase of 17.2% over the $62.0 million of net investment income in the first quarter 2006. This increase primarily reflects the increase in the company’s invested asset base driven by strong operating cash flows and the proceeds from the company’s July 2006 initial public offering. During the first quarter 2007, the company recorded net realized losses of $6.5 million compared to net realized losses of $5.2 million in the first quarter 2006.

Shareholders’ Equity

As of March 31, 2007, shareholders’ equity was $2.4 billion compared to $2.2 billion reported as of December 31, 2006. Diluted book value per share was $37.89 as of March 31, 2007 compared to $35.26 as of December 31, 2006. The company’s annualized return on average equity for the three months ended March 31, 2007 was 20.1% and the annualized operating return on average equity for the three months ended March 31, 2007 was 21.2%.

Quarterly Dividend

Allied World announced today that its Board of Directors has declared a quarterly dividend of $0.15 per common share. The dividend will be payable on June 14, 2007 to shareholders of record on May 29, 2007.

Conference Call

Allied World will host a conference call on Wednesday, May 9^th at 8:30 a.m. (Eastern Time) to discuss its first quarter 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 (800) 591-6930 (U.S. and Canada callers) or (617) 614-4908 (international callers) and entering the passcode 47308433 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Wednesday, May 23, 2007 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 43576018. In addition, the webcast will remain available online through Wednesday, May 23, 2007 at www.awac.com.

Financial Supplement

A financial supplement relating to the first quarter 2007 will be available at the “Investor Relations” section of the company’s website 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-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 GAAP.

“Operating income” is an internal performance measure used by the company in the management of its operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses and foreign exchange gains or losses. The company excludes net realized investment gains or losses and net foreign exchange gains or losses from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. The company believes these amounts are largely independent of its business and underwriting process and including them may distort the analysis of trends in its insurance and reinsurance operations. In addition to presenting net income determined in accordance with GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the company’s results of operations in a manner similar to how management analyzes the company’s underlying business performance. Operating income should not be viewed as a substitute for 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 a better measure of calculating shareholder returns than book value per share.

“Annualized return on average equity” (“ROAE”) is calculated using average equity, excluding the average after tax unrealized gains or losses on investments. Unrealized gains (losses) on investments are primarily the result of interest rate 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 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 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 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 return on average equity explanation above.

Reconciliations of these financial measures to their most directly comparable GAAP measures are included in the attached tables.

About Allied World Assurance Company

Allied World Assurance Company Holdings, Ltd, through its insurance subsidiaries, is a global provider of insurance and reinsurance solutions, offering superior client service through offices in Bermuda, the United States and Europe. Our insurance subsidiaries are rated A (Excellent) by A.M. Best Company and A- (Strong) by Standard & Poor’s. Our Bermuda and U.S. insurance subsidiaries are rated A2 (Good) by Moody’s Investors Service. For further information on Allied World Assurance Company, please visit our website at www.awac.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that involve inherent risks and uncertainties. Statements that are not historical facts, including statements that use terms such as “believes,” “anticipates,” “intends” or “expects” and that relate to our plans and objectives for future operations, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this press release should not be considered as a representation by us or any other person that our objectives or plans will be achieved. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (b) the effects of investigations into market practices, in particular insurance brokerage practices, together with any legal or regulatory proceedings, related settlements and industry reform or other changes arising therefrom; (c) the impact of acts of terrorism and acts of war; (d) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices have anticipated; (e) increased competition due to an increase in capacity of property and casualty

insurers or reinsurers; (f) the inability to obtain or maintain financial strength ratings by one or more of the company’s subsidiaries; (g) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (h) the company or one of its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; (i) changes in regulations or tax laws applicable to the company, its subsidiaries, brokers or customers; (j) changes in the availability, cost or quality of reinsurance or retrocessional coverage; (k) loss of key personnel; (l) changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect the company’s investment portfolio; and (m) such other risk factors as may be discussed in our most recent documents on file with the U.S. Securities and Exchange Commission. 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, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of United States dollars, except share and per share amounts)

