Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT

Attached files

file	filename
EX-99.1 - PRESS RELEASE - Allied World Assurance Co Holdings, AG	awh-20161031x8kexhibit991.htm
8-K - 8-K - Allied World Assurance Co Holdings, AG	form_8-kxxx3qx2016xearning.htm

Exhibit 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

3rd Quarter Ended September 30, 2016

Investor Contact: This report is for informational purposes only. It should be read in conjunction with documents filed by

Giuseppe Montefinese Allied World Assurance Company Holdings, AG with the U.S. Securities and Exchange Commission.

Phone: (646)794-0690

Email: Giuseppe.Montefinese@awac.com

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Any forward-looking statements made in this report reflect our current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, our forward-looking statements could be affected by pricing and policy term trends; increased competition; the adequacy of our loss reserves; negative rating agency actions; greater frequency or severity of unpredictable catastrophic events; the impact of acts of terrorism and acts of war; the company or its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; changes in regulations or tax laws; changes in the availability, cost or quality of reinsurance or retrocessional coverage; adverse general economic conditions; and judicial, legislative, political and other governmental developments, as well as management's response to these factors, and other factors identified in our filings with the U.S. Securities and Exchange Commission. 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 expressly disclaim any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.



ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
FINANCIAL SUPPLEMENT TABLE OF CONTENTS

		Page

	Basis of Presentation	4

I.	Financial Highlights
	- Consolidated Financial Highlights	5

II.	Consolidated Financial Statements
	- Consolidated Statements of Operations	6
	- Consolidated Balance Sheets	7
	- Consolidated Statement of Cash Flows	8

III.	Segment Results
	- Consolidated Segment Results - Current Quarter	9
	- Consolidated Segment Results - Prior Year Quarter	10
	- Consolidated Segment Results - Current Year to Date	11
	- Consolidated Segment Results - Prior Year to Date	12
	- Gross Premiums Written by Line of Business	13

IV.	Incurred Losses, Loss Reserves and PMLs
	- Consolidated Incurred Loss Analysis by Segment	14
	- Net Loss Reserve Development by Loss Year - Current Quarter	15
	- Net Loss Reserve Development by Loss Year - Prior Year Quarter	16
	- Net Loss Reserve Development by Loss Year - Current Year to Date	17
	- Net Loss Reserve Development by Loss Year - Prior Year to Date	18
	- Reinsurance Recoverable	19
	- Probable Maximum Losses	20

V.	Investment Portfolio
	- Consolidated Total Investment Portfolio	21
	- Investment Income, Book Yield and Portfolio Return	22
	- Additional Investment Detail	23

VI.	Capital Structure
	- Share Repurchase Detail	24
	- Capital Structure and Leverage Ratios	25

VII.	Non-GAAP Reconciliations
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share	26
	- Return on Average Shareholders' Equity and Average Tangible Shareholders' Equity and Reconciliation of Average Shareholders' Equity	27
	- Reconciliation of Diluted Book Value per Share and Tangible Book Value per Share	28
	- Regulation G	29

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION


•	All financial information contained herein is unaudited.


•	Unless otherwise noted, all data is in thousands of U.S. dollars, except for share, per share, percentage and ratio information.

•

Allied World Assurance Company Holdings, AG, along with others in the industry, use underwriting ratios as measures of performance. The loss and loss expense ratio is calculated by dividing net losses and loss expenses by net premiums earned. The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned. The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned. The expense ratio is calculated by combining the acquisition cost ratio and the general and administrative expense ratio. The combined ratio is calculated by combining the loss and loss expense ratios, the acquisition cost ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the costs of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.

•

In presenting the company’s results, management has included and discussed certain non-generally accepted accounting principles (“non-GAAP”) financial measures, as such term is defined in Regulation G promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with generally accepted accounting principles (“GAAP”). The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in this financial supplement. See page 29 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED FINANCIAL HIGHLIGHTS



			Three Months Ended										Nine Months Ended
			September 30,							$	%		September 30,							$	%
			2016			2015				Difference	Difference		2016			2015				Difference	Difference
HIGHLIGHTS
	Gross premiums written		$	730,224		$	754,062		$	(23,838)	(3.2	)%	$	2,394,063		$	2,460,646		$	(66,583)	(2.7	)%
	Net premiums written			528,325			606,992			(78,667)	(13.0	)%		1,810,508			1,983,189			(172,681)	(8.7	)%
	Net premiums earned			584,051			650,653			(66,602)	(10.2	)%		1,767,141			1,865,577			(98,436)	(5.3	)%
	Underwriting income			21,520			27,873			(6,353)	(22.8	)%		90,009			101,282			(11,273)	(11.1	)%
	Operating income			55,224			51,439			3,785	7.4	%		196,913			168,958			27,955	16.5	%
	Net income (loss)			68,613			(51,630)			120,243	232.9	%		296,121			82,184			213,937	260.3	%

	Total shareholders' equity			3,615,869			3,555,405			60,464	1.7	%		3,615,869			3,555,405			60,464	1.7	%
	Cash flows provided by operating activities			119,634			163,984			(44,350)	(27.0	)%		619,663			591,386			28,277	4.8	%

PER SHARE AND SHARE DATA
	Diluted earnings per share
		Net income (loss)	$	0.77		$	(0.56)*		$	1.33	237.5	%	$	3.29		$	0.87		$	2.42	278.2	%
		Operating income	$	0.62		$	0.55		$	0.07	12.7	%	$	2.19		$	1.79		$	0.40	22.3	%

	Basic book value per share		$	41.57		$	39.11		$	2.46	6.3	%	$	41.57		$	39.11
	Diluted book value per share		$	40.29		$	38.03		$	2.26	5.9	%	$	40.29		$	38.03
	Diluted tangible book value per share		$	34.67		$	32.84		$	1.83	5.6	%	$	34.67		$	32.84

FINANCIAL RATIOS
	Annualized return on average equity (ROAE), net income (loss)			7.6	%		(5.7	)%			13.3 pts			11.0	%		3.0	%			8.0 pts
	Annualized ROAE, operating income			6.1	%		5.7	%			0.4 pts			7.3	%		6.1	%			1.2 pts
	Annualized return on average tangible equity (ROATE), net income (loss)			8.9	%		(6.7	)%			15.6 pts			12.8	%		3.4	%			9.4 pts
	Annualized ROATE, operating income			7.1	%		6.6	%			0.5 pts			8.5	%		6.9	%			1.6 pts
	Financial statement portfolio return			0.7	%		(0.8	)%			1.5 pts			2.9	%		0.5	%			2.4 pts

	GAAP Ratios
	Loss and loss expense ratio			64.4	%		64.1	%			(0.3) pts			63.0	%		62.9	%			(0.1) pts
	Acquisition cost ratio			14.0	%		15.4	%			1.4 pts			14.6	%		15.0	%			0.4 pts
	General and administrative expense ratio			17.8	%		16.3	%			(1.5) pts			17.3	%		16.7	%			(0.6) pts
	Expense ratio			31.8	%		31.7	%			(0.1) pts			31.9	%		31.7	%			(0.2) pts
	Combined ratio			96.2	%		95.8	%			(0.4) pts			94.9	%		94.6	%			(0.3) pts

* Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share, and not in the calculation of diluted earnings per share,
as there was a net loss during the three months ended September 30, 2015.

