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0000950123-08-003371.txt : 200803260000950123-08-003371.hdr.sgml : 2008032620080326151224ACCESSION NUMBER:0000950123-08-003371CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:25CONFORMED PERIOD OF REPORT:20080326ITEM INFORMATION:Regulation FD DisclosureITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20080326DATE AS OF CHANGE:20080326

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:ALLIED WORLD ASSURANCE CO HOLDINGS LTDCENTRAL INDEX KEY:0001163348STANDARD INDUSTRIAL CLASSIFICATION:FIRE, MARINE & CASUALTY INSURANCE [6331]IRS NUMBER:000000000

FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-32938FILM NUMBER:08711968

BUSINESS ADDRESS:STREET 1:27 RICHMOND ROADCITY:PEMBROKESTATE:D0ZIP:HM 08BUSINESS PHONE:441-278-5400

MAIL ADDRESS:STREET 1:27 RICHMOND ROADCITY:PEMBROKESTATE:D0ZIP:HM 08

FORMER COMPANY:FORMER CONFORMED NAME:ALLIED WORLD ASSURANCE HOLDINGS LTDDATE OF NAME CHANGE:20011207

8-K1y52267e8vk.htmFORM 8-K

8-K

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section13 or 15 (d)of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March26, 2008

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

(Exact Name of Registrant as Specified in Charter)

Bermuda

001-32938

98-0481737

(State or Other Jurisdiction

(Commission File Number)

(I.R.S. Employer

of Incorporation)

Identification No.)

27 Richmond Road
Pembroke HM 08, Bermuda

(Address of Principal Executive Offices and Zip Code)

Registrants telephone number, including area code: (441)278-5400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfythe filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item7.01. RegulationFD DisclosureItem9.01. Financial Statements and Exhibits. SIGNATURES EXHIBIT INDEXEX-99.1: SLIDE PRESENTATION

Table of Contents

Item7.01. RegulationFD Disclosure

On March27, 2008, the Chief Financial Officer of Allied World Assurance Company Holdings, Ltd(the Company) will present at the JPMorgan 2008 Insurance Conference the information about theCompany described in the slides attached to this report as Exhibit99.1. After March27, 2008, theChief Executive Officer and the Chief Financial Officer will present to various investors and/orpotential investors this information. The slides set forth in Exhibit99.1 are incorporated byreference herein. The information in Item7.01 of this report is being furnished, not filed,pursuant to RegulationFD. Accordingly, the information in Item7.01 of this report will not beincorporated by reference into any registration statement filed by the Company under the SecuritiesAct of 1933, as amended, unless specifically identified therein as being incorporated therein byreference. The furnishing of the information in this report is not intended to, and does not,constitute a determination or admission by the Company that the information in this report ismaterial or complete, or that investors should consider this information before making aninvestment decision with respect to any security of the Company.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statements made in the presentation in Exhibit99.1 reflect our currentviews with respect to future events and financial performance and are made pursuant to the safeharbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involverisks and uncertainties, which may cause actual results to differ materially from those set forthin these statements. For example, our forward-looking statements could be affected by pricing andpolicy term trends; increased competition; the impact of acts of terrorism and acts of war; greaterfrequency or severity of unpredictable catastrophic events; investigations of market practices andrelated settlement terms; negative rating agency actions; the adequacy of our loss reserves; theCompany or its subsidiaries becoming subject to significant income taxes in the United States orelsewhere; changes in regulations or tax laws; changes in the availability, cost or quality ofreinsurance or retrocessional coverage; adverse general economic conditions; and judicial,legislative, political and other governmental developments, as well as managements response tothese factors, and other factors identified in our filings with the U.S. Securities and ExchangeCommission. 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 expresslydisclaim any such obligation) to update or revise any forward-looking statement that may be madefrom time to time, whether as a result of new information, future developments or otherwise.

Item9.01. Financial Statements and Exhibits.

