Allied World Assurance 8-K Regulation FD Disclosure

Investor Presentation

3

rd

Quarter 2013

Exhibit

99.1

This

presentation

contains

certain

statements,

estimates

and

forecasts

with

respect

to

future

performance

and

events.

These

statements,

estimates

and

forecasts

are

“forward-looking

statements".

In

some

cases, forward-

looking

statements

can

be

identified

by

the

use

of

forward-looking

terminology

such

as

"may,"

“might,”

“will,"

“should,”

"expect,"

“plan,”

"intend,"

"estimate,"

"anticipate,"

"believe,”

“predict,”

“potential”

or

"continue"

or

the

negatives

thereof

or

variations

thereon

or

similar

terminology.

All

statements

other

than

statements

of

historical

fact

included

in

this

presentation

are

forward-looking

statements

and

are

based

on

various

underlying

assumptions

and

expectations

and

are

subject

to

known

and

unknown

risks,

and

may

include

projections

of

our

future

financial

performance

based

on

our

growth

strategies

and

anticipated

trends

in

our

business.

These

statements

are

only

predictions

based

on

our

current

expectations

and

projections

about

future

events.

There

are

important

factors

that

could

cause

our

actual

results,

level

of

activity,

performance

or

achievements

to

differ

materially

from

the

results,

level

of

activity,

performance

or

achievements

expressed

or

implied

in

the

forward-looking

statements.

As

a

result,

there

can

be

no

assurance

that

the

forward-looking

statements

included

in

this

presentation

will

prove

to

be

accurate

or

correct.

In

light

of

these

risks,

uncertainties

and

assumptions,

the

future

performance

or

events

described

in

the

forward-looking

statements

in

this

presentation

might

not

occur.

Accordingly,

you

should

not

rely

upon

forward-looking

statements

as

a

prediction

of

actual

results

and

we

do

not

assume

any

responsibility

for

the

accuracy

or

completeness

of

any

of

these

forward-looking

statements

that

may

be

made

from

time

to

time.

We

are

under

no

obligation

(and

expressly

disclaim

any

such

obligation)

to

update

or

revise

any

forward-looking

statements,

whether

as

a

result

of

new

information,

future

developments

or otherwise.

2

Forward-Looking

Statements

&

Safe

Harbor

Agenda

Executive Summary

Executive Summary

Operating Segments

Operating Segments

U.S. Insurance

U.S. Insurance

International Insurance

International Insurance

Reinsurance

Reinsurance

Financial Highlights

Financial Highlights

Conclusion

Conclusion

Appendix

Appendix

3

Allied World’s Franchise

Specialty property and casualty insurer and reinsurer with niche

businesses and significant geographic reach

Experienced executive management team with a strong risk

management culture

Total return investment philosophy, emphasis on detailed transparency

Conservative approach, excellent capitalization with active capital

management

Highly Rated –

“A”

(Excellent) by A.M. Best, “A”

(Strong) by S&P, “A2”

(Good) by Moody’s and “A+”

(Good) by Fitch

Industry leading results and value creation

4

Niche

specialty

insurance

and

reinsurance

products

offered

across

a

global

platform

with

operations

in

the

U.S.,

Bermuda,

Canada,

Lloyd’s,

Europe,

Hong

Kong

and

Singapore

Emphasis

on

insurance

and

casualty

lines

reinsurance

and

property

capabilities

Customer focus

Moving closer to clients

Demonstrated expertise in markets in

which we underwrite

A “go to”

market for targeted lines and

industry verticals such as healthcare and

real estate/construction

Allied World –

A Niche Mix of Specialty Lines

Total TTM at September 30, 2013 GPW: $2,680M

65% Insurance / 35% Reinsurance

71% Casualty / 29% Property

with

opportunistic

We

are

a

leading

specialist

insurance

company

with

a

broad

range

of

product

offerings,

global

capabilities

and

a

significant

U.S.

focus

5

6

2007 GPW: $1,506M

In response to the changing macro economic environment, Allied World

has transformed itself since 2007

Total TTM at September 30, 2013 GPW: $2,680M

Allied World 2007

Allied World Today

Reduced dependence on Bermuda

large account excess business

U.S. segment has increased

significantly with focus on small and

middle market account primary and

specialty business

Reinsurance segment has a strong U.S.

presence and is growing internationally

Experienced Management: Shifting the Business Focus

International

Insurance

52%

U.S.