Page 5

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF OPERATIONS



			Three Months Ended															Nine Months Ended

			September 30,			June 30,			March 31,			December 31,			September 30,			September 30,			September 30,
			2016			2016			2016			2015			2015			2016			2015
Revenues
	Gross premiums written		$	730,224		$	800,294		$	863,545		$	632,357		$	754,062		$	2,394,063		$	2,460,646
	Net premiums written		$	528,325		$	578,137		$	704,046		$	464,818		$	606,992		$	1,810,508		$	1,983,189

	Net premiums earned		$	584,051		$	602,968		$	580,122		$	622,809		$	650,653		$	1,767,141		$	1,865,577
	Net investment income			50,564			55,839			53,253			49,099			45,667			159,655			132,978
	Net realized investment gains (losses)			10,663			74,493			18,858			(38,849)			(113,626)			104,014			(88,783)
	Other income			1,878			5,177			565			982			735			7,620			2,513
		Total revenues	$	647,156		$	738,477		$	652,798		$	634,041		$	583,429		$	2,038,430		$	1,912,285

Expenses
	Net losses and loss expenses		$	376,262		$	365,443		$	372,366		$	412,756		$	416,881		$	1,114,070		$	1,173,578
	Acquisition costs			82,033			87,403			88,308			95,938			100,101			257,744			279,418
	General and administrative expenses			104,236			104,729			96,352			95,025			105,798			305,318			311,299
	Other expense			2,192			1,682			1,134			1,907			1,245			5,008			4,303
	Amortization of intangible assets			2,501			2,501			2,500			3,668			2,639			7,502			6,091
	Interest expense			13,462			19,879			19,949			18,126			14,469			53,290			43,272
	Foreign exchange loss (gain)			1,007			(2,887)			(3,011)			920			(793)			(4,891)			10,369
		Total expenses	$	581,693		$	578,750		$	577,598		$	628,340		$	640,340		$	1,738,041		$	1,828,330

Income (loss) before income taxes			$	65,463		$	159,727		$	75,200		$	5,701		$	(56,911)		$	300,389		$	83,955
	Income tax (benefit) expense			(3,150)			6,317			1,101			3,994			(5,281)			4,268			1,771
Net income (loss)			$	68,613		$	153,410		$	74,099		$	1,707		$	(51,630)		$	296,121		$	82,184

GAAP Ratios
Loss and loss expense ratio				64.4	%		60.6	%		64.2	%		66.3	%		64.1	%		63.0	%		62.9	%
Acquisition cost ratio				14.0	%		14.5	%		15.2	%		15.4	%		15.4	%		14.6	%		15.0	%
General and administrative expense ratio				17.8	%		17.4	%		16.6	%		15.3	%		16.3	%		17.3	%		16.7	%
Expense ratio				31.8	%		31.9	%		31.8	%		30.7	%		31.7	%		31.9	%		31.7	%
Combined ratio				96.2	%		92.5	%		96.0	%		97.0	%		95.8	%		94.9	%		94.6	%

Per Share Data
Diluted earnings per share
	Net income (loss)		$	0.77		$	1.70		$	0.81		$	0.02		$	(0.56)*		$	3.29		$	0.87
	Operating income		$	0.62		$	0.91		$	0.65		$	0.47		$	0.55		$	2.19		$	1.79

* Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share, and not in the calculation of diluted earnings per share,
as there was a net loss during the three months ended September 30, 2015.

Page 6

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED BALANCE SHEETS



		As of		As of
		September 30, 2016		December 31, 2015
ASSETS
Fixed maturity investments trading, at fair value		$	7,327,301	$	7,201,538
Equity securities trading, at fair value			216,141		403,022
Other invested assets			941,653		966,709
	Total investments		8,485,095		8,571,269
Cash and cash equivalents			773,839		607,983
Restricted cash			98,851		60,629
Insurance balances receivable			893,300		745,888
Funds held			263,926		640,819
Prepaid reinsurance			448,722		392,265
Reinsurance recoverable			1,550,659		1,479,959
Reinsurance recoverable on paid losses			129,061		96,437
Accrued investment income			37,248		38,304
Net deferred acquisition costs			157,720		165,206
Goodwill			392,768		388,127
Intangible assets			111,100		116,623
Balances receivable on sale of investments			20,266		36,889
Net deferred tax assets			26,281		24,401
Other assets			153,467		147,149
TOTAL ASSETS		$	13,542,303	$	13,511,948

LIABILITIES
Reserve for losses and loss expenses		$	6,665,796	$	6,456,156
Unearned premiums			1,785,232		1,683,274
Reinsurance balances payable			258,444		214,369
Balances due on purchases of investments			242,350		125,126
Senior notes			793,973		1,292,907
Other long-term debt			23,306		23,033
Accounts payable and accrued liabilities			157,333		184,541
TOTAL LIABILITIES		$	9,926,434	$	9,979,406

SHAREHOLDERS' EQUITY
Common shares: 2016 and 2015: par value CHF 4.10 per share (2016: 93,586,418; 2015: 95,523,230 shares issued and 2016: 86,974,284; 2015: 90,959,635 shares outstanding)		$	378,840	$	386,702
Treasury shares, at cost (2016: 6,612,134; 2015: 4,563,595)			(237,048)		(155,072)
Accumulated other comprehensive loss			(5,421)		(9,297)
Retained earnings			3,479,498		3,310,209
TOTAL SHAREHOLDERS' EQUITY		$	3,615,869	$	3,532,542
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	13,542,303	$	13,511,948

Book value per share		$	41.57	$	38.84
Diluted book value per share		$	40.29	$	37.78
Diluted tangible book value per share		$	34.67	$	32.38

Page 7

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF CASH FLOWS



			Three Months Ended										Nine Months Ended

			September 30,		June 30,		March 31,		December 31,		September 30,		September 30,		September 30,
			2016		2016		2016		2015		2015		2016		2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)			$	68,656	$	153,410	$	74,099	$	1,708	$	(51,630)	$	296,165	$	82,184
Adjustments to reconcile net income (loss) to cash
	provided by operating activities:
		Net realized (gains) losses on sales of investments		(6,492)		(19,174)		(12,025)		(32,710)		17,039		(37,691)		(41,185)
		Mark to market adjustments		(1,816)		(62,210)		(27,088)		77,340		76,829		(91,114)		112,421
		Stock compensation expense		4,785		4,757		3,881		3,949		3,934		13,423		11,805
		Undistributed loss of equity method investments		7,045		5,993		9,207		3,365		3,257		22,245		19,244
Changes in:
		Reserve for losses and loss expenses, net of reinsurance recoverables		8,725		43,293		86,922		(12,907)		55,908		138,940		188,835
	Unearned premiums, net of prepaid reinsurance			(55,494)		(24,538)		125,533		(157,271)		(47,057)		45,501		113,380
	Insurance balances receivable			67,679		(76,919)		(139,527)		160,141		39,138		(148,767)		(123,175)
	Reinsurance recoverable on paid losses			(55,252)		8,853		13,775		20,673		(28,689)		(32,624)		(31,035)
	Funds held			15,210		74,020		287,663		(197,149)		18,823		376,893		280,351
	Reinsurance balances payable			30,751		6,060		7,264		(45,917)		28,875		44,075		40,354
	Net deferred acquisition costs			11,198		17,960		(21,672)		27,913		6,721		7,486		(10,901)
	Net deferred tax assets			(5,073)		3,764		(571)		7,399		(7,450)		(1,880)		(10,141)
	Accounts payable and accrued liabilities			19,722		2,220		(50,128)		28,914		15,557		(28,186)		(39,046)
	Other items, net			9,990		15,131		(9,924)		35,904		32,729		15,197		(1,705)
		Net cash provided by (used in) operating activities		119,634		152,620		347,409		(78,648)		163,984		619,663		591,386

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Net sales (purchases) of investments				635,425		(236,688)		(84,779)		(475,234)		(135,672)		313,958		(24,465)
Purchases of fixed assets				(1,219)		(1,351)		(560)		(8,041)		(5,814)		(3,130)		(23,798)
Change in restricted cash				(20,641)		9,216		(26,797)		99,234		(52,794)		(38,222)		(78,892)
Net cash paid for acquisitions				—		(1,244)		—		17,083		—		(1,244)		(141,503)
		Net cash provided by (used in) investing activities		613,565		(230,067)		(112,136)		(366,958)		(194,280)		271,362		(268,658)

CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid				(22,649)		(22,839)		(23,359)		(47,287)		(23,593)		(68,847)		(66,784	)
Proceeds from the exercise of stock options				4,543		2,757		358		954		1,795		7,658		9,184
Share repurchases				(26,231)		(89,491)		(50,000)		—		—		(165,722)		(246,443)
(Repayment) proceeds from senior notes				(500,000)		—		—		496,705		—		(500,000)		—
(Repayment) proceeds from other long-term debt				(1)		(75)		(76)		(72)		(79)		(152)		3,849
		Net cash used in financing activities		(544,338)		(109,648)		(73,077)		450,300		(21,877)		(727,063)		(300,194)

