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| PROSPECTUS SUPPLEMENT NO. 3 | Filed Pursuant to Rule 424(b)(3) | |
| (To Prospectus dated May 1, 2007) | Registration No. 333-135464 |
$500,000,000
Allied World Assurance Company Holdings, Ltd
7.50% Senior Notes due 2016
This Prospectus Supplement No. 3 supplements the Market-Making Prospectus, dated May 1, 2007, relating to 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.
This Prospectus Supplement No. 3 includes a Current Report on Form 8-K filed with the SEC on August 8, 2007. The Form 8-K includes an earnings release announcing the issuer’s financial results for the fiscal quarter ended June 30, 2007.
You should read this Prospectus Supplement No. 3 in conjunction with the Market-Making Prospectus. This Prospectus Supplement No. 3 updates information in the Market-Making Prospectus and, accordingly, to the extent inconsistent, the information in this Prospectus Supplement No. 3 supersedes the information contained in 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 Website at www.sec.gov. Alternatively, you may obtain a copy of the Market-Making Prospectus by calling Goldman, Sachs & Co. toll-free at 1-866-471-2526.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement is truthful and complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus Supplement No. 3 is August 8, 2007.
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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
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 7, 2007
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
(Exact Name of Registrant as Specified in Charter)
| Bermuda | 001-32938 | 98-0481737 | ||
| (State or Other Jurisdiction | (Commission File Number) | (I.R.S. Employer | ||
| of Incorporation) | 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 2.02. Results of Operations and Financial Condition | ||||||||
| Item 9.01. Financial Statements and Exhibits | ||||||||
| SIGNATURES | ||||||||
| EXHIBIT INDEX | ||||||||
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Item 2.02. Results of Operations and Financial Condition
On August 7, 2007, Allied World Assurance Company Holdings, Ltd issued a press release reporting its second quarter 2007 results and the availability of its second quarter 2007 financial supplement. The press release and the financial supplement are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively. The information hereunder is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not otherwise subject to the liabilities of that section and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit | ||
| Number | Description | |
| 99.1 | Press release, dated August 7, 2007, reporting second quarter results. | |
| 99.2 | Second Quarter 2007 Financial Supplement. |
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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: August 7, 2007 | By: | /s/ Joan H. Dillard | ||
| Name: | Joan H. Dillard | |||
| Title: | Senior Vice President and Chief Financial Officer | |||
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EXHIBIT INDEX
| Exhibit | ||
| Number | Description | |
| 99.1 | Press release, dated August 7, 2007, reporting second quarter results. | |
| 99.2 | Second Quarter 2007 Financial Supplement. |
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EXHIBIT 99.1
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD REPORTS SECOND
QUARTER 2007 OPERATING RESULTS; DECLARES QUARTERLY DIVIDEND
OF $0.15 PER COMMON SHARE
QUARTER 2007 OPERATING RESULTS; DECLARES QUARTERLY DIVIDEND
OF $0.15 PER COMMON SHARE
PEMBROKE, BERMUDA,August 7, 2007- Allied World Assurance Company Holdings, Ltd (NYSE: AWH) today reported net income of $123.3 million, or $1.96 per diluted share, for the second quarter 2007 compared to net income of $102.4 million, or $2.02 per diluted share, for the second quarter 2006. Net income for the six months ended June 30, 2007 was $237.2 million, or $3.81 per diluted share, compared to net income of $200.5 million, or $3.96 per diluted share, for the first six months of 2006.
The company reported operating income of $125.3 million, or $1.99 per diluted share, for the second quarter 2007 compared to operating income of $112.1 million, or $2.21 per diluted share, for the second quarter 2006. Operating income for the six months ended June 30, 2007 was $245.7 million, or $3.95 per diluted share, compared to operating income of $216.0 million, or $4.26 per diluted share, for the first six months of 2006. The decrease in diluted earnings per share amounts reflects the increase in the number of common shares outstanding resulting primarily from the company’s initial public offering in July 2006.
President and Chief Executive Officer Scott Carmilani commented, “Allied World continues to produce impressive results and generate strong book value growth for our shareholders. This is our sixth consecutive quarter with operating income in excess of $100 million and annualized operating income and net income return on average equity in excess of 20%. Enhancing the strong underwriting performance achieved in each of our business segments, we continue to reap the benefits of historically strong operating cash flows and significant investment income momentum.”
Mr. Carmilani added, “Despite the challenging market conditions that currently exist, we expect continued strong performance going forward as we continue to leverage our global operating platforms and diversified product lines to retain attractive business and find new opportunities that meet our return targets. We continue to be supported by strong ratings, a conservative balance sheet and an expanding invested asset base.”
Underwriting Results
Gross premiums written were $530.5 million in the second quarter 2007, a 2.4% increase compared to $518.3 million in the second quarter 2006. This increase was primarily due to increased gross premiums written in the reinsurance segment, which was a result of the early renewal of one large treaty that previously renewed in the third quarter of 2006. For the six months ended June 30, 2007, gross premiums written totaled $969.0 million, a 4.7% decrease compared to $1,016.4 million in the first six months of 2006. Gross premiums written for both the three and six months ended June 30, 2007 were reduced by the non-renewal of business that did not meet our underwriting requirements (which included pricing and/or policy terms and conditions), increased competition and decreasing rates for new and renewal business.
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Net premiums written were $386.6 million in the second quarter 2007, a 4.4% increase compared to $370.3 million in the second quarter 2006. The increase in net premiums written was primarily due to increased gross premiums written in the reinsurance segment and a reduction in ceded premiums in the company’s property segment. For the six months ended June 30, 2007, net premiums written totaled $744.4 million, a 6.7% decrease compared to $797.8 million in the first six months of 2006. The decrease in net premiums written reflected the decrease in gross premiums written and the increased utilization of reinsurance in the casualty segment.
Net premiums earned in the second quarter 2007 were $303.1 million, a 0.8% decrease compared to $305.5 million for the second quarter 2006. For the six months ended June 30, 2007, net premiums earned totaled $589.7 million, a 4.0% decrease from net premiums earned of $614.5 million in the first six months of 2006. These decreases also reflect the increased utilization of reinsurance in the casualty segment.
The combined ratio was 80.0% in the second quarter 2007 compared to 78.2% in second quarter 2006. The loss and loss expense ratio was 58.1% in the second quarter 2007 compared to 58.9% in the second quarter 2006. During the second quarter 2007, the company recorded net favorable reserve development on prior accident years of $32.4 million, a benefit of 10.7 percentage points to the company’s loss ratio for this quarter. In the second quarter 2006, the company recorded net favorable reserve development on prior accident years of $29.0 million, a benefit of 9.5 percentage points to the company’s loss ratio for that quarter. The combined ratio for the six months ended June 30, 2007 was 79.9% compared to 81.6% for the first six months of 2006.
Investment Results
Net investment income in the second quarter 2007 was $73.9 million, an increase of 34.6% over the $54.9 million of net investment income in the second quarter 2006. For the six months ended June 30, 2007, net investment income was $146.6 million, an increase of 25.3% over the $116.9 million of net investment income in the first six months of 2006. These increases primarily reflect the growth in the company’s invested asset base driven by positive operating cash flows, the proceeds from the company’s July 2006 initial public offering and increased interest rates. During the second quarter 2007, the company recorded net realized investment losses of $1.5 million compared to net realized investment losses of $10.2 million in the second quarter 2006. For the six months ended June 30, 2007, net realized investment losses were $8.0 million compared to net realized investment losses of $15.4 million in the first six months of 2006.
Shareholders’ Equity
As of June 30, 2007, shareholders’ equity was $2.4 billion compared to $2.2 billion reported at December 31, 2006. Diluted book value per share was $37.52 as of June 30, 2007. The company’s annualized net income return on average equity for the three and six months ended June 30, 2007 was 20.7% and 20.4 %, respectively. The company’s annualized operating return on average equity
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for the three and six months ended June 30, 2007 was 21.0% and 21.1%, respectively.
Quarterly Dividend
Allied World’s board of directors has declared a quarterly dividend of $0.15 per common share. The dividend will be payable on September 13, 2007 to shareholders of record as of the close of business on August 28, 2007.
Conference Call
Allied World will host a conference call on Wednesday, August 8, 2007 at 8:30 a.m. (Eastern Time) to discuss its second quarter financial results. The public may access a live webcast of the conference call at the “Investor Relations” section of the company’s website atwww.awac.com. In addition, the conference call can be accessed by dialing (866) 314-5050 (U.S. and Canada callers) or (617) 213-8051 (international callers) and entering the passcode 47056208 approximately ten minutes prior to the call.
Following the conclusion of the presentation, a replay of the call will be available through Wednesday, August 22, 2007 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 82915625. In addition, the webcast will remain available online through Wednesday, August 22, 2007 atwww.awac.com.
Financial Supplement
A financial supplement relating to the second quarter 2007 will be available at the “Investor Relations” section of the company’s website atwww.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 generally accepted accounting principles (“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
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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 net income 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 atwww.awac.com.
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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; investigations of market practices and related settlement terms; 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.