	Quarter Ended March 31,
	2007			2006
Revenues:
Gross premiums written	$	438,406		$	498,120
Premiums ceded		(80,562	)		(70,617	)
Net premiums written		357,844			427,503
Change in unearned premiums		(71,278	)		(118,560	)
Net premiums earned		286,566			308,943
Net investment income		72,648			62,001
Net realized investment losses		(6,484	)		(5,236	)
Total Revenue		352,730			365,708
Expenses:
Net losses and loss expenses		165,995			205,960
Acquisition costs		29,196			36,472
General and administrative expenses		33,203			20,322
Interest expense		9,374			6,451
Foreign exchange loss		32			545
Total Expenses		237,800			269,750
Income before income taxes		114,930			95,958
Income tax expense (recovery)		1,009			(2,163	)
NET INCOME	$	113,921		$	98,121
PER SHARE DATA:
Basic earnings per share	$	1.89		$	1.96
Diluted earnings per share	$	1.83		$	1.94
Weighted average common shares outstanding		60,333,209			50,162,842
Weighted average common shares and common share equivalents outstanding		62,207,941			50,485,556

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States dollars, except share and per share amounts)

	As of		As of
	March 31,		December 31,
	2007		2006
ASSETS:
Fixed maturity investments available for sale at fair value (amortized cost: 2007:
$5,392,983; 2006: $5,188,379)	$	5,407,813	$	5,177,812
Other invested assets available for sale, at fair value (cost: 2007: $246,500; 2006: $245,657)		263,993		262,557
Cash and cash equivalents		288,284		366,817
Restricted cash		200,813		138,223
Securities lending collateral		534,774		304,742
Insurance balances receivable		400,231		304,261
Prepaid reinsurance		154,461		159,719
Reinsurance recoverable		668,050		689,105
Accrued investment income		44,171		51,112
Deferred acquisition costs		107,465		100,326
Intangible assets		3,920		3,920
Balances receivable on sale of investments		25,239		16,545
Net deferred tax assets		5,259		5,094
Other assets		44,934		40,347
Total assets	$	8,149,407	$	7,620,580
LIABILITIES:
Reserve for losses and loss expenses	$	3,663,224	$	3,636,997
Unearned premiums		879,817		813,797
Unearned ceding commissions		25,352		23,914
Reinsurance balances payable		112,731		82,212
Securities lending payable		534,774		304,742
Balances due on purchase of investments		46,517		—
Dividends payable		9,052		—
Senior notes		498,602		498,577
Accounts payable and accrued liabilities		23,360		40,257
Total liabilities	$	5,793,429	$	5,400,496
SHAREHOLDERS’ EQUITY:
Common shares, par value $0.03 per share, issued and outstanding 2007: 60,390,269 shares; 2006: 60,287,696 shares		1,812		1,809
Additional paid-in capital		1,828,612		1,822,607
Retained earnings		494,073		389,204
Accumulated other comprehensive income: net unrealized gains on investments, net of tax		31,481		6,464
Total shareholders’ equity		2,355,978		2,220,084
Total liabilities and shareholders’ equity	$	8,149,407	$	7,620,580

