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-20170426x8kexhibit991.htm
8-K - 8-K - Allied World Assurance Co Holdings, AG	form_8-kxxx1qx2017xearning.htm

EXHIBIT 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

1st Quarter Ended March 31, 2017

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 the occurrence of any event, change or other circumstances that could give rise to the termination of the proposed acquisition by Fairfax Financial Holdings Limited ("Fairfax"); the inability to obtain Allied World’s or Fairfax’s shareholder approval or the failure to satisfy other conditions to completion of the proposed acquisition, including receipt of regulatory approvals; risks that the proposed acquisition disrupts our current plans and operations; the ability to retain key personnel; the ability to recognize the benefits of the proposed acquisition; the amount of the costs, fees, expenses and charges related to the proposed acquisition; 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
	- Gross Premiums Written by Line of Business	11

IV.	Incurred Losses, Loss Reserves and PMLs
	- Consolidated Incurred Loss Analysis by Segment	12
	- Net Loss Reserve Development by Loss Year - Current Quarter	13
	- Net Loss Reserve Development by Loss Year - Prior Year Quarter	14
	- Reinsurance Recoverable	15
	- Probable Maximum Losses	16

V.	Investment Portfolio
	- Consolidated Total Investment Portfolio	17
	- Investment Income, Book Yield and Portfolio Return	18
	- Additional Investment Detail	19

VI.	Capital Structure
	- Share Repurchase Detail	20
	- Capital Structure and Leverage Ratios	21

VII.	Non-GAAP Reconciliations
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share	22
	- Return on Average Shareholders' Equity and Reconciliation of Average Shareholders' Equity	23
	- Reconciliation of Diluted Book Value per Share	24
	- Regulation G	25

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 25 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED FINANCIAL HIGHLIGHTS



			Three Months Ended
			March 31,						$			%
			2017			2016			Difference			Difference
HIGHLIGHTS
	Gross premiums written		$	860,861		$	863,545		$	(2,684	)	(0.3	)%
	Net premiums written		676,049			704,046			(27,997		)	(4.0	)%
	Net premiums earned		544,863			580,122			(35,259		)	(6.1	)%
	Underwriting income		4,654			23,096			(18,442		)	(79.8	)%
	Net income		80,342			74,099			6,243			8.4	%
	Operating income		47,945			59,009			(11,064		)	(18.7	)%
	Total shareholders' equity		3,638,392			3,535,463			102,929			2.9	%
	Cash flows provided by operating activities		195,302			347,409			(152,107		)	(43.8	)%
PER SHARE AND SHARE DATA
	Diluted earnings per share
		Net income	$	0.90		$	0.81		$	0.09		11.1	%
		Operating income	$	0.53		$	0.65		$	(0.12	)	(18.5	)%

	Basic book value per share		$	41.59		$	39.35		$	2.24		5.7	%
	Diluted book value per share		$	40.59		$	38.13		$	2.46		6.5	%
	Diluted tangible book value per share		$	35.09		$	32.68		$	2.41		7.4	%

FINANCIAL RATIOS
	Annualized return on average equity (ROAE), net income		8.9		%	8.4		%				0.5 pts
	Annualized ROAE, operating income		5.3		%	6.7		%				(1.4) pts
	Annualized return on average tangible equity (ROATE), net income		10.3		%	9.8		%				0.5 pts
	Annualized ROATE, operating income		6.2		%	7.8		%				(1.6) pts
	Financial statement portfolio return		1.0		%	0.8		%				0.2 pts

	GAAP Ratios
	Loss and loss expense ratio		65.9		%	64.2		%				(1.7) pts
	Acquisition cost ratio		14.1		%	15.2		%				1.1 pts
	General and administrative expense ratio		19.1		%	16.6		%				(2.5) pts
	Expense ratio		33.2		%	31.8		%				(1.4) pts
	Combined ratio		99.1		%	96.0		%				(3.1) pts

Page 5

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF OPERATIONS



			Three Months Ended															Three Months Ended

			March 31,			December 31,			September 30,			June 30,			March 31,			March 31,			March 31,
			2017			2016			2016			2016			2016			2017			2016
Revenues
	Gross premiums written		$	860,861		$	671,703		$	730,224		$	800,294		$	863,545		$	860,861		$	863,545
	Net premiums written		$	676,049		$	445,328		$	528,325		$	578,137		$	704,046		$	676,049		$	704,046
	Net premiums earned		$	544,863		$	576,979		$	584,051		$	602,968		$	580,122		$	544,863		$	580,122
	Net investment income		52,307			58,131			50,564			55,839			53,253			52,307			53,253
	Net realized investment gains (losses)		40,679			(101,946		)	10,663			74,493			18,858			40,679			18,858
	Other income		1,334			4,818			1,878			5,177			565			1,334			565
		Total revenues	$	639,183		$	537,982		$	647,156		$	738,477		$	652,798		$	639,183		$	652,798

Expenses
	Net losses and loss expenses		$	359,016		$	387,774		$	376,262		$	365,443		$	372,366		$	359,016		$	372,366
	Acquisition costs		77,134			82,018			82,033			87,403			88,308			77,134			88,308
	General and administrative expenses		104,059			106,134			104,236			104,729			96,352			104,059			96,352
	Other expense		7,062			1,789			2,192			1,682			1,134			7,062			1,134
	Amortization of intangible assets		2,322			3,222			2,501			2,501			2,500			2,322			2,500
	Interest expense		10,390			10,444			13,462			19,879			19,949			10,390			19,949
	Foreign exchange loss (gain)		1,371			801			1,007			(2,887		)	(3,011		)	1,371			(3,011		)
		Total expenses	$	561,354		$	592,182		$	581,693		$	578,750		$	577,598		$	561,354		$	577,598