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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)
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, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues: | ||||||||||||||||
| Gross premiums written | $ | 530,549 | $ | 518,316 | $ | 968,955 | $ | 1,016,436 | ||||||||
| Premiums ceded | (143,962 | ) | (147,978 | ) | (224,524 | ) | (218,595 | ) | ||||||||
| Net premiums written | 386,587 | 370,338 | 744,431 | 797,841 | ||||||||||||
| Change in unearned premiums | (83,468 | ) | (64,821 | ) | (154,746 | ) | (183,381 | ) | ||||||||
| Net premiums earned | 303,119 | 305,517 | 589,685 | 614,460 | ||||||||||||
| Net investment income | 73,937 | 54,943 | 146,585 | 116,944 | ||||||||||||
| Net realized investment losses | (1,481 | ) | (10,172 | ) | (7,965 | ) | (15,408 | ) | ||||||||
Total revenue | 375,575 | 350,288 | 728,305 | 715,996 | ||||||||||||
Expenses: | ||||||||||||||||
| Net losses and loss expenses | 176,225 | 179,844 | 342,220 | 385,804 | ||||||||||||
| Acquisition costs | 31,872 | 32,663 | 61,068 | 69,135 | ||||||||||||
| General and administrative expenses | 34,432 | 26,257 | 67,635 | 46,579 | ||||||||||||
| Interest expense | 9,482 | 7,076 | 18,856 | 13,527 | ||||||||||||
| Foreign exchange loss (gain) | 532 | (475 | ) | 564 | 70 | |||||||||||
Total expenses | 252,543 | 245,365 | 490,343 | 515,115 | ||||||||||||
| Income before income taxes | 123,032 | 104,923 | 237,962 | 200,881 | ||||||||||||
| Income tax (recovery) expense | (255 | ) | 2,553 | 754 | 390 | |||||||||||
NET INCOME | $ | 123,287 | $ | 102,370 | $ | 237,208 | $ | 200,491 | ||||||||
PER SHARE DATA: | ||||||||||||||||
| Basic earnings per share | $ | 2.04 | $ | 2.04 | $ | 3.95 | $ | 4.00 | ||||||||
| Diluted earnings per share | $ | 1.96 | $ | 2.02 | $ | 3.81 | $ | 3.96 | ||||||||
| Weighted average common shares outstanding | 60,397,591 | 50,162,842 | 60,028,523 | 50,162,842 | ||||||||||||
| Weighted average common shares and common share equivalents outstanding | 62,874,235 | 50,682,557 | 62,277,010 | 50,637,809 | ||||||||||||
| Dividends declared per share | $ | 0.15 | $ | — | $ | 0.30 | $ | — | ||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States dollars, except share and per share amounts)
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, | |||||||
| 2007 | 2006 | |||||||
ASSETS: | ||||||||
| Fixed maturity investments available for sale, at fair value (amortized cost: 2007: $5,737,857; 2006: $5,188,379) | $ | 5,689,348 | $ | 5,177,812 | ||||
| Other invested assets available for sale, at fair value (cost: 2007: $202,016; 2006: $245,657) | 227,173 | 262,557 | ||||||
| Total investments | 5,916,521 | 5,440,369 | ||||||
| Cash and cash equivalents | 270,571 | 366,817 | ||||||
| Restricted cash | 51,896 | 138,223 | ||||||
| Securities lending collateral | 503,517 | 304,742 | ||||||
| Insurance balances receivable | 450,612 | 304,261 | ||||||
| Prepaid reinsurance | 209,522 | 159,719 | ||||||
| Reinsurance recoverable | 679,198 | 689,105 | ||||||
| Accrued investment income | 56,355 | 51,112 | ||||||
| Deferred acquisition costs | 131,368 | 100,326 | ||||||
| Intangible assets | 3,920 | 3,920 | ||||||
| Balances receivable on sale of investments | 53,089 | 16,545 | ||||||
| Net deferred tax assets | 3,863 | 5,094 | ||||||
| Other assets | 45,175 | 40,347 | ||||||
Total assets | $ | 8,375,607 | $ | 7,620,580 | ||||
LIABILITIES: | ||||||||
| Reserve for losses and loss expenses | $ | 3,743,680 | $ | 3,636,997 | ||||
| Unearned premiums | 1,018,347 | 813,797 | ||||||
| Unearned ceding commissions | 35,612 | 23,914 | ||||||
| Reinsurance balances payable | 122,344 | 82,212 | ||||||
| Securities lending payable | 503,517 | 304,742 | ||||||
| Balances due on purchase of investments | 21 | — | ||||||
| Senior notes | 498,629 | 498,577 | ||||||
| Accounts payable and accrued liabilities | 35,271 | 40,257 | ||||||
Total liabilities | $ | 5,957,421 | $ | 5,400,496 | ||||
SHAREHOLDERS’ EQUITY: | ||||||||
| Common stock, par value $0.03 per share, issued and outstanding 2007: 60,405,307 shares; 2006: 60,287,696 shares | 1,812 | 1,809 | ||||||
| Additional paid-in capital | 1,833,737 | 1,822,607 | ||||||
| Retained earnings | 608,300 | 389,204 | ||||||
| Accumulated other comprehensive (loss) income: net unrealized (losses) gains on investments, net of tax | (25,663 | ) | 6,464 | |||||
Total shareholders’ equity | 2,418,186 | 2,220,084 | ||||||
Total liabilities and shareholders’ equity | $ | 8,375,607 | $ | 7,620,580 | ||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars, except for ratio information)
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars, except for ratio information)
| Quarter Ended June 30, 2007 | Property | Casualty | Reinsurance | Total | ||||||||||||
| Gross premiums written | $ | 156,463 | $ | 188,091 | $ | 185,995 | $ | 530,549 | ||||||||
| Net premiums written | 58,947 | 141,620 | 186,020 | 386,587 | ||||||||||||
| Net premiums earned | 48,318 | 123,715 | 131,086 | 303,119 | ||||||||||||
| Net losses and loss expenses | (34,149 | ) | (60,908 | ) | (81,168 | ) | (176,225 | ) | ||||||||
| Acquisition costs | (105 | ) | (5,033 | ) | (26,734 | ) | (31,872 | ) | ||||||||
| General and administrative expenses | (8,163 | ) | (16,711 | ) | (9,558 | ) | (34,432 | ) | ||||||||
| Underwriting income | 5,901 | 41,063 | 13,626 | 60,590 | ||||||||||||
| Net investment income | 73,937 | |||||||||||||||
| Net realized investment losses | (1,481 | ) | ||||||||||||||
| Interest expense | (9,482 | ) | ||||||||||||||
| Foreign exchange loss | (532 | ) | ||||||||||||||
| Income before income taxes | $ | 123,032 | ||||||||||||||
GAAP Ratios: | ||||||||||||||||
| Loss and loss expense ratio | 70.7 | % | 49.2 | % | 61.9 | % | 58.1 | % | ||||||||
| Acquisition cost ratio | 0.2 | % | 4.1 | % | 20.4 | % | 10.5 | % | ||||||||
| General and administrative expense ratio | 16.9 | % | 13.5 | % | 7.3 | % | 11.4 | % | ||||||||
| Combined ratio | 87.8 | % | 66.8 | % | 89.6 | % | 80.0 | % | ||||||||
| Quarter Ended June 30, 2006 | Property | Casualty | Reinsurance | Total | ||||||||||||
| Gross premiums written | $ | 166,861 | $ | 200,004 | $ | 151,451 | $ | 518,316 | ||||||||
| Net premiums written | 44,756 | 172,725 | 152,857 | 370,338 | ||||||||||||
| Net premiums earned | 45,955 | 133,321 | 126,241 | 305,517 | ||||||||||||
| Net losses and loss expenses | (24,729 | ) | (82,411 | ) | (72,704 | ) | (179,844 | ) | ||||||||
| Acquisition costs | 777 | (6,955 | ) | (26,485 | ) | (32,663 | ) | |||||||||
| General and administrative expenses | (6,845 | ) | (13,118 | ) | (6,294 | ) | (26,257 | ) | ||||||||
| Underwriting income | 15,158 | 30,837 | 20,758 | 66,753 | ||||||||||||
| Net investment income | 54,943 | |||||||||||||||
| Net realized investment losses | (10,172 | ) | ||||||||||||||
| Interest expense | (7,076 | ) | ||||||||||||||
| Foreign exchange gain | 475 | |||||||||||||||
| Income before income taxes | $ | 104,923 | ||||||||||||||
GAAP Ratios: | ||||||||||||||||
| Loss and loss expense ratio | 53.8 | % | 61.8 | % | 57.6 | % | 58.9 | % | ||||||||
| Acquisition cost ratio | (1.7 | %) | 5.2 | % | 21.0 | % | 10.7 | % | ||||||||
| General and administrative expense ratio | 14.9 | % | 9.9 | % | 5.0 | % | 8.6 | % | ||||||||
| Combined ratio | 67.0 | % | 76.9 | % | 83.6 | % | 78.2 | % | ||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars, except for ratio information)
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars, except for ratio information)
| Six Months Ended June 30, 2007 | Property | Casualty | Reinsurance | Total | ||||||||||||
| Gross premiums written | $ | 258,328 | $ | 313,280 | $ | 397,347 | $ | 968,955 | ||||||||
| Net premiums written | 105,079 | 242,265 | 397,087 | 744,431 | ||||||||||||
| Net premiums earned | 92,809 | 248,124 | 248,752 | 589,685 | ||||||||||||
| Net losses and loss expenses | (41,014 | ) | (151,275 | ) | (149,931 | ) | (342,220 | ) | ||||||||
| Acquisition costs | (437 | ) | (11,071 | ) | (49,560 | ) | (61,068 | ) | ||||||||
| General and administrative expenses | (15,920 | ) | (32,018 | ) | (19,697 | ) | (67,635 | ) | ||||||||
| Underwriting income | 35,438 | 53,760 | 29,564 | 118,762 | ||||||||||||
| Net investment income | 146,585 | |||||||||||||||
| Net realized investment losses | (7,965 | ) | ||||||||||||||
| Interest expense | (18,856 | ) | ||||||||||||||
| Foreign exchange loss | (564 | ) | ||||||||||||||
| Income before income taxes | $ | 237,962 | ||||||||||||||
GAAP Ratios: | ||||||||||||||||
| Loss and loss expense ratio | 44.2 | % | 61.0 | % | 60.3 | % | 58.0 | % | ||||||||
| Acquisition cost ratio | 0.4 | % | 4.4 | % | 19.9 | % | 10.4 | % | ||||||||
| General and administrative expense ratio | 17.2 | % | 12.9 | % | 7.9 | % | 11.5 | % | ||||||||
| Combined ratio | 61.8 | % | 78.3 | % | 88.1 | % | 79.9 | % | ||||||||
| Six Months Ended June 30, 2006 | Property | Casualty | Reinsurance | Total | ||||||||||||
| Gross premiums written | $ | 286,680 | $ | 330,498 | $ | 399,258 | $ | 1,016,436 | ||||||||
| Net premiums written | 111,953 | 286,919 | 398,969 | 797,841 | ||||||||||||
| Net premiums earned | 95,057 | 265,303 | 254,100 | 614,460 | ||||||||||||
| Net losses and loss expenses | (58,048 | ) | (180,014 | ) | (147,742 | ) | (385,804 | ) | ||||||||
