UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

(Exact Name of Registrant as Specified in Charter)

Bermuda		001-32938		98-0481737
(State or Other Jurisdiction		(Commission File Number)		(I.R.S. Employer
of Incorporation)				Identification No.)

27 Richmond Road
Pembroke HM 08, Bermuda
(Address of Principal Executive Offices and Zip Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition

     On May 8, 2007, Allied World Assurance Company Holdings, Ltd issued a press release reporting its first quarter 2007 results and the availability of its first quarter 2007 financial supplement. The press release and the financial supplement are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively. The information hereunder is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not otherwise subject to the liabilities of that section and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d)

Exhibits

Exhibit
Number		Description
99.1		Press release, dated May 8, 2007, reporting first quarter results.
99.2		First Quarter 2007 Financial Supplement.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
Dated: May 8, 2007		By:		/s/ Joan H. Dillard
		Name:		Joan H. Dillard
		Title:		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number		Description
99.1		Press release, dated May 8, 2007, reporting first quarter results.
99.2		First Quarter 2007 Financial Supplement.

EXHIBIT 99.1

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD REPORTS FIRST
QUARTER 2007 OPERATING RESULTS; DECLARES QUARTERLY DIVIDEND
OF $0.15 PER COMMON SHARE

PEMBROKE, BERMUDA, May 8, 2007 - Allied World Assurance Company Holdings, Ltd (NYSE: AWH) today reported net income of $113.9 million, or $1.83 per diluted share, for the first quarter 2007 compared to net income of $98.1 million, or $1.94 per diluted share, for the first quarter 2006.

The company reported operating income of $120.4 million, or $1.94 per diluted share, for the first quarter 2007 compared to operating income of $103.9 million, or $2.06 per diluted share, for the first quarter 2006. The decrease in diluted earnings per share amounts reflects the increase in the number of shares outstanding resulting primarily from the company’s initial public offering in July 2006.

President and Chief Executive Officer Scott Carmilani commented, “We are very pleased with Allied World’s performance for the quarter. We have grown net income by 16% over the prior year and achieved an annualized operating return on equity of 21.2%. Gross premiums for the quarter were down 12% primarily due to our having recorded upward premium adjustments in our reinsurance segment in the first quarter of 2006. Without these adjustments, gross premiums declined by about 5% quarter over quarter. Our emphasis continues to be on sustaining underwriting profitability, especially in the face of softening market conditions.”

Mr. Carmilani concluded, “Notwithstanding current market conditions, we continue to leverage our diverse and seasoned books of business, strong financial strength ratings and growing asset base and expect to continue to generate strong results.”

Underwriting Results

Gross premiums written were $438.4 million in the first quarter 2007, a 12% decrease compared to $498.1 million in the first quarter 2006. Of this decrease, approximately $37.8 million, or 7.2%, was due to a reduction in estimated premium adjustments recorded in the reinsurance segment in the first quarter of 2007 as compared to the first quarter of 2006. The remaining 4.8% decrease was primarily the result of non-renewal of business that did not meet our underwriting requirements, increased competition and decreasing rates for new and renewal business.

Net premiums written were $357.8 million in the first quarter 2007, a 16.3% decrease compared to $427.5 million in the first quarter 2006. Net premiums earned in the first quarter 2007 were $286.6 million, a 7.2% decrease compared to $308.9 million for the first quarter 2006. These decreases were primarily driven by the decrease in gross premiums written.

The combined ratio was 79.7% in the first quarter 2007 compared to 85.1% in first quarter 2006. The loss and loss expense ratio was 57.9% in the first quarter 2007 compared to 66.7% in the first quarter 2006. During the first quarter 2007, the company recorded net favorable reserve development on prior accident years of $26.1 million, a benefit of 9.1 percentage points to the company’s loss ratio for this quarter. Of this development, net favorable development of $12.6 million relates to the windstorms of 2005.

Investment Results

Net investment income in the first quarter 2007 was $72.6 million, an increase of 17.2% over the $62.0 million of net investment income in the first quarter 2006. This increase primarily reflects the increase in the company’s invested asset base driven by strong operating cash flows and the proceeds from the company’s July 2006 initial public offering. During the first quarter 2007, the company recorded net realized losses of $6.5 million compared to net realized losses of $5.2 million in the first quarter 2006.

Shareholders’ Equity

As of March 31, 2007, shareholders’ equity was $2.4 billion compared to $2.2 billion reported as of December 31, 2006. Diluted book value per share was $37.89 as of March 31, 2007 compared to $35.26 as of December 31, 2006. The company’s annualized return on average equity for the three months ended March 31, 2007 was 20.1% and the annualized operating return on average equity for the three months ended March 31, 2007 was 21.2%.