Income (loss) before income taxes			$	77,829		$	(54,200	)	$	65,463		$	159,727		$	75,200		$	77,829		$	75,200
	Income tax (benefit) expense		(2,513		)	(13,323		)	(3,150		)	6,317			1,101			(2,513		)	1,101
Net income (loss)			$	80,342		$	(40,877	)	$	68,613		$	153,410		$	74,099		$	80,342		$	74,099

GAAP Ratios
Loss and loss expense ratio			65.9		%	67.2		%	64.4		%	60.6		%	64.2		%	65.9		%	64.2		%
Acquisition cost ratio			14.1		%	14.2		%	14.0		%	14.5		%	15.2		%	14.1		%	15.2		%
General and administrative expense ratio			19.1		%	18.4		%	17.8		%	17.4		%	16.6		%	19.1		%	16.6		%
Expense ratio			33.2		%	32.6		%	31.8		%	31.9		%	31.8		%	33.2		%	31.8		%
Combined ratio			99.1		%	99.8		%	96.2		%	92.5		%	96.0		%	99.1		%	96.0		%

Per Share Data
Diluted earnings (loss) per share
	Net income (loss)		$	0.90		$	(0.46	)*	$	0.77		$	1.70		$	0.81		$	0.90		$	0.81
	Operating income		$	0.53		$	0.48		$	0.62		$	0.91		$	0.65		$	0.53		$	0.65

* 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 December 31, 2016.

Page 6

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED BALANCE SHEETS



		As of		As of
		March 31, 2017		December 31, 2016
ASSETS
Fixed maturity investments trading, at fair value		$	6,473,097	$	6,737,719
Equity securities trading, at fair value		255,177		243,905
Other invested assets		966,620		960,678
	Total investments	7,694,894		7,942,302
Cash and cash equivalents		1,284,855		720,946
Restricted cash		60,573		76,485
Insurance balances receivable		862,242		783,958
Funds held		297,144		466,821
Prepaid reinsurance		478,693		486,375
Reinsurance recoverable		1,725,607		1,624,968
Reinsurance recoverable on paid losses		119,852		104,362
Accrued investment income		32,182		35,994
Net deferred acquisition costs		148,922		121,077
Goodwill		388,571		389,693
Intangible assets		104,195		104,745
Balances receivable on sale of investments		23,947		114,660
Net deferred tax assets		34,800		38,726
Other assets		171,050		167,921
TOTAL ASSETS		13,427,527		13,179,033

LIABILITIES
Reserve for losses and loss expenses		$	6,762,735	$	6,639,241
Unearned premiums		1,813,172		1,688,146
Reinsurance balances payable		202,883		223,323
Balances due on purchases of investments		58,218		79,650
Senior notes		794,376		794,172
Other long-term debt		22,569		21,970
Accounts payable and accrued liabilities		135,182		180,647
TOTAL LIABILITIES		$	9,789,135	$	9,627,149

SHAREHOLDERS' EQUITY
Common shares: 2017 and 2016: par value CHF 4.10 per share (2017: 93,586,418; 2016: 93,586,418 shares issued and 2017: 87,483,715; 2016: 87,098,120 shares outstanding)		$	378,840	$	378,840
Treasury shares, at cost (2017: 6,102,703; 2016: 6,488,298)		(223,629)		(233,791)
Accumulated other comprehensive loss		(5,856)		(11,556)
Retained earnings		3,489,037		3,418,391
TOTAL SHAREHOLDERS' EQUITY		$	3,638,392	$	3,551,884
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	13,427,527	$	13,179,033

Book value per share		$	41.59	$	40.78
Diluted book value per share		$	40.59	$	39.52
Diluted tangible book value per share		$	35.09	$	34.01

Page 7

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF CASH FLOWS



			Three Months Ended															Three Months Ended

			March 31,			December 31,			September 30,			June 30,			March 31,			March 31,			March 31,
			2017			2016			2016			2016			2016			2017			2016
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income (loss)			$	80,342		$	(40,921	)	$	68,656		$	153,410		$	74,099		$	80,342		$	74,099
Adjustments to reconcile net income (loss) to cash provided by operating activities:
		Net realized losses (gains) on sales of investments	13,145			(361		)	(6,492		)	(19,174		)	(12,025		)	13,145			(12,025		)
		Mark to market adjustments	(52,815		)	103,857			(1,816		)	(62,210		)	(27,088		)	(52,815		)	(27,088		)
		Stock compensation expense	5,465			2,980			4,785			4,757			3,881			5,465			3,881
		Undistributed income of equity method investments	1,353			8,318			7,045			5,993			9,207			1,353			9,207
Changes in:
	Reserve for losses and loss expenses, net of reinsurance recoverables		22,856			(100,864		)	8,725			43,293			86,922			22,856			86,922
	Unearned premiums, net of prepaid reinsurance		132,707			(134,738		)	(55,494		)	(24,538		)	125,533			132,707			125,533
	Insurance balances receivable		(78,284		)	109,342			67,679			(76,919		)	(139,527		)	(78,284		)	(139,527		)
	Reinsurance recoverable on paid losses		(15,490		)	24,699			(55,252		)	8,853			13,775			(15,490		)	13,775
	Funds held		169,677			(202,895		)	15,210			74,020			287,663			169,677			287,663
	Reinsurance balances payable		(20,440		)	(35,121		)	30,751			6,060			7,264			(20,440		)	7,264
	Net deferred acquisition costs		(27,845		)	36,643			11,198			17,960			(21,672		)	(27,845		)	(21,672		)
	Net deferred tax assets		3,926			(12,445		)	(5,073		)	3,764			(571		)	3,926			(571		)
	Accounts payable and accrued liabilities		(45,464		)	23,314			19,722			2,220			(50,128		)	(45,464		)	(50,128		)
	Other items, net		6,169			(2,274		)	9,990			15,131			(9,924		)	6,169			(9,924		)
		Net cash provided by (used in) operating activities	195,302			(220,466		)	119,634			152,620			347,409			195,302			347,409