| Acquisition costs | 2,258 | (16,274 | ) | (55,119 | ) | (69,135 | ) | |||||||||
| General and administrative expenses | (11,960 | ) | (22,980 | ) | (11,639 | ) | (46,579 | ) | ||||||||
| Underwriting income | 27,307 | 46,035 | 39,600 | 112,942 | ||||||||||||
| Net investment income | 116,944 | |||||||||||||||
| Net realized investment losses | (15,408 | ) | ||||||||||||||
| Interest expense | (13,527 | ) | ||||||||||||||
| Foreign exchange loss | (70 | ) | ||||||||||||||
| Income before income taxes | $ | 200,881 | ||||||||||||||
GAAP Ratios: | ||||||||||||||||
| Loss and loss expense ratio | 61.1 | % | 67.9 | % | 58.1 | % | 62.8 | % | ||||||||
| Acquisition cost ratio | (2.4 | %) | 6.1 | % | 21.7 | % | 11.2 | % | ||||||||
| General and administrative expense ratio | 12.6 | % | 8.7 | % | 4.6 | % | 7.6 | % | ||||||||
| Combined ratio | 71.3 | % | 82.7 | % | 84.4 | % | 81.6 | % | ||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED OPERATING INCOME RECONCILIATION
(Expressed in thousands of United States dollars, except share and per share amounts)
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, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Net income | $ | 123,287 | $ | 102,370 | $ | 237,208 | $ | 200,491 | ||||||||
| Net realized investment losses | 1,481 | 10,172 | 7,965 | 15,408 | ||||||||||||
| Foreign exchange loss (gain) | 532 | (475 | ) | 564 | 70 | |||||||||||
| Operating income | $ | 125,300 | $ | 112,067 | $ | 245,737 | $ | 215,969 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 60,397,591 | 50,162,842 | 60,028,523 | 50,162,842 | ||||||||||||
| Diluted | 62,874,235 | 50,682,557 | 62,277,010 | 50,637,809 | ||||||||||||
Basic per share data: | ||||||||||||||||
| Net income | $ | 2.04 | $ | 2.04 | $ | 3.95 | $ | 4.00 | ||||||||
| Net realized investment losses | 0.02 | 0.20 | 0.13 | 0.31 | ||||||||||||
| Foreign exchange loss (gain) | 0.01 | (0.01 | ) | 0.01 | — | |||||||||||
| Operating income | $ | 2.07 | $ | 2.23 | $ | 4.09 | $ | 4.31 | ||||||||
Diluted per share data | ||||||||||||||||
| Net income | $ | 1.96 | $ | 2.02 | $ | 3.81 | $ | 3.96 | ||||||||
| Net realized investment losses | 0.02 | 0.20 | 0.13 | 0.30 | ||||||||||||
| Foreign exchange loss (gain) | 0.01 | (0.01 | ) | 0.01 | — | |||||||||||
| Operating income | $ | 1.99 | $ | 2.21 | $ | 3.95 | $ | 4.26 | ||||||||
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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)
UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION
(Expressed in thousands of United States dollars, except share and per share amounts)
| As of | As of | |||||||
| June 30, | December 31, | |||||||
| 2007 | 2006 | |||||||
| Price per share at period end | $ | 51.25 | $ | 43.63 | ||||
| Total shareholders’ equity | 2,418,186 | 2,220,084 | ||||||
| Basic common shares outstanding | 60,405,307 | 60,287,696 | ||||||
| Add: unvested restricted share units | 828,657 | 704,372 | ||||||
| Add: Long-Term Incentive Plan (LTIP) share units | 886,251 | 342,501 | ||||||
| Add: dilutive options/warrants outstanding | 6,764,564 | 6,695,990 | ||||||
| Weighted average exercise price per share | $ | 33.59 | $ | 33.02 | ||||
| Deduct: options bought back via treasury method | (4,433,857 | ) | (5,067,534 | ) | ||||
| Common shares and common share equivalents outstanding | 64,450,922 | 62,963,025 | ||||||
| Basic book value per common share | $ | 40.03 | $ | 36.82 | ||||
| Diluted book value per common share | $ | 37.52 | $ | 35.26 | ||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY RECONCILIATION
(Expressed in thousands of United States dollars, except for percentage information)
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, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Opening shareholders’ equity | $ | 2,355,978 | $ | 1,478,907 | $ | 2,220,084 | $ | 1,420,266 | ||||||||
| (Deduct)/add: accumulated other comprehensive (income)/loss | (31,481 | ) | 64,988 | (6,464 | ) | 25,508 | ||||||||||
| Adjusted opening shareholders’ equity | 2,324,497 | 1,543,895 | 2,213,620 | 1,445,774 | ||||||||||||
| Closing shareholders’ equity | 2,418,186 | 1,565,062 | 2,418,186 | 1,565,062 | ||||||||||||
| Add: accumulated other comprehensive loss | 25,663 | 83,144 | 25,663 | 83,144 | ||||||||||||
| Adjusted closing shareholders’ equity | 2,443,849 | 1,648,206 | 2,443,849 | 1,648,206 | ||||||||||||
| Average shareholders’ equity | $ | 2,384,173 | $ | 1,596,051 | $ | 2,328,735 | $ | 1,546,990 | ||||||||
| Net income available to shareholders | $ | 123,287 | $ | 102,370 | $ | 237,208 | $ | 200,491 | ||||||||
| Annualized net income available to shareholders | 493,148 | 409,480 | 474,416 | 400,982 | ||||||||||||
| Annualized return on average shareholders’ equity — net income available to shareholders | 20.7 | % | 25.7 | % | 20.4 | % | 25.9 | % | ||||||||
| Operating income available to shareholders | $ | 125,300 | $ | 112,067 | $ | 245,737 | $ | 215,969 | ||||||||
| Annualized operating income available to shareholders | 501,200 | 448,268 | 491,474 | �� | 431,938 | |||||||||||
| Annualized return on average shareholders’ equity — operating income available to shareholders | 21.0 | % | 28.1 | % | 21.1 | % | 27.9 | % | ||||||||
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For further information, please contact:
Investor Contact: | Media Contact: | |
| Keith J. Lennox | Jamie Tully/Susan Burns | |
| Allied World Assurance Company Holdings, Ltd | Sard Verbinnen & Co | |
| 212-635-5319 | 212-687-8080 | |
| keith.lennox@awac.com | jtully@sardverb.com | |
| sburns@sardverb.com |
Table of Contents
EXHIBIT 99.2
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
2ndQuarter, 2007
Investor Contact: Keith Lennox | This report is for informational purposes only. It should be read in conjunction with documents filed by Allied World Assurance Company Holdings, Ltdwith the U.S. Securities and Exchange Commission. |
Phone: (212) 635-5319
Fax: (212) 635-5532
email: keith.lennox@awac.com
Table of Contents
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statements made in this report 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; investigations of market practices and related settlement terms; 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.
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
FINANCIAL SUPPLEMENT TABLE OF CONTENTS
FINANCIAL SUPPLEMENT TABLE OF CONTENTS
| Page | ||||
Basis of Presentation | 4 | |||
I.Financial Highlights | ||||
| - Consolidated Financial Highlights | 5 | |||
II.Consolidated Results | ||||
| - Consolidated Statements of Operations — Consecutive Quarters | 6 | |||
| - Consolidated Statements of Operations — Year to Date | 7 | |||
| - Consolidated Premium Distribution Analysis — Current Quarter | 8 | |||
| - Consolidated Premium Distribution Analysis — Year to Date | 9 | |||
III.Segment Results | ||||
| - Consolidated Segment Results — Current Quarter | 10 | |||
| - Consolidated Segment Results — Prior Year Quarter | 11 | |||
| - Consolidated Segment Results — Year to Date | 12 | |||
| - Consolidated Segment Results — Prior Year to Date | 13 | |||
IV.Balance Sheet Details | ||||
| - Consolidated Balance Sheets | 14 | |||
| - Consolidated Investment Portfolio | 15 | |||
| - Reserves for Losses and Loss Expenses | 16 | |||
| - Capital Structure and Leverage Ratios | 17 | |||
V.Other | ||||
| - Operating Income Reconciliation and Basic and Diluted Earnings per Share — Consecutive Quarters | 18 | |||
| - Operating Income Reconciliation and Basic and Diluted Earnings per Share — Year to Date | 19 | |||
| - Return on Average Shareholders’ Equity and Reconciliation of Shareholders’ Equity — Consecutive Quarters | 20 | |||
| - Return on Average Shareholders’ Equity and Reconciliation of Shareholders’ Equity — Year to Date | 21 | |||
| - Diluted Book Value per Share | 22 | |||
| - Annualized Investment Book Yield | 23 | |||
| - Regulation G | 25 | |||
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
BASIS OF PRESENTATION
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
- All financial information contained herein is unaudited.
- Unless otherwise noted, all data is in thousands of U.S. dollars, except for share, per share, percentage and ratio information.
- Allied World Assurance Company Holdings, Ltd, along with others in the industry, use underwriting ratios as measures of performance. The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned. The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned. The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned. The expense ratio is calculated by combining the acquisition cost ratio and the general and administrative expense ratio. The combined ratio is calculated by combining the loss ratio, the acquisition cost ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned or written, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned or written premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.
- In presenting the company’s results, management has included and discussed certain “non-GAAP” financial measures, as such term is defined in Regulation G promulgated by the SEC. 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 (“GAAP”). The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in this financial supplement. See page 25 for further details.
