OREANDA-NEWS. Allied World Assurance Company Holdings, AG (NYSE: AWH) today reported net income of $74.1 million, or $0.81 per diluted share, for the first quarter of 2016 compared to net income of $124.4 million, or $1.27 per diluted share, for the first quarter of 2015.

The company reported operating income of $59.0 million, or $0.65 per diluted share, for the first quarter of 2016, compared to operating income of $91.7 million, or $0.93 per diluted share, for the first quarter of 2015.

President and Chief Executive Officer Scott Carmilani commented, "We are pleased at the positive contributions from our investment portfolio and solid underwriting results this quarter. Although market conditions remain challenging, we continue to find attractive opportunities while maintaining our strong focus on risk selection and capital management."

First Quarter Summary (Unaudited)
     
(Expressed in millions of U.S. dollars,   Three Months Ended March 31,
except per share amounts)                 Diluted per share
    2016   2015         2016   2015
                       
Net income   $74.1   $124.4         $0.81   $1.27
Add after tax effect of:                      
Net realized investment gains   (12.1)   (42.6)         (0.13)   (0.44)
Foreign exchange (gain) loss   (3.0)   9.9         (0.03)   0.10
Operating income   $59.0   $91.7         $0.65   $0.93
                       

First Quarter Operating Results

  • Gross premiums written were $863.5 million, a 1.9% decrease compared to $880.6 million for the first quarter of 2015. This was driven by a decline in the Reinsurance segment, partially offset by growth in the Global Markets Insurance segment. North American Insurance was essentially flat.
    • The Global Markets Insurance segment grew by 94.7% on a constant dollar basis and 90.6% on an as reported basis, driven by the inclusion of the acquired Asian operations. The first quarter of 2016 was the fourth quarterly period to include the results of the acquired Asian operations, making future prior year quarter references directly comparable.
    • The North American Insurance segment was essentially unchanged, led by growth across programs and environmental businesses, offset in part by declines in primary casualty, healthcare, and property businesses.
    • The Reinsurance segment decreased by 16.0% driven largely by the reduction in property catastrophe risk as well as the non-renewal of certain other property and casualty treaties.
  • The company did not experience any reportable catastrophe losses for the first quarter of 2016 or the comparable quarter last year.
  • The combined ratio was 96.0% compared to 88.1% for the first quarter of 2015.
  • The loss and loss expense ratio was 64.2% for the first quarter of 2016 compared to 57.2% for the prior year quarter. During the first quarter of 2016, the company recorded net favorable reserve development on prior loss years of $25.4 million, a benefit of 4.4 percentage points to the loss and loss expense ratio, compared to $63.6 million a year ago, a benefit of 11.2 percentage points. In the prior year quarter, the company benefited from significant favorable development related to 2010 and prior accident years in its North American Insurance general casualty and professional lines businesses. During the quarter, the company experienced $8.6 million of current year development in the Global Markets Insurance segment largely due to the impact of certain aviation and property events.
  • The company's expense ratio was 31.8% for the first quarter of 2016 compared to 30.9% for the first quarter of 2015. The increase was largely driven by higher acquisition ratios across all three business segments, most notably within the acquired Asian operations. The company's general and administrative expense ratio was 16.6% for the first quarter of 2016 compared to 17.1% for the prior year quarter. This improvement was driven by lower compensation expenses.

Investment Results

  • The total financial statement return on the company's investment portfolio for the three months ended March 31, 2016 was 0.8% compared to 1.0% for the three months ended March 31, 2015.
  • Net investment income increased 19.5% in the quarter compared to the prior year quarter, driven by increased returns from fixed maturity assets and the improved performance of Allied World Financial Services.
  • As of March 31, 2016, non-core assets represented 19.3% of the investment portfolio, a decrease as compared to 22.5% as of December 31, 2015 and 28.9% as of March 31, 2015. This decrease was largely driven by a reduced allocation to public equities.
  • See the table below for the components of the investment returns:
(Expressed in millions of U.S. dollars,   Three Months Ended March 31,
except percentages)   2016   2015
Net investment income   $53.2   $44.6
Net realized investment gains   18.9   45.0
Total financial statement portfolio return   $72.1   $89.6
Average invested assets   $9,299.1   $8,615.0
Financial statement portfolio return   0.8%   1.0%
         

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

Shareholders' Equity

  • As of March 31, 2016, the company’s total shareholders' equity was $3,535.5 million, compared to $3,532.5 million as of December 31, 2015.
  • As of March 31, 2016, diluted book value per share was $38.13, an increase of 0.9% compared to $37.78 as of December 31, 2015.
  • As of March 31, 2016, diluted tangible book value per share was $32.68, an increase of 0.9% compared to $32.38 as of December 31, 2015.
  • Annualized net income return on average shareholders' equity was 8.4% for the quarter, compared to 2.3% for the full year 2015.

Capital Management

  • Through April 18, 2016, year to date, the company repurchased a total of 1,936,812 of its common shares for an aggregate cost of $66.7 million at an average price of $34.42 per share.
  • In May 2015, the company’s shareholders approved four quarterly dividends equal to $0.26 per share. The fourth and last dividend was paid on March 31, 2016.
  • Proposals for an additional four quarterly dividends equal to $0.26 per share and a new, two-year $500 million share repurchase authorization were approved by the company's shareholders at the Annual Shareholder Meeting held earlier today.

Supplementary Information

Allied World has provided a Financial Supplement as of March 31, 2016. This information is available in the "Investor Relations" section of the company's website at www.awac.com.

Conference Call

Allied World will host a conference call on Wednesday, April 20, 2016 at 8:00 a.m. (Eastern Time) to discuss the results for the first quarter ended March 31, 2016. The public may access a live webcast of the conference call at the "Investor Relations" 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 42198699 approximately ten minutes prior to the call. A replay of the call will be available through Friday, May 6, 2016 at www.awac.com.