Effect of exchange rate changes on foreign currency cash				474		(433)		1,852		(521)		(5,864)		1,893		(8,063)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				189,335		(187,528)		164,048		4,173		(58,037)		165,855		14,471
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD				584,503		772,031		607,983		603,810		661,847		607,983		589,339
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	773,838	$	584,503	$	772,031	$	607,983	$	603,810	$	773,838	$	603,810

Page 8

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT QUARTER



			Three Months Ended September 30, 2016

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	466,535		$	126,663		$	137,026		$	730,224
	Net premiums written		$	307,922		$	91,293		$	129,110		$	528,325
	Net premiums earned		$	312,840		$	96,771		$	174,440		$	584,051
		Total revenues	$	312,840		$	96,771		$	174,440		$	584,051

Expenses
	Net losses and loss expenses		$	(215,897)		$	(74,527)		$	(85,838)		$	(376,262)
	Acquisition costs			(31,517)			(16,449)			(34,067)			(82,033)
	General and administrative expenses			(55,111)			(32,640)			(16,485)			(104,236)
		Total expenses	$	(302,525)		$	(123,616)		$	(136,390)		$	(562,531)

Underwriting income (loss)			$	10,315		$	(26,845)		$	38,050		$	21,520

	Other insurance-related income			1,136			742			—			1,878
	Other insurance-related expenses			(570)			(328)			(1,294	)		(2,192)
Segment income (loss)			$	10,881		$	(26,431)		$	36,756		$	21,206

	Net investment income												50,564
	Net realized investment gains												10,663
	Amortization of intangible assets												(2,501)
	Interest expense												(13,462)
	Foreign exchange loss												(1,007)
Income before income taxes												$	65,463

GAAP Ratios
Loss and loss expense ratio				69.0	%		77.0	%		49.3	%		64.4	%
Acquisition cost ratio				10.1	%		17.0	%		19.5	%		14.0	%
General and administrative expense ratio				17.6	%		33.7	%		9.5	%		17.8	%
Expense ratio				27.7	%		50.7	%		29.0	%		31.8	%
Combined ratio				96.7	%		127.7	%		78.3	%		96.2	%

Page 9

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR QUARTER



			Three Months Ended September 30, 2015

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	460,386		$	132,664		$	161,012		$	754,062
	Net premiums written		$	350,791		$	104,075		$	152,126		$	606,992
	Net premiums earned		$	332,722		$	110,327		$	207,604		$	650,653
		Total revenues	$	332,722		$	110,327		$	207,604		$	650,653

Expenses
	Net losses and loss expenses		$	(222,250)		$	(70,935)		$	(123,696)		$	(416,881)
	Acquisition costs			(35,585)			(22,731)			(41,785)			(100,101)
	General and administrative expenses			(58,301)			(29,344)			(18,153)			(105,798)
		Total expenses	$	(316,136)		$	(123,010)		$	(183,634)		$	(622,780)

Underwriting income (loss)			$	16,586		$	(12,683)		$	23,970		$	27,873

	Other insurance-related income			735			—			—			735
	Other insurance-related expenses			(631)			(614)			—			(1,245)
Segment income (loss)			$	16,690		$	(13,297)		$	23,970		$	27,363

	Net investment income												45,667
	Net realized investment losses												(113,626)
	Amortization of intangible assets												(2,639)
	Interest expense												(14,469)
	Foreign exchange gain												793
Loss before income taxes												$	(56,911)

GAAP Ratios
Loss and loss expense ratio				66.8	%		64.3	%		59.6	%		64.1	%
Acquisition cost ratio				10.7	%		20.6	%		20.1	%		15.4	%
General and administrative expense ratio				17.5	%		26.6	%		8.7	%		16.3	%
Expense ratio				28.2	%		47.2	%		28.8	%		31.7	%
Combined ratio				95.0	%		111.5	%		88.4	%		95.8	%

Page 10

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT YEAR TO DATE



			Nine Months Ended September 30, 2016

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	1,354,101		$	367,627		$	672,335		$	2,394,063
	Net premiums written		$	904,935		$	267,127		$	638,446		$	1,810,508
	Net premiums earned		$	958,752		$	285,134		$	523,255		$	1,767,141
		Total revenues	$	958,752		$	285,134		$	523,255		$	1,767,141

Expenses
	Net losses and loss expenses		$	(642,058)		$	(203,418)		$	(268,594)		$	(1,114,070)
	Acquisition costs			(102,834)			(50,625)			(104,285)			(257,744)
	General and administrative expenses			(164,120)			(93,198)			(48,000)			(305,318)
		Total expenses	$	(909,012)		$	(347,241)		$	(420,879)		$	(1,677,132)

Underwriting income (loss)			$	49,740		$	(62,107)		$	102,376		$	90,009

	Other insurance-related income			2,615			742			4,263			7,620
	Other insurance-related expenses			(1,875)			(333)			(2,800	)		(5,008)
Segment income (loss)			$	50,480		$	(61,698)		$	103,839		$	92,621

	Net investment income												159,655
	Net realized investment gains												104,014
	Amortization of intangible assets												(7,502)
	Interest expense												(53,290)
	Foreign exchange gain												4,891
Income before income taxes												$	300,389

GAAP Ratios
Loss and loss expense ratio				67.0	%		71.3	%		51.3	%		63.0	%
Acquisition cost ratio				10.7	%		17.8	%		19.9	%		14.6	%
General and administrative expense ratio				17.1	%		32.7	%		9.2	%		17.3	%
Expense ratio				27.8	%		50.5	%		29.1	%		31.9	%
Combined ratio				94.8	%		121.8	%		80.4	%		94.9	%

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR TO DATE



			Nine Months Ended September 30, 2015

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	1,358,636		$	328,223		$	773,787		$	2,460,646
	Net premiums written		$	1,019,866		$	216,230		$	747,093		$	1,983,189
	Net premiums earned		$	974,232		$	262,993		$	628,352		$	1,865,577
		Total revenues	$	974,232		$	262,993		$	628,352		$	1,865,577

Expenses
	Net losses and loss expenses		$	(655,475)		$	(157,200)		$	(360,903)		$	(1,173,578)
	Acquisition costs			(100,818)			(54,076)			(124,524)			(279,418)
	General and administrative expenses			(175,732)			(78,093)			(57,474)			(311,299)
		Total expenses	$	(932,025)		$	(289,369)		$	(542,901)		$	(1,764,295)

Underwriting income (loss)			$	42,207		$	(26,376)		$	85,451		$	101,282

	Other insurance-related income			2,513			—			—			2,513
	Other insurance-related expenses			(2,076)			(2,227)			—			(4,303	)
Segment income (loss)			$	42,644		$	(28,603)		$	85,451		$	99,492

	Net investment income												132,978
	Net realized investment losses												(88,783)
	Amortization of intangible assets												(6,091)
	Interest expense												(43,272)
	Foreign exchange loss												(10,369)
Income before income taxes												$	83,955

GAAP Ratios
Loss and loss expense ratio				67.3	%		59.8	%		57.4	%		62.9	%
Acquisition cost ratio				10.3	%		20.6	%		19.8	%		15.0	%
General and administrative expense ratio				18.0	%		29.7	%		9.1	%		16.7	%
Expense ratio				28.3	%		50.3	%		28.9	%		31.7	%
Combined ratio				95.6	%		110.1	%		86.3	%		94.6	%

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS



	Three Months Ended								Nine Months Ended

	September 30, 2016				September 30, 2015				September 30, 2016				September 30, 2015
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
North American Insurance
Casualty	$	164,381	35.2	%	$	165,481	35.9	%	$	436,356	32.2	%	$	470,517	34.6	%
Professional liability		106,414	22.8	%		113,074	24.6	%		321,381	23.7	%		329,890	24.3	%
Programs		69,131	14.8	%		56,748	12.3	%		169,290	12.5	%		137,359	10.1	%
Other specialty⁽¹⁾		50,533	10.9	%		35,562	7.7	%		138,769	10.3	%		97,079	7.1	%
Property		46,619	10.0	%		53,557	11.6	%		192,551	14.2	%		219,848	16.2	%
Healthcare⁽²⁾		29,457	6.3	%		35,964	7.9	%		95,754	7.1	%		103,943	7.7	%
Total	$	466,535	100.0	%	$	460,386	100.0	%	$	1,354,101	100.0	%	$	1,358,636	100.0	%