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Net sales (purchases) of investments			351,143			169,636			635,425			(236,688		)	(84,779		)	351,143			(84,779		)
Purchases of fixed assets			(989		)	(330		)	(1,219		)	(1,351		)	(560		)	(989		)	(560		)
Change in restricted cash			15,911			22,366			(20,641		)	9,216			(26,797		)	15,911			(26,797		)
Net cash paid for acquisitions			—			—			—			(1,244		)	—			—			—
		Net cash provided by (used in) investing activities	366,065			191,672			613,565			(230,067		)	(112,136		)	366,065			(112,136		)

CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Dividends paid			—			(22,601		)	(22,649		)	(22,839		)	(23,359		)	—			(23,359		)
Proceeds from the exercise of stock options, net of taxes paid			1,406			2,605			4,543			2,757			358			1,406			358
Proceeds from senior notes			—			—			(500,000		)	—			—			—			—
Repayment of other long-term debt			(75		)	(149		)	(1		)	(75		)	(76		)	(75		)	(76		)
Share repurchases			—			(543		)	(26,231		)	(89,491		)	(50,000		)	—			(50,000		)
		Net cash provided by (used in) financing activities	1,331			(20,688		)	(544,338		)	(109,648		)	(73,077		)	1,331			(73,077		)

Effect of exchange rate changes on foreign currency cash			1,211			(3,410		)	474			(433		)	1,852			1,211			1,852

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			563,909			(52,892		)	189,335			(187,528		)	164,048			563,909			164,048
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			720,946			773,838			584,503			772,031			607,983			720,946			607,983
CASH AND CASH EQUIVALENTS, END OF PERIOD			$	1,284,855		$	720,946		$	773,838		$	584,503		$	772,031		$	1,284,855		$	772,031

Page 8

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT QUARTER



			Three Months Ended March 31, 2017

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	396,757		$	115,779		$	348,325		$	860,861
	Net premiums written		$	253,926		$	89,562		$	332,561		$	676,049
	Net premiums earned		$	294,943		$	92,698		$	157,222		$	544,863
		Total revenues	$	294,943		$	92,698		$	157,222		$	544,863

Expenses
	Net losses and loss expenses		$	(218,174	)	$	(55,195	)	$	(85,647	)	$	(359,016	)
	Acquisition costs		(25,438		)	(16,191		)	(35,505		)	(77,134		)
	General and administrative expenses		(59,001		)	(28,171		)	(16,887		)	(104,059		)
		Total expenses	$	(302,613	)	$	(99,557	)	$	(138,039	)	$	(540,209	)

Underwriting (loss) income			$	(7,670	)	$	(6,859	)	$	19,183		$	4,654
	Other insurance-related income		539			795			—			1,334
	Other insurance-related expenses		(1,420		)	(355		)	(460		)	(2,235		)
Segment (loss) income			$	(8,551	)	$	(6,419	)	$	18,723		$	3,753

	Net investment income											52,307
	Net realized investment gains											40,679
	Amortization of intangible assets											(2,322		)
	Other expenses											(4,827		)
	Interest expense											(10,390		)
	Foreign exchange loss											(1,371		)
Income before income taxes												$	77,829

GAAP Ratios
Loss and loss expense ratio			74.0		%	59.5		%	54.5		%	65.9		%
Acquisition cost ratio			8.6		%	17.5		%	22.6		%	14.1		%
General and administrative expense ratio			20.0		%	30.4		%	10.7		%	19.1		%
Expense ratio			28.6		%	47.9		%	33.3		%	33.2		%
Combined ratio			102.6		%	107.4		%	87.8		%	99.1		%

Page 9

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR QUARTER



			Three Months Ended March 31, 2016

			North American			Global Markets						Consolidated
			Insurance			Insurance			Reinsurance			Totals
Revenues
	Gross premiums written		$	379,183		$	115,529		$	368,833		$	863,545
	Net premiums written		$	266,245		$	87,613		$	350,188		$	704,046
	Net premiums earned		$	316,266		$	94,210		$	169,646		$	580,122
		Total revenues	$	316,266		$	94,210		$	169,646		$	580,122

Expenses
	Net losses and loss expenses		$	(216,218	)	$	(67,800	)	$	(88,348	)	$	(372,366	)
	Acquisition costs		(33,882		)	(17,908		)	(36,518		)	(88,308		)
	General and administrative expenses		(52,169		)	(29,029		)	(15,154		)	(96,352		)
		Total expenses	$	(302,269	)	$	(114,737	)	$	(140,020	)	$	(557,026	)

Underwriting income (loss)			$	13,997		$	(20,527	)	$	29,626		$	23,096
	Other insurance-related income		565			—			—			565
	Other insurance-related expenses		(705		)	(5		)	(423		)	(1,133		)
Segment income (loss)			$	13,857		$	(20,532	)	$	29,203		$	22,528

	Net investment income											53,253
	Net realized investment gains											18,858
	Amortization of intangible assets											(2,500		)
	Interest expense											(19,950		)
	Foreign exchange gain											3,011
Income before income taxes												$	75,200

GAAP Ratios
Loss and loss expense ratio			68.4		%	72.0		%	52.1		%	64.2		%
Acquisition cost ratio			10.7		%	19.0		%	21.5		%	15.2		%
General and administrative expense ratio			16.5		%	30.8		%	8.9		%	16.6		%
Expense ratio			27.2		%	49.8		%	30.4		%	31.8		%
Combined ratio			95.6		%	121.8		%	82.5		%	96.0		%

