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Filed Pursuant to Rule 433
Registration No. 333-135464
Registration No. 333-135464
The issuer has filed a Market-Making Prospectus with the U.S. Securities and Exchange Commission (SEC) for the public offering of the issuer's 7.50% senior notes due 2016, which closed on July 26, 2006. Goldman, Sachs & Co. is continuing to make a market in the senior notes pursuant to the Market-Making Prospectus. Before you invest in the issuer's senior notes, you should read the Market-Making Prospectus and other documents the issuer has filed with the SEC for more complete information about the issuer and an investment in its senior notes. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, you may obtain a copy of the Market-Making Prospectus if you so request by calling Goldman, Sachs & Co. toll-free at 1-866-471-2526.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 2007
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Exact Name of Registrant as Specified in Charter)
| Bermuda | 001-32938 | 98-0481737 | ||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
27 Richmond Road
Pembroke HM 08, Bermuda
(Address of Principal Executive Offices and Zip Code)
Pembroke HM 08, Bermuda
(Address of Principal Executive Offices and Zip Code)
Registrant’s telephone number, including area code: (441) 278-5400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Item 7.01. Regulation FD Disclosure. | ||||||||
| Item 9.01. Financial Statements and Exhibits. | ||||||||
| SIGNATURES | ||||||||
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Item 7.01. Regulation FD Disclosure.
Beginning on May 15, 2007, the Chief Executive Officer and the Chief Financial Officer of Allied World Assurance Company Holdings, Ltd (the ‘‘Company’’) will present to various investors the information about the Company described in the slides attached to this report as Exhibit 99.1. The slides set forth in Exhibit 99.1 are incorporated by reference herein. The information in Item 7.01 of this report is being furnished, not filed, pursuant to Regulation FD. Accordingly, the information in Item 7.01 of this report will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. The furnishing of the information in this report is not intended to, and does not, constitute a determination or admission by the Company that the information in this report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.
Safe Harbor for Forward-Looking Statements
The presentation in Exhibit 99.1 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 Exhibit 99.1 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.
Item 9.01. Financial Statements and Exhibits.
| (d) | Exhibits |
| Exhibit | ||
| Number | Description | |
| 99.1 | Slides from presentation by management |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD | ||||
Dated:May 14, 2007 | By: | /s/ Wesley D. Dupont | ||
| Name: | Wesley D. Dupont | |||
| Title: | Senior Vice President and General Counsel | |||
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EXHIBIT INDEX
| Exhibit | ||
| Number | Description | |
| 99.1 | Slides from presentation by management |
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Exhibit 99.1
| INVESTOR PRESENTATION 1st Quarter, 2007 |
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| Forward Looking Statements & Safe Harbor This presentation contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are “forward-looking statements”. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives thereof or variations thereon or similar terminology. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlying assumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-looking statements. As a result, there can be no assurance that the forward-looking statements included in this presentation will prove to be accurate or correct. In light of these risks, uncertainties and assumptions, the future performance or events described in the forward-looking statements in this presentation might not occur. Accordingly, you should not rely upon forward-looking statements as a prediction of actual results and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements that may be made from time to time. We are under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. |
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| Agenda Executive Summary Financial Review Conclusion Appendix |
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| Strong Stock Performance Since July 2006 IPO Relative Stock Price Comparison Daily from July 12, 2006 to May 09, 2007 |
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| A Five Year Old Franchise Allied World is a leading Bermuda based property and casualty insurer and reinsurer A maturing company that has generated strong results since inception — Track record of organic premium growth — Diversified mix of business with strong operating platforms in Bermuda, Europe and the U.S. — Strategic focus on direct insurance and casualty risks — Complementary reinsurance and direct property books of business Risk management culture — Balancing expected returns with capital preservation is primary objective — Controls and authorities are developed centrally and understood globally by all employees — Manage property catastrophe exposure for a 1-in-250-year event to about 10% of total capital — Prudent reserving practices have been a hallmark of Allied World since inception Excellent capitalization and strong financial flexibility — Capital base of $2.9 billion with debt to capital ratio under 20% — Conservative investment base in excess of $6 billion and generating significant returns Industry leading executive management team Low cost operating structure Strong financial strength and debt ratings |