Quarterly Dividend

Allied World announced today that its Board of Directors has declared a quarterly dividend of $0.15 per common share. The dividend will be payable on June 14, 2007 to shareholders of record on May 29, 2007.

Conference Call

Allied World will host a conference call on Wednesday, May 9^th at 8:30 a.m. (Eastern Time) to discuss its first quarter financial results. 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 (800) 591-6930 (U.S. and Canada callers) or (617) 614-4908 (international callers) and entering the passcode 47308433 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Wednesday, May 23, 2007 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 43576018. In addition, the webcast will remain available online through Wednesday, May 23, 2007 at www.awac.com.

Financial Supplement

A financial supplement relating to the first quarter 2007 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 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.

“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, 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”) is calculated using average equity, excluding the average after tax unrealized gains 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, through its insurance subsidiaries, is a global provider of insurance and reinsurance solutions, offering superior client service through offices in Bermuda, the United States and Europe. Our insurance subsidiaries are rated A (Excellent) by A.M. Best Company and A- (Strong) by Standard & Poor’s. Our Bermuda and U.S. insurance subsidiaries are rated A2 (Good) by Moody’s Investors Service. For further information on Allied World Assurance Company, please visit our website at www.awac.com.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act 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; (c) the impact of acts of terrorism and acts of war; (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 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 U.S. Securities and Exchange Commission. 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, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of United States dollars, except share and per share amounts)

		Quarter Ended March 31,
		2007				2006
Revenues:
Gross premiums written		$	438,406			$	498,120
Premiums ceded			(80,562	)			(70,617	)
Net premiums written			357,844				427,503
Change in unearned premiums			(71,278	)			(118,560	)
Net premiums earned			286,566				308,943
Net investment income			72,648				62,001
Net realized investment losses			(6,484	)			(5,236	)
Total Revenue			352,730				365,708
Expenses:
Net losses and loss expenses			165,995				205,960
Acquisition costs			29,196				36,472
General and administrative expenses			33,203				20,322
Interest expense			9,374				6,451
Foreign exchange loss			32				545
Total Expenses			237,800				269,750
Income before income taxes			114,930				95,958
Income tax expense (recovery)			1,009				(2,163	)
NET INCOME		$	113,921			$	98,121
PER SHARE DATA:
Basic earnings per share		$	1.89			$	1.96
Diluted earnings per share		$	1.83			$	1.94
Weighted average common shares outstanding			60,333,209				50,162,842
Weighted average common shares and common share equivalents outstanding			62,207,941				50,485,556

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States dollars, except share and per share amounts)

		As of				As of
		March 31,				December 31,
		2007				2006
ASSETS:
Fixed maturity investments available for sale at fair value (amortized cost: 2007:
$5,392,983; 2006: $5,188,379)		$	5,407,813			$	5,177,812
Other invested assets available for sale, at fair value (cost: 2007: $246,500; 2006: $245,657)			263,993				262,557
Cash and cash equivalents			288,284				366,817
Restricted cash			200,813				138,223
Securities lending collateral			534,774				304,742
Insurance balances receivable			400,231				304,261
Prepaid reinsurance			154,461				159,719
Reinsurance recoverable			668,050				689,105
Accrued investment income			44,171				51,112
Deferred acquisition costs			107,465				100,326
Intangible assets			3,920				3,920
Balances receivable on sale of investments			25,239				16,545
Net deferred tax assets			5,259				5,094
Other assets			44,934				40,347
Total assets		$	8,149,407			$	7,620,580
LIABILITIES:
Reserve for losses and loss expenses		$	3,663,224			$	3,636,997
Unearned premiums			879,817				813,797
Unearned ceding commissions			25,352				23,914
Reinsurance balances payable			112,731				82,212
Securities lending payable			534,774				304,742
Balances due on purchase of investments			46,517				—
Dividends payable			9,052				—
Senior notes			498,602				498,577
Accounts payable and accrued liabilities			23,360				40,257
Total liabilities		$	5,793,429			$	5,400,496
SHAREHOLDERS’ EQUITY:
Common shares, par value $0.03 per share, issued and outstanding 2007: 60,390,269 shares; 2006: 60,287,696 shares			1,812				1,809
Additional paid-in capital			1,828,612				1,822,607
Retained earnings			494,073				389,204
Accumulated other comprehensive income: net unrealized gains on investments, net of tax			31,481				6,464
Total shareholders’ equity			2,355,978				2,220,084
Total liabilities and shareholders’ equity		$	8,149,407			$	7,620,580