Insurance

13%

Reinsurance

35%

International

Insurance

23%

Reinsurance

35%

U.S.

Insurance

42%

Allied World’s Evolution

7

Purchased

Darwin

Professional

Underwriters

2008

Terminated merger

agreement with

Transatlantic

2011

2012

Launched Lloyd’s

Syndicate 2232

2010

Opened Hong Kong

and Singapore

offices

2009

Swiss

redomestication

Build out of additional U.S. insurance lines,

including Defense Base Act, Surety,

Construction, and Environmental, as well as

Crop Reinsurance

Completed

purchase of

Founders’

interest

2013

Hired over 60

underwriters

Opened Zug

office

Launched Allied

World Financial

Services

Began writing aviation via

renewal rights transaction

Significant milestones achieved over the past five years have shaped the franchise

Opened Toronto

office

8

8

Strategy Of Hiring Focused, Experienced Leadership

Targeted growth driven by key teams with seasoned experience and

a

shared culture

Name

Name

Role

Role

Joined

Joined

Years in Industry

Years in Industry

Tom Bradley

Chief Financial Officer

2012

30

Louis Iglesias

President, U.S. P&C

2012

26

Julian James

President, Europe

2013

32

Underwriting Team

Underwriting Team

Senior Underwriters

Senior Underwriters

Average Years Industry

Average Years Industry

Experience

Experience

Selected Former Experience

Selected Former Experience

Aviation

3

15

Alterra/Markel

Construction

1

17

AIG

Crop Reinsurance

1

28

Platinum

Defense Base Act

11

15

AIG, ACE

Environmental

6

12

AIG, Tokio Marine

Inland Marine

6

15

Axis, OneBeacon

U.S. M&A

3

12

AIG, Gulf, Banking/Finance Roles

Surety

3

10

AIG, American Safety

Key Added Senior Management Talent

Recently Hired Underwriting Teams

(1)

(1)

Senior underwriters are Assistant Vice President level and above

o

We focus on total investment return

as a key driver of book value growth,

of which net investment income is

one component

•

All investments categorized as

“trading”, with mark to market

flowing through the income

statement

•

Similar treatment of cash and

derivatives

•

Senior management incentive

compensation largely focused on

net

income

•

Emphasis on detailed transparency

o

We currently maintain a short

duration, overweight credit position

in core fixed income

o

We continue to build out the non-

core portfolio in 2013 including

equity investments through Allied

World Financial Services

9

Investment Strategy

-

Focused on maximizing total return performance via a diversified

portfolio

* Prior

to

the

2009

move

from

an

“available

for

sale”

portfolio

to

a

trading

portfolio,

which

impacts

the

presentation

of

returns

from

the

non-core

portfolio.

2009 excludes the impact of adopting ASC 320-10-65.

Active Capital Management Improves Shareholder Value

10

Capital Management History

•

$1.8 billion of shares and warrants

repurchased since December 2007

•

$272 million remaining capacity in

share repurchase program as of

October 2013

•

Increased the dividend over 30% in

May 2013 to $0.50 per share

•

$310

(2)

million of common dividends

since going public in 2006

•

Financial leverage of 18.8% at

September 2013

(1)

Excludes $243.8 million syndicated loan that was repaid on February 23, 2009.

(2) 

Includes dividends paid in October 2013.

o

Dividends:

o

Conservative Capital Position:

o

Share Repurchases:

Growth in book value per share calculated by taking change in book value per share from September 30, 2008 through

September 30, 2013 adjusted for regular and special dividends. 

Diluted book value per share used when available.

* Includes dividend of $0.50 per share declared in Q3 2013.

