Exhibit 99.2
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
4th Quarter and Year Ended December 31, 2011
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, AG with the U.S. Securities and Exchange Commission. | |
Phone: (646) 794-0750 email: keith.lennox@awac.com | ||
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; 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.
Page 2
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
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 by Segment and Geographic Location - Current Quarter | 8 | |||||
- Consolidated Premium Distribution Analysis by Line of Business - Current Quarter | 9 | |||||
- Consolidated Premium Distribution Analysis by Segment and Geographic Location - Year to Date | 10 | |||||
- Consolidated Premium Distribution Analysis by Line of Business - Year to Date | 11 | |||||
III. | Segment Results | |||||
- Consolidated Segment Results - Current Quarter | 12 | |||||
- Consolidated Segment Results - Prior Year Quarter | 13 | |||||
- Consolidated Segment Results - Current Year to Date | 14 | |||||
- Consolidated Segment Results - Prior Year to Date | 15 | |||||
IV. | Balance Sheet Details | |||||
- Condensed Consolidated Balance Sheets | 16 | |||||
- Consolidated Total Investment Portfolio | 17 | |||||
- Investment Portfolio - Additional Detail | 18 | |||||
- Reserves for Losses and Loss Expenses | 21 | |||||
- Capital Structure and Leverage Ratios | 22 | |||||
V. | Other | |||||
- Share Repurchase Detail - Year to Date | 23 | |||||
- Operating Income Reconciliation and Basic and Diluted Earnings per Share - Consecutive Quarters | 24 | |||||
- Operating Income Reconciliation and Basic and Diluted Earnings per Share - Year to Date | 25 | |||||
- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity - Consecutive Quarters | 26 | |||||
- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity - Year to Date | 27 | |||||
- Diluted Book Value per Share | 28 | |||||
- Calculation of Annualized Investment Book Yield | 29 | |||||
- Financial Statement Portfolio Return - Year to Date | 31 | |||||
- Regulation G | 32 | |||||
Page 3
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
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, AG, along with others in the industry, use underwriting ratios as measures of performance. The loss and loss expense 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 and loss expense 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, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned 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 32 for further details.
Page 4
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED FINANCIAL HIGHLIGHTS
| THREE MONTHS ENDED | YEAR ENDED | Previous | Previous | |||||||||||||||||||||||
| DECEMBER 31, | DECEMBER 31, | Quarter | Year to Date | |||||||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | Change | Change | |||||||||||||||||||||
HIGHLIGHTS | Gross premiums written | $ | 416,537 | $ | 381,942 | $ | 1,939,521 | $ | 1,758,397 | 9.1 | % | 10.3 | % | |||||||||||||
Net premiums written | 306,832 | 287,199 | 1,533,766 | 1,392,455 | 6.8 | % | 10.1 | % | ||||||||||||||||||
Net premiums earned | 395,469 | 342,804 | 1,456,992 | 1,359,548 | 15.4 | % | 7.2 | % | ||||||||||||||||||
Net investment income | 45,489 | 50,168 | 195,948 | 244,143 | (9.3 | %) | (19.7 | %) | ||||||||||||||||||
Net income | 183,100 | 92,786 | 274,548 | 665,005 | 97.3 | % | (58.7 | %) | ||||||||||||||||||
Operating income | 94,681 | 97,288 | 183,686 | 397,831 | (2.7 | %) | (53.8 | %) | ||||||||||||||||||
Total investments and cash & cash equivalents | 8,123,198 | 8,036,922 | 8,123,198 | 8,036,922 | 1.1 | % | 1.1 | % | ||||||||||||||||||
Total assets | 10,541,715 | 10,239,223 | 10,541,715 | 10,239,223 | 3.0 | % | 3.0 | % | ||||||||||||||||||
Total shareholders’ equity | 3,149,022 | 3,075,820 | 3,149,022 | 3,075,820 | 2.4 | % | 2.4 | % | ||||||||||||||||||
Cash flows from operating activities | 56,603 | 32,073 | 548,108 | 451,264 | 76.5 | % | 21.5 | % | ||||||||||||||||||
PER SHARE AND SHARE DATA | Basic earnings per share | |||||||||||||||||||||||||
Net income | $ | 4.80 | $ | 2.30 | $ | 7.21 | $ | 14.30 | 108.7 | % | (49.6 | %) | ||||||||||||||
Operating income | $ | 2.48 | $ | 2.41 | $ | 4.82 | $ | 8.56 | 2.9 | % | (43.7 | %) | ||||||||||||||
Diluted earnings per share | ||||||||||||||||||||||||||
Net income | $ | 4.63 | $ | 2.13 | $ | 6.92 | $ | 13.32 | 117.4 | % | (48.0 | %) | ||||||||||||||
Operating income | $ | 2.40 | $ | 2.24 | $ | 4.63 | $ | 7.97 | 7.1 | % | (41.9 | %) | ||||||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||||||||
Basic | 38,138,558 | 40,291,620 | 38,093,351 | 46,491,279 | ||||||||||||||||||||||
Diluted | 39,524,273 | 43,501,068 | 39,667,905 | 49,913,317 | ||||||||||||||||||||||
Book value per share | $ | 83.44 | $ | 80.75 | $ | 83.44 | $ | 80.75 | 3.3 | % | 3.3 | % | ||||||||||||||
Diluted book value per share | $ | 80.11 | $ | 74.29 | $ | 80.11 | $ | 74.29 | 7.8 | % | 7.8 | % | ||||||||||||||
FINANCIAL RATIOS | Annualized return on average equity (ROAE), net income | 23.9 | % | 11.9 | % | 8.9 | % | 21.9 | % | 12.0 | pts | (13.0 | ) pts | |||||||||||||
Annualized ROAE, operating income | 12.4 | % | 12.5 | % | 6.0 | % | 13.1 | % | (0.1 | ) pts | (7.1 | ) pts | ||||||||||||||
Annualized investment book yield | 2.3 | % | 2.7 | % | 2.5 | % | 3.3 | % | (0.4 | ) pts | (0.8 | ) pts | ||||||||||||||
Loss and loss expense ratio | 53.9 | % | 46.7 | % | 65.8 | % | 52.1 | % | 7.2 | pts | 13.7 | pts | ||||||||||||||
Acquisition cost ratio | 11.8 | % | 11.3 | % | 11.5 | % | 11.7 | % | 0.5 | pts | (0.2 | ) pts | ||||||||||||||
General and administrative expense ratio | 17.8 | % | 24.8 | % | 18.6 | % | 21.1 | % | (7.0 | ) pts | (2.5 | ) pts | ||||||||||||||
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Expense ratio | 29.6 | % | 36.1 | % | 30.1 | % | 32.8 | % | (6.5 | ) pts | (2.7 | ) pts | ||||||||||||||
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Combined ratio | 83.5 | % | 82.8 | % | 95.9 | % | 84.9 | % | 0.7 | pts | 11.0 | pts | ||||||||||||||
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Page 5
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED STATEMENTS OF OPERATIONS - CONSECUTIVE QUARTERS
| THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | THREE MONTHS ENDED | ||||||||||||||||
| DECEMBER 31, 2011 | SEPTEMBER 30, 2011 | JUNE 30, 2011 | MARCH 31, 2011 | DECEMBER 31, 2010 | ||||||||||||||||
Revenues | ||||||||||||||||||||
Gross premiums written | $ | 416,537 | $ | 442,698 | $ | 519,598 | $ | 560,688 | $ | 381,942 | ||||||||||
Net premiums written | $ | 306,832 | $ | 350,260 | $ | 395,803 | $ | 480,871 | $ | 287,199 | ||||||||||
Net premiums earned | $ | 395,469 | $ | 371,340 | $ | 355,307 | $ | 334,876 | $ | 342,804 | ||||||||||
Net investment income | 45,489 | 47,883 | 52,368 | 50,208 | 50,168 | |||||||||||||||
Net realized investment gains (losses) | 31,632 | (130,809 | ) | 58,878 | 50,376 | (3,738 | ) | |||||||||||||
Other income | 66,744 | 35,000 | — | — | — | |||||||||||||||
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Total revenues | $ | 539,334 | $ | 323,414 | $ | 466,553 | $ | 435,460 | $ | 389,234 | ||||||||||
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Expenses | ||||||||||||||||||||
Net losses and loss expenses: | ||||||||||||||||||||
Current year | $ | 305,769 | $ | 267,070 | $ | 279,514 | $ | 348,802 | $ | 233,950 | ||||||||||
Prior years | (92,424 | ) | (61,524 | ) | (43,701 | ) * | (44,350 | ) | (73,931 | ) | ||||||||||
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Total net losses and loss expenses | $ | 213,345 | $ | 205,546 | $ | 235,813 | $ | 304,452 | $ | 160,019 | ||||||||||
Acquisition costs | 46,562 | 39,680 | 42,971 | 38,082 | 38,848 | |||||||||||||||
General and administrative expenses | 70,492 | 66,007 | 67,201 | 67,956 | 85,134 | |||||||||||||||
Amortization and impairment of intangible assets | 678 | 767 | 766 | 767 | 808 | |||||||||||||||
Interest expense | 13,754 | 13,748 | 13,745 | 13,742 | 11,650 | |||||||||||||||
Foreign exchange (gain) loss | (549 | ) | 2,966 | 1,184 | (442 | ) | 196 | |||||||||||||
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Total expenses | $ | 344,282 | $ | 328,714 | $ | 361,680 | $ | 424,557 | $ | 296,655 | ||||||||||
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Income (Loss) before income taxes | $ | 195,052 | $ | (5,300 | ) | $ | 104,873 | $ | 10,903 | $ | 92,579 | |||||||||
Income tax expense (benefit) | 11,952 | 5,672 | 11,073 | 2,283 | (207 | ) | ||||||||||||||