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONSOLIDATED SEGMENT DATA

(Expressed in thousands of United States dollars, except for ratio information)

Three Months Ended March 31, 2007		Property				Casualty				Reinsurance				Total
Gross premiums written		$	101,865			$	125,189			$	211,352			$	438,406
Net premiums written			46,132				100,645				211,067				357,844
Net premiums earned			44,491				124,409				117,666				286,566
Net losses and loss expenses			(6,865	)			(90,367	)			(68,763	)			(165,995	)
Acquisition costs			(332	)			(6,038	)			(22,826	)			(29,196	)
General and administrative expenses			(7,757	)			(15,307	)			(10,139	)			(33,203	)
Underwriting income			29,537				12,697				15,938				58,172
Net investment income															72,648
Net realized investment losses															(6,484	)
Interest expense															(9,374	)
Foreign exchange loss															(32	)
Income before income taxes														$	114,930
GAAP Ratios:
Loss and loss expense ratio			15.4	%			72.6	%			58.4	%			57.9	%
Acquisition cost ratio			0.8	%			4.9	%			19.4	%			10.2	%
General and administrative expense ratio			17.4	%			12.3	%			8.6	%			11.6	%
Combined ratio			33.6	%			89.8	%			86.4	%			79.7	%
Three Months Ended March 31, 2006		Property				Casualty				Reinsurance				Total
Gross premiums written		$	119,819			$	130,494			$	247,807			$	498,120
Net premiums written			67,197				114,194				246,112				427,503
Net premiums earned			49,102				131,982				127,859				308,943
Net losses and loss expenses			(33,319	)			(97,603	)			(75,038	)			(205,960	)
Acquisition costs			1,481				(9,319	)			(28,634	)			(36,472	)
General and administrative expenses			(5,115	)			(9,862	)			(5,345	)			(20,322	)
Underwriting income			12,149				15,198				18,842				46,189
Net investment income															62,001
Net realized investment losses															(5,236	)
Interest expense															(6,451	)
Foreign exchange loss															(545	)
Income before income taxes														$	95,958
GAAP Ratios:
Loss and loss expense ratio			67.9	%			73.9	%			58.7	%			66.7	%
Acquisition cost ratio			(3.0	%)			7.1	%			22.4	%			11.8	%
General and administrative expense ratio			10.4	%			7.5	%			4.2	%			6.6	%
Combined ratio			75.3	%			88.5	%			85.3	%			85.1	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED OPERATING INCOME RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

		Three Months Ended March 31,
		2007				2006
Net income		$	113,921			$	98,121
Net realized investment losses			6,484				5,236
Foreign exchange loss			32				545
Operating income		$	120,437			$	103,902
Weighted average common shares outstanding:
Basic			60,333,209				50,162,842
Diluted			62,207,941				50,485,556
Basic per share data:
Net income		$	1.89			$	1.96
Net realized investment losses			0.11				0.10
Foreign exchange loss			—				0.01
Operating income		$	2.00			$	2.07
Diluted per share data
Net income		$	1.83			$	1.94
Net realized investment losses			0.11				0.11
Foreign exchange loss			—				0.01
Operating income		$	1.94			$	2.06

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

		As of				As of
		March 31,				December 31,
		2007				2006
Price per share at period end		$	42.75			$	43.63
Total shareholders’ equity			2,355,978				2,220,084
Basic common shares outstanding			60,390,269				60,287,696
Add: unvested restricted share units			266,477				704,372
Add: long-term incentive plan share units			206,023				342,501
Add: dilutive options/warrants outstanding			6,588,782				6,695,990
Weighted average exercise price per share		$	33.18			$	33.02
Less: treasury stock method adjustment			(5,269,881	)			(5,067,534	)
Common shares and common share equivalents outstanding			62,181,670				62,963,025
Basic book value per common share		$	39.01			$	36.82
Diluted book value per common share		$	37.89			$	35.26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY RECONCILIATION

(Expressed in thousands of United States dollars, except for percentage information)