Source: SNL Financial

11

Superior Value Creation

Agenda

Executive Summary

Executive Summary

Operating Segments

Operating Segments

U.S. Insurance

U.S. Insurance

International Insurance

International Insurance

Reinsurance

Reinsurance

Financial Highlights

Financial Highlights

Conclusion

Conclusion

Appendix

Appendix

12

U.S. Insurance Segment

-

A small and middle-market, U.S.-

based specialty franchise with niche product offerings

•

Property and casualty insurance for small

and middle-market, non-Fortune 1000

companies

•

Industry verticals strategy

o

Focused on servicing products in select

specialty industry classes, including healthcare,

private / non-profit, and public entity /

construction

•

Specialty product capabilities

o

Defense Base Act approved underwriter,

surety, primary construction, environmental,

inland marine and M&A capabilities

•

11 branch offices in strategic locations

throughout North America

•

Admitted and excess & surplus lines (E&S)

capabilities in all 50 states

•

Increased access to attractive small account

primary business

Allied World U.S. Insurance

13

Total TTM at September 30, 2013 GPW: $1,133M

Allied World International

14

International Insurance Segment

-

A targeted global presence

•

Specialty product capabilities:

•

Lloyd’s Syndicate 2232

•

Managing general agent (MGA)

business initiated in targeted areas

•

Offices in Bermuda, Dublin, Hong Kong,

London, Singapore and Switzerland

position the company to meet

developing opportunities

o

Recently announced entry into aviation

o

Trade credit and political risk

o

International healthcare

o

Small-to-medium enterprises (SME Professional)

o

Association with Lloyd’s enhances

Allied World’s brand recognition

o

Increases access to Latin America and

Asia-Pacific region

Total TTM at September 30, 2013 GPW: $611M

15

•

Opportunistic and flexible approach to

respond to dynamic market opportunities

•

U.S. operation has access to U.S. regional

business and strong local relationships

•

Strategic Bermuda platform

•

Miami, Singapore and Swiss offices and

Lloyd’s Syndicate 2232 increase global reach

and drive targeted growth

Reinsurance Segment

-

Flexibility to take advantage of opportunities as they arise

Total TTM at September 30, 2013 GPW: $937M

Allied World Reinsurance

o

Expansion into newer lines

including crop, global marine and

global catastrophe

o

Strategic partnership with Aeolus Capital

Management

o

Property catastrophe, property per risk,

workers’

compensation catastrophe,

accident & health and specialty casualty

o

Property reinsurance capabilities that focus

on small and medium account regional

carriers

Agenda

Executive Summary

Executive Summary

Operating Segments

Operating Segments

U.S. Insurance

U.S. Insurance

International Insurance

International Insurance

Reinsurance

Reinsurance

Financial Highlights

Financial Highlights

Conclusion

Conclusion

Appendix

Appendix

16

Operating Results

Operating Results

2009

2009

2010

2010

2011

2011

2012

2012

9M 2012

9M 2012

9M 2013

9M 2013

Underwriting Income

$317

$207

$59

$97

$175

$236

Operating Income

$538

$398

$184

$203

$258

$289

Net Income

$607

$665

$275

$493

$534

$280

Operating Return on Average Equity

20.0%

13.1%

6.0%

6.3%

10.5%

11.4%

Net Income Return on Average Equity

22.6%

21.9%

8.9%

15.3%

21.7%

11.0%

Combined Ratio

76.1%

84.9%

95.9%

94.5%

86.2%

84.1%

Cash Flow from Operations

$668

$451

$548

$629

$500

$338

Total Financial Statement Portfolio Return

7.9%

6.1%

2.0%

5.5%

4.9%

1.2%

Ending Diluted Book Value per Share

$59.56

$74.29

$80.11

$92.59

$93.82

$99.16

Growth in Diluted Book Value per Share

29.3%

24.7%

7.8%

15.6%

17.1%

7.1%

Allied World has reported consistently strong results despite a competitive

landscape, financial turbulence and catastrophe activity

17

($ in millions, except per share amounts)

Financial Highlights

18

Expense Ratio Declining as We Build Scale

Note: GAAP expense ratio

*Peer average includes ACGL, AGII, AHL, AXS, ENH, HCC, MKL, NAVG, OB, PRA, RLI, THG and WRB.

Source: SNL Financial

19

Growth Balanced With Underwriting Profitability

-Consistent performance despite a presence in varied lines of business

Five Year Performance

Average Combined Ratio vs. Growth in Net Premiums Earned

* ProAssurance not shown on chart (five year Average Combined Ratio of 62.9% with net premiums earned five-year

CAGR of 3.3%

from October 2008 through September 2013).