Page 4
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS
CONSOLIDATED FINANCIAL HIGHLIGHTS
| THREE MONTHS ENDED | SIX MONTHS ENDED | Previous | Previous | |||||||||||||||||||||||||||||||||||||
| JUNE 30, | JUNE 30, | Quarter | Year to Date | |||||||||||||||||||||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | Change | Change | |||||||||||||||||||||||||||||||||||
| HIGHLIGHTS | Gross premiums written | $ | 530,549 | $ | 518,316 | $ | 968,955 | $ | 1,016,436 | 2.4 | % | (4.7 | %) | |||||||||||||||||||||||||||
| Net premiums written | 386,587 | 370,338 | 744,431 | 797,841 | 4.4 | % | (6.7 | %) | ||||||||||||||||||||||||||||||||
| Net premiums earned | 303,119 | 305,517 | 589,685 | 614,460 | (0.8 | %) | (4.0 | %) | ||||||||||||||||||||||||||||||||
| Net investment income | 73,937 | 54,943 | 146,585 | 116,944 | 34.6 | % | 25.3 | % | ||||||||||||||||||||||||||||||||
| Net income | 123,287 | 102,370 | 237,208 | 200,491 | 20.4 | % | 18.3 | % | ||||||||||||||||||||||||||||||||
| Operating income | 125,300 | 112,067 | 245,737 | 215,969 | 11.8 | % | 13.8 | % | ||||||||||||||||||||||||||||||||
| Total investments and cash & cash equivalents | 6,238,988 | 5,310,325 | 6,238,988 | 5,310,325 | 17.5 | % | 17.5 | % | ||||||||||||||||||||||||||||||||
| Total assets | 8,375,607 | 7,393,386 | 8,375,607 | 7,393,386 | 13.3 | % | 13.3 | % | ||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 2,418,186 | 1,565,062 | 2,418,186 | 1,565,062 | 54.5 | % | 54.5 | % | ||||||||||||||||||||||||||||||||
| Cash flows from operating activities | 231,314 | 231,348 | 389,112 | 418,446 | 0.0 | % | (7.0 | %) | ||||||||||||||||||||||||||||||||
| PER SHARE AND SHARE DATA | Basic earnings per share | |||||||||||||||||||||||||||||||||||||||
| Net income | $ | 2.04 | $ | 2.04 | $ | 3.95 | $ | 4.00 | 0.0 | % | (1.3 | %) | ||||||||||||||||||||||||||||
| Operating income | $ | 2.07 | $ | 2.23 | $ | 4.09 | $ | 4.31 | (7.2 | %) | (5.1 | %) | ||||||||||||||||||||||||||||
| Diluted earnings per share | ||||||||||||||||||||||||||||||||||||||||
| Net income | $ | 1.96 | $ | 2.02 | $ | 3.81 | $ | 3.96 | (3.0 | %) | (3.8 | %) | ||||||||||||||||||||||||||||
| Operating income | $ | 1.99 | $ | 2.21 | $ | 3.95 | $ | 4.26 | (10.0 | %) | (7.3 | %) | ||||||||||||||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||||||||||||||||
| Basic | 60,397,591 | 50,162,842 | 60,028,523 | 50,162,842 | ||||||||||||||||||||||||||||||||||||
| Diluted | 62,874,235 | 50,682,557 | 62,277,010 | 50,637,809 | ||||||||||||||||||||||||||||||||||||
| Book value | $ | 40.03 | $ | 31.20 | $ | 40.03 | $ | 31.20 | 28.3 | % | 28.3 | % | ||||||||||||||||||||||||||||
| Diluted book value | $ | 37.52 | $ | 30.79 | $ | 37.52 | $ | 30.79 | 21.9 | % | 21.9 | % | ||||||||||||||||||||||||||||
| FINANCIAL RATIOS | Return on average equity (ROAE), net income | 20.7 | % | 25.7 | % | 20.4 | % | 25.9 | % | (5.0 | ) pts | (5.5 | ) pts | |||||||||||||||||||||||||||
| ROAE, operating income | 21.0 | % | 28.1 | % | 21.1 | % | 27.9 | % | (7.1 | ) pts | (6.8 | ) pts | ||||||||||||||||||||||||||||
| Annualized investment book yield | 4.8 | % | 4.2 | % | 4.7 | % | 4.3 | % | 0.5 | pts | 0.4 | pts | ||||||||||||||||||||||||||||
| Loss and loss expense ratio | 58.1 | % | 58.9 | % | 58.0 | % | 62.8 | % | (0.8 | ) pts | (4.8 | ) pts | ||||||||||||||||||||||||||||
| Acquisition cost ratio | 10.5 | % | 10.7 | % | 10.4 | % | 11.2 | % | (0.2 | ) pts | (0.8 | ) pts | ||||||||||||||||||||||||||||
| General and administrative expense ratio | 11.4 | % | 8.6 | % | 11.5 | % | 7.6 | % | 2.8 | pts | 3.9 | pts | ||||||||||||||||||||||||||||
| Expense ratio | 21.9 | % | 19.3 | % | 21.9 | % | 18.8 | % | 2.6 | pts | 3.1 | pts | ||||||||||||||||||||||||||||
| Combined ratio | 80.0 | % | 78.2 | % | 79.9 | % | 81.6 | % | 1.8 | pts | (1.7 | ) pts | ||||||||||||||||||||||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — CONSECUTIVE QUARTERS
CONSOLIDATED STATEMENTS OF OPERATIONS — CONSECUTIVE QUARTERS
| THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | ||||||||||||||||
| JUNE 30, 2007 | MARCH 31, 2007 | DECEMBER 31, 2006 | SEPTEMBER 30, 2006 | JUNE 30, 2006 | ||||||||||||||||
Revenues | ||||||||||||||||||||
| Gross premiums written | $ | 530,549 | $ | 438,406 | $ | 280,111 | $ | 362,478 | $ | 518,316 | ||||||||||
| Net premiums written | $ | 386,587 | $ | 357,844 | $ | 210,739 | $ | 298,016 | $ | 370,338 | ||||||||||
| Net premiums earned | $ | 303,119 | $ | 286,566 | $ | 319,791 | $ | 317,759 | $ | 305,517 | ||||||||||
| Net investment income | 73,937 | 72,648 | 66,009 | 61,407 | 54,943 | |||||||||||||||
| Net realized investment losses | (1,481 | ) | (6,484 | ) | (4,190 | ) | (9,080 | ) | (10,172 | ) | ||||||||||
Total revenues | $ | 375,575 | $ | 352,730 | $ | 381,610 | $ | 370,086 | $ | 350,288 | ||||||||||
Expenses | ||||||||||||||||||||
| Net losses and loss expenses: | ||||||||||||||||||||
| Current year | $ | 208,643 | $ | 192,102 | $ | 215,456 | $ | 219,616 | $ | 208,817 | ||||||||||
| Prior years | $ | (32,418 | ) | (26,107 | ) | (43,061 | ) | (38,682 | ) | (28,973 | ) | |||||||||
| Total net losses and loss expenses | 176,225 | 165,995 | 172,395 | 180,934 | 179,844 | |||||||||||||||
| Acquisition costs | 31,872 | 29,196 | 34,568 | 37,785 | 32,663 | |||||||||||||||
| General and administrative expenses | 34,432 | 33,203 | 33,856 | 25,640 | 26,257 | |||||||||||||||
| Foreign exchange loss (gain) | 532 | 32 | 1,092 | (561 | ) | (475 | ) | |||||||||||||
| Interest expense | 9,482 | 9,374 | 9,510 | 9,529 | 7,076 | |||||||||||||||
Total expenses | $ | 252,543 | $ | 237,800 | $ | 251,421 | $ | 253,327 | $ | 245,365 | ||||||||||
Income before income taxes | $ | 123,032 | $ | 114,930 | $ | 130,189 | $ | 116,759 | $ | 104,923 | ||||||||||
| Income tax (recovery) expense | (255 | ) | 1,009 | 1,827 | 2,774 | 2,553 | ||||||||||||||
Net income | $ | 123,287 | $ | 113,921 | $ | 128,362 | $ | 113,985 | $ | 102,370 | ||||||||||
GAAP Ratios | ||||||||||||||||||||
| Loss and loss expense ratio | 58.1 | % | 57.9 | % | 53.9 | % | 56.9 | % | 58.9 | % | ||||||||||
| Acquisition cost ratio | 10.5 | % | 10.2 | % | 10.8 | % | 11.9 | % | 10.7 | % | ||||||||||
| General and administrative expense ratio | 11.4 | % | 11.6 | % | 10.6 | % | 8.1 | % | 8.6 | % | ||||||||||
| Expense ratio | 21.9 | % | 21.8 | % | 21.4 | % | 20.0 | % | 19.3 | % | ||||||||||
| Combined ratio | 80.0 | % | 79.7 | % | 75.3 | % | 76.9 | % | 78.2 | % | ||||||||||
Per Share Data | ||||||||||||||||||||
| Basic earnings per share | ||||||||||||||||||||
| Net income | $ | 2.04 | $ | 1.89 | $ | 2.13 | $ | 1.95 | $ | 2.04 | ||||||||||
| Operating income | $ | 2.07 | $ | 2.00 | $ | 2.22 | $ | 2.10 | $ | 2.23 | ||||||||||
| Diluted earnings per share | ||||||||||||||||||||
| Net income | $ | 1.96 | $ | 1.83 | $ | 2.04 | $ | 1.89 | $ | 2.02 | ||||||||||
| Operating income | $ | 1.99 | $ | 1.94 | $ | 2.12 | $ | 2.03 | $ | 2.21 | ||||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — YEAR TO DATE
CONSOLIDATED STATEMENTS OF OPERATIONS — YEAR TO DATE
| SIX MONTHS ENDED | SIX MONTHS ENDED | |||||||
| JUNE 30, 2007 | JUNE 30, 2006 | |||||||
Revenues | ||||||||
| Gross premiums written | $ | 968,955 | $ | 1,016,436 | ||||
| Net premiums written | 744,431 | 797,841 | ||||||
| Net premiums earned | $ | 589,685 | $ | 614,460 | ||||
| Net investment income | 146,585 | 116,944 | ||||||
| Net realized investment losses | (7,965 | ) | (15,408 | ) | ||||
Total revenues | $ | 728,305 | $ | 715,996 | ||||
Expenses | ||||||||
| Net losses and loss expenses: | ||||||||
| Current year | $ | 400,745 | $ | 414,777 | ||||
| Prior years | (58,525 | ) | (28,973 | ) | ||||
| Total net losses and loss expenses | 342,220 | 385,804 | ||||||
| Acquisition costs | 61,068 | 69,135 | ||||||
| General and administrative expenses | 67,635 | 46,579 | ||||||
| Foreign exchange loss | 564 | 70 | ||||||
| Interest expense | 18,856 | 13,527 | ||||||
Total expenses | $ | 490,343 | $ | 515,115 | ||||
Income before income taxes | $ | 237,962 | $ | 200,881 | ||||
| Income tax expense | 754 | 390 | ||||||