		Three Months Ended March 31,
		2007				2006
Opening shareholders’ equity		$	2,220,084			$	1,420,266
(Deduct)/add: net unrealized (gains) losses on investments, net of tax			(6,464	)			25,508
Adjusted opening shareholders’ equity			2,213,620				1,445,774
Closing shareholders’ equity			2,355,978				1,478,907
(Deduct)/add: net unrealized (gains) losses on investments, net of tax			(31,481	)			64,988
Adjusted closing shareholders’ equity			2,324,497				1,543,895
Average shareholders’ equity		$	2,269,059			$	1,494,835
Net income available to shareholders		$	113,921			$	98,121
Annualized net income available to shareholders			455,684				392,484
Annualized return on average shareholders’ equity - net income available to shareholders			20.1	%			26.3	%
Operating income available to shareholders		$	120,437			$	103,902
Annualized operating income available to shareholders			481,748				415,608
Annualized return on average shareholders’ equity - operating income available to shareholders			21.2	%			27.8	%

For further information, please contact:

Investor Contact:		Media Contact:
Keith J. Lennox		Jamie Tully/Susan Burns
Allied World Assurance Company		Sard Verbinnen & Co
212-635-5319		212-687-8080
keith.lennox@awac.com		jtully@sardverb.com
		sburns@sardverb.com

EXHIBIT 99.2

FINANCIAL SUPPLEMENT

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
March 31, 2007

Investor Contact: Keith Lennox		This report is for informational purposes only. It should be read in conjunction with documents filed by Allied World Assurance Company Holdings, Ltd with the U.S. Securities and Exchange Commission.
Phone: (212) 635-5319
Fax: (212) 635-5532
email: keith.lennox@awac.com

NOTE ON FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act 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 report 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; (c) the impact of acts of terrorism and acts of war; (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 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 U.S. Securities and Exchange Commission (“SEC”). 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, LTD
FINANCIAL SUPPLEMENT TABLE OF CONTENTS

				Page
		Basis of Presentation			4
I.		Financial Highlights
		- Consolidated Financial Highlights			5
II.		Consolidated Results
		- Consolidated Statements of Operations — Consecutive Quarters			6
		- Consolidated Premium Distribution Analysis — Current Quarter			7
III.		Segment Results
		- Consolidated Segment Results — Current Quarter			8
IV.		Balance Sheet Details
		- Consolidated Balance Sheets			9
		- Investment Portfolio			10
		- Reserve for Losses and Loss Expenses			11
		- Capital Structure			12
V.		Other
		- Basic and Diluted Earnings per Share			13
		- Return on Average Shareholders’ Equity — Consecutive Quarters			14
		- Diluted Book Value per Share			15
		- Annualized Investment Book Yield			16
		- Regulation G			18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
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, Ltd, along with others in the industry, uses 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 ratio, 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 or written, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned or written 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-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 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 18 for further details.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS

			THREE MONTHS ENDED									Previous
			MARCH 31,									Quarter
			2007					2006				Change
HIGHLIGHTS
Gross premiums written			$	438,406				$	498,120				(12.0	%)
Net premiums written				357,844					427,503				(16.3	%)
Net premiums earned				286,566					308,943				(7.2	%)
Net investment income				72,648					62,001				17.2	%
Net income				113,921					98,121				16.1	%
Operating income				120,437					103,902				15.9	%
Total assets				8,149,407					6,642,307				22.7	%
Total shareholders’ equity				2,355,978					1,478,907				59.3	%
Cash flows from operating activities				157,798					187,098				(15.7	%)
PER SHARE AND SHARE DATA
Basic earnings per share
Net income			$	1.89				$	1.96				(3.6	%)
Operating income			$	2.00				$	2.07				(3.4	%)
Diluted earnings per share
Net income			$	1.83				$	1.94				(5.7	%)
Operating income			$	1.94				$	2.06				(5.8	%)
Weighted average common shares outstanding
Basic				60,333,209					50,162,842
Diluted				62,207,941					50,485,556
Book value			$	39.01				$	29.48				32.3	%
Diluted book value (treasury stock method)			$	37.89				$	29.29				29.4	%
FINANCIAL RATIOS
Return on average equity (ROAE), net income				20.1	%				26.3	%			(6.2	)		pts
ROAE, operating income				21.2	%				27.8	%			(6.6	)		pts
Annualized investment book yield				4.7	%				4.3	%			0.4			pts
Loss and loss expense ratio				57.9	%				66.7	%			(8.8	)		pts
Acquisition cost ratio				10.2	%				11.8	%			(1.6	)		pts
General and administrative expense ratio				11.6	%				6.6	%			5.0			pts
Expense ratio				21.8	%				18.4	%			3.4			pts
Combined ratio				79.7	%				85.1	%			(5.4	)		pts

