Allied World Assurance Company Holdings, Ltd Reports Record Fourth Quarter and Full Year 2006 Operating Results.PEMBROKE, Bermuda -- Allied World Assurance Company Holdings, Ltd (NYSE NYSE See: New York Stock Exchange : AWH AWH American Whole Health AWH Association of Western Hospitals ) today reported net income of $128.4 million, or $2.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the fourth quarter 2006 compared to a net loss of $12.3 million, or $0.24 per diluted share, for the fourth quarter 2005. Net income for the year ended December 31, 2006 was $442.8 million, or $7.75 per diluted share, compared to a net loss of $159.8 million, or $3.19 per diluted share, for the year ended December 31, 2005. Results in 2005 were adversely impacted by Hurricanes Katrina, Rita and Wilma. The company reported record operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $133.6 million, or $2.12 per diluted share, for the fourth quarter 2006 compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $5.3 million, or $0.11 per diluted share, for the fourth quarter 2005. Operating income for the year ended December 31, 2006 was $472.1 million, or $8.27 per diluted share, compared to a net loss of $147.4 million, or $2.94 per diluted share, for the year ended December 31, 2005. President and Chief Executive Officer Scott Carmilani commented, "During the quarter, Allied World marked its fifth anniversary, and we are very proud of what we have accomplished in our first five years. In 2006, we took the company public, consolidated our Bermuda operations into new corporate headquarters and expanded our U.S. operating platform." "On top of these successes, each operating segment performed extremely well during 2006, and we can now report record net and operating income for the quarter and for the full year. We have grown our diluted book value per share by 25% during the year and increased our capital base to over $2.7 billion, a 42% increase from the beginning of the year." Mr. Carmilani continued, "As a maturing company with a global diversified diversified (di·verˑ·s platform firmly in place, we are working to maintain our underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discipline through the current market conditions. We are bolstered by a very strong balance sheet, strong financial ratings, and an invested asset base that is approaching $6 billion. We believe that we are very well positioned as we move forward in 2007." Underwriting Results Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. were $280.1 million in the fourth quarter 2006, a 1.2% decrease compared to $283.4 million in the fourth quarter 2005. For the year ended December 31, 2006, gross premiums written totaled $1,659.0 million, a 6.3% increase compared to $1,560.3 million for the year ended December 31, 2005. This increase was primarily the result of increased premiums from the company's reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. segment due to new business written during the year and from upward premium adjustments on prior year business. In addition, premiums written increased due to continued expansion of the company's U.S distribution platform and from increases in general property rates in certain North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. catastrophe exposed areas and increased market opportunities that developed following the 2005 hurricane season Hurricane season refers to a period in a year when hurricanes usually form. For more information see: Tropical cyclone#Times of formation. For a lists of past seasons, see:
Net premiums written were $210.7 million in the fourth quarter 2006, a 1.3% decrease compared to $213.6 million in the fourth quarter 2005. For the year ended December 31, 2006, net premiums written totaled $1,306.6 million, a 6.9% increase compared to $1,222.0 million for the year ended December 31, 2005, which corresponds with the increase in gross premiums written during the same period. Net premiums earned in the fourth quarter 2006 were $319.8 million, a 5.9% increase compared to $302.0 million in the fourth quarter 2005. For the year ended December 31, 2006, net premiums earned totaled $1,252.0 million, a 1.5% decrease from net premiums earned of $1,271.5 million for the year ended December 31, 2005. This decrease reflects the reduced level of net premiums written during 2005. The combined ratio was 75.3% in the fourth quarter 2006 compared to 115.8% in the fourth quarter 2005. The loss ratio was 53.9% in the fourth quarter 2006 compared to 95.6% in the fourth quarter 2005. During the fourth quarter 2006, the company recorded net favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. reserve development on prior accident years of $43.1 million, a benefit of 13.5 percentage points to the company's loss ratio for this quarter. The combined ratio for the year ended December 31, 2006 was 78.8% compared to 124.4% for the year ended December 31, 2005. Results for the quarter ended December 31, 2005 were impacted by Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth while results for the year ended December 31, 2005 were adversely impacted by Hurricanes Katrina, Rita and Wilma. Investment Results Net investment income in the fourth quarter 2006 was $66.0 million, an increase of 29.9% over the $50.8 million of net investment income in the fourth quarter 2005. For the year ended December 31, 2006, net investment income was $244.4 million, an increase of 36.9% over $178.6 million for the year ended December 31, 2005. These increases primarily reflect the increase in the company's invested asset base driven by strong operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. and the receipt of approximately $316 million in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the company's initial public offering completed in July 2006. During the fourth quarter 2006, the company recorded net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. of $4.2 million compared to net realized losses of $5.3 million in the fourth quarter 2005. For the year ended December 31, 2006, the company recorded net realized losses of $28.7 million compared to net realized losses of $10.2 million for the year ended December 31, 2005. Legal Matter The company has a pending legal matter stemming from a Civil Investigative Demand received from the State of Texas in November 2005. Based on discussions with representatives of the Attorney General of that state, the investigation is currently expected to proceed to a settlement. This is likely to result in certain payments that would be adverse to the company. Based on those discussions, the company has reserved $2.1 million for settlement payments to be made to the State of Texas. Shareholders' Equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. Shareholders' equity