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Net income (loss) | $ | 183,100 | $ | (10,972 | ) | $ | 93,800 | $ | 8,620 | $ | 92,786 | |||||||||
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GAAP Ratios | ||||||||||||||||||||
Loss and loss expense ratio | 53.9 | % | 55.4 | % | 66.4 | % | 90.9 | % | 46.7 | % | ||||||||||
Acquisition cost ratio | 11.8 | % | 10.7 | % | 12.1 | % | 11.4 | % | 11.3 | % | ||||||||||
General and administrative expense ratio | 17.8 | % | 17.8 | % | 18.9 | % | 20.3 | % | 24.8 | % | ||||||||||
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Expense ratio | 29.6 | % | 28.5 | % | 31.0 | % | 31.7 | % | 36.1 | % | ||||||||||
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Combined ratio | 83.5 | % | 83.9 | % | 97.4 | % | 122.6 | % | 82.8 | % | ||||||||||
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Per Share Data | ||||||||||||||||||||
Basic earnings per share | ||||||||||||||||||||
Net income (loss) | $ | 4.80 | $ | (0.29 | ) | $ | 2.45 | $ | 0.23 | $ | 2.30 | |||||||||
Operating income (loss) | $ | 2.48 | $ | 2.26 | $ | 1.15 | $ | (1.08 | ) | $ | 2.41 | |||||||||
Diluted earnings per share | ||||||||||||||||||||
Net income (loss) | $ | 4.63 | $ | (0.29 | ) | $ | 2.36 | $ | 0.21 | $ | 2.13 | |||||||||
Operating income (loss) | $ | 2.40 | $ | 2.19 | $ | 1.11 | $ | (1.02 | ) | $ | 2.24 | |||||||||
| * | Includes prior year development of $55.2 million and the impact of a commutation, which increased prior years net losses and loss expenses by $11.5 million. |
Page 6
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED STATEMENTS OF OPERATIONS - YEAR TO DATE
| YEAR ENDED | YEAR ENDED | |||||||
| DECEMBER 31, 2011 | DECEMBER 31, 2010 | |||||||
Revenues | ||||||||
Gross premiums written | $ | 1,939,521 | $ | 1,758,397 | ||||
Net premiums written | $ | 1,533,766 | $ | 1,392,455 | ||||
Net premiums earned | $ | 1,456,992 | $ | 1,359,548 | ||||
Net investment income | 195,948 | 244,143 | ||||||
Net realized investment gains | 10,077 | 285,612 | ||||||
Net impairment charges recognized in earnings | — | (168 | ) | |||||
Other income | 101,744 | 913 | ||||||
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Total revenues | $ | 1,764,761 | $ | 1,890,048 | ||||
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Expenses | ||||||||
Net losses and loss expenses: | ||||||||
Current year | $ | 1,201,155 | $ | 1,012,374 | ||||
Prior years | (241,999 | ) * | (304,491 | ) ** | ||||
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Total net losses and loss expenses | $ | 959,156 | $ | 707,883 | ||||
Acquisition costs | 167,295 | 159,489 | ||||||
General and administrative expenses | 271,656 | 286,557 | ||||||
Amortization and impairment of intangible assets | 2,978 | 3,483 | ||||||
Interest expense | 54,989 | 40,242 | ||||||
Foreign exchange loss | 3,159 | 444 | ||||||
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Total expenses | $ | 1,459,233 | $ | 1,198,098 | ||||
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Income before income taxes | $ | 305,528 | $ | 691,950 | ||||
Income tax expense | 30,980 | 26,945 | ||||||
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Net income | $ | 274,548 | $ | 665,005 | ||||
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GAAP Ratios | ||||||||
Loss and loss expense ratio | 65.8 | % | 52.1 | % | ||||
Acquisition cost ratio | 11.5 | % | 11.7 | % | ||||
General and administrative expense ratio | 18.6 | % | 21.1 | % | ||||
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Expense ratio | 30.1 | % | 32.8 | % | ||||
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Combined ratio | 95.9 | % | 84.9 | % | ||||
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Per Share Data | ||||||||
Basic earnings per share | ||||||||
Net income | $ | 7.21 | $ | 14.30 | ||||
Operating income | $ | 4.82 | $ | 8.56 | ||||
Diluted earnings per share | ||||||||
Net income | $ | 6.92 | $ | 13.32 | ||||
Operating income | $ | 4.63 | $ | 7.97 | ||||
| * | Includes prior year reserve development of $253.5 million and the impact of a commutation, which increased prior years net losses and loss expenses by $11.5 million. |
| ** | Includes prior year reserve development of $313.3 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million. |
Page 7
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY SEGMENT AND GEOGRAPHIC LOCATION
CURRENT QUARTER
THREE MONTHS ENDED DECEMBER 31, 2011 | THREE MONTHS ENDED DECEMBER 31, 2010 | |||
| Gross Premiums Written = $416,537 | Gross Premiums Written = $381,942 | |||
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Page 8
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY LINE OF BUSINESS
CURRENT QUARTER
THREE MONTHS ENDED DECEMBER 31, 2011 | THREE MONTHS ENDED DECEMBER 31, 2010 | |||
| Gross Premiums Written = $416,537 | Gross Premiums Written = $381,942 | |||
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| * | Includes premiums written in our i-Bind line of business |
| ** | Includes premiums written in our facultative reinsurance line of business |
Page 9
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY SEGMENT AND GEOGRAPHIC LOCATION
YEAR TO DATE
YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||
| Gross Premiums Written = $1,939,521 | Gross Premiums Written = $1,758,397 | |||
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Page 10
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY LINE OF BUSINESS
YEAR TO DATE
YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||
| Gross Premiums Written = $1,939,521 | Gross Premiums Written = $1,758,397 | |||
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| * | Includes premiums written in our i-Bind line of business |
| ** | Includes premiums written in our facultative reinsurance line of business |
Page 11
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2011
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTALS | |||||||||||||
Revenues | ||||||||||||||||
Gross premiums written | $ | 227,005 | $ | 130,920 | $ | 58,612 | $ | 416,537 | ||||||||
Net premiums written | $ | 169,097 | $ | 79,813 | $ | 57,922 | $ | 306,832 | ||||||||
Net premiums earned | $ | 152,491 | $ | 80,585 | $ | 162,393 | $ | 395,469 | ||||||||
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Total revenues | $ | 152,491 | $ | 80,585 | $ | 162,393 | $ | 395,469 | ||||||||
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Expenses | ||||||||||||||||
Net losses and loss expenses: | ||||||||||||||||
Current year | $ | 106,330 | $ | 77,629 | $ | 121,810 | $ | 305,769 | ||||||||
Prior years | (13,377 | ) | (57,968 | ) | (21,079 | ) | (92,424 | ) | ||||||||
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Total net losses and loss expenses | $ | 92,953 | $ | 19,661 | $ | 100,731 | $ | 213,345 | ||||||||
Acquisition costs | 18,449 | 165 | 27,948 | 46,562 | ||||||||||||
General and administrative expenses | 33,437 | 21,351 | 15,704 | 70,492 | ||||||||||||
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Total expenses | $ | 144,839 | $ | 41,177 | $ | 144,383 | $ | 330,399 | ||||||||
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Underwriting income | $ | 7,652 | $ | 39,408 | $ | 18,010 | $ | 65,070 | ||||||||
Net investment income | $ | 45,489 | ||||||||||||||
Net realized investment gains | 31,632 | |||||||||||||||
Other income-termination fee | 66,744 | |||||||||||||||
Amortization and impairment of intangible assets | (678 | ) | ||||||||||||||
Interest expense | (13,754 | ) | ||||||||||||||
Foreign exchange gain | 549 | |||||||||||||||
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Income before income taxes | $ | 195,052 | ||||||||||||||
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GAAP Ratios | ||||||||||||||||
Loss and loss expense ratio | 61.0 | % | 24.4 | % | 62.0 | % | 53.9 | % | ||||||||
Acquisition cost ratio | 12.1 | % | 0.2 | % | 17.2 | % | 11.8 | % | ||||||||
General and administrative expense ratio | 21.9 | % | 26.5 | % | 9.7 | % | 17.8 | % | ||||||||
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Expense ratio | 34.0 | % | 26.7 | % | 26.9 | % | 29.6 | % | ||||||||
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Combined ratio | 95.0 | % | 51.1 | % | 88.9 | % | 83.5 | % | ||||||||
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Page 12
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2010
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTALS | |||||||||||||
Revenues | ||||||||||||||||
Gross premiums written | $ | 196,287 | $ | 115,056 | $ | 70,599 | $ | 381,942 | ||||||||