(d)Exhibits

Exhibit

Number Description

99.1

Slides from presentation by management.

-2-

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, theregistrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

Dated: March 26, 2008 By:

/s/ Wesley D. Dupont

Name: Wesley D. Dupont

Title: Senior Vice President and General Counsel

-3-

Table of Contents

EXHIBIT INDEX

Exhibit

Number Description

99.1

Slides from presentation by management.

-4-

EX-99.12y52267exv99w1.htmEX-99.1: SLIDE PRESENTATION

EX-99.1

INVESTOR

PRESENTATION

4th Quarter, 2007

Forward Looking Statements & Safe Harbor

This presentation contains certain statements, estimates and forecasts with respect to futureperformance and events. These statements, estimates and forecasts are "forward-lookingstatements". 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 orvariations thereon or similar terminology. All statements other than statements of historical factincluded in this presentation are forward-looking statements and are based on various underlyingassumptions and expectations and are subject to known and unknown risks, uncertainties andassumptions, may include projections of our future financial performance based on our growthstrategies and anticipated trends in our business. These statements are only predictions basedon our current expectations and projections about future events. There are important factors thatcould cause our actual results, level of activity performance or achievements to differ materiallyfrom the results, level of activity, performance or achievements expressed or implied in theforward-looking statements. As a result, there can be no assurance that the forward-lookingstatements included in this presentation will prove to be accurate or correct. In light of theserisks, 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 uponforward-looking statements as a prediction of actual results and we do not assume anyresponsibility for the accuracy or completeness of any of these forward-looking statements thatmay be made from time to time. We are under no obligation (and expressly disclaim any suchobligation) to update or revise any forward-looking statements, whether as a result of newinformation, future developments or otherwise.

Agenda

Executive Summary

Financial Review

Appendix

Allied World's Franchise

Six year old franchise with strong results since inception

Diversified mix of business with operating platforms inBermuda, Europe and the United States

Strong risk management culture

Excellent capitalization and financial flexibility

Experienced executive management team

Strong financial strength and debt ratings

Allied World is a well-diversified property

and casualty insurer and reinsurer

Key Business Strategies

Leverage Diversified

Underwriting Operations

Pursue Profitable

Business Opportunities

Capitalize on ability to offer multiple products acrossglobal operating platform

Focus marketing and distribution efforts on brandawareness and dedication to customer service

Maintain lead positions in Bermuda excess casualtyand direct property business

U.S. - expand E&S business, utilize admittedcapabilities and continue program initiative

Reinsurance - build U.S. distribution platform toservice existing clients and expand reinsurance book

Europe - emphasis on U.K. and Western Europe anduse of Lloyd's box

Expand presence in rest of Europe and Asia

Maintain Strong

Risk Management

Target risks in markets and layers that potentiallygenerate attractive returns

Continue to expand multi-dimensional ERMcapabilities

Manage property catastrophe exposure to aconservative level relative to total capital

Maintain conservative investment strategy andprudent reserving practices

Operating Segments Overview

2007 GPW - $578m

Locations: Bermuda,Europe and U.S.

Lines

General & ProductLiability - Specialtyinsurance products tolarge organizations

Professional Liability- - D&O, employmentpractices, fiduciary &E&O

Healthcare - Excessprofessional liabilityand other casualtycoverages

Leading Bermuda player inmiddle excess market

Casualty

Property

Leading direct writer out ofBermuda

2007 GPW - $391m

Locations: Bermuda,Europe and U.S.