Source: SNL Financial

(10%)

(5%)

0%

5%

10%

15%

80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

5 Year Average Combined Ratio

Allied World

Arch

Argo

Aspen

Axis

Endurance

Hanover

HCC

Markel

Navigators

OneBeacon

RLI

W.R. Berkley

Underwriting performance has been strong since our inception

(1) Pro-forma including Darwin development since inception.

(2) Case incurred loss ratios by year are not directly comparable to our financial statements as reinsurance case incurred losses shown above are on a treaty year basis.

20

Historical Loss Ratios Through September 2013 ($MM)

(1)

(2)

Strong Underwriting Results

AY

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

CY Total

CY Original Loss Ratio

70.1%

65.3%

75.9%

103.1%

59.6%

58.4%

55.6%

45.9%

52.0%

65.8%

65.1%

54.5%

Prior Year Development

0.0%

-4.9%

-5.8%

-3.6%

-8.2%

-10.2%

-24.2%

-18.8%

-23.0%

-17.4%

-9.7%

-10.4%

AY Original Loss Ratio

70.1%

70.1%

81.7%

106.7%

67.7%

68.6%

79.8%

64.7%

75.1%

83.2%

74.9%

64.9%

2002

2003

(56.8)

(56.8)

2004

(26.7)

(52.7)

(79.4)

2005

(8.4)

(45.7)

5.6

(48.5)

2006

(16.5)

(43.1)

(45.3)

(8.2)

(113.0)

2007

6.2

(33.8)

(76.9)

(6.2)

(26.1)

(136.9)

2008

(8.9)

(87.9)

(100.3)

(73.8)

(7.8)

(33.9)

(312.6)

2009

(16.5)

(57.2)

(118.1)

(102.5)

11.6

2.4

32.2

(248.0)

2010

4.4

(10.9)

(57.0)

(146.7)

(54.4)

(24.8)

(22.6)

(1.2)

(313.4)

2011

(0.0)

(1.3)

(22.1)

(89.5)

(42.3)

(68.7)

(21.7)

(27.9)

20.1

(253.5)

2012

4.4

(3.5)

(9.1)

(11.1)

(81.7)

(90.9)

(34.9)

(7.9)

11.1

53.4

(170.3)

2013

5.0

(3.4)

(10.5)

(7.3)

(21.0)

(39.3)

(40.7)

(14.7)

(26.4)

4.1

0.4

(153.9)

Subsequent Development

(114.0)

(339.5)

(433.7)

(445.4)

(221.7)

(255.3)

(87.8)

(51.7)

4.8

57.5

0.4

(1,886.4)

Loss Ratio Points

-26.3%

-29.0%

-31.6%

-32.8%

-16.0%

-19.0%

-6.8%

-3.9%

0.4%

3.9%

0.0%

AY Developed

43.8%

41.1%

50.1%

73.9%

51.7%

49.5%

73.0%

60.8%

75.4%

87.2%

74.9%

64.9%

Cat Losses

16.3%

27.8%

9.3%

5.7%

19.3%

10.1%

AY Developed EX Cat Losses

43.8%

41.1%

33.8%

46.0%

51.7%

49.5%

63.8%

60.8%

69.7%

67.8%

64.8%

64.9%

Case Incurred through 2013 Q3

41.9%

34.7%

46.4%

62.2%

40.6%

41.1%

54.1%

34.1%

49.9%

49.3%

35.5%

11.1%

Remaining IBNR / EP Ratio @ 2013 Q3

1.9%

6.4%

3.7%

11.6%

11.1%

8.4%

18.9%

26.7%

25.5%

37.8%

39.4%

53.7%

$

$

$

$

$

$

$

$

$

$

$

$

$

$

September 30, 2013 Total: $4.6B

•

Net reserves about 4.2% above mid-point of range at

September 30, 2013

•

$1.9 billion net favorable reserve development since

inception

•

72% of net reserves are IBNR

Net Loss & LAE Reserve Mix at September 30, 2013

Case

U.S. Insurance

10%

IBNR

International

Insurance

26%

Case

International

Insurance

8%

IBNR

Reinsurance

23%

Case

Reinsurance

10%

IBNR

U.S. Insurance

23%

Net Prior Year Reserve Releases* ($MM)