Page 10

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS



	Three Months Ended

	March 31, 2017				March 31, 2016
	Amount		% of Total		Amount		% of Total
North American Insurance
Casualty	$	107,333	27.0	%	$	104,746	27.6	%
Professional liability	92,292		23.3	%	96,422		25.4	%
Programs	65,702		16.6	%	51,982		13.7	%
Property	57,620		14.5	%	58,247		15.4	%
Other specialty⁽¹⁾	49,798		12.5	%	35,218		9.3	%
Healthcare	24,012		6.1	%	32,568		8.6	%
Total	$	396,757	100.0	%	$	379,183	100.0	%

Global Markets Insurance
Other specialty⁽²⁾	$	36,892	31.8	%	$	36,765	31.9	%
Professional liability	29,526		25.5	%	26,940		23.3	%
Casualty	27,511		23.8	%	29,748		25.7	%
Property	21,850		18.9	%	22,076		19.1	%
Total	$	115,779	100.0	%	$	115,529	100.0	%

Reinsurance
Property	$	176,295	50.7	%	$	194,804	52.9	%
Specialty	122,425		35.1	%	125,208		33.9	%
Casualty⁽³⁾	49,605		14.2	%	48,821		13.2	%
Total	$	348,325	100.0	%	$	368,833	100.0	%
Consolidated gross premiums written	$	860,861			$	863,545

⁽¹⁾ Includes the construction, environmental, surety, trade credit and product recall lines of business.
⁽²⁾ Includes accident and health, aviation, construction, marine and trade credit lines of business.
⁽³⁾ Includes the professional liability reinsurance line of business.

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED INCURRED LOSS ANALYSIS BY SEGMENT



	Three Months Ended

	March 31, 2017					March 31, 2016
	Amount			% of NPE⁽¹⁾		Amount			% of NPE⁽¹⁾
North American Insurance
Current year - non-catastrophe	$	201,991		68.5	%	$	216,313		68.4	%
Current year - property catastrophe	—			0.0	%	—			0.0	%
Prior year - increase (decrease)	16,183			5.5	%	(95		)	0.0	%
Net losses and loss expenses	$	218,174		74.0	%	$	216,218		68.4	%

Global Markets Insurance
Current year - non-catastrophe	$	57,203		61.6	%	$	71,986		76.4	%
Current year - property catastrophe	3,500			3.8	%	—			0.0	%
Prior year - increase (decrease)	(5,508		)	(5.9	)%	(4,186		)	(4.4	)%
Net losses and loss expenses	$	55,195		59.5	%	$	67,800		72.0	%

Reinsurance
Current year - non-catastrophe	$	90,548		57.6	%	$	109,503		64.6	%
Current year - property catastrophe	7,500			4.8	%	—			0.0	%
Prior year - increase (decrease)	(12,401		)	(7.9	)%	(21,155		)	(12.5	)%
Net losses and loss expenses	$	85,647		54.5	%	$	88,348		52.1	%

Consolidated
Current year - non-catastrophe	$	349,742		64.2	%	$	397,802		68.6	%
Current year - property catastrophe	11,000			2.0	%	—			0.0	%
Prior year - increase (decrease)	(1,726		)	(0.3	)%	(25,436		)	(4.4	)%
Net losses and loss expenses	$	359,016		65.9	%	$	372,366		64.2	%

⁽¹⁾ "NPE" means net premiums earned.

Page 12

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – CURRENT QUARTER



	Three Months Ended March 31, 2017
(Favorable) Unfavorable Development ($ in millions)	2011 and Prior			2012			2013			2014			2015			2016			Total

North American Insurance
Casualty	$	(9.4	)	$	3.9		$	0.0		$	5.0		$	0.0		$	0.0		$	(0.5	)
Professional liability	(1.2		)	(1.8		)	2.9			(0.3		)	0.0			0.0			(0.4		)
Property	(0.2		)	(0.4		)	(0.1		)	(0.3		)	1.5			7.8			8.3
Programs	(1.0		)	1.1			(0.8		)	(2.4		)	0.0			0.0			(3.1		)
Healthcare	(8.4		)	9.8			2.7			(0.8		)	0.0			0.0			3.3
Other specialty⁽¹⁾	0.0			0.0			6.4			0.1			2.1			0.0			8.6
Total	$	(20.2	)	$	12.6		$	11.1		$	1.3		$	3.6		$	7.8		$	16.2

Global Markets Insurance
Casualty	$	(7.4	)	$	(0.3	)	$	(1.0	)	$	0.7		$	2.0		$	0.4		$	(5.6	)
Professional liability	(1.1		)	(1.8		)	0.6			(2.0		)	6.5			2.8			5.0
Property	(0.2		)	(0.2		)	(0.3		)	(0.9		)	(0.5		)	(0.3		)	(2.4		)
Other specialty⁽²⁾	(0.3		)	0.0			0.0			(2.4		)	1.8			(1.6		)	(2.5		)
Total	$	(9.0	)	$	(2.3	)	$	(0.7	)	$	(4.6	)	$	9.8		$	1.3		$	(5.5	)

Reinsurance
Property	$	0.2		$	1.1		$	(0.1	)	$	1.5		$	(6.8	)	$	0.4		$	(3.7	)
Casualty	2.0			(2.6		)	(0.6		)	(2.0		)	8.7			(6.9		)	(1.4		)
Specialty	(0.4		)	(0.8		)	(1.1		)	(1.1		)	(4.5		)	0.6			(7.3		)
Total	$	1.8		$	(2.3	)	$	(1.8	)	$	(1.6	)	$	(2.6	)	$	(5.9	)	$	(12.4	)

Consolidated
North American Insurance	$	(20.2	)	$	12.6		$	11.1		$	1.3		$	3.6		$	7.8		$	16.2
Global Markets Insurance	(9.0		)	(2.3		)	(0.7		)	(4.6		)	9.8			1.3			(5.5		)
Reinsurance	1.8			(2.3		)	(1.8		)	(1.6		)	(2.6		)	(5.9		)	(12.4		)
Total	$	(27.4	)	$	8.0		$	8.6		$	(4.9	)	$	10.8		$	3.2		$	(1.7	)

⁽¹⁾Includes the construction, environmental, surety and trade credit lines of business.
⁽²⁾ Includes accident and health, aviation, construction, marine and trade credit lines of business.