Net premiums written | $ | 143,789 | $ | 73,973 | $ | 69,437 | $ | 287,199 | ||||||||
Net premiums earned | $ | 133,930 | $ | 81,764 | $ | 127,110 | $ | 342,804 | ||||||||
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Total revenues | $ | 133,930 | $ | 81,764 | $ | 127,110 | $ | 342,804 | ||||||||
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Expenses | ||||||||||||||||
Net losses and loss expenses: | ||||||||||||||||
Current year | $ | 93,180 | $ | 66,108 | $ | 74,662 | $ | 233,950 | ||||||||
Prior years | (18,430 | ) | (39,024 | ) | (16,477 | ) | (73,931 | ) | ||||||||
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Total net losses and loss expenses | $ | 74,750 | $ | 27,084 | $ | 58,185 | $ | 160,019 | ||||||||
Acquisition costs | 16,902 | (431 | ) | 22,377 | 38,848 | |||||||||||
General and administrative expenses | 38,978 | 26,905 | 19,251 | 85,134 | ||||||||||||
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Total expenses | $ | 130,630 | $ | 53,558 | $ | 99,813 | $ | 284,001 | ||||||||
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Underwriting income | $ | 3,300 | $ | 28,206 | $ | 27,297 | $ | 58,803 | ||||||||
Net investment income | $ | 50,168 | ||||||||||||||
Net realized investment losses | (3,738 | ) | ||||||||||||||
Amortization and impairment of intangible assets | (808 | ) | ||||||||||||||
Interest expense | (11,650 | ) | ||||||||||||||
Foreign exchange loss | (196 | ) | ||||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 92,579 | ||||||||||||||
|
| |||||||||||||||
GAAP Ratios | ||||||||||||||||
Loss and loss expense ratio | 55.8 | % | 33.1 | % | 45.8 | % | 46.7 | % | ||||||||
Acquisition cost ratio | 12.6 | % | (0.5 | %) | 17.6 | % | 11.3 | % | ||||||||
General and administrative expense ratio | 29.1 | % | 32.9 | % | 15.1 | % | 24.8 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expense ratio | 41.7 | % | 32.4 | % | 32.7 | % | 36.1 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Combined ratio | 97.5 | % | 65.5 | % | 78.5 | % | 82.8 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Page 13
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED SEGMENT RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2011
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTALS | |||||||||||||
Revenues | ||||||||||||||||
Gross premiums written | $ | 838,567 | $ | 530,450 | $ | 570,504 | $ | 1,939,521 | ||||||||
Net premiums written | $ | 639,196 | $ | 325,094 | $ | 569,476 | $ | 1,533,766 | ||||||||
Net premiums earned | $ | 584,303 | $ | 317,006 | $ | 555,683 | $ | 1,456,992 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 584,303 | $ | 317,006 | $ | 555,683 | $ | 1,456,992 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses | ||||||||||||||||
Net losses and loss expenses: | ||||||||||||||||
Current year | $ | 398,827 | $ | 325,055 | $ | 477,273 | $ | 1,201,155 | ||||||||
Prior years | (11,728 | )* | (118,462 | ) | (111,809 | ) | (241,999 | )** | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total net losses and loss expenses | $ | 387,099 | $ | 206,593 | $ | 365,464 | $ | 959,156 | ||||||||
Acquisition costs | 74,976 | (2,781 | ) | 95,100 | 167,295 | |||||||||||
General and administrative expenses | 124,434 | 84,290 | 62,932 | 271,656 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | $ | 586,509 | $ | 288,102 | $ | 523,496 | $ | 1,398,107 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Underwriting (loss) income | $ | (2,206 | ) | $ | 28,904 | $ | 32,187 | $ | 58,885 | |||||||
Net investment income | $ | 195,948 | ||||||||||||||
Net realized investment gains | 10,077 | |||||||||||||||
Other income-termination fee | 101,744 | |||||||||||||||
Amortization and impairment of intangible assets | (2,978 | ) | ||||||||||||||
Interest expense | (54,989 | ) | ||||||||||||||
Foreign exchange loss | (3,159 | ) | ||||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 305,528 | ||||||||||||||
|
| |||||||||||||||
GAAP Ratios | ||||||||||||||||
Loss and loss expense ratio | 66.2 | % | 65.2 | % | 65.8 | % | 65.8 | % | ||||||||
Acquisition cost ratio | 12.8 | % | (0.9 | %) | 17.1 | % | 11.5 | % | ||||||||
General and administrative expense ratio | 21.3 | % | 26.6 | % | 11.3 | % | 18.6 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expense ratio | 34.1 | % | 25.7 | % | 28.4 | % | 30.1 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Combined ratio | 100.3 | % | 90.9 | % | 94.2 | % | 95.9 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | Includes prior year favorable development of $23.3 million and the impact of a commutation, which increased prior years net losses and loss expenses by $11.5 million. |
| ** | Includes prior year favorable development of $253.5 million and the impact of a commutation, which increased prior years net losses and loss expenses by $11.5 million. |
Page 14
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED SEGMENT RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2010
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTALS | |||||||||||||
Revenues | ||||||||||||||||
Gross premiums written | $ | 729,267 | $ | 504,937 | $ | 524,193 | $ | 1,758,397 | ||||||||
Net premiums written | $ | 551,063 | $ | 319,083 | $ | 522,309 | $ | 1,392,455 | ||||||||
Net premiums earned | $ | 518,444 | $ | 338,791 | $ | 502,313 | $ | 1,359,548 | ||||||||
Other income | $ | 913 | $ | — | $ | — | $ | 913 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | $ | 519,357 | $ | 338,791 | $ | 502,313 | $ | 1,360,461 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expenses | ||||||||||||||||
Net losses and loss expenses: | ||||||||||||||||
Current year | $ | 357,158 | $ | 340,737 | $ | 314,479 | $ | 1,012,374 | ||||||||
Prior years | (59,641 | )* | (180,584 | ) | (64,266 | ) | (304,491 | )** | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total net losses and loss expenses | $ | 297,517 | $ | 160,153 | $ | 250,213 | $ | 707,883 | ||||||||
Acquisition costs | 67,797 | (460 | ) | 92,152 | 159,489 | |||||||||||
General and administrative expenses | 128,556 | 94,226 | 63,775 | 286,557 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total expenses | $ | 493,870 | $ | 253,919 | $ | 406,140 | $ | 1,153,929 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Underwriting income | $ | 25,487 | $ | 84,872 | $ | 96,173 | $ | 206,532 | ||||||||
Net investment income | $ | 244,143 | ||||||||||||||
Net realized investment gains | 285,612 | |||||||||||||||
Net impairment charges recognized in earnings | (168 | ) | ||||||||||||||
Amortization and impairment of intangible assets | (3,483 | ) | ||||||||||||||
Interest expense | (40,242 | ) | ||||||||||||||
Foreign exchange loss | (444 | ) | ||||||||||||||
|
| |||||||||||||||
Income before income taxes | $ | 691,950 | ||||||||||||||
|
| |||||||||||||||
GAAP Ratios | ||||||||||||||||
Loss and loss expense ratio | 57.4 | % | 47.3 | % | 49.8 | % | 52.1 | % | ||||||||
Acquisition cost ratio | 13.1 | % | (0.1 | %) | 18.3 | % | 11.7 | % | ||||||||
General and administrative expense ratio | 24.8 | % | 27.8 | % | 12.7 | % | 21.1 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Expense ratio | 37.9 | % | 27.7 | % | 31.0 | % | 32.8 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Combined ratio | 95.3 | % | 75.0 | % | 80.8 | % | 84.9 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
| * | Includes prior year favorable development of $68.5 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million. |
| ** | Includes prior year favorable development of $313.3 million and the impact of a commutation, which increased prior years net losses and loss expenses by $8.9 million. |
Page 15
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONDENSED CONSOLIDATED BALANCE SHEETS
| DECEMBER 31, 2011 | DECEMBER 31, 2010 | |||||||
ASSETS | ||||||||
Fixed maturity investments available for sale, at fair value (amortized cost: 2011: $226,397; 2010: $828,544) | $ | 244,016 | $ | 891,849 | ||||
Fixed maturity investments trading, at fair value (amortized cost: 2011: $6,207,991; 2010: $5,714,322) | 6,254,686 | 5,769,097 | ||||||
Equity securities trading, at fair value (cost: 2011: $356,370; 2010: $160,513) | 367,483 | 174,976 | ||||||
Other invested assets trading, at fair value | 540,409 | 347,632 | ||||||
|
|
|
| |||||
Total investments | 7,406,594 | 7,183,554 | ||||||
Cash and cash equivalents | 716,604 | 853,368 | ||||||
Insurance balances receivable | 652,158 | 529,927 | ||||||
Prepaid reinsurance | 226,721 | 187,287 | ||||||
Reinsurance recoverable | 1,002,919 | 927,588 | ||||||
