Allied World Posts $23.9 Million Q4 Net Loss; $159.8 Million Full Year

Bermuda-based Allied World Assurance Holdings, Ltd. has reported a net loss of $23.9 million for the fourth quarter 2005, compared to net income of $103 million for the fourth quarter 2004. The net loss for the twelve months ended December 31, 2005, was $159.8 million, compared to net income of $197.2 million for the twelve months ended December 31, 2004.

The losses were almost entirely the result of the fall hurricanes. In a separate bulletin Allied World said it had recalculated the losses from the third quarter to post a net loss of $271.8 million, compared to a net loss of $64.7 million for the third quarter of 2004. “In the third quarter of 2005, the company incurred losses of $362.8 million resulting from Hurricanes Katrina and Rita, net of reinsurance, and after taxes and reinstatement premiums. The net loss for the nine months ended September 30, 2005 was $135.9 million, compared to net income of $94.1 million for the same period in 2004,” the bulletin said.

In the fourth quarter of 2005 the Company incurred losses of $83 million resulting from Hurricane Wilma, net of reinsurance and after taxes and reinstatement premiums.

President and CEO Scott Carmilani commented: “Our results in 2005 were affected by some of the costliest natural disasters in history. Our net incurred property losses from Hurricanes Katrina, Rita and Wilma totaled $456 million. Although we sustained significant losses from these storms, our exposure management and product diversification adequately protected our capital position.

“We believe that our focus on the primary property market versus underwriting high excess property layers has afforded us less volatility, along with the ability to maintain greater control through a risk-based underwriting approach to catastrophe exposures for each client,” he continued. “As a result, we can act upon favorable market conditions or make adjustments as opportunities emerge.”

Allied World also reported a decrease in gross premiums written – $283.4 million in the fourth quarter of 2005, a decrease of 12.3 percent compared to $323.1 million written in the fourth quarter of 2004. For the twelve months ended December 31, 2005, gross premiums written totaled $1.5603 billion, an 8.6 percent decrease from the prior year’s gross premiums written of $1.708 billion.

Just how costly the hurricanes were for Allied World shows up in the Company’s net losses and loss adjustment expenses incurred (including increases in reserves for incurred but not reported losses). They were $297.3 million in the quarter ended December 31, 2005, and $196.3 million in the same quarter in 2004, “representing loss ratios of 99.4 percent and 59.7 percent, respectively.”

By comparison, net losses and loss adjustment expenses incurred (including increases in reserves for incurred but not reported losses) were $1.3446 billion in the twelve months ended December 31, 2005, and $1.0134 billion in the same period in 2004, representing loss ratios of 105.7 percent and 76.5 percent, respectively. Had Allied World been able to exclude the 2005 property catastrophe losses, “the loss ratios for the fourth quarter and twelve months ended December 31, 2005, would have been 67.9 percent and 68.9 percent, respectively,” the bulletin indicated.

Allied World said its “combined ratio for the quarter ended December 31, 2005, was 119.9 percent, and for the quarter ended December 31, 2004, was 79.2 percent. For the twelve months ended December 31, 2005 and 2004, the combined ratios were 124.4 percent and 95.9 percent, respectively. Excluding the 2005 property catastrophe losses, the combined ratios for the fourth quarter and twelve months ended December 31, 2005 would have been 88.3 percent and 87.6 percent, respectively.”

The full report and additional information may be obtained on the Company’s Website at: www.awac.com.