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONSOLIDATED SEGMENT DATA

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

Three Months Ended March 31, 2007	Property			Casualty			Reinsurance			Total
Gross premiums written	$	101,865		$	125,189		$	211,352		$	438,406
Net premiums written		46,132			100,645			211,067			357,844
Net premiums earned		44,491			124,409			117,666			286,566
Net losses and loss expenses		(6,865	)		(90,367	)		(68,763	)		(165,995	)
Acquisition costs		(332	)		(6,038	)		(22,826	)		(29,196	)
General and administrative expenses		(7,757	)		(15,307	)		(10,139	)		(33,203	)
Underwriting income		29,537			12,697			15,938			58,172
Net investment income											72,648
Net realized investment losses											(6,484	)
Interest expense											(9,374	)
Foreign exchange loss											(32	)
Income before income taxes										$	114,930
GAAP Ratios:
Loss and loss expense ratio		15.4	%		72.6	%		58.4	%		57.9	%
Acquisition cost ratio		0.8	%		4.9	%		19.4	%		10.2	%
General and administrative expense ratio		17.4	%		12.3	%		8.6	%		11.6	%
Combined ratio		33.6	%		89.8	%		86.4	%		79.7	%
Three Months Ended March 31, 2006	Property			Casualty			Reinsurance			Total
Gross premiums written	$	119,819		$	130,494		$	247,807		$	498,120
Net premiums written		67,197			114,194			246,112			427,503
Net premiums earned		49,102			131,982			127,859			308,943
Net losses and loss expenses		(33,319	)		(97,603	)		(75,038	)		(205,960	)
Acquisition costs		1,481			(9,319	)		(28,634	)		(36,472	)
General and administrative expenses		(5,115	)		(9,862	)		(5,345	)		(20,322	)
Underwriting income		12,149			15,198			18,842			46,189
Net investment income											62,001
Net realized investment losses											(5,236	)
Interest expense											(6,451	)
Foreign exchange loss											(545	)
Income before income taxes										$	95,958
GAAP Ratios:
Loss and loss expense ratio		67.9	%		73.9	%		58.7	%		66.7	%
Acquisition cost ratio		(3.0	%)		7.1	%		22.4	%		11.8	%
General and administrative expense ratio		10.4	%		7.5	%		4.2	%		6.6	%
Combined ratio		75.3	%		88.5	%		85.3	%		85.1	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED OPERATING INCOME RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

	Three Months Ended March 31,
	2007		2006
Net income	$	113,921	$	98,121
Net realized investment losses		6,484		5,236
Foreign exchange loss		32		545
Operating income	$	120,437	$	103,902
Weighted average common shares outstanding:
Basic		60,333,209		50,162,842
Diluted		62,207,941		50,485,556
Basic per share data:
Net income	$	1.89	$	1.96
Net realized investment losses		0.11		0.10
Foreign exchange loss		—		0.01
Operating income	$	2.00	$	2.07
Diluted per share data
Net income	$	1.83	$	1.94
Net realized investment losses		0.11		0.11
Foreign exchange loss		—		0.01
Operating income	$	1.94	$	2.06

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

	As of			As of
	March 31,			December 31,
	2007			2006
Price per share at period end	$	42.75		$	43.63
Total shareholders’ equity		2,355,978			2,220,084
Basic common shares outstanding		60,390,269			60,287,696
Add: unvested restricted share units		266,477			704,372
Add: long-term incentive plan share units		206,023			342,501
Add: dilutive options/warrants outstanding		6,588,782			6,695,990
Weighted average exercise price per share	$	33.18		$	33.02
Less: treasury stock method adjustment		(5,269,881	)		(5,067,534	)
Common shares and common share equivalents outstanding		62,181,670			62,963,025
Basic book value per common share	$	39.01		$	36.82
Diluted book value per common share	$	37.89		$	35.26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY RECONCILIATION

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

	Three Months Ended March 31,
	2007			2006
Opening shareholders’ equity	$	2,220,084		$	1,420,266
(Deduct)/add: net unrealized (gains) losses on investments, net of tax		(6,464	)		25,508
Adjusted opening shareholders’ equity		2,213,620			1,445,774
Closing shareholders’ equity		2,355,978			1,478,907
(Deduct)/add: net unrealized (gains) losses on investments, net of tax		(31,481	)		64,988
Adjusted closing shareholders’ equity		2,324,497			1,543,895
Average shareholders’ equity	$	2,269,059		$	1,494,835
Net income available to shareholders	$	113,921		$	98,121
Annualized net income available to shareholders		455,684			392,484
Annualized return on average shareholders’ equity - net income available to shareholders		20.1	%		26.3	%
Operating income available to shareholders	$	120,437		$	103,902
Annualized operating income available to shareholders		481,748			415,608
Annualized return on average shareholders’ equity - operating income available to shareholders		21.2	%		27.8	%

For further information, please contact:

Investor Contact:	Media Contact:
Keith J. Lennox	Jamie Tully/Susan Burns
Allied World Assurance Company	Sard Verbinnen & Co
212-635-5319	212-687-8080
keith.lennox@awac.com	jtully@sardverb.com
	sburns@sardverb.com