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

NET LOSS RESERVE DEVELOPMENT BY LOSS YEAR – PRIOR YEAR QUARTER



	Three Months Ended March 31, 2016
(Favorable) Unfavorable Development ($ in millions)	2010 and Prior			2011			2012			2013			2014			2015			Total

North American Insurance
Casualty	$	(13.8	)	$	2.2		$	11.1		$	4.7		$	1.9		$	0.0		$	6.1
Professional liability	(9.3		)	(2.4		)	(1.8		)	4.6			3.8			0.0			(5.1		)
Property	(0.3		)	(0.2		)	0.2			0.4			(1.6		)	1.8			0.3
Programs	1.0			0.0			3.5			(3.1		)	(1.4		)	(1.5		)	(1.5		)
Healthcare	0.2			(0.2		)	0.0			0.0			0.0			0.0			0.0
Other specialty	0.0			0.0			0.0			0.0			0.1			0.0			0.1
Total	$	(22.2	)	$	(0.6	)	$	13.0		$	6.6		$	2.8		$	0.3		$	(0.1	)

Global Markets Insurance
Casualty	$	(2.1	)	$	(0.3	)	$	(0.6	)	$	1.3		$	0.1		$	2.7		$	1.1
Professional liability	(0.6		)	1.2			(0.2		)	0.1			1.3			0.4			2.2
Property	(5.1		)	1.1			0.8			(0.2		)	(2.3		)	4.9			(0.8		)
Other specialty	(0.1		)	0.1			0.0			0.0			(0.1		)	(6.5		)	(6.6		)
Total	$	(7.9	)	$	2.1		$	0.0		$	1.2		$	(1.0	)	$	1.5		$	(4.1	)

Reinsurance
Property	$	1.5		$	3.1		$	(3.8	)	$	(8.4	)	$	2.3		$	(18.6	)	$	(23.9	)
Casualty	(10.7		)	0.6			10.7			9.0			4.7			(6.0		)	8.3
Specialty	0.1			(0.7		)	(0.6		)	2.8			(7.1		)	(0.1		)	(5.6		)
Total	$	(9.1	)	$	3.0		$	6.3		$	3.4		$	(0.1	)	$	(24.7	)	$	(21.2	)

Consolidated
North American Insurance	$	(22.2	)	$	(0.6	)	$	13.0		$	6.6		$	2.8		$	0.3		$	(0.1	)
Global Markets Insurance	(7.9		)	2.1			0.0			1.2			(1.0		)	1.5			(4.1		)
Reinsurance	(9.1		)	3.0			6.3			3.4			(0.1		)	(24.7		)	(21.2		)
Total	$	(39.2	)	$	4.5		$	19.3		$	11.2		$	1.7		$	(22.9	)	$	(25.4	)

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

REINSURANCE RECOVERABLE



	March 31, 2017							December 31, 2016

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

Munich Re	A+	$	374,491	21.7	%	$	109,617	A+	$	348,089	21.4	%	$	109,617
Axis Capital	A+	173,449		10.1	%	6,980		A+	160,433		9.9	%	6,980
Swiss Re	A+	159,343		9.2	%	7,746		A+	146,700		9.0	%	7,746
Markel	A	109,159		6.3	%	25,572		A	102,975		6.3	%	25,572
Arch Re	A+	100,798		5.8	%	2,966		A+	100,527		6.2	%	2,966
RenaissanceRe	A+	92,948		5.4	%	—		A+	88,233		5.4	%	—
XL Group	A	87,169		5.1	%	824		A	83,858		5.2	%	824
Odyssey Reinsurance	A	68,239		4.0	%	—		A	68,782		4.2	%	—
Everest Re	A+	74,827		4.3	%	32,471		A+	65,785		4.0	%	32,422
Liberty Mutual	A	52,719		3.1	%	—		A	53,821		3.3	%	—
Top ten reinsurers		1,293,142		75.0	%	186,176			1,219,203		74.9	%	186,127
Other reinsurers' balances		432,465		25.0	%	65,382			405,765		25.1	%	65,382
Total reinsurance recoverable		$	1,725,607	100.0	%	$	251,558		$	1,624,968	100.0	%	$	251,509

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

A++		$	95,929	5.6	%	$	1,620		$	93,089	5.8	%	$	1,620
A+		1,049,928		60.8	%	159,781			977,649		60.2	%	159,732
A		562,290		32.6	%	31,940			538,186		33.1	%	31,940
A-		5,266		0.3	%	—			3,957		0.2	%	—
Total "A-" or higher		1,713,413		99.3	%	193,341			1,612,881		99.3	%	193,292
B++		—		0.0	%	—			—		0.0	%	—
NR		12,194		0.7	%	58,217			12,087		0.7	%	58,217
Total reinsurance recoverable		$	1,725,607	100.0	%	$	251,558		$	1,624,968	100.0	%	$	251,509

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

PROBABLE MAXIMUM LOSSES



Consolidated Estimated Net Loss as of March 1, 2017
		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	$	392	$	426	U.S. Southeast(1)	Hurricane	$	374	$	406

U.S. total	Earthquake	$	384	$	487	U.S. Gulf Coast(2)	Hurricane	$	196	$	360

						U.S. Northeast(3)	Hurricane	$	211	$	364

						California	Earthquake	$	330	$	455

PMLs Over the Most Recent Six Quarters as a % of Total Capital⁽⁴⁾

(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.