Range of Net Reserves at September 30, 2013 ($MM)

21

* Pro-forma including Darwin

development since inception

Prudent Reserving Philosophy

Investment Portfolio Return –

Breakout and Peer Comparison

•

We have increased our allocation to investment

strategies outside of the core fixed income portfolio

•

Portfolio was > 95% core fixed income in 2008 and has

moved to a 75/25% core/non-core split at present

•

Returns from the non-core piece have had a

disproportionately positive impact on the total

investment return

Composition of Allied World Total Investment Return

2013 Year-to-Date Peer Total Return

(1,3)

5 Year Annualized Total Return

(2,3)

Peer Average = 1.0%

Peer Average = 4.6%

6.7%

5.4%

2.9%

4.1%

3.8%

1.0%

0.7%

-0.9%

1.1%

1.5%

2009

2010

2011

2012

9M 2012

9M 2013

Return from Fixed Income Strategy

Return from Non-Core Strategy

Barclays

Customized

Benchmark

(4)

1.4%

2.6%

2.2%

2.1%

1.6%

1.5%

1.2%

1.0%

0.9%

0.7%

0.6%

0.3%

0.1%

RLI

MKL

OB

PRA

AGII

AWH

WRB

ENH

AXS

ACGL

THG

AHL

NAVG

HCC

6.6%

5.2%

5.2%

4.9%

4.8%

4.7%

4.6%

4.4%

4.3%

4.3%

4.2%

4.2%

4.1%

3.0%

THG

RLI

ACGL

AWH

MKL

PRA

WRB

AGII

AXS

HCC

NAVG

ENH

AHL

OB

7.7%

6.1%

2.0%

5.5%

4.9%

1.2%

-0.9%

-0.3%

-0.3%

Year-to-date total return from January 2013 – September 2013.               

    5 year annualized total return from October 2008 – September 2013.      

(1)

(2)

(3)

(4)

Source: BlackRock, Company filings. 

Blend of Barclays Aggregate benchmarks representative of the underlying sectors of our portfolio.

22

Peer Comparisons –

Net Income ROE

Source: SNL Financial

23

Agenda

Executive Summary

Executive Summary

Operating Segments

Operating Segments

U.S. Insurance

U.S. Insurance

International Insurance

International Insurance

Reinsurance

Reinsurance

Financial Highlights

Financial Highlights

Conclusion

Conclusion

Appendix

Appendix

24

Conclusion

25

Strong growth in underwriting income from niche businesses

•

Gross premiums increasing in each operating segment

Historically strong returns

•

Combined ratio compares favorably to peers

•

Expense ratio remains at or below 30%

Solid investment returns

Active capital management

Industry leading value creation

Current valuation is attractive given the company’s historical

performance and strong position to capitalize on market opportunities

Growth in book value per share calculated by taking change in book value per share from September 30, 2008 through

September 30, 2013 adjusted for dividends. Diluted book value per share used when available.

* Includes dividend of $0.50 per share declared in Q3 2013.

Five Year Growth in Book Value per Share (through September 2013)

vs.

Price to Book Value @ November 7, 2013

26

Conclusion

-

Allied World is attractively valued given its demonstrated ability to grow book value

Five Year Growth in Diluted Book Value Per Share

Agenda

Executive Summary

Executive Summary

Operating Segments

Operating Segments

U.S. Insurance

U.S. Insurance

International Insurance

International Insurance

Reinsurance

Reinsurance

Financial Highlights

Financial Highlights

Conclusion

Conclusion

Appendix

Appendix

27

Allied World –

Investment Portfolio Breakout

28

Total Investment Portfolio at September 30, 2013: $8,872M

Cash & Cash Equivalents

13.5%

U.S. Government Securities

17.1%

U.S. Government Agencies

3.7%

Non

-

U.S. Government

Securities and Agencies

2.4%

State, Municipalities and

Political Subdivisions

1.1%

Mortgage

-

Backed

Securities:

13.5%

Corporate Securities:

19.2%

Asset

-

Backed

Securities

5.1%

Hedge Funds

6.1%

Floating

-

rate Bank Loans

4.1%

Private Equity

2.2%

Non-agency High Yield

2.0%

Other Private Securities

1.6%

High Yield Loan Fund

0.4%

Equities

8.0%

Core Assets

75.6%

Non-Core Assets

24.4%

Non-GAAP Financial Measures

In

presenting

the

company's

results,

management

has

included

and

discussed

in

this

presentation

certain

non

generally

accepted

accounting

principles

("non-GAAP")

financial

measures

within

the

meaning

of

Regulation

G

as

promulgated

by

the

U.S.