Lines

General Property -Physical property andbusiness interruptioncoverage forcommercial risks

Energy - Variousindustries coveredincluding oil and gasproduction, powergeneration andpetrochemical

Reinsurance

Flexible ReinsuranceOperation

2007 GPW - $536m

Location: Bermuda

Lines

General Casualty

Professional Liability

Property per risk

Property Catastrophe

International

Accident and Health

Marine & Aviation

Diversified book of business by product lines and geography enables usto accommodate a broad range of market conditions

Long-term strategy to emphasize direct insurance and casualty lines

Diversified Underwriting Portfolio Reinsurance Casualty Healthcare Professional Liability General Casualty Energy General Property Reinsurance Property East 0.29 0.03 0.18 0.17 0.06 0.2 0.07

12/07 YTD GPW = $1.5B

Casualty / Property - 67% / 33%

Direct / Reinsurance - 64% / 36%

Gross Premiums Written by Segment and Office($MM)

Business Type Splits

Professional Liability General Casualty Healthcare Other East 0.46 0.416 0.091 0.03

Allied World Net Combined Ratio 2004 752 0.841 2005 633 0.875 2006 622.3 0.777 2007 578 0.76

Specialty Casualty Operation

12/07 YTD GPW Breakdown

GPW ($MM)

STRENGTHS AND STRATEGY

Emphasis on specialty excess lines

Leading player in Bermuda middle excess layers

Ground-up underwriting approach is a keystrength

Results in preferred market position

Diversified risk portfolio

General casualty - covers complex risks ina variety of industries and territories

Professional liability - covers D&O,employment practices, fiduciary and E&O

Healthcare - covers hospitals, long-termcare facilities and managed care

MARKET OUTLOOK

Competition continues to increase

Rates continue to decline but remainadequate

Some pressure on terms and conditions

STRENGTHS AND STRATEGY

Leading direct writer of primary propertyinsurance in Bermuda

Solely commercial accounts

Flexible and opportunistic approach

Allied World's franchise helps maintainclient loyalty

Capacity

Claims handling

Ability to offer other product lines

Manage line size and overall exposure

Reduced energy accounts General Property Energy East 0.75 0.25

Direct Property Operation

12/07 YTD GPW Breakdown

MARKET OUTLOOK

Competition continues to increase

We believe margins are still attractive forcatastrophe exposed business

GPW ($MM) Allied World Net Combined Ratio (ex. Cats) Net Combined Ratio (with Cats) 2004 548 0.816 1.13 2005 413 0.658 1.923 2006 464 0.729 2007 391 0.774

* Excludes $105mm and $287mm cat losses in 2004 and 2005, respectively.

Allied World Upward Premium Adjustments Net Combined Ratio (ex. Cats) Net Combined Ratio (with Cats) 2004 408 0.776 1.008 2005 514 0.846 1.375 2006 573 0.821 2007 536 0.877

Professional Liability General Casualty Facultative Casualty Property International Other East 0.393 0.236 0.053 0.156 0.1378 0.016

Flexible Reinsurance Operation

12/07 YTD GPW Breakdown

* Excludes $82mm and $245mm cat losses in 2004 and 2005, respectively.

GPW ($MM)

STRENGTHS AND STRATEGY

Targeted to represent about 1/3rd of portfolio on agross written basis

Focused on E&S and specialty lines

Complements insurance book

Reduces concentration of risk

Provides ability to react quickly to changing marketconditions

Only dedicated Bermuda casualty facultativeoperation

Building U.S. reinsurance platform to betterservice existing and potential producers andcedents on long-tail casualty risks

MARKET OUTLOOK

Softening of underlying professional liabilityand general casualty pricing. We anticipateseeing more excess opportunities

Although pressure on rates and terms on allcasualty lines of business, we believe themarket still presents profitable opportunities

The U.S. property market is experiencingsome softening but continues to offeropportunities

NameTitle / Responsibility Years in Industry Years with Allied World Scott Carmilani President and CEO 21 6 Joan Dillard SVP, Chief Financial Officer 23 4 John Redmond President, Allied World Europe 34 5 Richard Jodoin President, Allied World U.S. 36 6 John Bender COO, U.S. Reinsurance 19 0 Gordon Knight President, U.S. Operations, Distribution & Marketing 26 0 Frank D'Orazio SVP, General Casualty 17 4 David Bell SVP, Professional Lines 12 6 Michael McCrimmon SVP, Property 24 6 Marshall Grossack SVP, Chief Corporate Actuary 24 5 Ralph Rathjen SVP, Chief Risk Officer 27 2 Wesley Dupont SVP, General Counsel 6 4