Accrued investment income | 38,263 | 40,520 | ||||||
Net deferred acquisition costs | 100,334 | 96,803 | ||||||
Goodwill | 268,376 | 268,376 | ||||||
Intangible assets | 53,898 | 56,876 | ||||||
Net deferred tax assets | 22,646 | 19,740 | ||||||
Other assets | 53,202 | 75,184 | ||||||
|
|
|
| |||||
TOTAL ASSETS | $ | 10,541,715 | $ | 10,239,223 | ||||
|
|
|
| |||||
LIABILITIES | ||||||||
Reserve for losses and loss expenses | $ | 5,225,143 | $ | 4,879,188 | ||||
Unearned premiums | 1,078,412 | 962,203 | ||||||
Reinsurance balances payable | 124,539 | 99,732 | ||||||
Net balances payable on purchases and sales of investments | 36,285 | 318,570 | ||||||
Dividends payable | 14,302 | — | ||||||
Senior notes | 797,949 | 797,700 | ||||||
Accounts payable and accrued liabilities | 116,063 | 106,010 | ||||||
|
|
|
| |||||
TOTAL LIABILITIES | $ | 7,392,693 | $ | 7,163,403 | ||||
|
|
|
| |||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares: 2011: par value CHF 14.03 per share and 2010: par value | ||||||||
CHF 15.00 per share (2011:40,003,642; 2010: 40,003,642 shares issued and 2011: 37,742,131; 2010: 38,089,226 shares outstanding) | 557,153 | 600,055 | ||||||
Additional paid-in capital | 78,225 | 170,239 | ||||||
Treasury shares, at cost (2011: 2,261,511; 2010: 1,914,416) | (136,590 | ) | (112,811 | ) | ||||
Retained earnings | 2,635,750 | 2,361,202 | ||||||
Accumulated other comprehensive income: net unrealized gains on investments, net of tax | 14,484 | 57,135 | ||||||
|
|
|
| |||||
TOTAL SHAREHOLDERS’ EQUITY | 3,149,022 | 3,075,820 | ||||||
|
|
|
| |||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 10,541,715 | $ | 10,239,223 | ||||
|
|
|
| |||||
Book value per share | $ | 83.44 | $ | 80.75 | ||||
Diluted book value per share | $ | 80.11 | $ | 74.29 | ||||
Page 16
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CONSOLIDATED TOTAL INVESTMENT PORTFOLIO
| DECEMBER 31, 2011 FAIR VALUE | SEPTEMBER 30, 2011 FAIR VALUE | JUNE 30, 2011 FAIR VALUE | MARCH 31, 2011 FAIR VALUE | DECEMBER 31, 2010 FAIR VALUE | ||||||||||||||||||||||||||||||||||||
FAIR VALUE | ||||||||||||||||||||||||||||||||||||||||
Fixed maturities available for sale | $ | 244,016 | 3.0 | % | $ | 284,966 | 3.4 | % | $ | 345,551 | 4.2 | % | $ | 543,808 | 6.8 | % | $ | 891,849 | 11.1 | % | ||||||||||||||||||||
Fixed maturities trading | 6,254,686 | 77.0 | % | 6,279,615 | 74.4 | % | 6,201,034 | 74.6 | % | 5,960,830 | 74.6 | % | 5,769,097 | 71.8 | % | |||||||||||||||||||||||||
Equity securities | 367,483 | 4.5 | % | 424,104 | 5.0 | % | 393,913 | 4.7 | % | 271,057 | 3.4 | % | 174,976 | 2.2 | % | |||||||||||||||||||||||||
Other invested assets trading | 540,409 | 6.7 | % | 552,074 | 6.5 | % | 562,267 | 6.8 | % | 469,999 | 5.9 | % | 347,632 | 4.3 | % | |||||||||||||||||||||||||
Cash and cash equivalents | 716,604 | 8.8 | % | 902,573 | 10.7 | % | 807,657 | 9.7 | % | 746,002 | 9.3 | % | 853,368 | 10.6 | % | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 8,123,198 | 100.0 | % | $ | 8,443,332 | 100.0 | % | $ | 8,310,422 | 100.0 | % | $ | 7,991,696 | 100.0 | % | $ | 8,036,922 | 100.0 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
ASSET ALLOCATION BY FAIR VALUE | ||||||||||||||||||||||||||||||||||||||||
U.S. government and agencies | $ | 1,311,895 | 16.1 | % | $ | 1,102,971 | 13.1 | % | $ | 1,021,290 | 12.3 | % | $ | 1,145,787 | 14.3 | % | $ | 1,321,673 | 16.5 | % | ||||||||||||||||||||
Non-U.S. government and government agencies | 256,756 | 3.2 | % | 225,782 | 2.7 | % | 177,529 | 2.1 | % | 176,193 | 2.2 | % | 266,177 | 3.3 | % | |||||||||||||||||||||||||
Corporate securities | 2,431,381 | 29.9 | % | 2,451,278 | 29.0 | % | 2,606,743 | 31.4 | % | 2,654,399 | 33.3 | % | 2,526,550 | 31.4 | % | |||||||||||||||||||||||||
State, municipalities and political subdivisions | 167,381 | 2.1 | % | 136,287 | 1.6 | % | 156,922 | 1.9 | % | 199,875 | 2.5 | % | 245,614 | 3.1 | % | |||||||||||||||||||||||||
Mortgage-backed securities | 1,818,091 | 22.5 | % | 2,053,663 | 24.4 | % | 1,904,565 | 22.9 | % | 1,702,619 | 21.3 | % | 1,751,883 | 21.8 | % | |||||||||||||||||||||||||
Asset-backed securities | 513,198 | 6.2 | % | 594,600 | 6.9 | % | 679,536 | 8.2 | % | 625,765 | 7.8 | % | 549,049 | 6.8 | % | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Fixed income sub-total | 6,498,702 | 80.0 | % | 6,564,581 | 77.7 | % | 6,546,585 | 78.8 | % | 6,504,638 | 81.4 | % | 6,660,946 | 82.9 | % | |||||||||||||||||||||||||
Hedge funds | 431,544 | 5.3 | % | 461,944 | 5.5 | % | 496,358 | 6.0 | % | 426,415 | 5.3 | % | 310,638 | 3.9 | % | |||||||||||||||||||||||||
Private equity (funded) | 108,865 | 1.4 | % | 90,130 | 1.1 | % | 65,909 | 0.8 | % | 43,584 | 0.6 | % | 36,994 | 0.4 | % | |||||||||||||||||||||||||
Equity securities | 367,483 | 4.5 | % | 424,104 | 5.0 | % | 393,913 | 4.7 | % | 271,057 | 3.4 | % | 174,976 | 2.2 | % | |||||||||||||||||||||||||
Cash & cash equivalents | 716,604 | 8.8 | % | 902,573 | 10.7 | % | 807,657 | 9.7 | % | 746,002 | 9.3 | % | 853,368 | 10.6 | % | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 8,123,198 | 100.0 | % | $ | 8,443,332 | 100.0 | % | $ | 8,310,422 | 100.0 | % | $ | 7,991,696 | 100.0 | % | $ | 8,036,922 | 100.0 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
FIXED INCOME CREDIT QUALITY BY FAIR VALUE | ||||||||||||||||||||||||||||||||||||||||
U.S. government and agencies | $ | 1,311,895 | 20.2 | % | $ | 1,102,971 | 16.8 | % | $ | 1,021,290 | 15.6 | % | $ | 1,145,787 | 17.6 | % | $ | 1,321,673 | 19.9 | % | ||||||||||||||||||||
AAA/Aaa | 1,336,221 | 20.6 | % | 1,455,702 | 22.2 | % | 2,825,333 | 43.2 | % | 2,615,609 | 40.2 | % | 2,677,441 | 40.2 | % | |||||||||||||||||||||||||
AA/Aa | 1,656,861 | 25.4 | % | 1,916,585 | 29.2 | % | 500,935 | 7.7 | % | 607,630 | 9.3 | % | 622,446 | 9.3 | % | |||||||||||||||||||||||||
A/A | 1,148,138 | 17.7 | % | 1,103,176 | 16.8 | % | 1,205,929 | 18.4 | % | 1,289,286 | 19.8 | % | 1,259,295 | 18.9 | % | |||||||||||||||||||||||||
BBB/Baa | 565,105 | 8.7 | % | 584,714 | 8.9 | % | 626,466 | 9.7 | % | 575,290 | 8.9 | % | 523,577 | 7.9 | % | |||||||||||||||||||||||||
BB | 168,095 | 2.6 | % | 134,279 | 2.1 | % | 116,425 | 1.8 | % | 33,887 | 0.5 | % | 28,050 | 0.4 | % | |||||||||||||||||||||||||
B/B | 103,324 | 1.6 | % | 54,570 | 0.8 | % | 64,451 | 1.1 | % | 54,162 | 0.9 | % | 52,793 | 0.8 | % | |||||||||||||||||||||||||
CCC+ and below | 209,063 | 3.2 | % | 212,584 | 3.2 | % | 185,754 | 2.8 | % | 182,987 | 2.8 | % | 175,671 | 2.6 | % | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | $ | 6,498,702 | 100.0 | % | $ | 6,564,581 | 100.0 | % | $ | 6,546,584 | 100.0 | % | $ | 6,504,638 | 100.0 | % | $ | 6,660,946 | 100.0 | % | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
STATISTICS | ||||||||||||||||||||||||||||||||||||||||
Annualized book yield, year to date | 2.5 | % | 2.6 | % | 2.7 | % | 2.6 | % | 3.3 | % | ||||||||||||||||||||||||||||||
Duration* | 1.9 years | 2.1 years | 2.3 years | 2.8 years | 2.7 years | |||||||||||||||||||||||||||||||||||
Average credit quality (S&P) | AA- | AA- | AA | AA | AA | |||||||||||||||||||||||||||||||||||
| * | Includes only cash and cash equivalents and fixed maturity investments |
Page 17
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
INVESTMENT PORTFOLIO - ADDITIONAL DETAIL
DECEMBER 31, 2011
| FAIR VALUE | AVERAGE RATING | PORTFOLIO PERCENTAGE | ||||||||
Cash & cash equivalents | $ | 716,604 | AAA | 8.8 | % | |||||
U.S. government securities | 1,087,633 | AA+ | 13.4 | % | ||||||
U.S. government agencies | 224,262 | AA+ | 2.7 | % | ||||||
Non-U.S. government and government agencies | 256,756 | AAA | 3.2 | % | ||||||
Mortgage-backed securities: | ||||||||||
Agency MBS | 1,183,893 | AA+ | 14.6 | % | ||||||
Non-agency RMBS | 120,345 | A+ | 1.5 | % | ||||||
Non-agency RMBS-Non investment grade strategy | 182,482 | CCC | 2.3 | % | ||||||
CMBS | 331,371 | AAA | 4.1 | % | ||||||
Total mortgage-backed securities | 1,818,091 | 22.5 | % | |||||||
Corporate securities: | ||||||||||
Financials | 1,179,391 | A+ | 14.5 | % | ||||||
Industrials | 1,064,813 | BBB | 13.1 | % | ||||||
Utilities | 187,177 | BBB+ | 2.3 | % | ||||||
Total corporate securities | 2,431,381 | 29.9 | % | |||||||
Asset-backed securities: | ||||||||||
Credit cards | 44,424 | AAA | 0.5 | % | ||||||
Auto receivables | 73,226 | AAA | 0.9 | % | ||||||
Student loans | 178,898 | AA+ | 2.2 | % | ||||||
Collateralized loan obligations | 139,678 | AA+ | 1.7 | % | ||||||
Other | 76,972 | AAA | 0.9 | % | ||||||
Total asset-backed securities | 513,198 | 6.2 | % | |||||||