exceeded $2.2 billion at December 31, 2006, including net proceeds from the company's initial public offering, compared to $1.4 billion reported at December 31, 2005. Diluted book value per share was $35.26 at December 31, 2006 compared to $28.20 at December 31, 2005. The company's annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average equity for the quarter and the year ended December 31, 2006 was 23.9% and 24.2%, respectively. The company's annualized operating return on average equity for the quarter and the year ended December 31, 2006 was 24.8% and 25.8%, respectively. Conference Call Allied World Assurance Company Holdings, Ltd will host a conference call on Tuesday, February 13, 2007 at 8:30 a.m. (Eastern Time) to discuss its fourth quarter financial results. The public may access a live webcast of the conference call at the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " section of the company's website at www.awac.com. In addition, the conference call can be accessed by dialing (866) 203-3436 (U.S. and Canada callers) or (617) 213-8849 (international callers) and entering the passcode 43663034 approximately ten minutes prior to the call. Following the conclusion of the presentation, a replay of the call will be available through Tuesday, February 27, 2007 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 19573156. In addition, the webcast will remain available online through Tuesday, February 27, 2007 at www.awac.com. Financial Supplement A financial supplement relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the fourth quarter of 2006 will be available at the "Investor Relations" section of the company's website at www.awac.com. Non-GAAP Financial Measures In presenting the company's results, management has included and discussed in this press release certain non-GAAP financial measures within the meaning of Regulation G as promulgated prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. by the U.S. Securities and Exchange Commission. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . "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 and foreign exchange gains or losses. The company excludes net realized investment gains or losses and net foreign exchange gains or losses from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. , the availability of market opportunities. The company believes these amounts are largely independent of its business and underwriting process and including them may distort the analysis of trends in its insurance and reinsurance operations. 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 in a manner similar to how management analyzes the company's underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. The company has included "diluted book value per share" because it takes into account the effect of dilutive securities; therefore, the company believes it is a better measure of calculating shareholder returns than book value per share. "Annualized return on average equity" (ROAE ROAE Return on Average Equity ) is calculated using average equity, excluding the average after tax unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. or losses on investments. Unrealized gains (losses) on investments are primarily the result of interest rate movements and the resultant impact on fixed income securities. Such 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 unrealized 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 company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. "Annualized operating return on average 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 equity, excluding the average after tax unrealized gains (losses) on investments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average equity explanation above. Reconciliations of these financial measures to their most directly comparable GAAP measures are included in the attached tables. About Allied World Assurance Company Allied World Assurance Company Holdings, Ltd, founded in November 2001, is one of Bermuda's leading property and casualty insurers. The company, through its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , offers property and casualty insurance and reinsurance on a worldwide basis. The principal operating subsidiaries of Allied World Assurance Company Holdings, Ltd have A (Excellent) ratings from A.M. Best Company and A- ratings from Standard & Poor's. The company's Bermuda and U.S. operating subsidiaries are rated A2 by Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. . Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 that involve inherent risks and uncertainties. Statements that are not historical facts, including statements that use terms such as "believes," "anticipates," "intends" or "expects" and that relate to our plans and objectives for future operations, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this press release should not be considered as a representation by us or any other person that our objectives or plans will be achieved. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the effects of competitors' pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (b) the effects of investigations into market practices, in particular insurance brokerage practices, together with any legal or regulatory proceedings, related settlements and industry reform or other changes arising therefrom there·from adv. From that place, time, or thing. Adv. 1. therefrom - from that circumstance or source; "atomic formulas and all compounds thence constructible"- W.V. ; (c) the impact of acts of terrorism and acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. ; (d) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices have anticipated; (e) increased competition due to an increase in capacity of property and casualty insurers or reinsurers; (f) the inability to obtain or maintain financial strength ratings by one or more of the company's subsidiaries; (g) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (h) the company or one of its subsidiaries becoming subject to significant income taxes in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or elsewhere; (i) changes in regulations or tax laws applicable to the company, its subsidiaries, brokers or customers; (j) changes in the availability, cost or quality of reinsurance or retrocessional coverage; (k) loss of key personnel; (l) changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect the company's investment portfolio; and (m) such other risk factors as may be discussed in our most recent documents on file with the SEC. We are under no obligation (and expressly disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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