Experienced Management Team

Agenda

Executive Summary

Financial Review

Appendix

2007 Financial Highlights

Strong Results

Net income - $469.2 million, includes $217.0 million of underwriting income and $297.9 millionof net investment income

Operating Income - $476.0 million, a 22.1% return on average shareholders' equity

Combined Ratio - 81.3% which benefited by 10.6 points from net favorable reservedevelopment

Cash Flow - $761.0 million from operations

Diluted Book Value Per Share - Increased 20.6% in 2007 to $42.53

2007 Leverage Measures Improved Despite Stock Acquisition from AIG

Acquired $563.4 million in shares from AIG in December 2007 to improve capital position

Capital base in excess of $2.7 billion as of December 31, 2007, slightly higher than year end2006

Invested asset base in excess of $6.2 billion, 82.5% of fixed income portfolio rated AAA

Debt / capital of 18.2% at December 31, 2007, lower than year end 2006

Fixed coverage charge of 13.2X

Consistent Performance

8 straight quarters with operating income in excess of $100 million

8 straight quarters with annualized operating return on average equity of 18% or better

22.1% operating return on average shareholders' equity for 2007

8 straight quarters with operating income in excess of $100 million

8 straight quarters with combined ratio of 85.1% or better Loss & LAE Ratio Expense Ratio Operating Income ($MM) Q1 2006 0.667 0.184 104 Q2 2006 0.589 0.193 112 Q3 2006 0.569 0.2 123 Q4 2006 0.539 0.214 134 Q1 2007 0.579 0.218 120 Q2 2007 0.581 0.219 125 Q3 2007 0.611 0.23 112 Q4 2007 0.582 0.232 118

Strong Underwriting = Consistent Results

85.1%

78.2%

76.9%

75.3%

79.7%

80.0%

84.1%

81.4%

Investment Income Momentum Cummulative operating cash flows Total investments end of period Combined Ratio (ex. Cats) Combined Ratio (with Cats) 2002 0.7 1.6 82 2003 1.8 1.5 101 2004 2.8 1.4 129 113 2005 3.6 1.3 179 192.3 2006 4.4 1.5 240 2007 5.2 1 265.6

Net Investment Income Net Investment Income / Net Premiums Earned 2002 81.6 0.188 2003 101 0.087 2004 129 0.097 2005 179 0.14 2006 244 0.195 2007 297.9 0.257

Growth in investment income is driven by strong operating cashflows and growth in invested assets

Strong Cash Flows = Increased Asset Base

Increased Asset Base = Greater Investment Returns

Portfolio

Yield 4.4% 3.7% 3.5% 3.9% 4.5% 4.9%

Paid Loss

Ratio 1.0% 8.5% 15.3% 33.8% 38.6% 38.4%

Efficient Operating Structure 2004 2005 2006 2007 All Bermuda Companies Average(1) 0.247 0.238 0.263 0.27 Class of 2001 Average(2) 0.260833333 0.257166667 0.282 0.285 Allied World 0.194 0.187 0.198 0.225

1 All Bermuda Companies Average includes Arch, Endurance, Aspen, Platinum, Montpelier, Axis, ACE, XL Capital, Everest Re, Partner Re, Renaissance Re, IPC, Max Re andArgonaut.