Net income | $ | 237,208 | $ | 200,491 | ||||
GAAP Ratios | ||||||||
| Loss and loss expense ratio | 58.0 | % | 62.8 | % | ||||
| Acquisition cost ratio | 10.4 | % | 11.2 | % | ||||
| General and administrative expense ratio | 11.5 | % | 7.6 | % | ||||
| Expense ratio | 21.9 | % | 18.8 | % | ||||
| Combined ratio | 79.9 | % | 81.6 | % | ||||
Per Share Data | ||||||||
| Basic earnings per share | ||||||||
| Net income | $ | 3.95 | $ | 4.00 | ||||
| Operating income | $ | 4.09 | $ | 4.31 | ||||
| Diluted earnings per share | ||||||||
| Net income | $ | 3.81 | $ | 3.96 | ||||
| Operating income | $ | 3.95 | $ | 4.26 | ||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER
THREE MONTHS ENDED JUNE 30, 2007 | THREE MONTHS ENDED JUNE 30, 2006 | |
| Gross Premiums Written = $530,549 | Gross Premiums Written = $518,316 | |
 |  | |
 |  |
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE
| SIX MONTHS ENDED JUNE 30, 2007 | SIX MONTHS ENDED JUNE 30, 2006 | |
| Gross Premiums Written = $968,955 | Gross Premiums Written = $1,016,436 | |
 |  | |
 |  |
Page 9
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2007
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2007
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTALS | |||||||||||||
Revenues | ||||||||||||||||
| Gross premiums written | $ | 156,463 | $ | 188,091 | $ | 185,995 | $ | 530,549 | ||||||||
| Net premiums written | $ | 58,947 | $ | 141,620 | $ | 186,020 | $ | 386,587 | ||||||||
| Net premiums earned | $ | 48,318 | $ | 123,715 | $ | 131,086 | $ | 303,119 | ||||||||
Total revenues | $ | 48,318 | $ | 123,715 | $ | 131,086 | $ | 303,119 | ||||||||
Expenses | ||||||||||||||||
| Net losses and loss expenses: | ||||||||||||||||
| Current year | $ | 32,848 | $ | 91,320 | $ | 84,475 | $ | 208,643 | ||||||||
| Prior years | 1,301 | (30,412 | ) | (3,307 | ) | (32,418 | ) | |||||||||
| Total net losses and loss expenses | 34,149 | 60,908 | 81,168 | 176,225 | ||||||||||||
| Acquisition costs | 105 | 5,033 | 26,734 | 31,872 | ||||||||||||
| General and administrative expenses | 8,163 | 16,711 | 9,558 | 34,432 | ||||||||||||
Total expenses | $ | 42,417 | $ | 82,652 | $ | 117,460 | $ | 242,529 | ||||||||
Underwriting Income | $ | 5,901 | $ | 41,063 | $ | 13,626 | $ | 60,590 | ||||||||
| Net investment income | 73,937 | |||||||||||||||
| Net realized investment losses | (1,481 | ) | ||||||||||||||
| Interest expense | (9,482 | ) | ||||||||||||||
| Foreign exchange loss | (532 | ) | ||||||||||||||
Income before income taxes | $ | 123,032 | ||||||||||||||
GAAP Ratios | ||||||||||||||||
| Loss and loss expense ratio | 70.7 | % | 49.2 | % | 61.9 | % | 58.1 | % | ||||||||
| Acquisition cost ratio | 0.2 | % | 4.1 | % | 20.4 | % | 10.5 | % | ||||||||
| General and administrative expense ratio | 16.9 | % | 13.5 | % | 7.3 | % | 11.4 | % | ||||||||
| Expense ratio | 17.1 | % | 17.6 | % | 27.7 | % | 21.9 | % | ||||||||
| Combined ratio | 87.8 | % | 66.8 | % | 89.6 | % | 80.0 | % | ||||||||
Page 10
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2006
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED JUNE 30, 2006
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTALS | |||||||||||||
Revenues | ||||||||||||||||
| Gross premiums written | $ | 166,861 | $ | 200,004 | $ | 151,451 | $ | 518,316 | ||||||||
| Net premiums written | $ | 44,756 | $ | 172,725 | $ | 152,857 | $ | 370,338 | ||||||||
| Net premiums earned | $ | 45,955 | $ | 133,321 | $ | 126,241 | $ | 305,517 | ||||||||
Total revenues | $ | 45,955 | $ | 133,321 | $ | 126,241 | $ | 305,517 | ||||||||
Expenses | ||||||||||||||||
| Net losses and loss expenses: | ||||||||||||||||
| Current year | $ | 33,136 | $ | 98,606 | $ | 77,076 | $ | 208,818 | ||||||||
| Prior years | (8,407 | ) | (16,195 | ) | (4,372 | ) | (28,974 | ) | ||||||||
| Total net losses and loss expenses | 24,729 | 82,411 | 72,704 | 179,844 | ||||||||||||
| Acquisition costs | (777 | ) | 6,955 | 26,485 | 32,663 | |||||||||||
| General and administrative expenses | 6,845 | 13,118 | 6,294 | 26,257 | ||||||||||||
Total expenses | $ | 30,797 | $ | 102,484 | $ | 105,483 | $ | 238,764 | ||||||||
Underwriting Income | $ | 15,158 | $ | 30,837 | $ | 20,758 | $ | 66,753 | ||||||||
| Net investment income | 54,943 | |||||||||||||||
| Net realized investment losses | (10,172 | ) | ||||||||||||||
| Interest expense | (7,076 | ) | ||||||||||||||
| Foreign exchange gain | 475 | |||||||||||||||
Income before income taxes | $ | 104,923 | ||||||||||||||
GAAP Ratios | ||||||||||||||||
| Loss and loss expense ratio | 53.8 | % | 61.8 | % | 57.6 | % | 58.9 | % | ||||||||
| Acquisition cost ratio | (1.7 | %) | 5.2 | % | 21.0 | % | 10.7 | % | ||||||||
| General and administrative expense ratio | 14.9 | % | 9.9 | % | 5.0 | % | 8.6 | % | ||||||||
| Expense ratio | 13.2 | % | 15.1 | % | 26.0 | % | 19.3 | % | ||||||||
| Combined ratio | 67.0 | % | 76.9 | % | 83.6 | % | 78.2 | % | ||||||||
Page 11
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2007
CONSOLIDATED SEGMENT RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2007
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTALS | |||||||||||||
Revenues | ||||||||||||||||
| Gross premiums written | $ | 258,328 | $ | 313,280 | $ | 397,347 | $ | 968,955 | ||||||||
| Net premiums written | $ | 105,079 | $ | 242,265 | $ | 397,087 | $ | 744,431 | ||||||||
| Net premiums earned | $ | 92,809 | $ | 248,124 | $ | 248,752 | $ | 589,685 | ||||||||
Total revenues | $ | 92,809 | $ | 248,124 | $ | 248,752 | $ | 589,685 | ||||||||
Expenses | ||||||||||||||||
| Net losses and loss expenses: | ||||||||||||||||
| Current year | $ | 65,378 | $ | 180,981 | $ | 154,386 | $ | 400,745 | ||||||||
| Prior years | (24,364 | ) | (29,706 | ) | (4,455 | ) | (58,525 | ) | ||||||||
| Total net losses and loss expenses | 41,014 | 151,275 | 149,931 | 342,220 | ||||||||||||
| Acquisition costs | 437 | 11,071 | 49,560 | 61,068 | ||||||||||||
| General and administrative expenses | 15,920 | 32,018 | 19,697 | 67,635 | ||||||||||||
Total expenses | $ | 57,371 | $ | 194,364 | $ | 219,188 | $ | 470,923 | ||||||||
Underwriting Income | $ | 35,438 | $ | 53,760 | $ | 29,564 | $ | 118,762 | ||||||||
| Net investment income | 146,585 | |||||||||||||||
| Net realized investment losses | (7,965 | ) | ||||||||||||||
| Interest expense | (18,856 | ) | ||||||||||||||
| Foreign exchange loss | (564 | ) | ||||||||||||||
Income before income taxes | $ | 237,962 | ||||||||||||||
GAAP Ratios | ||||||||||||||||
| Loss and loss expense ratio | 44.2 | % | 61.0 | % | 60.3 | % | 58.0 | % | ||||||||
| Acquisition cost ratio | 0.4 | % | 4.4 | % | 19.9 | % | 10.4 | % | ||||||||
| General and administrative expense ratio | 17.2 | % | 12.9 | % | 7.9 | % | 11.5 | % | ||||||||
| Expense ratio | 17.6 | % | 17.3 | % | 27.8 | % | 21.9 | % | ||||||||
| Combined ratio | 61.8 | % | 78.3 | % | 88.1 | % | 79.9 | % | ||||||||
Page 12
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
CONSOLIDATED SEGMENT RESULTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTALS | |||||||||||||
Revenues | ||||||||||||||||
| Gross premiums written | $ | 286,680 | $ | 330,498 | $ | 399,258 | $ | 1,016,436 | ||||||||
| Net premiums written | $ | 111,953 | $ | 286,919 | $ | 398,969 | $ | 797,841 | ||||||||
| Net premiums earned | $ | 95,057 | $ | 265,303 | $ | 254,100 | $ | 614,460 | ||||||||
Total revenues | $ | 95,057 | $ | 265,303 | $ | 254,100 | $ | 614,460 | ||||||||
Expenses | ||||||||||||||||
| Net losses and loss expenses: | ||||||||||||||||
| Current year | $ | 63,993 | $ | 196,209 | $ | 154,576 | $ | 414,778 | ||||||||
| Prior years | (5,945 | ) | (16,195 | ) | (6,834 | ) | (28,974 | ) | ||||||||
| Total net losses and loss expenses | 58,048 | 180,014 | 147,742 | 385,804 | ||||||||||||
| Acquisition costs | (2,258 | ) | 16,274 | 55,119 | 69,135 | |||||||||||
| General and administrative expenses | 11,960 | 22,980 | 11,639 | 46,579 | ||||||||||||
Total expenses | $ | 67,750 | $ | 219,268 | $ | 214,500 | $ | 501,518 | ||||||||
Underwriting Income | $ | 27,307 | $ | 46,035 | $ | 39,600 | $ | 112,942 | ||||||||