State, municipalities and political subdivisions | 167,381 | AA- | 2.1 | % | ||||||
Hedge funds | 431,544 | N/A | 5.3 | % | ||||||
Private equity (funded) | 108,865 | N/A | 1.4 | % | ||||||
Equities | 367,483 | N/A | 4.5 | % | ||||||
|
|
|
| |||||||
Total Investment Portfolio | $ | 8,123,198 | 100.0 | % | ||||||
|
|
|
| |||||||
TOP 10 CORPORATE EXPOSURES
| CORPORATE | FAIR VALUE | PORTFOLIO PERCENTAGE | ||||||
JPMorgan Chase & Co | $ | 67,776 | 0.8 | % | ||||
Bank of America Corp | 55,093 | 0.7 | % | |||||
Wells Fargo & Co | 52,784 | 0.7 | % | |||||
Sparebank 1 Boligkreditt AS | 51,696 | 0.6 | % | |||||
Citigroup Inc | 49,701 | 0.6 | % | |||||
Morgan Stanley | 48,212 | 0.6 | % | |||||
Verizon Communications Inc | 42,269 | 0.5 | % | |||||
HSBC Holdings PLC | 41,085 | 0.5 | % | |||||
Canadian Imperial Bank of Comm | 39,084 | 0.5 | % | |||||
BP PLC | 33,618 | 0.4 | % | |||||
| OTHER INVESTED ASSET FUND DETAILS | FAIR VALUE DECEMBER 31, 2011 | UNFUNDED COMMITMENTS | LONG EXPOSURE(1) (% OF FUNDED) | SHORT EXPOSURE(2) (% OF FUNDED) | GROSS EXPOSURE(3) | NET EXPOSURE(4) | ||||||||||||||||||
Private equity (primary and secondary) | $ | 83,787 | $ | 111,566 | 100 | % | 0 | % | 100 | % | 100 | % | ||||||||||||
Mezzanine debt | 14,535 | 100,344 | 100 | % | 0 | % | 100 | % | 100 | % | ||||||||||||||
Distressed | 10,543 | 33,968 | 100 | % | 0 | % | 100 | % | 100 | % | ||||||||||||||
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|
|
| |||||||||||||||||||||
Total private equity | 108,865 | 245,878 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Distressed | 42,849 | — | 61 | % | 31 | % | 92 | % | 30 | % | ||||||||||||||
Equity long/short | 159,615 | — | 75 | % | 49 | % | 124 | % | 26 | % | ||||||||||||||
Multi-strategy | 157,251 | — | 98 | % | 20 | % | 118 | % | 78 | % | ||||||||||||||
Event driven | 71,829 | — | 81 | % | 66 | % | 147 | % | 15 | % | ||||||||||||||
|
|
|
| |||||||||||||||||||||
Total hedge funds | 431,544 | — | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total other invested assets | $ | 540,409 | $ | 245,878 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
| (1) | Long exposure represents the ratio of the fund’s equity to investments in securities (over 100% may denote explicit borrowing). |
| (2) | Short exposure represents the ratio of the fund’s equity to securities sold short. |
| (3) | Gross exposure is the addition of the long and short exposures. |
| (4) | Net exposure is the subtraction of the short exposure from the long exposure. |
Page 18
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
INVESTMENT PORTFOLIO - ADDITIONAL DETAIL
DECEMBER 31, 2011
NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL
NON INVESTMENT GRADE STRATEGY
| Vintage | AAA | AA | A | BBB | BB | B | CCC | CC | D | TOTAL FAIR VALUE | AVERAGE ENHANCEMENT** | |||||||||||||||||||||||||||||||||
2007 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 35,977 | $ | 3,738 | $ | 10,257 | $ | 49,972 | 22.0 | % | ||||||||||||||||||||||
2006 | — | — | — | — | — | 2,909 | 47,769 | — | 27,239 | 77,917 | 18.4 | % | ||||||||||||||||||||||||||||||||
2005 and prior | 12,073 | 391 | — | 287 | 2,978 | 678 | 13,865 | 6,551 | 17,770 | 54,593 | 20.7 | % | ||||||||||||||||||||||||||||||||
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|
|
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|
|
| |||||||||||||||||||||||||
Total* | $ | 12,073 | $ | 391 | $ | — | $ | 287 | $ | 2,978 | $ | 3,587 | $ | 97,611 | $ | 10,289 | $ | 55,266 | $ | 182,482 | 20.1 | % | ||||||||||||||||||||||
|
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|
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|
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|
|
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|
| |||||||||||||||||||||||||
* Included in the above is fair value of $5.3 million of subprime mortgages with an average rating of CCC.
NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL CORE FIXED INCOME ACCOUNT
|
| |||||||||||||||||||||||||||||||||||||||||||
| Vintage | AAA | AA | A | BBB | BB | B | CCC | CC | D | TOTAL FAIR VALUE | AVERAGE ENHANCEMENT** | |||||||||||||||||||||||||||||||||
2007 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 622 | $ | 457 | $ | — | $ | 1,079 | 1.5 | % | ||||||||||||||||||||||
2006 | — | — | — | — | — | 1,674 | — | — | — | 1,674 | 10.0 | % | ||||||||||||||||||||||||||||||||
2005 and prior | 72,415 | 7,642 | 8,077 | 1,515 | 16,635 | 10,583 | 725 | — | — | 117,592 | 11.0 | % | ||||||||||||||||||||||||||||||||
|
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|
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|
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|
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|
|
| |||||||||||||||||||||||||
Total* | $ | 72,415 | $ | 7,642 | $ | 8,077 | $ | 1,515 | $ | 16,635 | $ | 12,257 | $ | 1,347 | $ | 457 | $ | — | $ | 120,345 | 10.9 | % | ||||||||||||||||||||||
|
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|
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|
|
|
|
|
|
| |||||||||||||||||||||||||
* Included in the above is fair value of $0.1 million of subprime mortgages with an average rating of AA+.
COMMERCIAL MORTGAGE BACKED SECURITIES DETAIL
|
| |||||||||||||||||||||||||||||||||||||||||||
| Vintage | AAA | AA | A | BBB | BB | B | CCC | CC | NR | TOTAL FAIR VALUE | AVERAGE ENHANCEMENT** | |||||||||||||||||||||||||||||||||
2011 | $ | 30,702 | $ | 5,238 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 35,940 | 36.9 | % | ||||||||||||||||||||||
2010 | 16,592 | 24,600 | — | — | — | — | — | — | — | 41,192 | 67.0 | % | ||||||||||||||||||||||||||||||||
2009 | — | — | — | — | — | — | — | — | — | — | 0.0 | % | ||||||||||||||||||||||||||||||||
2008 | 6,403 | — | — | — | — | — | — | — | — | 6,403 | 28.2 | % | ||||||||||||||||||||||||||||||||
2007 | 29,870 | 628 | — | — | — | — | — | — | — | 30,498 | 43.9 | % | ||||||||||||||||||||||||||||||||
2006 | 109,695 | — | — | 414 | — | — | — | — | 110,109 | 32.7 | % | |||||||||||||||||||||||||||||||||
2005 and prior | 106,698 | — | 531 | — | — | — | — | — | 107,229 | 25.6 | % | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 299,960 | $ | 30,466 | $ | 531 | $ | 414 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 331,371 | 36.1 | % | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
|
| |||||||||||||||||||||||||
| ** | Average credit enhancement is the amount, reported as a percentage, of subordination and/or overcollateralization available to support the security. |
Page 19
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
INVESTMENT PORTFOLIO - ADDITIONAL DETAIL
DECEMBER 31, 2011
TOTAL EXPOSURE BY ASSET TYPE AND CONTINENT
| ASSET TYPE | AFRICA | ASIA / MIDDLE EAST | AUSTRALIA | EUROPE | NORTH AMERICA | SOUTH AMERICA | TOTAL EXPOSURE | |||||||||||||||||||||
Sovereign* | $ | — | $ | — | $ | 36,154 | $ | 63,197 | $ | 1,425,410 | $ | — | $ | 1,524,761 | ||||||||||||||
Sovereign - guaranteed financial institutions | — | 6,500 | 48,255 | 168,154 | 43,054 | — | 265,963 | |||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||||
Agency MBS | — | — | — | — | 1,183,893 | — | 1,183,893 | |||||||||||||||||||||
RMBS | — | — | 532 | 302,295 | — | 302,827 | ||||||||||||||||||||||
CMBS | — | — | — | — | 331,371 | — | 331,371 | |||||||||||||||||||||
Corporate securities: | ||||||||||||||||||||||||||||
Financials | — | 25,801 | 14,455 | 314,423 | 599,501 | 3,137 | 957,317 | |||||||||||||||||||||
Industrials | 6,026 | 29,223 | 23,350 | 199,404 | 772,476 | 34,336 | 1,064,815 | |||||||||||||||||||||
Utilities | — | 6,108 | — | 3,607 | 171,808 | 5,654 | 187,177 | |||||||||||||||||||||
Asset-backed securities | — | — | — | 16,983 | 496,215 | — | 513,198 | |||||||||||||||||||||
State and municipalities | — | — | — | — | 167,381 | — | 167,381 | |||||||||||||||||||||
Equities | — | 47,647 | 7,230 | 40,527 | 264,127 | 7,951 | 367,482 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL EXPOSURE | $ | 6,026 | $ | 115,279 | $ | 129,444 | $ | 806,827 | $ | 5,757,531 | $ | 51,078 | $ | 6,866,185 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL EXPOSURE BY COUNTRY AND CONTINENT
| COUNTRY | AFRICA | ASIA / MIDDLE EAST | AUSTRALIA | EUROPE | NORTH AMERICA | SOUTH AMERICA | TOTAL EXPOSURE | |||||||||||||||||||||
Australia | $ | — | $ | — | $ | 129,444 | $ | — | $ | — | $ | — | $ | 129,444 | ||||||||||||||
Belgium | — | — | — | 34,464 | — | — | 34,464 | |||||||||||||||||||||
Bermuda | — | — | — | — | 2,915 | — | 2,915 | |||||||||||||||||||||
Brazil | — | — | — | — | — | 23,854 | 23,854 | |||||||||||||||||||||
