Allied World Posts $64.7 Million Q3 Loss

November 3, 2004

Bermuda’s Allied World Assurance Holdings, Ltd reported a net loss of $64.7 million for the third quarter 2004, compared to net income of $71.6 million for the third quarter last year.

Allied World, one of the new companies established on the island in the wake of Sept. 11, was hit by losses of $153.6 million (net of reinsurance and reinstatement premiums, and after taxes) resulting from the Florida hurricanes and two Japanese typhoons.

The natural catastrophes also affected the company’s nine-month figures. It reported net income for the period of $94.1 million, compared to $201.2 million for the same period in 2003.

President and CEO Scott Carmilani commented, “While our results this quarter were negatively impacted by an unprecedented number of natural catastrophes, we remain satisfied with the growth and performance of our overall book of business. Year-to-date, our gross written premiums are up over 10 percent, and net earned premiums are up over 18 percent. We strive to maintain underwriting discipline and adequate pricing amidst the declining rate environment of the past two quarters. We remain focused on what matters most to our customers and shareholders — responsive service, financial strength and solid operating performance.”

Allied World also reported: “Gross premiums written were $402.5 million in the third quarter 2004, a decrease of 3.5 percent compared to $417.3 million written in the third quarter 2003.” For the nine months ending September 30, 2004, gross premiums written totaled $1.3849 billion, a 10.2 percent increase over gross premiums written of $1.2565 billion in the same period last year.

“Net premiums earned in the quarter were $325.6 million, and $322.6 million in the quarter ending September 30, 2003; net premiums earned in the nine months ending September 30, 2004, were $996.7 million, compared to $842.1 million in 2003,” said the bulletin. “Net investment income in the quarter ended September 30, 2004, was $33.3 million, and $23.9 million in the third quarter 2003. For the nine-month period ended September 30, 2004, net investment income was $95.8 million, compared to $75.2 million in 2003.

“Net losses and loss adjustment expenses incurred (including increases in reserves for incurred but not reported losses) were $375.1 million in the quarter ended September 30, 2004, and $218.3 million in the same quarter last year, representing loss ratios of 115.2 percent and 67.7 percent, respectively. Net losses and loss adjustment expenses incurred were $817.0 million in the nine months ended September 30, 2004, and $573.3 million in the same period in 2003, representing loss ratios of 82.0 percent and 68.1 percent, respectively. Excluding the catastrophe losses, the loss ratios for the third quarter and year-to-date 2004 would have been 65.7 percent and 65.8 percent, respectively.

“Acquisition costs and general and administrative expenses totaled $56.3 million in the quarter ended September 30, 2004, and $59.8 million in the quarter ended September 30, 2003, representing expense ratios of 17.3 percent and 18.5 percent, respectively. For the nine months ended September 30, 2004, acquisition costs and general and administrative expenses totaled $193.2 million, compared to $156.4 million for the same period in 2003, representing expense ratios of 19.4 percent and 18.6 percent, respectively.

“Net income (loss), which includes $4.4 million of net realized investment gains, was a loss of $64.7 million for the three months ended September 30, 2004, compared to $71.6 million of net income in the same period in 2003, which included $3.9 million of net realized investment gains. For the nine months ended September 30, 2004, net income was $94.1 million, which includes $9.4 million of net realized investment gains, compared to $201.2 million for the same period in 2003, which included $15.7 million of net realized investment gains.

“The company’s combined ratio for the quarter ended September 30, 2004, was 132.5 percent, and for the quarter ended September 30, 2003, was 86.2 percent. For the nine months ended September 30, 2004 and 2003, the combined ratios were 101.4 percent and 86.7 percent, respectively. Excluding the effect of the catastrophes, the combined ratios for the third quarter and year-to-date were 83.3 percent and 85.3 percent, respectively.

“At September 30, 2004, shareholders’ equity was $2.05 billion, compared to $1.98 billion reported at December 31, 2003, and $1.91 billion reported at September 30, 2003.”

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