Global Markets Insurance
Other specialty⁽³⁾	$	41,788	33.0	%	$	35,975	27.1	%	$	115,727	31.5	%	$	94,970	28.9	%
Professional liability		40,223	31.8	%		35,914	27.1	%		108,203	29.4	%		98,966	30.3	%
Casualty		23,870	18.8	%		36,043	27.2	%		80,082	21.8	%		75,295	22.9	%
Property		20,782	16.4	%		24,732	18.7	%		63,615	17.3	%		58,992	18.0	%
Total	$	126,663	100.0	%	$	132,664	100.0	%	$	367,627	100.0	%	$	328,223	100.0	%

Reinsurance
Casualty⁽⁴⁾	$	74,988	54.7	%	$	84,344	52.3	%	$	156,941	23.3	%	$	181,497	23.5	%
Property		54,372	39.7	%		70,939	44.1	%		345,425	51.4	%		414,760	53.6	%
Specialty		7,666	5.6	%		5,729	3.6	%		169,969	25.3	%		177,530	22.9	%
Total	$	137,026	100.0	%	$	161,012	100.0	%	$	672,335	100.0	%	$	773,787	100.0	%

Consolidated gross premiums written	$	730,224			$	754,062			$	2,394,063			$	2,460,646

⁽¹⁾ Includes the construction, environmental, surety and trade credit lines of businesses.
⁽²⁾ Includes the medical malpractice line of business. The healthcare management liability line of business previously included in the healthcare line of business is
included in the professional liability line of business. The comparative period was updated to reflect the current presentation.
⁽³⁾ Includes the accident and health, aviation, construction, marine and trade credit lines of businesses.
⁽⁴⁾ Includes the professional liability reinsurance line of business.

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED INCURRED LOSS ANALYSIS BY SEGMENT



	Three Months Ended								Nine Months Ended

	September 30, 2016				September 30, 2015				September 30, 2016				September 30, 2015
	Amount		% of NPE⁽¹⁾		Amount		% of NPE⁽¹⁾		Amount		% of NPE⁽¹⁾		Amount			% of NPE⁽¹⁾
North American Insurance
Current year - non-catastrophe	$	232,047	74.2	%	$	221,021	66.5	%	$	669,778	69.9	%	$	668,699		68.6	%
Current year - property catastrophe		—	0.0	%		2,750	0.8	%		4,600	0.5	%		2,750		0.3	%
Prior year - increase (decrease)		(16,150)	(5.2	)%		(1,521)	(0.5	)%		(32,320)	(3.4	)%		(15,974)		(1.6	)%
Net losses and loss expenses	$	215,897	69.0	%	$	222,250	66.8	%	$	642,058	67.0	%	$	655,475		67.3	%

Global Markets Insurance
Current year - non-catastrophe	$	70,476	72.8	%	$	73,039	66.2	%	$	209,634	73.5	%	$	172,746		65.7	%
Current year - property catastrophe		—	0.0	%		250	0.2	%		—	0.0	%		4,250		1.6	%
Prior year - increase (decrease)		4,051	4.2	%		(2,354)	(2.1	)%		(6,216)	(2.2	)%		(19,796)		(7.5	)%
Net losses and loss expenses	$	74,527	77.0	%	$	70,935	64.3	%	$	203,418	71.3	%	$	157,200		59.8	%

Reinsurance
Current year - non-catastrophe	$	98,610	56.6	%	$	95,912	46.2	%	$	301,876	57.7	%	$	365,704		58.2	%
Current year - property catastrophe		4,850	2.8	%		32,500	15.7	%		21,125	4.0	%		53,500		8.5	%
Prior year - increase (decrease)		(17,622)	(10.1	)%		(4,716)	(2.3	)%		(54,407)	(10.4	)%		(58,301)		(9.3	)%
Net losses and loss expenses	$	85,838	49.3	%	$	123,696	59.6	%	$	268,594	51.3	%	$	360,903		57.4	%

Consolidated
Current year - non-catastrophe	$	401,133	68.7	%	$	389,972	59.9	%	$	1,181,288	66.8	%	$	1,207,149		64.7	%
Current year - property catastrophe		4,850	0.8	%		35,500	5.5	%		25,725	1.5	%		60,500		3.2	%
Prior year - increase (decrease)		(29,721)	(5.1	)%		(8,591)	(1.3	)%		(92,943)	(5.3	)%		(94,071	)	(5.0	)%
Net losses and loss expenses	$	376,262	64.4	%	$	416,881	64.1	%	$	1,114,070	63.0	%	$	1,173,578		62.9	%

⁽¹⁾ "NPE" means net premiums earned.

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – CURRENT QUARTER



	Three Months Ended September 30, 2016
(Favorable) Unfavorable Development ($ in millions)	2010 and Prior		2011		2012		2013		2014		2015		Total

North American Insurance
Casualty	$	(3.4)	$	(0.4)	$	0.1	$	2.1	$	0.1	$	(0.1)	$	(1.6)
Professional liability		(15.4)		0.1		(0.7)		8.1		0.1		0.0		(7.8)
Property		(0.2)		(2.0)		0.0		(0.8)		(1.0)		0.1		(3.9)
Programs		0.6		(0.3)		(0.3)		(1.4)		(1.3)		(0.2)		(2.9)
Healthcare		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Other specialty		0.0		0.0		0.0		0.3		(0.2)		0.0		0.1
Total	$	(18.4)	$	(2.6)	$	(0.9)	$	8.3	$	(2.3)	$	(0.2)	$	(16.1)

Global Markets Insurance
Casualty	$	(2.4)	$	0.0	$	(1.4)	$	(0.5)	$	(0.3)	$	0.0	$	(4.6)
Professional liability		4.6		(0.8)		(0.1)		(0.6)		(0.5)		0.0		2.6
Property		0.1		(0.5)		0.3		(0.5)		(0.4)		(2.5)		(3.5)
Other specialty		(0.3)		0.2		0.0		(2.3)		10.8		1.2		9.6
Total	$	2.0	$	(1.1)	$	(1.2)	$	(3.9)	$	9.6	$	(1.3)	$	4.1

Reinsurance
Property	$	(0.1)	$	0.6	$	(0.9)	$	(1.8)	$	(6.1)	$	(3.3)	$	(11.6)
Casualty		(3.1)		(1.8)		(4.4)		3.3		0.2		1.3		(4.5)
Specialty		(0.4)		(0.1)		(0.2)		(0.4)		(0.7)		0.3		(1.5)
Total	$	(3.6)	$	(1.3)	$	(5.5)	$	1.1	$	(6.6)	$	(1.7)	$	(17.6)

Consolidated
North American Insurance	$	(18.4)	$	(2.6)	$	(0.9)	$	8.3	$	(2.3)	$	(0.2)	$	(16.1)
Global Markets Insurance		2.0		(1.1)		(1.2)		(3.9)		9.6		(1.3)		4.1
Reinsurance		(3.6)		(1.3)		(5.5)		1.1		(6.6)		(1.7)		(17.6)
Total	$	(20.0)	$	(5.0)	$	(7.6)	$	5.5	$	0.7	$	(3.2)	$	(29.6)

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – PRIOR YEAR QUARTER



	Three Months Ended September 30, 2015
(Favorable) Unfavorable Development ($ in millions)	2009 and Prior		2010		2011		2012		2013		2014		Total

North American Insurance
Casualty	$	(4.5)	$	(2.2)	$	1.1	$	6.5	$	9.5	$	1.9	$	12.3
Professional liability		(6.1)		(1.9)		(3.7)		(3.9)		(0.6)		3.3		(12.9)
Property		(1.4)		0.2		0.2		0.5		(1.6)		2.0		(0.1)
Programs		0.4		(0.3)		(0.5)		(0.3)		(1.2)		0.1		(1.8)
Healthcare		0.0		0.0		0.0		0.0		0.0		0.0		0.0
Other specialty		0.0		0.0		0.0		0.0		0.0		1.0		1.0
Total	$	(11.6)	$	(4.2)	$	(2.9)	$	2.8	$	6.1	$	8.3	$	(1.5)