Canada | — | — | — | — | 238,684 | — | 238,684 | |||||||||||||||||||||
Cayman Islands | — | — | — | — | 107,081 | — | 107,081 | |||||||||||||||||||||
China | — | 5,407 | — | — | — | — | 5,407 | |||||||||||||||||||||
Colombia | — | — | — | — | — | 7,951 | 7,951 | |||||||||||||||||||||
Denmark | — | — | — | 34,822 | — | — | 34,822 | |||||||||||||||||||||
France | — | — | — | 51,039 | — | — | 51,039 | |||||||||||||||||||||
Germany | — | — | — | 91,236 | — | — | 91,236 | |||||||||||||||||||||
Hong Kong | — | 8,818 | — | — | — | — | 8,818 | |||||||||||||||||||||
India | — | 2,516 | — | — | — | — | 2,516 | |||||||||||||||||||||
Israel | — | 14,430 | — | — | — | — | 14,430 | |||||||||||||||||||||
Italy | — | — | — | 1,558 | — | — | 1,558 | |||||||||||||||||||||
Japan | — | 13,254 | — | — | — | — | 13,254 | |||||||||||||||||||||
Luxembourg | — | — | — | 9,902 | — | — | 9,902 | |||||||||||||||||||||
Mexico | — | — | — | — | — | 18,981 | 18,981 | |||||||||||||||||||||
Netherlands | — | — | — | 114,765 | — | — | 114,765 | |||||||||||||||||||||
Norway | — | — | — | 79,206 | — | — | 79,206 | |||||||||||||||||||||
Philippines | — | 5,825 | — | — | — | — | 5,825 | |||||||||||||||||||||
Puerto Rico | — | — | — | — | — | 292 | 292 | |||||||||||||||||||||
Qatar | — | 12,646 | — | — | — | — | 12,646 | |||||||||||||||||||||
Russia | — | — | — | 16,999 | — | — | 16,999 | |||||||||||||||||||||
Singapore | — | 26,394 | — | — | — | — | 26,394 | |||||||||||||||||||||
South Africa | 6,026 | — | — | — | — | — | 6,026 | |||||||||||||||||||||
South Korea | — | 19,536 | — | — | — | — | 19,536 | |||||||||||||||||||||
Spain | — | — | — | 22,005 | — | — | 22,005 | |||||||||||||||||||||
Sweden | — | — | — | 37,194 | — | — | 37,194 | |||||||||||||||||||||
Switzerland | — | — | — | 64,144 | — | — | 64,144 | |||||||||||||||||||||
Taiwan | — | 5,049 | — | — | — | — | 5,049 | |||||||||||||||||||||
United Arab Emirates | — | 1,404 | — | — | — | — | 1,404 | |||||||||||||||||||||
United Kingdom | — | — | — | 249,493 | — | — | 249,493 | |||||||||||||||||||||
United States | — | — | — | — | 5,408,851 | — | 5,408,851 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
TOTAL EXPOSURE | $ | 6,026 | $ | 115,279 | $ | 129,444 | $ | 806,827 | $ | 5,757,531 | $ | 51,078 | $ | 6,866,185 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
| * | Allied World has no direct exposure to any of the Sovereign governments of Portugal, Italy, Ireland, Greece or Spain. |
Page 20
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
RESERVES FOR LOSSES AND LOSS EXPENSES
| AT DECEMBER 31, 2011 | ||||||||||||||||
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTAL | |||||||||||||
Case reserves (net of reinsurance recoverable) | $ | 313,750 | $ | 400,292 | $ | 455,940 | $ | 1,169,982 | ||||||||
IBNR (net of reinsurance recoverable) | 910,383 | 1,284,434 | 857,425 | 3,052,242 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,224,133 | $ | 1,684,726 | $ | 1,313,365 | $ | 4,222,224 | ||||||||
IBNR/Total reserves (net of reinsurance recoverable) | 74.4 | % | 76.2 | % | 65.3 | % | 72.3 | % | ||||||||
| AT DECEMBER 31, 2010 | ||||||||||||||||
| U.S. INSURANCE | INTERNATIONAL INSURANCE | REINSURANCE | CONSOLIDATED TOTAL | |||||||||||||
Case reserves (net of reinsurance recoverable) | $ | 213,574 | $ | 374,105 | $ | 372,707 | $ | 960,386 | ||||||||
IBNR (net of reinsurance recoverable) | 821,531 | 1,321,593 | 848,090 | 2,991,214 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,035,105 | $ | 1,695,698 | $ | 1,220,797 | $ | 3,951,600 | ||||||||
IBNR/Total reserves (net of reinsurance recoverable) | 79.4 | % | 77.9 | % | 69.5 | % | 75.7 | % | ||||||||
Page 21
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CAPITAL STRUCTURE AND LEVERAGE RATIOS
| DECEMBER 31, 2011 | SEPTEMBER 30, 2011 | JUNE 30, 2011 | MARCH 31, 2011 | DECEMBER 31, 2010 | ||||||||||||||||
Senior notes | $ | 797,949 | $ | 797,885 | $ | 797,823 | $ | 797,761 | $ | 797,700 | ||||||||||
Shareholders’ equity | 3,149,022 | 3,003,074 | 3,044,417 | 2,950,953 | 3,075,820 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total capitalization | $ | 3,946,971 | $ | 3,800,959 | $ | 3,842,240 | $ | 3,748,714 | $ | 3,873,520 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Leverage ratios | ||||||||||||||||||||
Debt to total capitalization | 20.2 | % | 21.0 | % | 20.8 | % | 21.3 | % | 20.6 | % | ||||||||||
Closing shareholders’ equity | $ | 3,149,022 | $ | 3,003,074 | $ | 3,044,417 | $ | 2,950,953 | $ | 3,075,820 | ||||||||||
Deduct: accumulated other comprehensive income | (14,484 | ) | (17,796 | ) | (23,095 | ) | (32,963 | ) | (57,135 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Adjusted shareholders’ equity | $ | 3,134,538 | $ | 2,985,278 | $ | 3,021,322 | $ | 2,917,990 | $ | 3,018,685 | ||||||||||
Net premiums written (trailing 12 months) | $ | 1,533,766 | $ | 1,514,133 | $ | 1,466,042 | $ | 1,440,034 | $ | 1,392,455 | ||||||||||
Net premiums written (trailing 12 months) to adjusted shareholders’ equity | 0.49 | 0.51 | 0.49 | 0.49 | 0.46 | |||||||||||||||
Total investments and cash & cash equivalents | $ | 8,123,198 | $ | 8,443,332 | $ | 8,310,422 | $ | 7,991,696 | $ | 8,036,922 | ||||||||||
Total investments and cash & cash equivalents to adjusted shareholders’ equity | 2.59 | 2.83 | 2.75 | 2.74 | 2.66 | |||||||||||||||
Reserve for losses and loss expenses | $ | 5,225,143 | $ | 5,245,553 | $ | 5,251,304 | $ | 5,100,643 | $ | 4,879,188 | ||||||||||
Deduct: reinsurance recoverable | (1,002,919 | ) | (1,009,643 | ) | (1,013,951 | ) | (975,523 | ) | (927,588 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net reserve for losses and loss expenses | $ | 4,222,224 | $ | 4,235,910 | $ | 4,237,353 | $ | 4,125,120 | $ | 3,951,600 | ||||||||||
Net reserve for losses and loss expenses to adjusted shareholders’ equity | 1.35 | 1.42 | 1.40 | 1.41 | 1.31 | |||||||||||||||
Page 22
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
SHARE REPURCHASE DETAIL - CURRENT YEAR
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Actual Cost | Maximum Dollar Value (or Approximate Dollar Value) of Shares that May Yet Be Purchased | ||||||||||||
January 1-31, 2011 | — | $ | — | $ | — | $ | 260,873 | |||||||||
February 1-28, 2011 | 282,609 | 61.67 | 17,428 | 243,445 | ||||||||||||
March 1-31, 2011 | 686,554 | 62.01 | 42,572 | 200,873 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total March 31, 2011 | 969,163 | $ | 61.91 | $ | 60,000 | $ | 200,873 | |||||||||
April 1-30, 2011 | — | $ | — | $ | — | $ | 200,873 | |||||||||
May 1-31, 2011 | — | — | — | 200,873 | ||||||||||||
June 1-30, 2011 | — | — | — | 200,873 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total June 30, 2011 | — | * | $ | — | $ | — | $ | 200,873 | ||||||||
July 1-31, 2011 | — | $ | — | $ | — | $ | 200,873 | |||||||||
August 1-31, 2011 | — | — | — | 200,873 | ||||||||||||
September 1-30, 2011 | — | — | — | 200,873 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total September 30, 2011 | — | * | $ | — | $ | 200,873 | ||||||||||
October 1-31, 2011 | — | $ | — | $ | — | $ | 200,873 | |||||||||
November 1-30, 2011 | — | — | 0 | 200,873 | ||||||||||||
December 1-31, 2011 | 450,000 | 59.33 | 26,700 | 174,173 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total December 31, 2011 | 450,000 | $ | 59.33 | $ | 26,700 | $ | 174,173 | |||||||||
Year to date December 31, 2011 | 1,419,163 | $ | 61.09 | $ | 86,700 | $ | 174,173 | |||||||||
| * | The plan was inactive in the second and third quarter of 2011 because of the merger agreement with Transatlantic Holdings, Inc. which was subsequently terminated. |
Page 23
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
| THREE MONTHS ENDED DECEMBER 31, 2011 | THREE MONTHS ENDED SEPTEMBER 30, 2011 | THREE MONTHS ENDED JUNE 30, 2011 | THREE MONTHS ENDED MARCH 31, 2011 | THREE MONTHS ENDED DECEMBER 31, 2010 | ||||||||||||||||
Net income (loss) | $ | 183,100 | $ | (10,972 | ) | $ | 93,800 | $ | 8,620 | $ | 92,786 | |||||||||
Add after tax affect of: | ||||||||||||||||||||
Net realized investment (gains) losses | (26,332 | ) | 126,440 | (50,795 | ) | (49,526 | ) | 4,306 | ||||||||||||
Other income - termination fee | (61,538 | ) | (32,270 | ) | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (549 | ) | 2,966 | 1,184 | (442 | ) | 196 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating income (loss) | $ | 94,681 | $ | 86,164 | $ | 44,189 | $ | (41,348 | ) | $ | 97,288 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Weighted average common shares outstanding | ||||||||||||||||||||
