Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported net income of $153.4 million, or $1.70 per diluted share, for the second quarter of 2016, compared to net income of $9.5 million, or $0.10 per diluted share, for the second quarter of 2015.

The company reported operating income of $82.7 million, or $0.91 per diluted share, for the second quarter of 2016, compared to operating income of $25.8 million, or $0.27 per diluted share, for the second quarter of 2015.

“I am very pleased with our results this quarter, which were attributable to strong performances across both the underwriting and investment portfolios," commented President and Chief Executive Officer, Scott Carmilani. “In particular, with a combined ratio of 92.3%, our North American Insurance business is showing the strength and results of our focused build out.”

Second Quarter Operating Results

• Gross premiums written were $800.3 million, a 3.1% decrease, compared to $826.0 million in the second quarter of 2015 as all three segments declined.
  • The North American Insurance segment decreased 1.8% to $508.4 million, led by declines in property and casualty, partially offset by growth in programs and other specialty lines.
  • The Global Markets Insurance segment decreased 7.1% to $125.4 million, driven by reductions across multiple lines in the European business, as conditions remain challenging in that region, but partially offset by an increase in the Asia Pacific business.
  • The Reinsurance segment decreased 4.0% to $166.5 million, driven by declines in property.
• The company experienced $20.9 million, or 3.5 points, of catastrophe losses in the second quarter of 2016, compared to $25.0 million, or 3.9 points, in the second quarter of 2015. Within the Reinsurance segment, losses of $6.0 million arose from the April hailstorm in Texas and losses of $10.3 million arose from the Fort McMurray wildfires. Within the North American Insurance segment, losses of $4.6 million arose from the April hailstorm in Texas.
• Underwriting income was $45.4 million, compared to underwriting income of $5.9 million in the second quarter of 2015.
• The combined ratio was 92.5%, compared to 99.2% in the second quarter of 2015.
• The loss and loss expense ratio was 60.6% in the second quarter of 2016, compared to 66.8% in the prior year quarter. During the second quarter of 2016, the company recorded net favorable reserve development on prior loss years of $37.8 million, a benefit of 6.3 percentage points to the loss and loss expense ratio, compared to $21.8 million a year ago, a benefit of 3.4 percentage points. All three segments benefited from net favorable reserve development this quarter.
• The company's expense ratio was 31.8% for the second quarter of 2016, compared to 32.4% for the second quarter of 2015. This improvement was largely driven by the lower acquisition cost ratio in the Global Markets Insurance segment.

Investment Results

• The total financial statement return on the company's investment portfolio for the three months ended June 30, 2016 was 1.4%, compared to 0.3% for the three months ended June 30, 2015.
• Net investment income increased 30.6% compared to the prior year quarter as a result of positive contributions across most components, including fixed maturity investments, hedge funds and private equity and Allied World Financial Services.
• Net realized gains of $74.5 million were a significant contributor to the total return as compared to the prior year period, when rising bond yields in the fixed income portfolio drove net realized losses of $20.2 million for the second quarter of 2015.
• See the table below for the components of our investment returns:

Note: Net investment income, realized gains and unrealized gains are disclosed on a pre-tax basis.

Shareholders' Equity

• As of June 30, 2016, the company’s total shareholders' equity was $3,584.5 million, compared to $3,535.5 million as of March 31, 2016.
• As of June 30, 2016, basic book value per share was $40.98, an increase of 4.1% compared to $39.35 as of March 31, 2016, and an increase of 5.5% compared to $38.84 as of December 31, 2015.
• As of June 30, 2016, diluted book value per share was $39.70, an increase of 4.1%, compared to $38.13 as of March 31, 2016, and an increase of 5.1%, compared to $37.78 as of December 31, 2015.
• As of June 30, 2016, diluted tangible book value per share was $34.10, an increase of 4.3%, compared to $32.68 as of March 31, 2016, and an increase of 5.3%, compared to $32.38 as of December 31, 2015.

Capital Management

• Through July 19, 2016, year to date, the company repurchased a total of 4,427,396 of its common shares for an aggregate cost of $156.7 million at an average price of $35.39 per share. This includes 2,491,355 common shares for an aggregate cost of $90 million purchased during the second quarter and an additional 475,153 common shares at an aggregate cost of $16.7 million purchased to date during the third quarter.
• As of July 19, 2016, the company had $410 million remaining on its outstanding share repurchase authorization.
• In April 2016, the company’s shareholders approved four quarterly dividends equal to $0.26 per share. The first dividend was paid on June 30, 2016.

Supplementary Information

Allied World has provided a Financial Supplement as of June 30, 2016. This information is available in the "Investors" section of the company's website at www.awac.com.

Conference Call

Allied World will host a conference call on Wednesday, July 20, 2016 at 9:00 a.m. (Eastern Time) to discuss the results of the second quarter ended June 30, 2016. The public may access a live webcast of the conference call at the "Investors" section of the company's website at www.awac.com. In addition, the conference call can be accessed by dialing 1 (888) 771-4371 (U.S. callers) or 1 (847) 585-4405 (international callers) and entering the passcode 42758001 approximately ten minutes prior to the call.

A replay of the call will be available through August 20, 2016 by dialing 1 (888) 843-7419 (U.S. callers) and entering the passcode 42758001.

Non-GAAP Financial Measures

In presenting the company's results, management has included and discussed in this press release certain non-generally accepted accounting principles ("non-GAAP") financial measures within the meaning of Regulation G as promulgated 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 generally accepted accounting principles ("U.S. GAAP").

"Operating income" is an internal performance measure used in the management of the company's operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses, net foreign exchange gain or loss, 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 the 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 U.S. GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of the company's financial information to more easily analyze our results of operations and underlying business performance. Operating income should not be viewed as a substitute for U.S. GAAP net income.

"Annualized return on average shareholders' equity" ("ROAE") is calculated using average shareholders’ equity, excluding the average after tax other comprehensive income or loss, which may include unrealized gains (losses) on investments or currency translation adjustments. Unrealized gains (losses) on investments are primarily the result of interest rate and credit spread 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 amounts provides a more consistent and useful measurement of operating performance, which supplements U.S. 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 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 adjustments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the ROAE explanation above.

"Tangible shareholders' equity and diluted book value per share" is calculated using 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.

Reconciliations of these financial measures to their most directly comparable U.S. GAAP measures are included in the attached tables.

About Allied World

Allied World Assurance Company Holdings, AG, through its subsidiaries and brand known as Allied World, is a global provider of innovative property, casualty and specialty insurance and reinsurance solutions. Allied World offers superior client service through a global network of offices and branches. All of Allied World's rated insurance and reinsurance subsidiaries are rated A by A.M. Best Company, A by Standard & Poor's, and A2 by Moody's, and our Lloyd's Syndicate 2232 is rated A+ by Standard & Poor's and AA- by Fitch.

Please visit the following for further information on Allied World: Web: www.awac.com | Facebook: www.facebook.com/alliedworld | LinkedIn: https://www.linkedin.com/company/allied-world.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statements made in this press release 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160719006542/en/