Global Markets Insurance
Casualty	$	(1.2)	$	(1.0)	$	0.2	$	(0.4)	$	2.8	$	0.5	$	0.9
Professional liability		(1.1)		(1.0)		(1.1)		(1.0)		(1.0)		(0.3)		(5.5)
Property		0.4		(0.5)		(0.1)		0.5		(0.1)		(1.4)		(1.2)
Other specialty		(0.1)		0.0		(0.1)		0.3		4.0		(0.7)		3.4
Total	$	(2.0)	$	(2.5)	$	(1.1)	$	(0.6)	$	5.7	$	(1.9)	$	(2.4)

Reinsurance
Property	$	(0.6)	$	0.3	$	(0.8)	$	(0.7)	$	(1.0)	$	(0.5)	$	(3.3)
Casualty		(4.5)		(1.4)		0.8		1.8		0.1		1.1		(2.1)
Specialty		(0.4)		(0.1)		(0.2)		0.9		0.0		0.5		0.7
Total	$	(5.5)	$	(1.2)	$	(0.2)	$	2.0	$	(0.9)	$	1.1	$	(4.7)

Consolidated
North American Insurance	$	(11.6)	$	(4.2)	$	(2.9)	$	2.8	$	6.1	$	8.3	$	(1.5)
Global Markets Insurance		(2.0)		(2.5)		(1.1)		(0.6)		5.7		(1.9)		(2.4)
Reinsurance		(5.5)		(1.2)		(0.2)		2.0		(0.9)		1.1		(4.7)
Total	$	(19.1)	$	(7.9)	$	(4.2)	$	4.2	$	10.9	$	7.5	$	(8.6)

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – CURRENT YEAR TO DATE



	Nine Months Ended September 30, 2016
(Favorable) Unfavorable Development ($ in millions)	2010 and Prior		2011		2012		2013		2014		2015		Total

North American Insurance
Casualty	$	(30.7)	$	(0.5)	$	13.3	$	8.4	$	6.5	$	0.3	$	(2.7)
Professional liability		(32.2)		(3.2)		(5.5)		15.1		3.8		0.1		(21.9)
Property		(0.9)		(2.1)		0.1		(0.7)		(5.9)		5.9		(3.6)
Programs		1.7		0.9		4.2		(4.9)		(4.6)		(0.7)		(3.4)
Healthcare		0.2		(0.2)		0.0		0.0		0.0		0.0		0.0
Other specialty		0.0		0.0		0.0		0.3		0.2		(1.2)		(0.7)
Total	$	(61.9)	$	(5.1)	$	12.1	$	18.2	$	0.0	$	4.4	$	(32.3)

Global Markets Insurance
Casualty	$	(5.7)	$	(0.3)	$	(2.2)	$	(0.7)	$	0.2	$	2.7	$	(6.0)
Professional liability		5.9		(0.3)		(1.2)		0.1		0.3		0.4		5.2
Property		(6.9)		0.0		1.0		(0.4)		(3.6)		2.3		(7.6)
Other specialty		(0.5)		0.6		0.0		(1.5)		10.8		(7.2)		2.2
Total	$	(7.2)	$	0.0	$	(2.4)	$	(2.5)	$	7.7	$	(1.8)	$	(6.2)

Reinsurance
Property	$	0.7	$	3.6	$	(4.7)	$	(11.3)	$	(10.5)	$	(26.6)	$	(48.8)
Casualty		(12.5)		(5.2)		7.6		13.8		4.6		(4.8)		3.5
Specialty		(0.8)		(1.4)		0.0		2.1		(7.3)		(1.7)		(9.1)
Total	$	(12.6)	$	(3.0)	$	2.9	$	4.6	$	(13.2)	$	(33.1)	$	(54.4)

Consolidated
North American Insurance	$	(61.9)	$	(5.1)	$	12.1	$	18.2	$	0.0	$	4.4	$	(32.3)
Global Markets Insurance		(7.2)		0.0		(2.4)		(2.5)		7.7		(1.8)		(6.2)
Reinsurance		(12.6)		(3.0)		2.9		4.6		(13.2)		(33.1)		(54.4)
Total	$	(81.7)	$	(8.1)	$	12.6	$	20.3	$	(5.5)	$	(30.5)	$	(92.9)

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – PRIOR YEAR TO DATE



	Nine Months Ended September 30, 2015
(Favorable) Unfavorable Development ($ in millions)	2009 and Prior		2010		2011		2012		2013		2014		Total

North American Insurance
Casualty	$	(16.2)	$	(4.5)	$	(6.0)	$	12.7	$	16.5	$	2.2	$	4.7
Professional liability		8.7		(18.0)		(14.1)		(1.6)		(0.3)		8.8		(16.5)
Property		(2.1)		0.2		(0.3)		(1.9)		(4.1)		2.1		(6.1)
Programs		(2.5)		(3.5)		(2.7)		(2.8)		(0.5)		(0.3)		(12.3)
Healthcare		(4.7)		(0.4)		5.5		7.4		3.1		0.0		10.9
Other specialty		0.0		(0.1)		0.0		0.5		0.0		2.9		3.3
Total	$	(16.8)	$	(26.3)	$	(17.6)	$	14.3	$	14.7	$	15.7	$	(16.0)

Global Markets Insurance
Casualty	$	(7.7)	$	(3.6)	$	0.3	$	1.7	$	2.3	$	(0.6)	$	(7.6)
Professional liability		(0.8)		(5.8)		(2.0)		3.3		(1.5)		0.1		(6.7)
Property		(1.3)		(0.3)		(0.5)		0.3		(4.4)		(5.2)		(11.4)
Other specialty		(0.2)		(0.1)		(0.3)		(0.1)		5.0		1.6		5.9
Total	$	(10.0)	$	(9.8)	$	(2.5)	$	5.2	$	1.4	$	(4.1)	$	(19.8)

Reinsurance
Property	$	(2.1)	$	1.9	$	3.2	$	(8.3)	$	7.9	$	(45.0)	$	(42.4)
Casualty		(17.3)		(14.3)		1.3		6.6		4.8		2.5		(16.4)
Specialty		(0.7)		(0.1)		(0.5)		1.2		(1.8)		2.4		0.5
Total	$	(20.1)	$	(12.5)	$	4.0	$	(0.5)	$	10.9	$	(40.1)	$	(58.3)

Consolidated
North American Insurance	$	(16.8)	$	(26.3)	$	(17.6)	$	14.3	$	14.7	$	15.7	$	(16.0)
Global Markets Insurance		(10.0)		(9.8)		(2.5)		5.2		1.4		(4.1)		(19.8)
Reinsurance		(20.1)		(12.5)		4.0		(0.5)		10.9		(40.1)		(58.3)
Total	$	(46.9)	$	(48.6)	$	(16.1)	$	19.0	$	27.0	$	(28.5)	$	(94.1)

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

REINSURANCE RECOVERABLE



	As of September 30, 2016							As of December 31, 2015

	A.M. Best	Reinsurance						A.M. Best	Reinsurance
Top Ten Reinsurers	Rating	Recoverable		Percentage		Collateral		Rating	Recoverable		Percentage		Collateral

Munich Re	A+	$	312,525	20.1	%	$	86,021	A+	$	307,865	20.8	%	$	90,393
Axis Capital	A+		154,696	10.0	%		7,122	A+		150,832	10.2	%		7,122
Swiss Re	A+		132,463	8.5	%		6,088	A+		103,872	7.0	%		6,088
Arch Re	A+		104,835	6.8	%		2,919	A+		115,330	7.8	%		2,894
Markel	A		97,269	6.3	%		26,221	A		90,105	6.1	%		25,232
RenaissanceRe	A+		89,495	5.8	%		—	A+		93,991	6.4	%		—
XL Group	A		84,113	5.4	%		796	A		87,132	5.9	%		794
Odyssey Reinsurance	A		73,767	4.8	%		—	A		77,203	5.2	%		—
Everest Re	A+		60,474	3.9	%		19,018	A+		51,006	3.4	%		19,017
Transatlantic	A		53,597	3.5	%		807	A		55,336	3.7	%		—
Top ten reinsurers			1,163,234	75.1	%		148,992			1,132,672	76.5	%		151,540
Other reinsurers' balances			387,425	24.9	%		30,172			347,287	23.5	%		27,183
Total reinsurance recoverable		$	1,550,659	100.0	%	$	179,164		$	1,479,959	100.0	%	$	178,723

