Allied World Posts $41.1 Million Q4 Loss; FY 2012 Net Income $493 Million

February 15, 2013

Allied World Assurance Company Holdings, AG, which is domiciled in Switzerland, reported a net loss of $41.1 million, or $1.17 per diluted share, for the fourth quarter of 2012 compared to net income of $183.1 million, or $4.63 per diluted share, for the fourth quarter of 2011.

Net income for the year ended December 31, 2012 was $493.0 million, or $13.30 per diluted share, compared to net income of $274.5 million, or $6.92 per diluted share, for the year ended December 31, 2011.

The company reported an operating loss of $55.4 million, or $1.58 per diluted share, for the fourth quarter of 2012 compared to operating income of $94.7 million, or $2.40 per diluted share, for the fourth quarter of 2011.

Operating income for the year ended December 31, 2012 was $202.7 million, or $5.47 per diluted share, compared to operating income of $183.7 million, or $4.63 per diluted share, for the year ended December 31, 2011.

President and CEO Scott Carmilani commented: “Allied World had a strong year in 2012. While Superstorm Sandy tempered our fourth quarter underwriting results, we still generated $493 million of net income for the full year, continuing to build value for our shareholders. Our diluted book value per share grew by over 15 percent in 2012, to $92.59. The company’s top line production grew by 20 percent to $2.3 billion in gross premiums written for the year, and we were able to achieve targeted growth in all three of our business segments.

“Our company continues to capitalize on our various book value drivers including our expanded breadth and diversity of underwriting platforms, strong investment acumen, responsible reserving and capital management flexibility,” he added. “I believe these strengths have Allied World well positioned as we move into 2013 and beyond.”

The company listed the following underwriting result for the fourth quarter and full year:
— Gross premiums written were $497.1 million in the fourth quarter of 2012, a 19.3 percent increase compared to $416.5 million in the fourth quarter of 2011.
— For the year ended December 31, 2012, gross premiums written totaled $2.3293 billion, a 20.1 percent increase compared to $1.9395 billion for the year ended December 31, 2011.
— Net premiums written were $362.6 million in the fourth quarter of 2012, an 18.2 percent increase compared to $306.8 million in the fourth quarter of 2011.
— For the year ended December 31, 2012, net premiums written totaled $1.8378 billion, a 19.8 percent increase compared to $1.5338 billion for the year ended December 31, 2011.
— Net premiums earned in the fourth quarter of 2012 were $476.2 million, a 20.4 percent increase compared to $395.5 million in the fourth quarter of 2011.
— For the year ended December 31, 2012, net premiums earned totaled $1.7489 billion, a 20.0 percent increase compared to $1.4570 billion for the year ended December 31, 2011.
— The combined ratio was 116.5 percent in the fourth quarter of 2012 compared to 83.5 percent in the fourth quarter of 2011. The loss and loss expense ratio was 87.1 percent in the fourth quarter of 2012 compared to 53.9 percent in the fourth quarter of 2011.

The report also explained that “during the fourth quarter of 2012, the company recorded net favorable reserve development on prior loss years of $32.8 million. This favorable reserve development resulted in a benefit of 6.9 percentage points to the company’s loss and loss expense ratio for the quarter.

“This compares to the fourth quarter of 2011, when the company recorded net favorable reserve development on prior loss years of $92.4 million, a benefit of 23.4 percentage points to the company’s loss and loss expense ratio for that quarter.

“Absent these adjustments, the loss and loss expense ratio for the fourth quarter of 2012 was 94.0 percent compared to 77.3 percent for the fourth quarter of 2011. The fourth quarter 2012 loss and loss expense ratio was impacted by $175.7 million, or 36.9 percentage points, from net losses related to Superstorm Sandy (before consideration of estimated reinstatement premiums). This compares to the fourth quarter of 2011 loss and loss expense ratio, which was impacted by $59.1 million of net losses, or 14.9 percentage points, from 2011 global catastrophe activity.

“For the year ended December 31, 2012, the combined ratio was 94.5 percent compared to 95.9 percent for the year ended December 31, 2011. The loss and loss expense ratio was 65.1 percent for the year ended December 31, 2012 compared to 65.8 percent for the year ended December 31, 2011.

“For the year ended December 31, 2012, the company recorded net favorable reserve development on prior loss years of $170.3 million, a benefit of 9.7 percentage points to the company’s loss and loss expense ratio.

“For the year ended December 31, 2011, the company recorded net favorable reserve development on prior loss years of $253.5 million, a benefit of 17.6 percentage points to the company’s loss and loss expense ratio. Absent prior year reserve adjustments, the loss and loss expense ratio for the year ended December 31, 2012 was 74.8 percent compared to 83.4 percent for 2011.

“The loss and loss expense ratio for the year ended December 31, 2012 was impacted by $179.6 million, or 10.3 percentage points, from Superstorm Sandy and Hurricane Isaac and by $36.0 million, or 2.1 percentage points, of crop reinsurance losses. The loss and loss expense ratio for the year ended December 31, 2011 was impacted $292.2 million of net losses, or 20.2 percentage points, from 2011 global catastrophe activity.

“The company’s expense ratio was 29.4 percent for the fourth quarter of 2012 compared to 29.6 percent for the fourth quarter of 2011. For the year ended December 31, 2012, the company’s expense ratio was 29.4 percent compared to 30.1 percent for the year ended December 31, 2011.”

Source: Allied World Assurance

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