2 Class of 2001 Average includes expense ratios for Arch, Endurance, Aspen, Platinum, Montpelier and Axis.

Greater percentage of direct business results in lower acquisition ratio

2007 underwriting expense ratio of 22.5% reflects increased compensation expensesand reduced writings

Expense ratio expected to increase 2 to 4 points in 2008 as infrastructure is expanded

Conservative, with diversified fixed-income portfolio:

99% investment grade fixed income securities

72.5% of total portfolio is rated AAA

Only .05% of portfolio ($3 million) is supported by subprime collateral

Portfolio Summary as of 12/31/2007

US Treasuries 0.32 Corporate Bonds 0.2 MBS 0.34 Hedge Funds 0.04 Cash 0.04 ABS 0.03 Non-US Sovereign 0.02 High Yield Funds 0.01

U.S. Treasuries

32%

Corporate

Bonds

20%

MBS

34%

Hedge Funds 4%

Cash 4%

ABS 3%

Non-U.S. Sovereign 2%

High Yield Fund 1%

Total: $6.2B

Portfolio Yield: 4.9%

Duration: 3.1

Investment Portfolio

Mortgage Backed Securities as of12/31/2007($MM)

Casualty Property Reinsurance Low Estimate 1383 283 714 Carried 1878 361 998 High Estimate 2218 425 1184

Reserves 4.3% above mid-point of range

Net favorable reserve development ineach of the last 5 years

Released $35 million of KRW reserves in 2007

79% of reserves are IBNR

2003 2004 2005 2006 2007 Property 50.2 18.4 71.8 30.3 10 Casualty 0 43.4 22.7 63.4 71 Reinsurance 6.6 17.8 17 12.4 3 Total 15 15 15 15 15

Net Loss & LAE Reserve Mix at December 31, 2007 3/31/2006 IBNR Casualty 51 IBNR Reins 24 OSLR Property 7 OSLR Reins 7 OSLR Casualty 7 IBNR Prop 4

OSLR Property

7%

IBNR Casualty

51%

OSLR Casualty

7%

IBNR Reinsurance

24%

OSLR Reinsurance7%

IBNR Property

4%

12/31/07 Total: $3.24bn

Net Prior Year Reserve Releases - (Non-Cat) ($MM)

Range of Net Reserves at December 31, 2007 ($MM)

Prudent Reserving Philosophy

Capital Management

Our capital management strategy is to preserve sufficient capital to support our businessplan and future growth while maintaining conservative financial leverage and earningscoverage ratios

Over $800 million in capital was raised in July 2006

Capitalization and strong leverage measures maintained despite $563 million stockacquisition from AIG

Debt to Capital (EX AOCI) Ratio 0.00% 25.7% 18.4% 19.2%

Fixed Charge Coverage - (9.3)x 14.7x 13.4x

$1,946

$2,713

$2,602

$2,105

Conclusion

Allied World expects to generate a mid teen ROE,

assuming normalized catastrophe activity

Strong underwriting franchise diversified by product andgeography

Solid 6 year operating history

Seasoned, profitable book of business

Proven risk management expertise

Excellent capitalization, strong balance sheet and financialflexibility

Experienced management team

Strong financial strength and debt ratings

Investment income momentum

Agenda

Executive Summary

Financial Review

Appendix

Segment Results 2007 & 2006

Year Ended December 31, 2007 Property Casualty Reinsurance Total

Gross premiums written $ 391,017 $ 578,433 $ 536,059 $ 1,505,509

Net premiums written 176,420 440,802 535,888 1,153,110

Net premiums earned 180,458 475,523 503,961 1,159,942

Net losses and loss expenses (105,662 ) (275,815 ) (300,863 ) (682,340 )

Acquisition costs 114 (17,269 ) (101,804 ) (118,959 )

General and administrative expenses (34,185 ) (68,333 ) (39,123 ) (141,641 )

Underwriting income 40,725 114,106 62,171 217,002

Net investment income 297,932

Net realized investment losses (7,617 )

Interest expense (37,848 )

Foreign exchange gain 817

Income before income taxes $ 470,286

GAAP Ratios:

Loss and loss expense ratio 58.6 % 58.0 % 59.7 % 58.8 %

Acquisition cost ratio (0.1 %) 3.6 % 20.2 % 10.3 %

General and administrative expense ratio 18.9 % 14.4 % 7.8 % 12.2 %

Combined ratio 77.4 % 76.0 % 87.7 % 81.3 %

Year Ended December 31, 2006 Property Casualty Reinsurance Total

Gross premiums written $ 463,903 $ 622,387 $ 572,735 $ 1,659,025

Net premiums written 193,655 540,980 571,961 1,306,596

Net premiums earned 190,784 534,294 526,932 1,252,010

Net losses and loss expenses (114,994 ) (331,759 ) (292,380 ) (739,133 )

Acquisition costs 2,247 (30,396 ) (113,339 ) (141,488 )

General and administrative expenses (26,294 ) (52,809 ) (26,972 ) (106,075 )

Underwriting income 51,743 119,330 94,241 265,314

Net investment income 244,360

Net realized investment losses (28,678 )

Interest expense (32,566 )

Foreign exchange loss (601 )

Income before income taxes $ 447,829

GAAP Ratios:

Loss and loss expense ratio 60.3 % 62.1 % 55.5 % 59.0 %

Acquisition cost ratio (1.2 %) 5.7 % 21.5 % 11.3 %

General and administrative expense ratio 13.8 % 9.9 % 5.1 % 8.5 %

Combined ratio 72.9 % 77.7 % 82.1 % 78.8 %

21

Non-GAAP Financial Measures

In presenting the company's results, management has included and discussed in this press release certain non-GAAP financial measureswithin the meaning of Regulation G as promulgated by the U.S. Securities and Exchange Commission. Management believes that thesenon-GAAP measures, which may be defined differently by other companies, better explain the company's results of operations in a mannerthat allows for a more complete understanding of the underlying trends in the company's business. However, these measures should notbe viewed as a substitute for those determined in accordance with GAAP.

"Operating income" is an internal performance measure used by the company in the management of its operations and represents after-taxoperational results excluding, as applicable, net realized investment gains or losses and foreign exchange gains or losses. The companyexcludes net realized investment gains or losses and net foreign exchange gains or losses from its calculation of operating incomebecause the amount of these gains or losses is heavily influenced by, and fluctuates in part according to, the availability of marketopportunities. The company believes these amounts are largely independent of its business and underwriting process and including themdistorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with GAAP, the companybelieves that showing operating income enables investors, analysts, rating agencies and other users of its financial information to moreeasily analyze the company's results of operations in a manner similar to how management analyzes the company's underlying businessperformance. Operating income should not be viewed as a substitute for GAAP net income.

The company has included "diluted book value per share" because it takes into account the effect of dilutive securities; therefore, thecompany believes it is a better measure of calculating shareholder returns than book value per share.

"Annualized return on average equity" ("ROAE") is calculated using average equity, excluding the average after tax unrealized gains orlosses on investments. Unrealized gains (losses) on investments are primarily the result of interest rate movements and the resultantimpact on fixed income securities. Such gains (losses) are not related to management actions or operational performance, nor are theylikely to be realized. Therefore, the company believes that excluding these unrealized gains (losses) provides a more consistent anduseful 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 netincome (loss) available to shareholders. The company presents ROAE as a measure that is commonly recognized as a standard ofperformance by investors, analysts, rating agencies and other users of its financial information.

"Annualized operating return on average equity" is calculated using operating income (as defined above and annualized in the mannerdescribed for net income (loss) available to shareholders under ROAE above), and average equity, excluding the average after taxunrealized gains (losses) on investments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualizedreturn on average equity explanation above.

See slides 23 - 25 for a reconciliation of non-GAAP measures used in this presentation to their most directly comparable GAAP measures.