| Net investment income | 116,944 | |||||||||||||||
| Net realized investment losses | (15,408 | ) | ||||||||||||||
| Interest expense | (13,527 | ) | ||||||||||||||
| Foreign exchange loss | (70 | ) | ||||||||||||||
Income before income taxes | $ | 200,881 | ||||||||||||||
GAAP Ratios | ||||||||||||||||
| Loss and loss expense ratio | 61.1 | % | 67.9 | % | 58.1 | % | 62.8 | % | ||||||||
| Acquisition cost ratio | (2.4 | %) | 6.1 | % | 21.7 | % | 11.2 | % | ||||||||
| General and administrative expense ratio | 12.6 | % | 8.7 | % | 4.6 | % | 7.6 | % | ||||||||
| Expense ratio | 10.2 | % | 14.8 | % | 26.3 | % | 18.8 | % | ||||||||
| Combined ratio | 71.3 | % | 82.7 | % | 84.4 | % | 81.6 | % | ||||||||
Page 13
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
| JUNE 30, 2007 | DECEMBER 31, 2006 | |||||||
ASSETS | ||||||||
| Fixed maturity investments available for sale, at fair value (amortized cost: 2007: $5,737,857; 2006: $5,188,379) | $ | 5,689,348 | $ | 5,177,812 | ||||
| Other invested assets available for sale, at fair value (cost: 2007: $202,016; 2006: $245,657) | 227,173 | 262,557 | ||||||
| Total investments | 5,916,521 | 5,440,369 | ||||||
| Cash and cash equivalents | 270,571 | 366,817 | ||||||
| Restricted cash | 51,896 | 138,223 | ||||||
| Securities lending collateral | 503,517 | 304,742 | ||||||
| Insurance balances receivable | 450,612 | 304,261 | ||||||
| Prepaid reinsurance | 209,522 | 159,719 | ||||||
| Reinsurance recoverable | 679,198 | 689,105 | ||||||
| Accrued investment income | 56,355 | 51,112 | ||||||
| Deferred acquisition costs | 131,368 | 100,326 | ||||||
| Intangible assets | 3,920 | 3,920 | ||||||
| Balances receivable on sale of investments | 53,089 | 16,545 | ||||||
| Net deferred tax assets | 3,863 | 5,094 | ||||||
| Other assets | 45,175 | 40,347 | ||||||
TOTAL ASSETS | $ | 8,375,607 | $ | 7,620,580 | ||||
LIABILITIES | ||||||||
| Reserve for losses and loss expenses | $ | 3,743,680 | $ | 3,636,997 | ||||
| Unearned premiums | 1,018,347 | 813,797 | ||||||
| Unearned ceding commissions | 35,612 | 23,914 | ||||||
| Reinsurance balances payable | 122,344 | 82,212 | ||||||
| Securities lending payable | 503,517 | 304,742 | ||||||
| Balances due on purchase of investments | 21 | — | ||||||
| Senior notes | 498,629 | 498,577 | ||||||
| Accounts payable and accrued liabilities | 35,271 | 40,257 | ||||||
TOTAL LIABILITIES | $ | 5,957,421 | $ | 5,400,496 | ||||
SHAREHOLDERS’ EQUITY | ||||||||
| Common shares, par value $0.03 per share: 60,405,307 issued and outstanding (2006 - 60,287,696) | $ | 1,812 | $ | 1,809 | ||||
| Additional paid-in capital | 1,833,737 | 1,822,607 | ||||||
| Retained earnings | 608,300 | 389,204 | ||||||
| Accumulated other comprehensive (loss) income: net unrealized (losses) gains on investments, net of tax | (25,663 | ) | 6,464 | |||||
TOTAL SHAREHOLDERS’ EQUITY | $ | 2,418,186 | $ | 2,220,084 | ||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 8,375,607 | $ | 7,620,580 | ||||
| Book value per share | $ | 40.03 | $ | 36.82 | ||||
| Diluted book value per share | 37.52 | 35.26 | ||||||
Page 14
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED INVESTMENT PORTFOLIO
CONSOLIDATED INVESTMENT PORTFOLIO
| JUNE 30, 2007 | MARCH 31, 2007 | DECEMBER 31, 2006 | SEPTEMBER 30, 2006 | JUNE 30, 2006 | ||||||||||||||||||||||||||||||||||||
| FAIR MARKET | FAIR MARKET | FAIR MARKET | FAIR MARKET | FAIR MARKET | ||||||||||||||||||||||||||||||||||||
| VALUE | VALUE | VALUE | VALUE | VALUE | ||||||||||||||||||||||||||||||||||||
MARKET VALUE | ||||||||||||||||||||||||||||||||||||||||
| Fixed maturities available for sale | $ | 5,689,348 | 96.2 | % | $ | 5,407,813 | 95.3 | % | $ | 5,177,812 | 95.2 | % | $ | 5,283,799 | 95.4 | % | $ | 4,808,403 | 94.8 | % | ||||||||||||||||||||
| Other invested assets available for sale | 227,173 | 3.8 | % | 263,993 | 4.7 | % | 262,557 | 4.8 | % | 256,997 | 4.6 | % | 264,700 | 5.2 | % | |||||||||||||||||||||||||
| Total | $ | 5,916,521 | 100.0 | % | $ | 5,671,806 | 100.0 | % | $ | 5,440,369 | 100.0 | % | $ | 5,540,796 | 100.0 | % | $ | 5,073,103 | 100.0 | % | ||||||||||||||||||||
ASSET ALLOCATION BY MARKET VALUE | ||||||||||||||||||||||||||||||||||||||||
| U.S. government and agencies | $ | 2,062,352 | 33.1 | % | $ | 1,939,024 | 31.5 | % | $ | 1,700,052 | 28.6 | % | $ | 2,412,080 | 41.1 | % | $ | 2,375,542 | 44.7 | % | ||||||||||||||||||||
| Non-U.S. government securities | 105,397 | 1.7 | % | 100,064 | 1.6 | % | 97,319 | 1.6 | % | 99,504 | 1.7 | % | 91,384 | 1.7 | % | |||||||||||||||||||||||||
| Corporate securities | 1,191,679 | 19.1 | % | 1,242,895 | 20.2 | % | 1,318,136 | 22.2 | % | 1,057,457 | 18.0 | % | 839,861 | 15.8 | % | |||||||||||||||||||||||||
| Mortgage-backed securities | 2,123,124 | 34.0 | % | 1,897,086 | 30.8 | % | 1,823,907 | 30.7 | % | 1,456,789 | 24.9 | % | 1,248,140 | 23.5 | % | |||||||||||||||||||||||||
| Asset-backed securities | 206,796 | 3.3 | % | 228,744 | 3.7 | % | 238,398 | 3.9 | % | 257,969 | 4.4 | % | 253,476 | 4.8 | % | |||||||||||||||||||||||||
| Fixed income sub-total | 5,689,348 | 91.2 | % | 5,407,813 | 87.8 | % | 5,177,812 | 87.0 | % | 5,283,799 | 90.1 | % | 4,808,403 | 90.5 | % | |||||||||||||||||||||||||
| Global high-yield bond fund | 34,142 | 0.5 | % | 33,968 | 0.6 | % | 33,031 | 0.6 | % | 31,724 | 0.5 | % | 30,519 | 0.6 | % | |||||||||||||||||||||||||
| Hedge funds | 193,031 | 3.1 | % | 230,025 | 3.7 | % | 229,526 | 3.9 | % | 225,273 | 3.9 | % | 234,181 | 4.4 | % | |||||||||||||||||||||||||
| Cash & cash equivalents | 322,467 | 5.2 | % | 489,097 | 7.9 | % | 505,040 | 8.5 | % | 321,719 | 5.5 | % | 237,222 | 4.5 | % | |||||||||||||||||||||||||
| Total | $ | 6,238,988 | 100.0 | % | $ | 6,160,903 | 100.0 | % | $ | 5,945,409 | 100.0 | % | $ | 5,862,515 | 100.0 | % | $ | 5,310,325 | 100.0 | % | ||||||||||||||||||||
CREDIT QUALITY BY MARKET VALUE | ||||||||||||||||||||||||||||||||||||||||
| U.S. government and agencies | $ | 2,062,351 | 36.3 | % | $ | 1,939,024 | 35.9 | % | $ | 1,700,052 | 32.8 | % | $ | 2,412,080 | 45.7 | % | $ | 2,374,326 | 49.5 | % | ||||||||||||||||||||
| AAA/Aaa | 2,605,371 | 45.8 | % | 2,416,429 | 44.7 | % | 2,426,331 | 46.9 | % | 2,005,127 | 37.9 | % | 1,752,653 | 36.4 | % | |||||||||||||||||||||||||
| AA/Aa | 370,794 | 6.5 | % | 377,225 | 7.0 | % | 306,242 | 5.9 | % | 274,377 | 5.2 | % | 246,483 | 5.1 | % | |||||||||||||||||||||||||
| A/A | 609,453 | 10.7 | % | 629,368 | 11.6 | % | 699,267 | 13.5 | % | 546,204 | 10.3 | % | 418,172 | 8.7 | % | |||||||||||||||||||||||||
| BBB/Baa | 41,379 | 0.7 | % | 45,767 | 0.8 | % | 45,920 | 0.9 | % | 46,011 | 0.9 | % | 16,769 | 0.3 | % | |||||||||||||||||||||||||
| Total | $ | 5,689,348 | 100.0 | % | $ | 5,407,813 | 100.0 | % | $ | 5,177,812 | 100.0 | % | $ | 5,283,799 | 100.0 | % | $ | 4,808,403 | 100.0 | % | ||||||||||||||||||||
STATISTICS | ||||||||||||||||||||||||||||||||||||||||
| Annualized book yield, year to date | 4.8 | % | 4.7 | % | 4.5 | % | 4.3 | % | 4.3 | % | ||||||||||||||||||||||||||||||
| Duration | 3.0 | years | 2.9 | years | 2.8 | years | 3.0 | years | 3.2 | years | ||||||||||||||||||||||||||||||
| Average credit quality (S&P) | AA | AA | AA | AA | AA | |||||||||||||||||||||||||||||||||||
Page 15
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RESERVES FOR LOSSES AND LOSS EXPENSES
RESERVES FOR LOSSES AND LOSS EXPENSES
| AT JUNE 30, 2007 | ||||||||||||||||
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTAL | |||||||||||||
| Case reserves (net of reinsurance recoverable) | $ | 236,800 | $ | 183,075 | $ | 210,827 | $ | 630,702 | ||||||||
| IBNR (net of reinsurance recoverable) | 139,149 | 1,599,136 | 695,495 | 2,433,780 | ||||||||||||
| Total | $ | 375,949 | $ | 1,782,211 | $ | 906,322 | $ | 3,064,482 | ||||||||
IBNR/Total reserves (net of reinsurance recoverable) | 37.0 | % | 89.7 | % | 76.7 | % | 79.4 | % | ||||||||
| AT DECEMBER 31, 2006 | ||||||||||||||||
| CONSOLIDATED | ||||||||||||||||
| PROPERTY | CASUALTY | REINSURANCE | TOTAL | |||||||||||||
| Case reserves (net of reinsurance recoverable) | $ | 284,284 | $ | 149,619 | $ | 197,366 | $ | 631,269 | ||||||||