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| Building for Our Future “As proud as we are of our accomplishments, we are really more excited about our future” Allied World has established a strong foundation — Experienced Board of Directors — Successful Initial Public Offering in July 2006 — Completely independent IT systems and support functions New Bermuda Headquarters — Centralized 4 Bermuda offices into our new corporate headquarters — Allied World is one of the largest insurance company employers in Bermuda New Brand Identity — Revamped our brand elements including our logo and website — Reflective of our corporate culture which is a blend of contemporary and conservative values — Strategic decision to better communicate brand attributes and enhance our position in the marketplace Growth in Non-Bermuda Operations — U.S. operating platform has expanded and entered program business including recently announced Program Manager Agreement with C.V. Starr. — European operations premiums grew by 5% in 2006 and opened a Box at Lloyd’s |
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| Strong Growth Since Inception Gross Premiums Rigorous focus on profitability — ($MM) 4.8% decline on underwriting year basis in Q1 2007 Maintaining underwriting discipline as market softens in 2007 in most lines and geographies With the diverse lines we offer and our global operating platforms, Allied World is nimble and can quickly access market opportunities as they develop Strong existing relationships with distribution: |
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| Geographic Strategy |
| Bermuda Europe United States Corporate Headquarters Dublin and London New York, Boston, Chicago & San Francisco 162 Employees at 12/06 46 Employees at 12/06 71 Employees at 12/06 $1.2 billion GPW in 2006 $279 million GPW in 2006 $172 million GPW in 2006 Direct property and casualty for North Direct property and casualty insurance Direct property and casualty for middle American Fortune 1000 companies. for large European and international market and non-Fortune 1000 Treaty & facultative reinsurance accounts. companies. Generally do business on primarily for U.S. exposures. E&S basis but adding admitted capability. |
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| Diversified Portfolio Allied World has a diversified book of business that allows it to target product lines based on market conditions Long term strategy has been to emphasize insurance and casualty lines |
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| Leading Specialty Casualty Operation STRENGTHS AND STRATEGY Emphasis on specialty excess lines Lead player in middle excess layers — Ground-up underwriting approach is a key strength — Results in preferred market position Diversified risk portfolio — General casualty — covers complex risks in variety of industries and territories — Professional liability — covers D&O, employment practices, fiduciary and E&O — Healthcare — covers hospitals, long term care facilities and managed care OUTLOOK Competition is increasing and rates continue to decline, however rates remain adequate and terms and conditions are holding |
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| Leading Bermuda Direct Property Operation STRENGTHS AND STRATEGY Leading direct writer of primary property insurance in Bermuda Solely commercial accounts — No direct impact from Florida legislation Opportunistic approach Allied World’s franchise helps maintain client loyalty — Capacity — Claims handling — Ability to offer other product lines Manage line size and overall exposure Reduction in low-return energy accounts OUTLOOK Competition increasing but margins still particularly attractive for catastrophe exposed business Insured’s deductible levels have remained stable * Excludes $105mm and $287mm cat |
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| Flexible Reinsurance Operation STRENGTHS AND STRATEGY Targeted to represent about 1/3rd of portfolio on a written basis Focused on E&S and specialty lines — Complements insurance book — Reduces concentration of risk Provides ability to react quickly to changing market conditions Only dedicated Bermuda casualty facultative operation Opportunistically provide ILW contracts OUTLOOK Stable property market in U.S. and for most global catastrophe business which offers continued profit opportunities Softening of underlying professional liability and general casualty pricing has necessitated shift to providing more XOL covers where market opportunities are more attractive * Excludes $82mm and $245mm cattively losses |
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| Agenda Executive Summary Financial Review Conclusion Appendix |