Non-GAAPFinancial Measures - Reconciliations

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS EQUITY RECONCILIATION
(Expressed in thousands of United States dollars, except for percentage information)

Quarter Ended December 31,

Year Ended December 31,

2007 2006

2007 2006

Opening shareholders equity $ 2,612,775 $ 2,094,872

$ 2,220,084 $ 1,420,266

Deduct/add: accumulated other comprehensive (income)/loss (62,917 ) (3,447 )

(6,464 ) 25,508

Adjusted opening shareholders equity 2,549,858 2,091,425

2,213,620 1,445,774

Closing shareholders equity 2,239,842 2,220,084

2,239,842 2,220,084

Deduct: accumulated other comprehensive income (136,214 ) (6,464 )

(136,214 ) (6,464 )

Adjusted closing shareholders equity 2,103,628 2,213,620

2,103,628 2,213,620

Average shareholders equity $ 2,326,743 $ 2,152,523

$ 2,158,624 $ 1,829,697

Net income available to shareholders $ 123,015 $ 128,362

$ 469,182 $ 442,838

Annualized net income available to shareholders 492,060 513,448

469,182 442,838

Annualized return on average shareholders equity netincome available to shareholders 21.1 % 23.9 %

21.7 % 24.2 %

Operating income available to shareholders $ 118,066 $ 133,644

$ 475,982 $ 472,117

Annualized operating income available to shareholders 472,264 534,576

475,982 472,117

Annualized return on average shareholders equity operating income available to shareholders 20.3 % 24.8 %

22.1 % 25.8 %

23

Non-GAAP Financial Measures - Reconciliations

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED OPERATING INCOME RECONCILIATION
(Expressed in thousands of United States dollars, except share and per share amounts)

Quarter Ended December 31,

Year Ended December 31,

2007 2006

2007 2006

Net income $ 123,015 $ 128,362

$ 469,182 $ 442,838

Net realized investment (gain)losses (4,544 ) 4,190

7,617 28,678

Foreign exchange (gain)loss (405 ) 1,092

(817 ) 601

Operating income $ 118,066 $ 133,644

$ 475,982 $ 472,117

Weighted average common shares outstanding:

Basic 58,247,755 60,284,459

59,846,987 54,746,613

Diluted 61,133,206 62,963,243

62,331,165 57,115,172

Basic per share data:

Net income $ 2.11 $ 2.13

$ 7.84 $ 8.09

Net realized investment (gain)losses (0.07 ) 0.07

0.12 0.52

Foreign exchange (gain)loss (0.01 ) 0.02

(0.01 ) 0.01

Operating income $ 2.03 $ 2.22

$ 7.95 $ 8.62

Diluted per share data

Net income $ 2.01 $ 2.04

$ 7.53 $ 7.75

Net realized investment (gain)losses (0.07 ) 0.06

0.12 0.51

Foreign exchange (gain)loss (0.01 ) 0.02

(0.01 ) 0.01

Operating income $ 1.93 $ 2.12

$ 7.64 $ 8.27

24

Non-GAAPFinancial Measures - Reconciliations

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION
(Expressed in thousands of United States dollars, except share and per share amounts)

As of As of

December 31, December 31,

2007 2006

Price per share at period end $ 50.17 $ 43.63

Total shareholders equity 2,239,842 2,220,084

Basic common shares outstanding 48,741,927 60,287,696

Add: unvested restricted share units 820,890 704,372

Add: performance based equity awards 886,251 342,501

Add: dilutive options/warrants outstanding 6,723,875 6,695,990

Weighted average exercise price per share $ 33.62 $ 33.02

Deduct: options bought back via treasury method (4,506,182 ) (5,067,534 )

Common shares and common shareequivalents outstanding 52,666,761 62,963,025

Basic book value per common share $ 45.95 $ 36.82

Diluted book value per common share $ 42.53 $ 35.26

25

GRAPHIC3y52267y52267z0001.gifGRAPHIC

begin 644 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