Allied World Reports 10.8% Growth In Diluted Book Value Per Share For The Full-Year 2013

Allied World Assurance Company Holdings, AG (NYSE:AWH) today reported net income of $137.9 million, or $4.01 per diluted share, for the fourth quarter of 2013 compared to a net loss of $41.1 million, or $1.17 per diluted share, for the fourth quarter of 2012. Net income for the year ended December 31, 2013 was $417.9 million, or $11.95 per diluted share, compared to net income of $493.0 million, or $13.30 per diluted share, for the year ended December 31, 2012.

The company reported operating income of $74.5 million, or $2.17 per diluted share, for the fourth quarter of 2013, compared to an operating loss of $55.4 million, or $1.58 per diluted share, for the fourth quarter of 2012. Operating income for the year ended December 31, 2013 was $364.0 million, or $10.41 per diluted share, compared to operating income of $202.7 million, or $5.47 per diluted share, for the year ended December 31, 2012.

President and Chief Executive Officer Scott Carmilani commented, "Allied World had a very strong year in 2013. Consistent underwriting performance, highlighted by an 86% combined ratio, and a solid contribution from the investment portfolio, drove an 11% growth in diluted book value per share. Our platform is strongly positioned to gain additional scale over the coming year and our investment portfolio is well-aligned with the current investment environment. We are excited by the opportunities we see across the businesses."
 

Fourth Quarter and Full-Year Summary (Unaudited)
                           

(Expressed in millions of U.S. Dollars, except per share amounts)

 

Three Months Ended

December 31,

Diluted per share

Year Ended

December 31,

Diluted per share
2013   2012         2013   2012         2013   2012         2013   2012
       
Net income (loss) $137.9 $(41.1) $4.01 $(1.17) $417.9 $493.0 $11.95 $13.30

Adjusted for after tax effect of:

Net realized investment (gains)
(64.1) (15.2) (1.86) (0.43) (61.9) (291.1) (1.77) (7.85)
Foreign exchange loss 0.7   0.9         0.02   0.02         8.0   0.8         0.23   0.02
Operating income (loss) $74.5   $(55.4)         $2.17   $(1.58)         $364.0   $202.7         $10.41   $5.47
 

Fourth Quarter Operating Results

Gross premiums written were $555.5 million, an 11.8% increase compared to $497.1 million in the fourth quarter of 2012. This was driven by growth in the international insurance segment and the U.S insurance segment, offset by a slight decrease in the reinsurance segment. The international segment's gross premiums written grew by 19.9% attributable to growth across all lines, led by double-digit growth in trade credit, general casualty and the new aviation business; the U.S. insurance segment's gross premiums written grew by 11.7% helped by growth across existing lines including general casualty and programs, and contributions from newer lines including construction and surety.
  • Net premiums written were $391.1 million, a 7.9% increase compared to $362.6 million in the fourth quarter of 2012.
  • Net premiums earned were $524.6 million, a 10.1% increase compared to $476.2 million in the fourth quarter of 2012.
  • Underwriting income was $41.9 million, compared to an underwriting loss of $78.8 million in the fourth quarter of 2012 due to higher premiums earned as well as lower catastrophe losses.
  • The combined ratio was 92.0% compared to 116.5% in the fourth quarter of 2012 primarily due to the impact of Superstorm Sandy in the prior year quarter.
  • The loss and loss expense ratio was 60.2% in the fourth quarter of 2013 compared to 87.1% in the prior year quarter. During the fourth quarter of 2013, the company recorded net favorable reserve development on prior loss years of $26.4 million, a benefit of 5.0 percentage points to the loss and loss expense ratio, compared to $32.8 million a year ago, a benefit of 6.9 percentage points.
  • Excluding prior year reserve adjustments, the loss and loss expense ratio for the fourth quarter of 2013 was 65.3% compared to 94.0% for the fourth quarter of 2012.
  • The company experienced $13.5 million of catastrophe losses for the fourth quarter of 2013 related to Typhoon Fitow. This compares to $174.6 million of catastrophe losses in the prior year quarter primarily related to Superstorm Sandy.
  • The company's expense ratio was 31.8% for the fourth quarter of 2013 compared to 29.4% for the fourth quarter of 2012. The increase was largely driven by increased salary-related costs and higher stock-based compensation expense.

Investment Results
  • The total financial statement return on the company's investment portfolio for the three months ended December 31, 2013 was 1.4% compared to 0.6% for the three months ended December 31, 2012.
  • Net investment income grew 23.2% in the quarter compared to the prior year quarter.
  • The increase in net realized investment gains was primarily due to positive performance from the other invested assets and equities portfolio.
  • See the table below for the components of our investment returns:
             
(Expressed in millions of U.S. Dollars)

Three Months Ended December 31,

Year Ended December 31,
2013   2012           2013   2012
Net investment income $47.3   $38.4 $157.6   $167.1

Net realized investment gains (includes mark-to-market)

67.6
14.4 59.5

306.4

Change in unrealized (gains)
-   (2.2)           -   (17.5)
Total financial statement portfolio return $114.9   $50.6           $217.1   $456.0
 
Average invested assets $8,488.3 $8,518.1 $8,411.7 $8,272.6
Financial statement portfolio return 1.4%   0.6%           2.6%   5.5%

Note: net investment income, realized gains and unrealized gains are disclosed on a pre-tax basis.

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