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 March 1, 2017. 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 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED TOTAL INVESTMENT PORTFOLIO



				As of March 31, 2017												As of December 31, 2016


							Average	Portfolio		Investment		Non-Investment
				Fair Value			Rating	Percentage		Grade		Grade		Total		Fair Value
Cash and cash equivalents				$	1,345,428		AAA	14.8	%	$	1,345,428	$	—	$	1,345,428	$	797,431
U.S. government securities				1,357,514			AA+	15.0	%	1,357,514		—		1,357,514		1,379,607
U.S. government agencies				52,987			AA+	0.6	%	52,987		—		52,987		46,371
Non-U.S. government and government agencies				543,307			AA	6.0	%	517,869		25,438		543,307		469,889
State, municipalities and political subdivisions				41,673			BB-	0.5	%	15,287		26,386		41,673		354,084
Mortgage-backed securities:
	Agency MBS			595,607			AA+	6.6	%	595,607		—		595,607		614,534
	Non-agency RMBS			23,418			BB	0.3	%	12,862		10,556		23,418		23,883
	CMBS			467,064			BB-	5.2	%	198,055		269,009		467,064		598,025
		Total mortgage-backed securities		1,086,089				12.1	%	806,524		279,565		1,086,089		1,236,442
Corporate securities⁽¹⁾:
	Financials			1,046,359			A	11.6	%	1,032,563		13,796		1,046,359		1,032,701
	Industrials			1,379,167			A-	15.3	%	1,249,783		129,384		1,379,167		1,321,309
	Utilities			153,215			BBB+	1.7	%	149,841		3,374		153,215		140,008
		Total corporate securities		2,578,741				28.6	%	2,432,187		146,554		2,578,741		2,494,018
Asset-backed securities				812,786			AA	8.9	%	783,342		29,444		812,786		757,308
Equities				255,177			N/A	2.8	%	—		255,177		255,177		243,905
Other invested assets:
	Private equity			566,386			N/A	6.3	%	—		566,386		566,386		559,804
	Hedge funds			336,362			N/A	3.7	%	—		336,362		336,362		337,979
	Other private securities			63,872			N/A	0.7	%	—		63,872		63,872		62,895
		Total other invested assets		966,620				10.7	%	—		966,620		966,620		960,678
			Total investment portfolio	$	9,040,322			100.0	%	$	7,311,138	$	1,729,184	$	9,040,322	$	8,739,733

Annualized book yield, year to date				2.4		%										2.5		%
Duration⁽²⁾				2.3 years												3.0 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 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

INVESTMENT INCOME, BOOK YIELD AND PORTFOLIO RETURN



		Three Months Ended

		March 31,			March 31,
		2017			2016
NET INVESTMENT INCOME
Fixed maturity investments		$	44,958		$	47,969
Equity securities		2,946			1,827
Other invested assets: hedge funds and private equity		6,994			4,701
Other invested assets: other private securities		976			3,051
Cash and cash equivalents		853			468
Expenses		(4,420		)	(4,763		)
Net investment income		$	52,307		$	53,253

NET REALIZED INVESTMENT GAINS
Net realized gains (losses) on sale:
	Fixed maturity investments	(17,892		)	2,755
	Equity securities	4,047			6,237
	Other invested assets: hedge funds and private equity	5,262			3,133
	Derivatives	(3,552		)	(20,352		)
Mark-to-market gains (losses):
	Fixed maturity investments	46,737			62,322
	Equity securities	12,915			(15,099		)
	Other invested assets: hedge funds and private equity	(6,410		)	(17,553		)
	Derivatives	(428		)	(2,585		)
Net realized investment gains		$	40,679		$	18,858

TOTAL FINANCIAL STATEMENT PORTFOLIO RETURN		$	92,986		$	72,111

ANNUALIZED INVESTMENT BOOK YIELD
Net investment income, recurring		$	52,307		$	53,253
Annualized net investment income		209,228			213,012
Average aggregate invested assets, at cost		$	8,899,955		$	9,295,116
Annualized investment book yield		2.4		%	2.3		%

FINANCIAL STATEMENT PORTFOLIO RETURN
Total financial statement portfolio return		$	92,986		$	72,111
Average aggregate invested assets, at fair value		$	8,890,397		$	9,299,095
Financial statement portfolio return		1.0		%	0.8		%

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL



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

			Carrying Value		Unfunded							Fair Value	Portfolio
Fund Details			March 31, 2017		Commitments			Corporate				March 31, 2017	Percentage
Private Equity:								JPMorgan Chase & Co				63,938	0.7	%
Primary and secondary			$	281,471	$	208,838		Wells Fargo & Co				47,409	0.5	%
Mezzanine debt			211,206		189,162			Morgan Stanley				46,576	0.5	%
Real estate			68,897		3,830			Microsoft Corp				35,612	0.4	%
Distressed			4,812		191,636			General Electric Co				35,349	0.4	%
	Total private equity		566,386		593,466			PNC Financial Services Group				33,909	0.4	%
Hedge Funds:								Credit Suisse Group AG				33,600	0.4	%
Distressed			173,299		—			Royal Bank of Canada				32,204	0.4	%
Relative value credit			87,433		—			Apple Inc				32,112	0.4	%
Equity long/short			65,136		—			US Bancorp				29,740	0.3	%
Fund of funds			10,494
	Total hedge funds		336,362		—
	Other private securities		63,872		—
		Total other invested assets	$	966,620	$	593,466