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS

		THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED
		MARCH 31, 2007				DECEMBER 31, 2006				SEPTEMBER 30, 2006				JUNE 30, 2006				MARCH 31, 2006				DECEMBER 31, 2005
Revenues
Gross premiums written		$	438,406			$	280,111			$	362,478			$	518,316			$	498,120			$	283,393
Net premiums written		$	357,844			$	210,739			$	298,016			$	370,338			$	427,503			$	213,571
Net premiums earned		$	286,566			$	319,791			$	317,759			$	305,517			$	308,943			$	302,032
Net investment income			72,648				66,009				61,407				54,943				62,001				50,823
Net realized investment losses			(6,484	)			(4,190	)			(9,080	)			(10,172	)			(5,236	)			(5,286	)
Total revenues		$	352,730			$	381,610			$	370,086			$	350,288			$	365,708			$	347,569
Expenses
Net losses and loss expenses		$	165,995			$	172,395			$	180,934			$	179,844			$	205,960			$	288,669
Acquisition costs			29,196				34,568				37,785				32,663				36,472				33,604
General and administrative expenses			33,203				33,856				25,640				26,257				20,322				27,594
Foreign exchange loss (gain)			32				1,092				(561	)			(475	)			545				1,670
Interest expense			9,374				9,510				9,529				7,076				6,451				5,832
Total expenses		$	237,800			$	251,421			$	253,327			$	245,365			$	269,750			$	357,369
Income (loss) before income taxes		$	114,930			$	130,189			$	116,759			$	104,923			$	95,958			$	(9,800	)
Income tax expense (recovery)			1,009				1,827				2,774				2,553				(2,163	)			2,478
Net income (loss)		$	113,921			$	128,362			$	113,985			$	102,370			$	98,121			$	(12,278	)
GAAP Ratios
Loss and loss expense ratio			57.9	%			53.9	%			56.9	%			58.9	%			66.7	%			95.6	%
Acquisition cost ratio			10.2	%			10.8	%			11.9	%			10.7	%			11.8	%			11.1	%
General and administrative expense ratio			11.6	%			10.6	%			8.1	%			8.6	%			6.6	%			9.1	%
Expense ratio			21.8	%			21.4	%			20.0	%			19.3	%			18.4	%			20.2	%
Combined ratio			79.7	%			75.3	%			76.9	%			78.2	%			85.1	%			115.8	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION
FOR THE THREE MONTHS ENDED MARCH 31, 2007

Gross Premiums Written = $438,406

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2007

														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTALS
Revenues
Gross premiums written		$	101,865			$	125,189			$	211,352			$	438,406
Net premiums written		$	46,132			$	100,645			$	211,067			$	357,844
Net premiums earned		$	44,491			$	124,409			$	117,666			$	286,566
Total revenues		$	44,491			$	124,409			$	117,666			$	286,566
Expenses
Net losses and loss expenses		$	6,865			$	90,367			$	68,763			$	165,995
Acquisition costs			332				6,038				22,826				29,196
General and administrative expenses			7,757				15,307				10,139				33,203
Total expenses		$	14,954			$	111,712			$	101,728			$	228,394
Underwriting Income		$	29,537			$	12,697			$	15,938			$	58,172
GAAP Ratios
Loss and loss expense ratio			15.4	%			72.6	%			58.4	%			57.9	%
Acquisition cost ratio			0.8	%			4.9	%			19.4	%			10.2	%
General and administrative expense ratio			17.4	%			12.3	%			8.6	%			11.6	%
Expense ratio			18.2	%			17.2	%			28.0	%			21.8	%
Combined ratio			33.6	%			89.8	%			86.4	%			79.7	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED BALANCE SHEETS