		Reinsurance							Reinsurance
A.M Best Rating		Recoverable		Percentage		Collateral			Recoverable		Percentage		Collateral

A++		$	92,010	5.9	%	$	1,513		$	81,374	5.5	%	$	1,399
A+			919,531	59.3	%		121,167			896,981	60.6	%		125,514
A			523,483	33.8	%		30,926			486,344	32.9	%		28,871
A-			4,682	0.3	%		—			4,408	0.3	%		—
Total "A-" or higher			1,539,706	99.3	%		153,606			1,469,107	99.3	%		155,784
B++			—	0.0	%		—			4	0.0	%		—
NR			10,953	0.7	%		25,558			10,848	0.7	%		22,939
Total reinsurance recoverable		$	1,550,659	100.0	%	$	179,164		$	1,479,959	100.0	%	$	178,723

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

PROBABLE MAXIMUM LOSSES



Consolidated Estimated Net Loss as of September 1, 2016
		1-in-100 Year		1-in-250 Year				1-in-100 Year		1-in-250 Year
		($ in millions)						($ in millions)
Zone	Peril	PML		PML		Zone	Peril	PML		PML


U.S. total	Hurricane	$	399	$	443	California	Earthquake	$	322	$	492

U.S. total	Earthquake	$	399	$	526	U.S. Southeast (1)	Hurricane	$	364	$	403

						U.S. Gulf Coast (2)	Hurricane	$	192	$	366

						U.S. Northeast (3)	Hurricane	$	198	$	384



PMLs Over the Most Recent Six Quarters as a % of Total Capital

(1) Florida, Georgia, North Carolina and South Carolina.

(2) Alabama, Louisiana, Mississippi and Texas.

(3) Connecticut, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont.

(4) Total capital combines shareholders' equity, other long-term debt and senior notes adjusted for the repayment at maturity of the senior notes in August 2016 with the proceeds from the senior notes issued in October 2015.

Note: We develop the estimates of losses expected from certain catastrophes for our portfolio of (re)insurance contracts using commercially available catastrophe models. The above tables show our largest Probable Maximum Losses ("PMLs") from a single catastrophic event (1) within a specific peril which corresponds to peak industry catastrophe exposures and (2) within a defined zone which corresponds to peak industry catastrophe exposures at September 1, 2016. A zone is a geographic area in which the insurance risks are considered to be correlated to a single catastrophic event. Net loss estimates and zonal aggregates are before income tax and net of reinsurance and retrocessional recoveries. The 1-in-100 year and 1-in-250 year return periods refer to the frequency with which losses of a given amount or greater are expected to occur.

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED TOTAL INVESTMENT PORTFOLIO



				As of September 30, 2016												As of December 31, 2015


							Average	Portfolio		Investment		Non-Investment
				Fair Value			Rating	Percentage		Grade		Grade		Total			Fair Value
Cash and cash equivalents				$	872,690		AAA	9.3	%	$	872,690	$	—	$	872,690	$	668,612
U.S. government and agency securities					1,471,170		AA+	15.8	%		1,471,170		—		1,471,170		1,434,048
Non-U.S. government and government agencies					488,167		AA	5.2	%		460,819		27,348		488,167		556,758
State, municipalities and political subdivisions					480,770		AA	5.1	%		449,752		31,018		480,770		413,473
Mortgage-backed securities:
	Agency MBS				845,880		AA+	9.0	%		845,880		—		845,880		751,838
	Non-agency RMBS				22,610		BB	0.2	%		11,021		11,589		22,610		34,015
	CMBS				631,770		BB	6.8	%		270,162		361,608		631,770		582,785
		Total mortgage-backed securities			1,500,260			16.0	%		1,127,063		373,197		1,500,260		1,368,638
Corporate securities⁽¹⁾:
	Financials				1,084,247		A	11.6	%		1,066,596		17,651		1,084,247		1,275,408
	Industrials				1,372,480		A-	14.7	%		1,256,571		115,909		1,372,480		1,308,093
	Utilities				138,397		BBB+	1.5	%		135,815		2,582		138,397		118,945
		Total corporate securities			2,595,124			27.8	%		2,458,982		136,142		2,595,124		2,702,446
Total asset-backed securities					791,810		AA	8.5	%		749,496		42,314		791,810		726,175
Equities					216,141		N/A	2.3	%		—		216,141		216,141		403,022
Other invested assets:
	Private equity				495,531		N/A	5.3	%		—		495,531		495,531		447,455
	Hedge funds				331,567		N/A	3.5	%		—		331,567		331,567		378,988
	Other private securities				114,555		N/A	1.2	%		—		114,555		114,555		126,492
	High yield loan fund				—		N/A	0.0	%		—		—		—		13,774
		Total other invested assets			941,653			10.0	%		—		941,653		941,653		966,709
			Total investment portfolio	$	9,357,785			100.0	%	$	7,589,972	$	1,767,813	$	9,357,785	$	9,239,881

Annualized book yield, year to date					2.3	%											2.1	%
Duration⁽²⁾					2.9 years												2.6 years
Average credit quality (S&P)					AA-												A+


⁽¹⁾ Includes floating rate bank loans.
⁽²⁾ Includes only fixed maturity investments and cash and cash equivalents.

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

INVESTMENT INCOME, BOOK YIELD AND PORTFOLIO RETURN



		Three Months Ended						Nine Months Ended

			September 30,			September 30,			September 30,			September 30,
			2016			2015			2016			2015
NET INVESTMENT INCOME
Fixed maturity investments		$	46,414		$	42,801		$	143,301		$	120,264
Equity securities			1,143			3,115			4,393			11,540
Other invested assets: hedge funds and private equity			5,867			3,342			18,140			16,305
Other invested assets: other private securities			973			1,804			5,698			(1,119)
Cash and cash equivalents			687			277			2,004			1,178
Expenses			(4,520)			(5,672)			(13,881)			(15,190)
Net investment income		$	50,564		$	45,667		$	159,655		$	132,978

NET REALIZED INVESTMENT GAINS (LOSSES)
Net realized gains (losses) on sale:
	Fixed maturity investments	$	1,351		$	(5,251)		$	18,170		$	5,062
	Equity securities		1,842			(12,238)			2,294			14,916
	Other invested assets: hedge funds and private equity		3,493			1,448			17,614			22,286
	Derivatives		2,162			(19,793)			(25,178)			(17,557)
Mark-to-market gains (losses):
	Fixed maturity investments		(9,452)			(15,271)			108,267			(42,442)
	Equity securities		11,119			(62,852)			(3,064)			(57,762)
	Other invested assets: hedge funds and private equity		3,347			443			(15,333)			(13,227)
	Derivatives		(3,199)			(112)			1,244			(59)
Net realized investment gains (losses)		$	10,663		$	(113,626)		$	104,014		$	(88,783)

TOTAL FINANCIAL STATEMENT PORTFOLIO RETURN		$	61,227		$	(67,959)		$	263,669		$	44,195

ANNUALIZED INVESTMENT BOOK YIELD
Net investment income, recurring		$	50,564		$	45,667		$	159,655		$	132,978
Annualized net investment income			202,256			182,668			212,873			177,304
Average aggregate invested assets, at cost		$	9,269,293		$	8,750,453		$	9,109,465		$	8,601,085
Annualized investment book yield			2.2	%		2.1	%		2.3	%		2.1	%

FINANCIAL STATEMENT PORTFOLIO RETURN
Total financial statement portfolio return		$	61,227		$	(67,959)		$	263,669		$	44,195
Average aggregate invested assets, at fair value		$	9,347,150		$	8,864,607		$	9,143,673		$	8,722,660
Financial statement portfolio return			0.7	%		(0.8	)%		2.9	%		0.5	%

Page 22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL



Other Invested Assets:								Top 10 Corporate Fixed Income and Equity Exposures:

			Carrying Value										Fair Value
Fund Details			September 30, 2016		Unfunded Commitments			Corporate					September 30, 2016		Portfolio Percentage
Private Equity:								Morgan Stanley					$	52,716		0.6	%
Primary and secondary			$	248,067	$	221,849		JP Morgan Chase & Co						52,251		0.6	%
Mezzanine debt				221,005		195,142		Apple Inc						50,670		0.5	%
Distressed				5,086		3,807		Bank of America Corp						44,131		0.5	%
Real estate				21,373		189,342		Wells Fargo & Co						41,841		0.5	%
	Total private equity			495,531		610,140		US Bancorp						37,220		0.4	%
Hedge Funds:								General Electric Co						36,559		0.4	%
Distressed				173,913		—		Oracle Corp						35,919		0.4	%
Relative value credit				82,602		—		Microsoft Corp						34,759		0.4	%
Equity long/short				64,824		—		PNC Financial Services Group						34,686		0.4	%
Fund of funds				10,227		—
	Total hedge funds			331,567		—
	Other private securities			114,555		—
		Total other invested assets	$	941,653	$	610,140


Fixed Income Credit Quality:			September 30, 2016					December 31, 2015

Rating			Fair Value		Percentage			Fair Value		Percentage
U.S. government and agencies			$	1,471,170		20.1	%	$	1,434,049		19.9	%
AAA/Aaa				1,446,630		19.7	%		1,572,212		21.8	%
AA/Aa				1,708,724		23.3	%		1,484,109		20.6	%
A/A				1,141,276		15.6	%		1,083,257		15.0	%
BBB/Baa				949,482		13.0	%		920,220		12.8	%
	Total BBB/Baa and above			6,717,282		91.7	%		6,493,847		90.1	%
BB/Bb				62,551		0.9	%		88,708		1.2	%
B/B				138,636		1.9	%		232,070		3.3	%
CCC+ and below				408,832		5.5	%		386,913		5.4	%
		Total	$	7,327,301		100.0	%	$	7,201,538		100.0	%

Page 23

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

SHARE REPURCHASE DETAIL



					Average				Average		Remaining
		Aggregate Cost		Number of	Price paid		Average		Repurchase		Share
		of Shares		Shares	Per Share		Diluted Book		Price to Diluted		Repurchase
Period		Repurchased		Repurchased	Repurchased		Value Per Share⁽¹⁾		Book Value		Authorization

Three Months Ended:
	March 31, 2015	$	50,949	1,271,213	$	40.08	$	38.63	103.8	%
	June 30, 2015		194,352	4,776,224		40.69		39.45	103.1	%
	September 30, 2015		—	—		0.00		38.97	—
	December 31, 2015		—	—		0.00		37.90	—
	Total - 2015	$	245,301	6,047,437	$	40.56	$	38.03	106.7	%

Three Months Ended:
	March 31, 2016	$	50,000	1,460,888	$	34.23	$	37.96	90.2	%
	June 30, 2016		90,022	2,491,355		36.13		38.92	92.8	%
	September 30, 2016		26,231	716,970		36.59		39.95	91.6	%
	Total - 2016	$	166,253	4,669,213	$	35.61	$	38.99	91.3	%	$	400,414

⁽¹⁾ Average of beginning and ending diluted book value per share for each period presented and weighted average total.

Page 24

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CAPITAL STRUCTURE AND LEVERAGE RATIOS



	As of			As of
	September 30, 2016			December 31, 2015

Senior notes	$	793,973		$	1,292,907
Other long-term debt		23,306			23,033
Shareholders' equity		3,615,869			3,532,542
Total capitalization	$	4,433,148		$	4,848,482

Leverage Ratios
Debt to total capitalization⁽¹⁾		18.4	%		27.1	%*

Net premiums written (trailing 12 months)	$	2,275,326		$	2,448,007
Net premiums written (trailing 12 months) to shareholders' equity		0.63 x			0.69 x

Total investments and cash & cash equivalents	$	9,357,785		$	9,239,881
Total investments and cash & cash equivalents to shareholders' equity		2.59 x			2.62 x

Reserve for losses and loss expenses	$	6,665,796		$	6,456,156
Deduct: reinsurance recoverable		(1,550,659)			(1,479,959)
Net reserve for losses and loss expenses	$	5,115,137			4,976,197
Net reserve for losses and loss expenses to shareholders' equity		1.41 x			1.41 x

^* Includes $500 million 4.35% senior notes issued in October 2015, the proceeds of which were used to repay at maturity the $500 million 7.50% senior notes in August 2016.




Fixed Charge Coverage Ratio	Three Months Ended						Nine Months Ended

		September 30,			September 30,			September 30,			September 30,
		2016			2015			2016			2015

Interest expense	$	13,462		$	14,469		$	53,290		$	43,272

Income (loss) before income taxes		65,463			(56,911	)		300,389			83,955
Interest expense		13,462			14,469			53,290			43,272
Earnings for calculation of fixed coverage ratio	$	78,925		$	(42,442	)	$	353,679		$	127,227

Fixed charge coverage ratio		5.9	x		(2.9	) x		6.6	x		2.9	x

Page 25

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

OPERATING INCOME RECONCILIATION AND

BASIC AND DILUTED EARNINGS PER SHARE INFORMATION



		Three Months Ended										Nine Months Ended

		September 30,		June 30,		March 31,		December 31,		September 30,		September 30,		September 30,
		2016		2016		2016		2015		2015		2016		2015

Net income (loss)		$	68,613	$	153,410	$	74,099	$	1,707	$	(51,630)	$	296,121	$	82,184
Add pre-tax effect of:
	Net realized investment (gains) losses		(10,663)		(74,493)		(18,858)		38,849		113,626		(104,014)		88,783
	Foreign exchange loss (gain)		1,007		(2,887)		(3,011)		920		(793)		(4,891)		10,369
Income tax (benefit) expense⁽¹⁾			(3,733)		6,651		6,779		1,536		(9,764)		9,697		(12,378)
Operating income		$	55,224	$	82,681	$	59,009	$	43,012	$	51,439	$	196,913	$	168,958

Weighted average common shares outstanding
Basic			87,102,290		88,742,484		90,254,512		90,934,107		90,882,511		88,691,983		93,068,088
Diluted			88,603,101		90,040,509		91,559,225		92,422,422		92,440,277*		90,113,606		94,724,980

Basic per share data
Net income (loss)		$	0.79	$	1.73	$	0.82	$	0.02	$	(0.57)	$	3.34	$	0.88
Add pre-tax effect of:
	Net realized investment (gains) losses		(0.12)		(0.84)		(0.21)		0.43		1.25		(1.17)		0.95
	Foreign exchange loss (gain)		0.01		(0.03)		(0.03)		0.01		(0.01)		(0.06)		0.11
Income tax (benefit) expense⁽¹⁾			(0.04)		0.07		0.08		0.01		(0.11)		0.11		(0.13)
Operating income		$	0.64	$	0.93	$	0.66	$	0.47	$	0.56	$	2.22	$	1.81

Diluted per share data
Net income (loss)		$	0.77	$	1.70	$	0.81	$	0.02	$	(0.56)*	$	3.29	$	0.87
Add pre-tax effect of:
	Net realized investment (gains) losses		(0.12)		(0.83)		(0.21)		0.42		1.23		(1.15)		0.94
	Foreign exchange loss (gain)		0.01		(0.03)		(0.03)		0.01		(0.01)		(0.05)		0.11
Income tax (benefit) expense⁽¹⁾			(0.04)		0.07		0.08		0.02		(0.11)		0.11		(0.13)
Operating income		$	0.62	$	0.91	$	0.65	$	0.47	$	0.55	$	2.19	$	1.79

⁽¹⁾ Represents the tax expense or benefit associated with the specific country to which the pre-tax adjustment related to.

* Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share, and not in the calculation of diluted earnings per share,
as there was a net loss during the three months ended September 30, 2015.