Fixed Income Credit Quality:			March 31, 2017					December 31, 2016

Rating			Fair Value		Percentage			Fair Value		Fair Value
U.S. government and agencies			$	1,410,501	21.8		%	$	1,425,978	21.2	%
AAA/Aaa			1,152,013		17.8		%	1,345,939		20.0	%
AA/Aa			1,282,855		19.8		%	1,340,653		19.9	%
A/A			1,138,268		17.6		%	1,149,510		17.1	%
BBB/Baa			982,074		15.2		%	893,905		13.3	%
	Total BBB/Baa and above		5,965,711		92.2		%	6,155,985		91.5	%
BB/Bb			47,047		0.7		%	61,487		0.8	%
B/B			88,358		1.4		%	95,462		1.4	%
CCC+ and below			371,981		5.7		%	424,785		6.3	%
		Total	$	6,473,097	100.0		%	$	6,737,719	100.0	%

Page 19

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, 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	%
	December 31, 2016	12		300	39.71		39.86		99.6	%
	Total - 2016	$	166,265	4,669,513	$	35.61	$	38.65	92.1	%

Three Months Ended:
	March 31, 2017⁽²⁾	$	0	0	n/a		$	40.06	n/a
	Total - 2017	$	0	0	n/a		$	40.06	n/a		$	400,402

⁽¹⁾ Average of beginning and ending diluted book value per share for each period presented and weighted average total.
⁽²⁾ There were no shares repurchased during the three months ended March 31, 2017.

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CAPITAL STRUCTURE AND LEVERAGE RATIOS



	As of			As of
	March 31, 2017			December 31, 2016

Senior notes	$	794,376		$	794,172
Other long-term debt	22,569			21,970
Shareholders' equity	3,638,392			3,551,884
Total capitalization	$	4,455,337		$	4,368,026

Leverage ratios
Debt to total capitalization	18.3		%	18.7		%

Net premiums written (trailing 12 months)	$	2,227,839		$	2,255,836
Net premiums written (trailing 12 months) to shareholders' equity	0.61x			0.64x

Total investments and cash & cash equivalents	$	9,040,322		$	8,739,733
Total investments and cash & cash equivalents to shareholders' equity	2.48x			2.46x

Reserve for losses and loss expenses	$	6,762,735		$	6,639,241
Deduct: reinsurance recoverable	(1,725,607)			(1,624,968)
Net reserve for losses and loss expenses	$	5,037,128		$	5,014,273
Net reserve for losses and loss expenses to shareholders' equity	1.38x			1.41x




Fixed Charge Coverage Ratio	Three Months Ended

	March 31,			March 31,
	2017			2016

Interest expense	$	10,390		$	19,949

Income before income taxes	77,829			75,200
Interest expense	10,390			19,949
Earnings for calculation of fixed coverage ratio	$	88,219		$	95,149

Fixed charge coverage ratio	8.5		x	4.8		x

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

OPERATING INCOME RECONCILIATION AND

BASIC AND DILUTED EARNINGS PER SHARE INFORMATION



		Three Months Ended															Three Months Ended

		March 31,			December 31,			September 30,			June 30,			March 31,			March 31,			March 31,
		2017			2016			2016			2016			2016			2017			2016

Net income (loss)		$	80,342		$	(40,877	)	$	68,613		$	153,410		$	74,099		$	80,342		$	74,099
Add pre-tax effect of:
	Net realized investment (gains) losses	(40,679		)	101,946			(10,663		)	(74,493		)	(18,858		)	(40,679		)	(18,858		)
	Foreign exchange loss (gain)	1,371			801			1,007			(2,887		)	(3,011		)	1,371			(3,011		)
	Other expense⁽¹⁾	4,827			—			—			—			—			4,827			—
Income tax expense (benefit)⁽²⁾		2,084			(19,432		)	(3,733		)	6,651			6,779			2,084			6,779
Operating income		$	47,945		$	42,438		$	55,224		$	82,681		$	59,009		$	47,945		$	59,009

Weighted average common shares outstanding
Basic		87,291,369			87,036,339			87,102,290			88,742,484			90,254,512			87,291,369			90,254,512
Diluted		89,133,212			88,780,410		*	88,603,101			90,040,509			91,559,225			89,133,212			91,559,225

Basic per share data
Net income (loss)		$	0.92		$	(0.47	)	$	0.79		$	1.73		$	0.82		$	0.92		$	0.82
Add pre-tax effect of:
	Net realized investment (gains) losses	(0.47		)	1.17			(0.12		)	(0.84		)	(0.21		)	(0.47		)	(0.21		)
	Foreign exchange loss (gain)	0.02			0.01			0.01			(0.03		)	(0.03		)	0.02			(0.03		)
	Other expense⁽¹⁾	0.06			—			—			—			—			0.06			—
Income tax expense (benefit)⁽²⁾		0.02			(0.22		)	(0.04		)	0.07			0.08			0.02			0.08
Operating income		$	0.55		$	0.49		$	0.64		$	0.93		$	0.66		$	0.55		$	0.66

Diluted per share data
Net income (loss)		$	0.90		$	(0.46	)*	$	0.77		$	1.70		$	0.81		$	0.90		$	0.81
Add pre-tax effect of:
	Net realized investment (gains) losses	(0.46		)	1.15			(0.12		)	(0.83		)	(0.21		)	(0.46		)	(0.21		)
	Foreign exchange loss (gain)	0.02			0.01			0.01			(0.03		)	(0.03		)	0.02			(0.03		)
	Other expense⁽¹⁾	0.05			—			—			—			—			0.05			—
Income tax expense (benefit)⁽²⁾		0.02			(0.22		)	(0.04		)	0.07			0.08			0.02			0.08
Operating income		$	0.53		$	0.48		$	0.62		$	0.91		$	0.65		$	0.53		$	0.65

⁽¹⁾ Represents non-recurring expenses including expenses associated with the pending acquisition of Allied World Assurance Company Holdings, AG by Fairfax.
⁽²⁾Represents the tax expense or benefit associated with the specific country to which the pre-tax adjustment related.
* 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 December 31, 2016.