Securities

and

Exchange

Commission.

Management

believes

that

these

non-GAAP

measures,

which

may

be

defined

differently

by

other

companies,

better

explain

the

company's

results

of

operations

in

a

manner

that

allows

for

a

more

complete

understanding

of

the

underlying

trends

in

the

company's

business.

However,

these

measures

should

not

be

viewed

as

a

substitute

for

those

determined

in

accordance

with

generally

accepted

accounting

principles

("U.S.

GAAP").

"Operating

income"

is

an

internal

performance

measure

used

in

the

management

of

the

company’s

operations

and

represents

after-tax

operational

results

excluding,

as

applicable,

net

realized

investment

gains

or

losses,

net

impairment

charges

recognized

in

earnings,

net

foreign

exchange

gain

or

loss

and

other

non-recurring

items.

The

company

excludes

net

realized

investment

gains

or

losses,

net

impairment

charges

recognized

in

earnings,

net

foreign

exchange

gain

or

loss,

and

other

non-

recurring

items

from

the

calculation

of

operating

income

because

these

amounts

are

heavily

influenced

by

and

fluctuate

in

part

according

to

the

availability

of

market

opportunities

and

other

factors.

The

company

has

excluded

from

operating

income

the

termination

fee

received

from

Transatlantic

Holdings,

Inc.

in

2011

as

this

is

a

non-recurring

item.

In

addition

to

presenting

net

income

determined

in

accordance

with

U.S.

GAAP,

the

company

believes

that

showing

operating

income

enables

investors,

analysts,

rating

agencies

and

other

users

of

the

company’s

financial

information

to

more

easily

analyze

our

results

of

operations

and

underlying

business

performance.

Operating

income

should

not

be

viewed

as

a

substitute

for

U.S.

GAAP

net

income.

The

company

has

included

"diluted

book

value

per

share"

because

it

takes

into

account

the

effect

of

dilutive

securities;

therefore,

the

company

believes

it

is

an

important

measure

of

calculating

shareholder

returns.

"Annualized

net

income

return

on

average

shareholders'

equity"

("ROAE")

is

calculated

using

average

shareholders’

equity,

excluding

the

average

after

tax

unrealized

gains

(or

losses)

on

investments.

Unrealized

gains

(losses)

on

investments

are

primarily

the

result

of

interest

rate

and

credit

spread

movements

and

the

resultant

impact

on

fixed

income

securities.

Such

gains

(losses)

are

not

related

to

management

actions

or

operational

performance,

nor

are

they

likely

to

be

realized.

Therefore,

the

company

believes

that

excluding

these

unrealized

gains

(losses)

provides

a

more

consistent

and

useful

measurement

of

operating

performance,

which

supplements

U.S.

GAAP

information.

In

calculating

ROAE,

the

net

income

(loss)

available

to

shareholders

for

the

period

is

multiplied

by

the

number

of

such

periods

in

a

calendar

year

in

order

to

arrive

at

annualized

net

income

(loss)

available

to

shareholders.

The

company

presents

ROAE

as

a

measure

that

is

commonly

recognized

as

a

standard

of

performance

by

investors,

analysts,

rating

agencies

and

other

users

of

its

financial

information.

"Annualized

operating

return

on

average

shareholders'

equity"

is

calculated

using

operating

income

(as

defined

above

and

annualized

in

the

manner

described

for

net

income

(loss)

available

to

shareholders

under

ROAE

above),

and

average

shareholders'

equity,

excluding

the

average

after

tax

unrealized

gains

(losses)

on

investments.

Unrealized

gains

(losses)

are

excluded

from

equity

for

the

reasons

outlined

in

the

annualized

net

income

return

on

average

shareholders'

equity

explanation

above.