Page 26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND AVERAGE TANGIBLE SHAREHOLDERS' EQUITY AND RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY



		Three Months Ended															Nine Months Ended

		September 30,			June 30,			March 31,			December 31,			September 30,			September 30,			September 30,
		2016			2016			2016			2015			2015			2016			2015

Opening shareholders' equity		$	3,584,452		$	3,535,463		$	3,532,542		$	3,555,405		$	3,624,801		$	3,532,542		$	3,778,291
Add: accumulated other comprehensive loss			6,024			6,168			9,297			4,265			3,272			9,297			—
Adjusted opening shareholders' equity		$	3,590,476		$	3,541,631		$	3,541,839		$	3,559,670		$	3,628,073		$	3,541,839		$	3,778,291
Adjusted opening tangible shareholders' equity⁽¹⁾			3,084,360			3,036,217			3,037,089			3,074,277			3,133,976			3,037,089			3,453,735

Closing shareholders' equity		$	3,615,869		$	3,584,452		$	3,535,463		$	3,532,542		$	3,555,405		$	3,615,869		$	3,555,405
Add: accumulated other comprehensive loss			5,421			6,024			6,168			9,297			4,265			5,421			4,265
Adjusted closing shareholders' equity		$	3,621,290		$	3,590,476		$	3,541,631		$	3,541,839		$	3,559,670		$	3,621,290		$	3,559,670
Adjusted closing tangible shareholders' equity⁽¹⁾			3,117,422			3,084,360			3,036,217			3,037,089			3,074,277			3,117,422			3,074,277

Average adjusted shareholders' equity		$	3,605,883		$	3,566,054		$	3,541,735		$	3,550,755		$	3,593,872		$	3,581,565		$	3,668,981
Average adjusted tangible shareholders' equity			3,100,891			3,060,289			3,036,653			3,055,683			3,104,127			3,077,256			3,264,006

Net income (loss) available to shareholders		$	68,613		$	153,410		$	74,099		$	1,707		$	(51,630)		$	296,121		$	82,184

	Annualized net income (loss) available to shareholders	$	274,452		$	613,640		$	296,396		$	6,828		$	(206,520)		$	394,828		$	109,579

Annualized return on average shareholders' equity - net income (loss) available to shareholders			7.6	%		17.2	%		8.4	%		0.2	%		(5.7	)%		11.0	%		3.0	%
Annualized return on average tangible shareholders' equity - net income (loss) available to shareholders			8.9	%		20.1	%		9.8	%		0.2	%		(6.7	)%		12.8	%		3.4	%

Operating income available to shareholders		$	55,224		$	82,681		$	59,009		$	43,012		$	51,439		$	196,913		$	168,958

	Annualized operating income available to shareholders	$	220,896		$	330,724		$	236,036		$	172,048		$	205,756		$	262,551		$	225,277

Annualized return on average shareholders' equity - operating income available to shareholders			6.1	%		9.3	%		6.7	%		4.8	%		5.7	%		7.3	%		6.1	%
Annualized return on average tangible shareholders' equity - operating income available to shareholders			7.1	%		10.8	%		7.8	%		5.6	%		6.6	%		8.5	%		6.9	%

⁽¹⁾ Represents adjusted shareholders' equity less goodwill and intangible assets for each period presented.

Page 27

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RECONCILIATION OF DILUTED BOOK VALUE PER SHARE AND TANGIBLE BOOK VALUE PER SHARE



		As of			As of			As of			As of
		September 30,			June 30,			December 31,			September 30,
		2016			2016			2015			2015

Price per share at period end		$	40.42		$	35.14		$	37.19		$	38.17

Total shareholders' equity		$	3,615,869		$	3,584,452		$	3,532,542		$	3,555,405
Deduct:
	Goodwill		392,768			392,643			388,127			354,781
	Intangible assets		111,100			113,473			116,623			130,612
Total tangible shareholders' equity		$	3,112,001		$	3,078,336		$	3,027,792		$	3,070,012

Basic common shares outstanding			86,974,284			87,463,950			90,959,635			90,911,888

Add: unvested restricted stock units			1,194,576			1,215,116			819,309			823,635

Add: performance based equity awards			588,537			594,240			591,683			591,683

Add: employee share purchase plan			38,404			62,451			53,514			32,515

Add: dilutive stock options outstanding			1,652,847			1,833,830			1,968,607			2,020,354
	Weighted average exercise price per share	$	17.14		$	16.96		$	16.87		$	16.70
Deduct: stock options bought back via treasury method			(700,903)			(885,060)			(892,993)			(883,846)

Common shares and common share equivalents outstanding			89,747,745			90,284,527			93,499,755			93,496,229

Basic book value per common share		$	41.57		$	40.98		$	38.84		$	39.11
Year-to-date percentage change in basic book value per common share			7.0	%		5.5	%		(0.7	)%

Diluted book value per common share		$	40.29		$	39.70		$	37.78		$	38.03
Year-to-date percentage change in diluted book value per common share			6.6	%		5.1	%		(0.7	)%

Basic tangible book value per common share		$	35.78		$	35.20		$	33.29		$	33.77
Year-to-date percentage change in basic tangible book value per common share			7.5	%		5.7	%		(1.4	)%

Diluted tangible book value per common share		$	34.67		$	34.10		$	32.38		$	32.84
Year-to-date percentage change in diluted tangible book value per common share			7.1	%		5.3	%		(1.4	)%

Page 28

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

REGULATION G

In presenting the company's results, management has included and discussed certain non-GAAP financial measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company's results of operations in a manner that allows for a more complete understanding of the underlying trends in the company's business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

OPERATING INCOME

Operating income is an internal performance measure used by the company in the management of its operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, impairment of intangible assets and other non-recurring items. The company excludes net realized investment gains or losses, net foreign exchange gain or loss and other non-recurring items from its calculation of operating income because these amounts are heavily influenced by and fluctuate in part according to the availability of market opportunities and other factors. In addition to presenting net income determined in accordance with GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the company's results of operations and the company's underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. See page 26 for the reconciliation of net income to operating income.

ANNUALIZED RETURN ON AVERAGE SHAREHOLDERS' EQUITY ("ROAE") AND AVERAGE TANGIBLE SHAREHOLDERS' EQUITY ("ROATE")

Annualized return on average shareholders' equity is calculated using average shareholders’ equity, excluding the average after tax unrealized gains (losses) on investments and currency translation adjustment gains (losses). Unrealized gains (losses) on investments are primarily the result of interest rate and credit spread movements and the resultant impact on fixed income securities. These gains (losses) are not related to management actions or operational performance, nor are they likely to be realized. Therefore, the company believes that excluding these gains (losses) provides a more consistent and useful 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 net income (loss) available to shareholders. The ROATE is the same calculation but reduces shareholders' equity for goodwill and intangible assets. The company presents ROAE and ROATE as measures that are commonly recognized as standards of performance by investors, analysts, rating agencies and other users of its financial information. See page 27 for the reconciliation of average shareholders’ equity and average tangible shareholders equity.

ANNUALIZED OPERATING RETURN ON AVERAGE SHAREHOLDERS' EQUITY AND AVERAGE TANGIBLE SHAREHOLDERS' EQUITY

Annualized operating return on average shareholders' equity is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above), and average shareholders' equity, excluding the average after tax unrealized gains (losses) on investments or currency translation adjustment gains (losses). The ROATE is the same calculation but reduces shareholders' equity for goodwill and intangible assets. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average shareholders' equity explanation above. See page 26 for the reconciliation of net income to operating income and page 27 for the reconciliation of average shareholders’ equity.

TANGIBLE SHAREHOLDERS' EQUITY AND DILUTED BOOK VALUE PER SHARE

The company has included tangible shareholders' equity, which is total shareholders' equity excluding goodwill and intangible assets, because it represents a more liquid measure of the company's net assets than total shareholders' equity. The company also has included diluted book value per share because it takes into account the effect of dilutive securities; therefore, the company believes it is an important measure of calculating shareholder returns. See page 28 for the reconciliation of diluted book value per share to basic book value per share.

ANNUALIZED INVESTMENT BOOK YIELD

Annualized investment book yield is calculated by dividing normalized net investment income by average aggregate invested assets at book value. In calculating annualized investment book yield, normalized net investment income for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net investment income. Normalized net investment income is adjusted for known annual or non-recurring items. Aggregate invested assets includes cash and cash equivalents, fixed maturity securities, equity securities, other invested assets and the net balances receivable or payable on purchases and sales of investments. The company utilizes and presents the investment yield in order to better disclose the performance of the company's investments and to show the components of the company's ROAE. See page 22 for the calculation of annualized investment book yield.

Page 29

Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT - October 31, 2016

Attached files

Allied World Assurance Co Holdings, AG Reports