Page 22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

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



		Three Months Ended															Three Months Ended

		March 31,			December 31,			September 30,			June 30,			March 31,			March 31,			March 31,
		2017			2016			2016			2016			2016			2017			2016

Opening shareholders' equity		$	3,551,884		$	3,615,869		$	3,584,452		$	3,535,463		$	3,532,542		$	3,551,884		$	3,532,542
Add: accumulated other comprehensive loss		11,556			5,421			6,024			6,168			9,297			11,556			9,297
Adjusted opening shareholders' equity		$	3,563,440		$	3,621,290		$	3,590,476		$	3,541,631		$	3,541,839		$	3,563,440		$	3,541,839
Adjusted opening tangible shareholders' equity⁽¹⁾		3,069,002			3,117,422			3,084,360			3,036,217			3,037,089			3,069,002			3,037,089

Closing shareholders' equity		$	3,638,392		$	3,551,884		$	3,615,869		$	3,584,452		$	3,535,463		$	3,638,392		$	3,535,463
Add: accumulated other comprehensive loss		5,856			11,556			5,421			6,024			6,168			5,856			6,168
Adjusted closing shareholders' equity		$	3,644,248		$	3,563,440		$	3,621,290		$	3,590,476		$	3,541,631		$	3,644,248		$	3,541,631
Adjusted closing tangible shareholders' equity⁽¹⁾		3,151,482			3,069,002			3,117,422			3,084,360			3,036,217			3,151,482			3,036,217

Average adjusted shareholders' equity		$	3,603,844		$	3,592,365		$	3,605,883		$	3,566,054		$	3,541,735		$	3,603,844		$	3,541,735
Average adjusted tangible shareholders' equity		3,110,242			3,093,212			3,100,891			3,060,289			3,036,653			3,110,242			3,036,653

Net income (loss) available to shareholders		$	80,342		$	(40,877	)	$	68,613		$	153,410		$	74,099		$	80,342		$	74,099

Annualized net income (loss) available to shareholders		$	321,368		$	(163,508	)	$	274,452		$	613,640		$	296,396		$	321,368		$	296,396

Annualized return on average shareholders' equity - net (loss) income available to shareholders		8.9		%	(4.6		)%	7.6		%	17.2		%	8.4		%	8.9		%	8.4		%
Annualized return on average tangible shareholders' equity - net (loss) income available to shareholders		10.3		%	(5.3		)%	8.9		%	20.1		%	9.8		%	10.3		%	9.8		%

Operating income available to shareholders		$	47,945		$	42,438		$	55,224		$	82,681		$	59,009		$	47,945		$	59,009

Annualized operating income available to shareholders		$	191,780		$	169,752		$	220,896		$	330,724		$	236,036		$	191,780		$	236,036

Annualized return on average shareholders' equity - operating income available to shareholders		5.3		%	4.7		%	6.1		%	9.3		%	6.7		%	5.3		%	6.7		%
Annualized return on average tangible shareholders' equity - operating income available to shareholders		6.2		%	5.5		%	7.1		%	10.8		%	7.8		%	6.2		%	7.8		%

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

Page 23

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RECONCILIATION OF DILUTED BOOK VALUE PER SHARE



		As of			As of			As of
		March 31,			December 31,			March 31,
		2017			2016			2016

Price per share at period end		$	53.10		$	53.71		$	34.94

Total shareholders' equity		$	3,638,392		$	3,551,884		$	3,535,463
Deduct:
	Goodwill	388,571			389,693			389,695
	Intangible Assets	104,195			104,745			115,719
Total tangible shareholders' equity		$	3,145,626		$	3,057,446		$	3,030,049

Basic common shares outstanding		87,483,715			87,098,120			89,840,448

Add: unvested restricted stock units		761,163			1,133,929			1,243,533

Add: performance based equity awards		424,690			583,441			595,572

Add: employee purchase plan		—			37,616			38,885

Add: dilutive stock options outstanding		1,435,271			1,525,743			1,947,836
	Weighted average exercise price per share	$	17.35		$	17.36		$	16.88
Deduct: stock options bought back via treasury method		(468,963		)	(493,146		)	(941,259		)

Common shares and common share equivalents outstanding		89,635,876			89,885,703			92,725,015


Basic book value per common share		$	41.59		$	40.78		$	39.35
Year-to-date percentage change in basic book value per common share		2.0		%	3.6		%

Diluted book value per common share		$	40.59		$	39.52		$	38.13
Year-to-date percentage change in diluted book value per common share		2.7		%	3.6		%

Basic tangible book value per common share		$	35.96		$	35.10		$	33.73
Year-to-date percentage change in basic tangible book value per common share		2.5		%	4.1		%

Diluted tangible book value per common share		$	35.09		$	34.01		$	32.68
Year-to-date percentage change in diluted tangible book value per common share		3.2		%	4.1		%

Page 24

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 22 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 23 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 22 for the reconciliation of net income to operating income and page 23 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 24 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 18 for the calculation of annualized investment book yield.

Page 25

Allied World Assurance Co Holdings, AG - FORM 8-K - EX-99.2 - FINANCIAL SUPPLEMENT - April 26, 2017

Attached files

Allied World Assurance Co Holdings, AG Reports