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| 1st Quarter 2007 Financial Highlights Results — 16% net income growth over prior year — $113.9 million compared to $98.1 in 1st quarter 2006 — Operating income in quarter — $120.4 million, or $2.00 per diluted share — Record Investment Income — $72.6 million — Diluted Book Value Per Share — Increased 29.8% on annualized basis to $37.89 at 3/07 — Expense Ratio — 21.8% for quarter reflecting increased compensation expenses and reduced premium writings — Combined ratio of 79.7% which benefited by 9.1 points from favorable reserve development Production — Gross written premiums declined by 12% primarily due to upward premium adjustments in reinsurance segment in 1st quarter 2006 — 4.8% decline on underwriting year basis reflecting response to softening market conditions including non-renewal of business that did not meet underwriting requirements, increased competition and decreasing rates Consistency — 5th straight quarter with operating income in excess of $100 million — 5th straight quarter with annualized net income and operating return on average equity in excess of 20% — 4th straight quarter with combined ratio under 80% Capital and Assets — Capital base increased to over $2.9 billion as of March 31, 2007 — Invested asset base in excess of $6.2 billion |
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| 13 Segment Results — First Quarter 2007 & 2006 |
| 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 $95,958 GAAP Ratios: Loss and loss expense ratio 67.9% 73.9% 58.7% 66.7% Acquisition cost ratio (3.0%) 7.1% 22.4% 11.8% General and administrative expense ratio 10.4% 7.5% 4.2% 6.6% Combined ratio 75.3% 88.5% 85.3% 85.1% |
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| Strong Underwriting Performance = Strong Results Gross Premiums Written by Segment ($MM) Underwriting Ratios and Annualized Operating Return on Average Equity |
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| Prudent Reserving Philosophy · Reserves above mid-point of range — Favorable reserve development in each of the last 4 years 80% of net reserves are IBNR Net Loss Reserves at MarchMix Adequacy Range erves at of Net Res |
| Carried Estimate Reserves Low High Property 381 295 444 Casualty 1,758 1,312 2,031 2007 Reinsurance 855 573 997 |
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| Non-Catastrophe Reserve Efficient Operating Structure Greater percentage of direct business results in lower acquisition ratio Flat, streamlined management structure Prudent expense management culture Underwriting Expense Ratios 1All Bermuda Companies Average includes Platinum, Montpelier, Axis, ACE, Arch, Endurance, Aspen, r Re, Renaissance Re,XL Capital, Everest 2Class of 2001 Average includes ce, Aspen, Platinum, expense ratios for Arch, Montpelier, and Axis. Enduran |
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| Investment Income Momentum Growth in investmentncome is driven by and growth in invested Strong Cash Flows = Increased Asset Base ($Billion) Increased Asset Base = Greater Investment Returns |
| Portfolio Yield 4.4% 3.7% 3.5% 3.9% 4.5% 4.3% 4.7% Paid Loss Ratio 1.0% 18.5% 15.3% 33.8% 38.6% 44.8% 41.6% |
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| Investment Portfolio Conservative, with diversified fixed-income portfolio: — 99% investment grade fixed income securities — 79% of fixed income portfolio is rated AAA — Portfolio reviewed for correlation with underwriting portfolio Portfolio Summary as of 3/31/2007 |
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| Capital Management Our capital management strategy is to preserve sufficient capital to support our business plan and future growth while maintaining conservative financial leverage and earnings coverage ratios Over $800 million in capital was raised in July 2006 Total Capitalization ($MM) |
| Debt to Total Capital Ratio 0.00% 25.7% 18.4% 17.5% Fixed Charge Coverage — (9.0)x 14.7x 13.2x (Interest + Preferred) |
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| Strong Financial Position Strong capitalization levels Prudent investment management strategy Conservative financial leverage Low operating leverage Conservative reserving practices Highly-rated reinsurance partners No legacy liabilities $2.9 billion as of March 31, 2006 AA average invested asset rating Debt / capital ratio well below 20% Rolling 12 month NPW/adjusted capital of 0.53x Net positive reserve development in each of the last four years and first quarter 2007 96% of ceded case reserves from counterparties rated “A-” or better by A.M. Best Founded in November 2001, not encumbered by pre-existing exposures |
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| Agenda Executive Summary Financial Review Conclusion Appendix |
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| Conclusion Allied World expects to generate a mid-to-high teen ROE, assuming normalized catastrophe activity Strong underwriting franchise diversified by product and geography Solid 5 year operating history Seasoned, profitable book of business Proven risk management expertise Excellent capitalization, strong balance sheet and financial flexibility Stable industry leading management team Low cost operating structure Strong financial strength and debt ratings Investment income strength |
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| Agenda Executive Summary Financial Review Conclusion Appendix |
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| 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 distorts the analysis of trends in its 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 (1) operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above), and (2) 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. See slide 26 and 27 for a reconciliation of non-GAAP measures used in this presentation to their most directly comparable GAAP measures. |
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| Non-GAAP Financial Measures - Reconciliations |
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| Non-GAAP Financial Measures - Reconciliations (con't) |
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