See

slides

29

–

32

for

a

reconciliation

of

non-GAAP

measures

used

in

this

presentation

to

their

most

directly

comparable

U.S.

GAAP

measures.

29

30

Non-GAAP Financial Measures -

Reconciliations

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

UNAUDITED OPERATING INCOME RECONCILIATION

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

Quarter

Ended September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

Net income

$

122,843

$

219,647

$

$

534,154

Add after tax effect of:

Net realized investment (gains) losses

(25,395)

(141,451)

2,160

(276,035)

Foreign exchange loss (gain)

4,353

1,023

7,361

(77)

Operating income

$

101,80

1

$

79,219

$

289,49

4

$

258,042

Weighted average common shares outstanding:

Basic

33,991,359

35,652,768

34,340,227

36,379,514

Diluted

34,728,193

36,616,734

35,131,092

37,393,093

Basic per share data:

Net income

$

3.61

$

6.16

$

8.15

$

14.68

Add after tax effect of:

Net realized investment (ga

ins) losses

(0.75)

(3.97)

0.06

(7.59)

Foreign exchange loss (gain)

0.13

0.03

0.22

—

Operating income

$

2.99

$

2.22

$

8.43

$

7.09

Diluted per share data:

Net income

$

3.54

$

6.00

$

7.97

$

14.28

Add after tax effect of:

Net realized investment (gains) losses

(0.73)

(3.86)

0.06

(7.38)

Foreign exchange loss (gain)

0.12

0.02

0.21

—

Operating income

$

2.93

$

2.16

$

8.24

$

6.90

279,973

Non-GAAP Financial Measures -

Reconciliations

31

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS' EQUITY RECONCILIATION

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

Quarter Ended September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

Opening shareholders' equity

$

3,373,229

$

3,283,901

$

3,326,335

$

3,149,022

Deduct: accumulated other comprehensive income

—

(1,414)

—

(14,484)

Adjusted opening shareholders' equity

3,373,229

3,282,487

3,326,335

3,134,538

Closing shareholders' equity

$

3,443,928

$

3,435,786

$

3,443,928

$

3,435,786

Deduct: accumulated other comprehensive income

—

(1,385)

—

(1,385)

Adjusted closing shareholders' equit

y

3,443,928

3,434,401

3,443,928

3,434,401

Average shareholders' equity

$

3,408,579

$

3,358,444

$

3,385,132

$

3,284,470

Net income available to shareholders

$

122,84

3

$

219,647

$

279,97

3

$

534,154

Annualized net income available to shareholders

491,3

72

878,588

373,

297

712,205

Annualized return on average shareholders' equity

-

net income available to shareholders

14.4%

26.2%

11.0%

21.7%

Operating income available to shareholders

$

101,80

1

$

79,219

$

289,49

4

$

258,042

Annualized operating income available to shareholders

407,2

04

316,876

385,99

2

344,056

Annualized return on average shareholders' equity

-

operating income available to shareholders

11.9%

9.4%

11.4%

10.5%

Non-GAAP Financial Measures -

Reconciliations

32

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

UNAUDITED  DILUTED BOOK VALUE PER SHARE RECONCILIATION

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

As of

As of

As of

September 30,

December 31,

September 30,

2013

2012

2012

Price per share at period end

$

99.39

$

78.80

$

77.25

Total shareholders' equity

$

3,443,928

$

3,326,335

$

3,435,786

Basic common shares outstanding

33,814,920

34,797,781

35,402,558

Add:  unvested restricted stock

units

83,240

135,123

179,986

Add:  performance based equity awards

270,853

485,973

508,130

Add:  employee purchase plan

15,320

10,750

5,925

Add:  dilutive options outstanding

1,050,832

1,224,607

1,306,837

Weighted average exercise price per share

$

47.77

$

47.02

$

46.14

Deduct: options bought back via treasury method

(505,057)

(730,652)

(780,502)

Common shares and common share equivalents outstanding

34,730,108

35,923,582

36,622,934

Basic book value per common share

$

101.85

$

95.59

$

97.05

Year-to-date percentage change in basic book value per common share

6.5%

(1.5%)

Diluted book value per common share

$

99.16

$

92.59

$

93.82

Year-to-date percentage change in dilutive book value per common share

7.1%

(1.3%)