| IBNR (net of reinsurance recoverable) | 139,703 | 1,541,549 | 635,371 | 2,316,623 | ||||||||||||
| Total | $ | 423,987 | $ | 1,691,168 | $ | 832,737 | $ | 2,947,892 | ||||||||
IBNR/Total reserves (net of reinsurance recoverable) | 32.9 | % | 91.2 | % | 76.3 | % | 78.6 | % | ||||||||
Page 16
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CAPITAL STRUCTURE AND LEVERAGE RATIOS
CAPITAL STRUCTURE AND LEVERAGE RATIOS
| JUNE 30, | MARCH 31, | DECEMBER 31, | SEPTEMBER 30, | JUNE 30, | ||||||||||||||||
| 2007 | 2007 | 2006 | 2006 | 2006 | ||||||||||||||||
| Senior notes/long-term debt | $ | 498,629 | $ | 498,602 | $ | 498,577 | $ | 498,543 | $ | 500,000 | ||||||||||
| Shareholders’ equity | 2,418,186 | 2,355,978 | 2,220,084 | 2,094,872 | 1,565,062 | |||||||||||||||
| Total capitalization | $ | 2,916,815 | $ | 2,854,580 | $ | 2,718,661 | $ | 2,593,415 | $ | 2,065,062 | ||||||||||
Leverage ratios | ||||||||||||||||||||
Debt to total capitalization | 17.1 | % | 17.5 | % | 18.3 | % | 19.2 | % | 24.2 | % | ||||||||||
| Closing shareholders’ equity | $ | 2,418,186 | $ | 2,355,978 | $ | 2,220,084 | $ | 2,094,872 | $ | 1,565,062 | ||||||||||
| Add/(deduct): accumulated other comprehensive loss/(income) | 25,663 | (31,481 | ) | (6,464 | ) | (3,447 | ) | 83,144 | ||||||||||||
| Adjusted shareholders’ equity | $ | 2,443,849 | $ | 2,324,497 | $ | 2,213,620 | $ | 2,091,425 | $ | 1,648,206 | ||||||||||
| Net premiums written (trailing 12 months) | $ | 1,253,186 | $ | 1,236,937 | $ | 1,306,596 | $ | 1,309,428 | $ | 1,261,132 | ||||||||||
Net premiums written (trailing 12 months) to adjusted shareholders’ equity | 0.51 | 0.53 | 0.59 | 0.63 | 0.77 | |||||||||||||||
| Total investments and cash & cash equivalents | $ | 6,238,988 | $ | 6,160,903 | $ | 5,945,409 | $ | 5,862,515 | $ | 5,310,325 | ||||||||||
Total investments and cash & cash equivalents to adjusted shareholders’ equity | 2.55 | 2.65 | 2.69 | 2.80 | 3.22 | |||||||||||||||
| Reserve for losses and loss expenses | 3,743,680 | 3,663,224 | 3,636,997 | 3,586,964 | 3,459,742 | |||||||||||||||
| Deduct: reinsurance recoverable | (679,198 | ) | (668,050 | ) | (689,105 | ) | (688,066 | ) | (641,429 | ) | ||||||||||
| Net reserve for losses and loss expenses | 3,064,482 | 2,995,174 | 2,947,892 | 2,898,898 | 2,818,313 | |||||||||||||||
Net reserve for losses and loss expenses to adjusted shareholders’ equity | 1.25 | 1.29 | 1.33 | 1.39 | 1.71 | |||||||||||||||
Page 17
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
| THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | ||||||||||||||||
| JUNE 30, 2007 | MARCH 31, 2007 | DECEMBER 31, 2006 | SEPTEMBER 30, 2006 | JUNE 30, 2006 | ||||||||||||||||
| Net income | $ | 123,287 | $ | 113,921 | $ | 128,362 | $ | 113,985 | $ | 102,370 | ||||||||||
| Add: | ||||||||||||||||||||
| Net realized investment losses | 1,481 | 6,484 | 4,190 | 9,080 | 10,172 | |||||||||||||||
| Foreign exchange loss (gain) | 532 | 32 | 1,092 | (561 | ) | (475 | ) | |||||||||||||
| Operating income | $ | 125,300 | $ | 120,437 | $ | 133,644 | $ | 122,504 | $ | 112,067 | ||||||||||
Weighted average common sharesoutstanding | ||||||||||||||||||||
| Basic | 60,397,591 | 60,333,209 | 60,284,459 | 58,376,307 | 50,162,842 | |||||||||||||||
| Diluted | 62,874,235 | 62,207,941 | 62,963,243 | 60,451,643 | 50,682,557 | |||||||||||||||
Basic per share data | ||||||||||||||||||||
| Net income | $ | 2.04 | $ | 1.89 | $ | 2.13 | $ | 1.95 | $ | 2.04 | ||||||||||
| Add: | ||||||||||||||||||||
| Net realized investment losses | 0.02 | 0.11 | 0.07 | 0.16 | 0.20 | |||||||||||||||
| Foreign exchange loss (gain) | 0.01 | — | 0.02 | (0.01 | ) | (0.01 | ) | |||||||||||||
| Operating income | $ | 2.07 | $ | 2.00 | $ | 2.22 | $ | 2.10 | $ | 2.23 | ||||||||||
Diluted per share data | ||||||||||||||||||||
| Net income | $ | 1.96 | $ | 1.83 | $ | 2.04 | $ | 1.89 | $ | 2.02 | ||||||||||
| Add: | ||||||||||||||||||||
| Net realized investment losses | 0.02 | 0.11 | 0.06 | 0.15 | 0.20 | |||||||||||||||
| Foreign exchange loss (gain) | 0.01 | — | 0.02 | (0.01 | ) | (0.01 | ) | |||||||||||||
| Operating income | $ | 1.99 | $ | 1.94 | $ | 2.12 | $ | 2.03 | $ | 2.21 | ||||||||||
Page 18
Table of Contents
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
| SIX MONTHS ENDED | SIX MONTHS ENDED | |||||||
| JUNE 30, 2007 | JUNE 30, 2006 | |||||||
| Net income | $ | 237,208 | $ | 200,491 | ||||
| Add: | ||||||||
| Net realized investment losses | 7,965 | 15,408 | ||||||
| Foreign exchange loss | 564 | 70 | ||||||
| Operating income | $ | 245,737 | $ | 215,969 | ||||
Weighted average common shares outstanding | ||||||||
| Basic | 60,028,523 | 50,162,842 | ||||||
| Diluted | 62,277,010 | 50,637,809 | ||||||
Basic per share data | ||||||||
| Net income | $ | 3.95 | $ | 4.00 | ||||
| Add: | ||||||||
| Net realized investment losses | 0.13 | 0.31 | ||||||
| Foreign exchange loss | 0.01 | — | ||||||
| Operating income | $ | 4.09 | $ | 4.31 | ||||
Diluted per share data | ||||||||
| Net income | $ | 3.81 | $ | 3.96 | ||||
| Add: | ||||||||
| Net realized investment losses | 0.13 | 0.30 | ||||||
| Foreign exchange loss | 0.01 | — | ||||||
| Operating income | $ | 3.95 | $ | 4.26 | ||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
| THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | ||||||||||||||||
| JUNE 30, 2007 | MARCH 31, 2007 | DECEMBER 31, 2006 | SEPTEMBER 30, 2006 | JUNE 30, 2006 | ||||||||||||||||
| Opening shareholders’ equity | $ | 2,355,978 | $ | 2,220,084 | $ | 2,094,872 | $ | 1,565,062 | $ | 1,478,907 | ||||||||||
| (Deduct)/add: accumulated other comprehensive (income)/loss | (31,481 | ) | (6,464 | ) | (3,447 | ) | 83,144 | 64,988 | ||||||||||||
| Adjusted opening shareholders’ equity | $ | 2,324,497 | $ | 2,213,620 | $ | 2,091,425 | $ | 1,648,206 | $ | 1,543,895 | ||||||||||
| Closing shareholders’ equity | $ | 2,418,186 | $ | 2,355,978 | $ | 2,220,084 | $ | 2,094,872 | $ | 1,565,062 | ||||||||||
| Add/(deduct): accumulated other comprehensive loss/(income) | 25,663 | (31,481 | ) | (6,464 | ) | (3,447 | ) | 83,144 | ||||||||||||
| Adjusted closing shareholders’ equity | $ | 2,443,849 | $ | 2,324,497 | $ | 2,213,620 | $ | 2,091,425 | $ | 1,648,206 | ||||||||||
| Average shareholders’ equity | $ | 2,384,173 | $ | 2,269,059 | $ | 2,152,523 | $ | 1,869,816 | $ | 1,596,051 | ||||||||||
| Net income available to shareholders | $ | 123,287 | $ | 113,921 | $ | 128,362 | $ | 113,985 | $ | 102,370 | ||||||||||
| Annualized net income available to shareholders | 493,148 | 455,684 | 513,448 | 455,940 | 409,480 | |||||||||||||||
| Annualized return on average shareholders’ equity — net income available to shareholders | 20.7 | % | 20.1 | % | 23.9 | % | 24.4 | % | 25.7 | % | ||||||||||
| Operating income available to shareholders | $ | 125,300 | $ | 120,437 | $ | 133,644 | $ | 122,504 | $ | 112,067 | ||||||||||
| Annualized operating income available to shareholders | 501,200 | 481,748 | 534,576 | 490,016 | 448,268 | |||||||||||||||
| Annualized return on average shareholders’ equity — operating income available to shareholders | 21.0 | % | 21.2 | % | 24.8 | % | 26.2 | % | 28.1 | % | ||||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
| SIX MONTHS ENDED | SIX MONTHS ENDED | |||||||
| JUNE 30, 2007 | JUNE 30, 2006 | |||||||
| Opening shareholders’ equity | $ | 2,220,084 | $ | 1,420,266 | ||||
| (Deduct)/add: accumulated other comprehensive (income)/loss | (6,464 | ) | 25,508 | |||||
| Adjusted opening shareholders’ equity | $ | 2,213,620 | $ | 1,445,774 | ||||
| Closing shareholders’ equity | $ | 2,418,186 | $ | 1,565,062 | ||||
| Add: accumulated other comprehensive loss | 25,663 | 83,144 | ||||||
| Adjusted closing shareholders’ equity | $ | 2,443,849 | $ | 1,648,206 | ||||
| Average shareholders’ equity | $ | 2,328,735 | $ | 1,546,990 | ||||
| Net income available to shareholders | $ | 237,208 | $ | 200,491 | ||||
| Annualized net income available to shareholders | 474,416 | 400,982 | ||||||
| Annualized return on average shareholders’ equity — net income available to ordinary shareholders | 20.4 | % | 25.9 | % | ||||