Basic | 38,138,558 | 38,110,368 | 38,346,489 | 38,199,867 | 40,291,620 | |||||||||||||||
Diluted | 39,524,273 | 39,340,710 | * | 39,800,753 | 40,383,523 | 43,501,068 | ||||||||||||||
Basic per share data | ||||||||||||||||||||
Net income (loss) | $ | 4.80 | $ | (0.29 | ) | $ | 2.45 | $ | 0.23 | $ | 2.30 | |||||||||
Add after tax affect of: | ||||||||||||||||||||
Net realized investment (gains) losses | (0.69 | ) | 3.32 | (1.32 | ) | (1.30 | ) | 0.11 | ||||||||||||
Other income - termination fee | (1.62 | ) | (0.85 | ) | — | — | — | |||||||||||||
Foreign exchange (gain) loss | (0.01 | ) | 0.08 | 0.02 | (0.01 | ) | — | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating income (loss) | $ | 2.48 | $ | 2.26 | $ | 1.15 | $ | (1.08 | ) | $ | 2.41 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Diluted per share data | ||||||||||||||||||||
Net income (loss) | $ | 4.63 | $ | (0.29 | ) * | $ | 2.36 | $ | 0.21 | $ | 2.13 | |||||||||
Add after tax affect of: | ||||||||||||||||||||
Net realized investment (gains) losses | (0.67 | ) | 3.21 | (1.28 | ) | (1.22 | ) | 0.10 | ||||||||||||
Other income - termination fee | (1.56 | ) | (0.82 | ) | — | — | — | |||||||||||||
Foreign exchange (gain) loss | — | 0.09 | 0.03 | (0.01 | ) | 0.01 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating income (loss) | $ | 2.40 | $ | 2.19 | $ | 1.11 | $ | (1.02 | ) | $ | 2.24 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| * | Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share. There were no common share equivalents included in calculating diluted earnings per share as there was a net loss and any additional shares would prove to be anti-dilutive. |
Page 24
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION
| YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||||||
Net income | $ | 274,548 | $ | 665,005 | ||||
Add after tax affect of: | ||||||||
Net realized investment gains | (213 | ) | (267,727 | ) | ||||
Net impairment charges in earnings | — | 109 | ||||||
Other income - termination fee | (93,808 | ) | — | |||||
Foreign exchange loss | 3,159 | 444 | ||||||
|
|
|
| |||||
Operating income | $ | 183,686 | $ | 397,831 | ||||
|
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|
| |||||
Weighted average common shares outstanding | ||||||||
Basic | 38,093,351 | 46,491,279 | ||||||
Diluted | 39,667,905 | 49,913,317 | ||||||
Basic per share data | ||||||||
Net income | $ | 7.21 | $ | 14.30 | ||||
Add after tax affect of: | ||||||||
Net realized investment gains | (0.01 | ) | (5.75 | ) | ||||
Net impairment charges in earnings | — | — | ||||||
Other income - termination fee | (2.46 | ) | — | |||||
Foreign exchange loss | 0.08 | 0.01 | ||||||
|
|
|
| |||||
Operating income | $ | 4.82 | $ | 8.56 | ||||
|
|
|
| |||||
Diluted per share data | ||||||||
Net income | $ | 6.92 | $ | 13.32 | ||||
Add after tax affect of: | ||||||||
Net realized investment gains | (0.01 | ) | (5.36 | ) | ||||
Net impairment charges in earnings | — | — | ||||||
Other income - termination fee | (2.36 | ) | — | |||||
Foreign exchange loss | 0.08 | 0.01 | ||||||
|
|
|
| |||||
Operating income | $ | 4.63 | $ | 7.97 | ||||
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| |||||
Page 25
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
| THREE MONTHS ENDED DECEMBER 31, 2011 | THREE MONTHS ENDED SEPTEMBER 30, 2011 | THREE MONTHS ENDED JUNE 30, 2011 | THREE MONTHS ENDED MARCH 31, 2011 | THREE MONTHS ENDED DECEMBER 31, 2010 | ||||||||||||||||
Opening shareholders’ equity | $ | 3,003,074 | $ | 3,044,417 | $ | 2,950,953 | $ | 3,075,820 | $ | 3,341,314 | ||||||||||
Deduct: accumulated other comprehensive income | (17,796 | ) | (23,095 | ) | (32,963 | ) | (57,135 | ) | (111,760 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Adjusted opening shareholders’ equity | $ | 2,985,278 | $ | 3,021,322 | $ | 2,917,990 | $ | 3,018,685 | $ | 3,229,554 | ||||||||||
Closing shareholders’ equity | $ | 3,149,022 | $ | 3,003,074 | $ | 3,044,417 | $ | 2,950,953 | $ | 3,075,820 | ||||||||||
Deduct: accumulated other comprehensive income | (14,484 | ) | (17,796 | ) | (23,095 | ) | (32,963 | ) | (57,135 | ) | ||||||||||
|
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|
|
|
|
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| |||||||||||
Adjusted closing shareholders’ equity | $ | 3,134,538 | $ | 2,985,278 | $ | 3,021,322 | $ | 2,917,990 | $ | 3,018,685 | ||||||||||
Average shareholders’ equity | $ | 3,059,908 | $ | 3,003,300 | $ | 2,969,656 | $ | 2,968,338 | $ | 3,124,120 | ||||||||||
Net income (loss) available to shareholders | $ | 183,100 | $ | (10,972 | ) | $ | 93,800 | $ | 8,620 | $ | 92,786 | |||||||||
Annualized net income (loss) available to shareholders | 732,400 | (43,888 | ) | 375,200 | 34,480 | 371,144 | ||||||||||||||
Annualized return on average shareholders’ equity - net income (loss) available to shareholders | 23.9 | % | (1.5 | %) | 12.6 | % | 1.2 | % | 11.9 | % | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Operating income (loss) available to shareholders | $ | 94,681 | $ | 86,164 | $ | 44,189 | $ | (41,348 | ) | $ | 97,288 | |||||||||
Annualized operating income (loss) available to shareholders | 378,724 | 344,656 | 176,756 | (165,392 | ) | 389,152 | ||||||||||||||
Annualized return on average shareholders’ equity - operating income (loss) available to shareholders | 12.4 | % | 11.5 | % | 6.0 | % | (5.6 | %) | 12.5 | % | ||||||||||
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| |||||||||||
Page 26
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY
| YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||||||
Opening shareholders’ equity | $ | 3,075,820 | $ | 3,213,295 | ||||
Deduct: accumulated other comprehensive income | (57,135 | ) | (149,849 | ) | ||||
|
|
|
| |||||
Adjusted opening shareholders’ equity | $ | 3,018,685 | $ | 3,063,446 | ||||
Closing shareholders’ equity | $ | 3,149,022 | $ | 3,075,820 | ||||
Deduct: accumulated other comprehensive income | (14,484 | ) | (57,135 | ) | ||||
|
|
|
| |||||
Adjusted closing shareholders’ equity | $ | 3,134,538 | $ | 3,018,685 | ||||
Average shareholders’ equity | $ | 3,076,612 | $ | 3,041,066 | ||||
Net income available to shareholders | $ | 274,548 | $ | 665,005 | ||||
Annualized return on average shareholders’ equity - net income available to shareholders | 8.9 | % | 21.9 | % | ||||
|
|
|
| |||||
Operating income available to shareholders | $ | 183,686 | $ | 397,831 | ||||
Annualized return on average shareholders’ equity - operating income available to shareholders | 6.0 | % | 13.1 | % | ||||
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| |||||
Page 27
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
DILUTED BOOK VALUE PER SHARE
| DECEMBER 31, 2011 | DECEMBER 31, 2010 | |||||||
Price per share at period end | $ | 62.93 | $ | 59.44 | ||||
Total shareholders’ equity | $ | 3,149,022 | $ | 3,075,820 | ||||
Basic common shares outstanding | 37,742,131 | 38,089,226 | ||||||
Add: unvested restricted share units | 249,251 | 571,178 | ||||||
Add: performance based equity awards | 889,939 | 1,440,017 | ||||||
Add: employee share purchase plan | 11,053 | 10,576 | ||||||
Add: dilutive options/warrants outstanding | 1,525,853 | 3,272,739 | ||||||
Weighted average exercise price per share | $ | 45.72 | $ | 35.98 | ||||
Deduct: options bought back via treasury method | (1,108,615 | ) | (1,980,884 | ) | ||||
|
|
|
| |||||
Common shares and common share equivalents outstanding | 39,309,612 | 41,402,852 | ||||||
Basic book value per common share | $ | 83.44 | $ | 80.75 | ||||
Year-to-date percentage change in basic book value per common share | 3.3 | % | 25.0 | % | ||||
Diluted book value per common share | $ | 80.11 | $ | 74.29 | ||||
Year-to-date percentage change in dilutive book value per common share | 7.8 | % | 24.7 | % | ||||
Page 28
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CALCULATION OF ANNUALIZED INVESTMENT BOOK YIELD
| THREE MONTHS ENDED DECEMBER 31, 2011 | THREE MONTHS ENDED DECEMBER 31, 2010 | YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||||||||||||
Net investment income | $ | 45,489 | $ | 50,168 | $ | 195,948 | $ | 244,143 | ||||||||
Deduct: annual and non-recurring items | — | — | 6,438 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net investment income, recurring | $ | 45,489 | $ | 50,168 | $ | 195,948 | $ | 237,705 | ||||||||
Annualized net investment income, recurring | $ | 181,956 | $ | 200,672 | $ | 195,948 | $ | 237,705 | ||||||||