| Operating income available to shareholders | $ | 245,737 | $ | 215,969 | ||||
| Annualized operating income available to shareholders | 491,474 | 431,938 | ||||||
| Annualized return on average shareholders’ equity — operating income available to shareholders | 21.1 | % | 27.9 | % | ||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
DILUTED BOOK VALUE PER SHARE
DILUTED BOOK VALUE PER SHARE
| JUNE 30, | MARCH 31, | DECEMBER 31, | JUNE 30, | |||||||||||||
| 2007 | 2007* | 2006 | 2006 | |||||||||||||
| Price per share at period end | $ | 51.25 | $ | 42.75 | $ | 43.63 | N/A | |||||||||
| Total shareholders’ equity | 2,418,186 | 2,355,978 | 2,220,084 | 1,565,062 | ||||||||||||
| Basic common shares outstanding | 60,405,307 | 60,390,269 | 60,287,696 | 50,162,842 | ||||||||||||
| Add: unvested restricted share units | 828,657 | 837,056 | 704,372 | 214,712 | ||||||||||||
| Add: Long-Term Incentive Plan (LTIP) share units | 886,251 | 886,251 | 342,501 | 228,334 | ||||||||||||
| Add: dilutive options/warrants outstanding | 6,764,564 | 6,588,782 | 6,695,990 | 1,187,875 | ||||||||||||
| Weighted average exercise price per share | $ | 33.59 | $ | 33.18 | $ | 33.02 | $ | 27.42 | ||||||||
| Deduct: options bought back via treasury method | (4,433,857 | ) | (5,114,200 | ) | (5,067,534 | ) | (957,916 | ) | ||||||||
| Common shares and common share equivalents outstanding | 64,450,922 | 63,588,158 | 62,963,025 | 50,835,847 | ||||||||||||
| Basic book value per common share | $ | 40.03 | $ | 39.01 | $ | 36.82 | $ | 31.20 | ||||||||
| Diluted book value per common share | $ | 37.52 | $ | 37.05 | $ | 35.26 | $ | 30.79 | ||||||||
| * | Previously calculated using Financial Accounting Standards No. 128 (“FAS 128”) dilution methodology. When calculated using FAS 128 dilution methodology, the effect becomes less dilutive. The calculation as shown is consistent with prior quarters. |
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD
ANNUALIZED INVESTMENT BOOK YIELD
| THREE MONTHS ENDED | THREE MONTHS ENDED | SIX MONTHS ENDED | SIX MONTHS ENDED | |||||||||||||
| JUNE 30, 2007 | JUNE 30, 2006 | JUNE 30, 2007 | JUNE 30, 2006 | |||||||||||||
| Net investment income | 73,937 | 54,943 | 146,585 | 116,944 | ||||||||||||
| (Add)/deduct: annual and non-recurring items | — | — | 2,062 | 12,034 | ||||||||||||
| Net investment income, recurring | 73,937 | 54,943 | 144,523 | 104,910 | ||||||||||||
| Annualized net investment income, recurring | 295,748 | 219,772 | 289,046 | 209,820 | ||||||||||||
| (Deduct)/add: annual and non-recurring items | — | — | 2,062 | 12,034 | ||||||||||||
| Normalized net investment income | 295,748 | 219,772 | 291,108 | 221,854 | ||||||||||||
| Fixed maturity investments available for sale, amortized cost | 5,392,983 | 4,613,208 | 5,188,379 | 4,442,040 | ||||||||||||
| Other invested assets, available for sale, cost | 246,500 | 247,486 | 245,657 | 270,138 | ||||||||||||
| Cash and cash equivalents | 288,284 | 188,599 | 366,817 | 172,379 | ||||||||||||
| Restricted cash | 200,813 | 55,161 | 138,223 | 41,788 | ||||||||||||
| Balances receivable on sale of investments | 25,239 | 1,224 | 16,545 | 3,633 | ||||||||||||
| Balances due on purchase of investments | (46,517 | ) | — | — | — | |||||||||||
| Opening aggregate invested assets | 6,107,302 | 5,105,678 | 5,955,621 | 4,929,978 | ||||||||||||
| Fixed maturity investments available for sale, amortized cost | 5,737,857 | 4,907,653 | 5,737,857 | 4,907,653 | ||||||||||||
| Other invested assets, available for sale, cost | 202,016 | 247,975 | 202,016 | 247,975 | ||||||||||||
| Cash and cash equivalents | 270,571 | 223,602 | 270,571 | 223,602 | ||||||||||||
| Restricted cash | 51,896 | 13,620 | 51,896 | 13,620 | ||||||||||||
| Balances receivable on sale of investments | 53,089 | 2,433 | 53,089 | 2,433 | ||||||||||||
| Balances due on purchase of investments | (21 | ) | (76,779 | ) | (21 | ) | (76,779 | ) | ||||||||
| Closing aggregate invested assets | 6,315,408 | 5,318,504 | 6,315,408 | 5,318,504 | ||||||||||||
| Average aggregate invested assets | 6,211,355 | 5,212,091 | 6,135,515 | 5,124,241 | ||||||||||||
| Annualized investment book yield | 4.8 | % | 4.2 | % | 4.7 | % | 4.3 | % | ||||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD
ANNUALIZED INVESTMENT BOOK YIELD
| THREE MONTHS ENDED | YEAR ENDED | NINE MONTHS ENDED | ||||||||||
| MARCH 31, 2007 | DECEMBER 31, 2006 | SEPTEMBER 30, 2006 | ||||||||||
| Net investment income | 72,648 | 244,360 | 178,351 | |||||||||
| Deduct: annual and non-recurring items | 2,062 | — | 11,689 | |||||||||
| Net investment income, recurring | 70,586 | 244,360 | 166,662 | |||||||||
| Annualized net investment income, recurring | 282,344 | 244,360 | 222,216 | |||||||||
| Add: annual and non-recurring items | 2,062 | — | 11,689 | |||||||||
| Normalized net investment income | 284,406 | 244,360 | 233,905 | |||||||||
| Fixed maturity investments available for sale, amortized cost | 5,188,379 | 4,442,040 | 4,442,040 | |||||||||
| Other invested assets, available for sale, cost | 245,657 | 270,138 | 270,138 | |||||||||
| Cash and cash equivalents | 366,817 | 172,379 | 172,379 | |||||||||
| Restricted cash | 138,223 | 41,788 | 41,788 | |||||||||
| Balances receivable on sale of investments | 16,545 | 3,633 | 3,633 | |||||||||
| Balances due on purchase of investments | — | — | — | |||||||||
| Opening aggregate invested assets | 5,955,621 | 4,929,978 | 4,929,978 | |||||||||
| Fixed maturity investments available for sale, amortized cost | 5,392,983 | 5,188,379 | 5,289,411 | |||||||||
| Other invested assets, available for sale, cost | 246,500 | 245,657 | 246,854 | |||||||||
| Cash and cash equivalents | 288,284 | 366,817 | 270,848 | |||||||||
| Restricted cash | 200,813 | 138,223 | 50,871 | |||||||||
| Balances receivable on sale of investments | 25,239 | 16,545 | 70,174 | |||||||||
| Balances due on purchase of investments | (46,517 | ) | — | (66,874 | ) | |||||||
| Closing aggregate invested assets | 6,107,302 | 5,955,621 | 5,861,284 | |||||||||
| Average aggregate invested assets | 6,031,462 | 5,442,800 | 5,395,631 | |||||||||
| Annualized investment book yield | 4.7 | % | 4.5 | % | 4.3 | % | ||||||
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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
REGULATION G
REGULATION G
In presenting the company’s results, management has included and discussed certain non-GAAP financial measures. 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
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. See pages 18 and 19 for reconciliations of operating income to net income.
ANNUALIZED RETURN ON AVERAGE EQUITY (“ROAE”)
Annualized return on average equity 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 is it 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. See pages 20 and 21 for reconciliations of average equity.
ANNUALIZED OPERATING RETURN ON AVERAGE EQUITY
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 pages 18 and 19 for reconciliations of net income to operating income and pages 20 and 21 for reconciliations of average equity.
DILUTED BOOK VALUE PER SHARE
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. See page 22 for a reconciliation of diluted book value per share to basic book value per share.
ANNUALIZED INVESTMENT BOOK YIELD
Annualized investment book yield is calculated by dividing normalized net investment income by average aggregate invested assets at book value. In calculating annualized investment book yield, normalized net investment income for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net investment income. Normalized net investment income is adjusted for known annual or non-recurring items. The company utilizes and presents the investment yield in order to better disclose the performance of the company’s investments and to show the components of the company’s ROAE. See pages 23 and 24 for reconciliations of annualized investment book yield.
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