Add: annual and non-recurring items | — | — | — | 6,438 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Normalized net investment income | $ | 181,956 | $ | 200,672 | $ | 195,948 | $ | 244,143 | ||||||||
Opening aggregate invested assets: | ||||||||||||||||
Fixed maturity investments, amortized cost | $ | 6,489,633 | $ | 6,529,858 | $ | 6,542,867 | $ | 6,792,563 | ||||||||
Equity securities, cost | 445,515 | 117,599 | 160,513 | 309 | ||||||||||||
Other invested assets, at cost | 549,277 | 322,486 | 331,772 | 184,237 | ||||||||||||
Cash and cash equivalents | 902,573 | 831,444 | 853,368 | 379,751 | ||||||||||||
Net balances on purchases and sales of investments | (405,124 | ) | (307,140 | ) | (318,570 | ) | 184 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Opening aggregate invested assets | $ | 7,981,874 | $ | 7,494,247 | $ | 7,569,950 | $ | 7,357,044 | ||||||||
Closing aggregate invested assets: | ||||||||||||||||
Fixed maturity investments, amortized cost | $ | 6,434,387 | $ | 6,542,867 | $ | 6,434,387 | $ | 6,542,867 | ||||||||
Equity securities, cost | 356,370 | 160,513 | 356,370 | 160,513 | ||||||||||||
Other invested assets, cost | 529,851 | 331,772 | 529,851 | 331,772 | ||||||||||||
Cash and cash equivalents | 716,604 | 853,368 | 716,604 | 853,368 | ||||||||||||
Net balances on purchases and sales of investments | (36,285 | ) | (318,570 | ) | (36,285 | ) | (318,570 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Closing aggregate invested assets | $ | 8,000,927 | $ | 7,569,950 | $ | 8,000,927 | $ | 7,569,950 | ||||||||
Average aggregate invested assets | $ | 7,991,401 | $ | 7,532,099 | $ | 7,785,439 | $ | 7,463,497 | ||||||||
Annualized investment book yield | 2.3 | % | 2.7 | % | 2.5 | % | 3.3 | % | ||||||||
Page 29
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
CALCULATION OF ANNUALIZED INVESTMENT BOOK YIELD
| NINE MONTHS ENDED SEPTEMBER 30, 2011 | SIX MONTHS ENDED JUNE 30, 2011 | THREE MONTHS ENDED MARCH 31, 2011 | ||||||||||
Net investment income | $ | 150,459 | $ | 102,576 | $ | 50,208 | ||||||
Deduct: annual and non-recurring items | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Net investment income, recurring | $ | 150,459 | $ | 102,576 | $ | 50,208 | ||||||
Annualized net investment income, recurring | $ | 200,612 | $ | 205,152 | $ | 200,832 | ||||||
Add: annual and non-recurring items | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Normalized net investment income | $ | 200,612 | $ | 205,152 | $ | 200,832 | ||||||
Opening aggregate invested assets: | ||||||||||||
Fixed maturity investments, amortized cost | $ | 6,542,867 | $ | 6,542,867 | $ | 6,542,867 | ||||||
Equity securities, cost | 160,513 | 160,513 | 160,513 | |||||||||
Other invested assets, at cost | 331,772 | 331,772 | 331,772 | |||||||||
Cash and cash equivalents | 853,368 | 853,368 | 853,368 | |||||||||
Net balances on purchases and sales of investments | (318,570 | ) | (318,570 | ) | (318,570 | ) | ||||||
|
|
|
|
|
| |||||||
Opening aggregate invested assets | $ | 7,569,950 | $ | 7,569,950 | $ | 7,569,950 | ||||||
Closing aggregate invested assets: | ||||||||||||
Fixed maturity investments, amortized cost | $ | 6,489,633 | $ | 6,419,637 | $ | 6,398,230 | ||||||
Equity securities, cost | 445,515 | 365,394 | 245,618 | |||||||||
Other invested assets, at cost | 549,277 | 533,914 | 444,331 | |||||||||
Cash and cash equivalents | 902,573 | 807,657 | 746,002 | |||||||||
Net balances on purchases and sales of investments | (405,124 | ) | (252,351 | ) | (204,767 | ) | ||||||
|
|
|
|
|
| |||||||
Closing aggregate invested assets | $ | 7,981,874 | $ | 7,874,251 | $ | 7,629,414 | ||||||
Average aggregate invested assets | $ | 7,775,912 | $ | 7,722,101 | $ | 7,599,682 | ||||||
Annualized investment book yield | 2.6 | % | 2.7 | % | 2.6 | % | ||||||
Page 30
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
FINANCIAL STATEMENT PORTFOLIO RETURN
| YEAR ENDED DECEMBER 31, 2011 | YEAR ENDED DECEMBER 31, 2010 | |||||||
Net investment income | $ | 195,948 | $ | 244,143 | ||||
Net realized investment gains | $ | 10,077 | $ | 285,612 | ||||
Opening net unrealized gains on investments: | ||||||||
Net unrealized gains on fixed maturities | $ | 109,060 | * | $ | 166,187 | |||
Net unrealized (losses) gains on foreign exchange | (3,866 | ) | 41 | |||||
|
|
|
| |||||
Opening net unrealized gains on investments | $ | 105,194 | $ | 166,228 | ||||
Closing net unrealized gains on investments: | ||||||||
Net unrealized gains on fixed maturities | $ | 59,508 | * | $ | 109,060 | * | ||
Net unrealized losses on foreign exchange | — | (3,866 | ) | |||||
|
|
|
| |||||
Closing net unrealized gains on investments | $ | 59,508 | $ | 105,194 | ||||
Net investment income, realized gains and unrealized gains | $ | 160,339 | $ | 468,721 | ||||
Opening aggregate invested assets, at fair value: | ||||||||
Fixed maturities available for sale | $ | 891,849 | $ | 4,427,072 | ||||
Fixed maturities trading | 5,769,097 | 2,544,322 | ||||||
Other invested assets trading | 522,608 | 184,869 | ||||||
Cash and cash equivalents | 853,368 | 379,751 | ||||||
|
|
|
| |||||
Total investments and cash | 8,036,922 | 7,536,014 | ||||||
Net balances on purchases and sales of investments | (318,570 | ) | 184 | |||||
|
|
|
| |||||
Opening aggregate invested assets, at fair value | $ | 7,718,352 | $ | 7,536,198 | ||||
Closing aggregate invested assets, at fair value: | ||||||||
Fixed maturities available for sale | $ | 244,016 | $ | 891,849 | ||||
Fixed maturities trading | 6,254,686 | 5,769,097 | ||||||
Other invested assets trading | 907,892 | 522,608 | ||||||
Cash and cash equivalents | 716,604 | 853,368 | ||||||
|
|
|
| |||||
Total investments and cash | 8,123,198 | 8,036,922 | ||||||
Net balances on purchases and sales of investments | (36,285 | ) | (318,570 | ) | ||||
|
|
|
| |||||
Closing aggregate invested assets, at fair value | $ | 8,086,913 | $ | 7,718,352 | ||||
Average invested assets | $ | 7,902,633 | $ | 7,627,275 | ||||
Financial statement portfolio return | 2.0 | % | 6.1 | % | ||||
| * | Excludes reclassification of net unrealized gains of $41,889 related to the adoption of ASU 2010-11. |
Note: net investment income, net realized gains/losses and change in unrealized gains/losses are disclosed on a pre-tax basis.
Page 31
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
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, net impairment charges recognized in earnings, net foreign exchange gain or loss, impairment of intangible assets and other non-recurring items. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings, net foreign exchange gain or loss and other non-recurring items from its calculation of operating income because these amounts are heavily influenced by and fluctuate in part according to the availability of market opportunities and other factors. The company excludes impairment of intangible assets as these are non-recurring charges. In addition to presenting net income determined in accordance with 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 and the company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. See pages 24 and 25 for reconciliation of operating income to net income.
ANNUALIZED RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROAE”)
Annualized return on average shareholders’ 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 and credit spread movements and the resultant impact on fixed income securities. Such gains (losses) are not related to management actions or operational performance, nor are they likely to be realized. Therefore, the company believes that excluding these unrealized gains (losses) provides a more consistent and useful measurement of operating performance, which supplements 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 26 and 27 for reconciliation of average shareholders’ equity.
ANNUALIZED OPERATING RETURN ON AVERAGE SHAREHOLDERS’ EQUITY
Annualized operating return on average shareholders’ equity is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above), and average shareholders’ equity, excluding the average after tax unrealized gains (losses) on investments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average shareholders’ equity explanation above. See pages 24 and 25 for the reconciliation of net income to operating income and pages 26 and 27 for the reconciliation of average shareholders’ 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 an important measure of calculating shareholder returns. See page 28 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 29 and 30 for calculation of annualized investment book yield.
Page 32