		MARCH 31, 2007				DECEMBER 31, 2006
ASSETS
Fixed maturity investments available for sale, at fair value		$	5,407,813			$	5,177,812
Other invested assets available for sale, at fair value			263,993				262,557
Cash and cash equivalents			288,284				366,817
Restricted cash			200,813				138,223
Securities lending collateral			534,774				304,742
Insurance balances receivable			400,231				304,261
Prepaid reinsurance			154,461				159,719
Reinsurance recoverable			668,050				689,105
Accrued investment income			44,171				51,112
Deferred acquisition costs			107,465				100,326
Intangible assets			3,920				3,920
Balances receivable on sale of investments			25,239				16,545
Net deferred tax assets			5,259				5,094
Other assets			44,934				40,347
TOTAL ASSETS		$	8,149,407			$	7,620,580
LIABILITIES
Reserve for losses and loss expenses		$	3,663,224			$	3,636,997
Unearned premiums			879,817				813,797
Unearned ceding commissions			25,352				23,914
Reinsurance balances payable			112,731				82,212
Securities lending payable			534,774				304,742
Balances due on purchase of investments			46,517				—
Dividends payable			9,052				—
Senior notes			498,602				498,577
Accounts payable and accrued liabilities			23,360				40,257
TOTAL LIABILITIES		$	5,793,429			$	5,400,496
SHAREHOLDERS’ EQUITY
Common shares, par value $0.03 per share:
60,390,269 issued and outstanding (2006 - 60,287,696)		$	1,812			$	1,809
Additional paid-in capital			1,828,612				1,822,607
Retained earnings			494,073				389,204
Accumulated other comprehensive income:
net unrealized gains on investments, net of tax			31,481				6,464
TOTAL SHAREHOLDERS’ EQUITY		$	2,355,978			$	2,220,084
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	8,149,407			$	7,620,580
Book value per share		$	39.01			$	36.82
Diluted book value per share (treasury stock method)			37.89			$	35.26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO

		MARCH 31, 2007								DECEMBER 31, 2006								SEPTEMBER 30, 2006								JUNE 30, 2006
		FAIR MARKET								FAIR MARKET								FAIR MARKET								FAIR MARKET
		VALUE								VALUE								VALUE								VALUE
MARKET VALUE
Fixed maturities available for sale		$	5,407,813				95.3	%		$	5,177,812				95.2	%		$	5,283,799				95.4	%		$	4,808,403				94.8	%
Other invested assets available for sale			263,993				4.7	%			262,557				4.8	%			256,997				4.6	%			264,700				5.2	%
Total		$	5,671,806				100.0	%		$	5,440,369				100.0	%		$	5,540,796				100.0	%		$	5,073,103				100.0	%
ASSET ALLOCATION BY MARKET VALUE
U.S. government and agencies		$	1,939,024				31.5	%		$	1,700,052				28.6	%		$	2,412,080				41.1	%		$	2,375,542				44.7	%
Non-U.S. government securities			100,064				1.6	%			97,319				1.6	%			99,504				1.7	%			91,384				1.7	%
Corporate securities			1,242,895				20.2	%			1,318,136				22.2	%			1,057,457				18.0	%			839,861				15.8	%
Mortgage-backed securities			1,897,086				30.8	%			1,823,907				30.7	%			1,456,789				24.9	%			1,248,140				23.5	%
Asset-backed securities			228,744				3.7	%			238,398				3.9	%			257,969				4.4	%			253,476				4.8	%
Fixed Income Sub-Total			5,407,813				87.8	%			5,177,812				87.0	%			5,283,799				90.1	%			4,808,403				90.5	%
Global high-yield bond fund			33,968				0.6	%			33,031				0.6	%			31,724				0.5	%			30,519				0.6	%
Hedge funds			230,025				3.7	%			229,526				3.9	%			225,273				3.9	%			234,181				4.4	%
Cash & cash equivalents			489,097				7.9	%			505,040				8.5	%			321,719				5.5	%			237,222				4.5	%
Total		$	6,160,903				100.0	%		$	5,945,409				100.0	%		$	5,862,515				100.0	%		$	5,310,325				100.0	%
CREDIT QUALITY BY MARKET VALUE
U.S. government and agencies		$	1,939,024				35.9	%		$	1,700,052				32.8	%		$	2,412,080				45.7	%		$	2,374,326				49.5	%
AAA/Aaa			2,416,429				44.7	%			2,426,331				46.9	%			2,005,127				37.9	%			1,752,653				36.4	%
AA/Aa			377,225				7.0	%			306,242				5.9	%			274,377				5.2	%			246,483				5.1	%
A/A			629,368				11.6	%			699,267				13.5	%			546,204				10.3	%			418,172				8.7	%
BBB/Baa			45,767				0.8	%			45,920				0.9	%			46,011				0.9	%			16,769				0.3	%
Total		$	5,407,813				100.0	%		$	5,177,812				100.0	%		$	5,283,799				100.0	%		$	4,808,403				100.0	%
STATISTICS
Annualized book yield, year to date			4.7	%							4.5	%							4.3	%							4.3	%
Duration		2.9		years						2.8		years						3.0		years						3.2		years
Average credit quality (S&P)		AA							AA								AA								AA

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANALYSIS OF RESERVE FOR LOSSES AND LOSS EXPENSES

						AT MARCH 31, 2007
														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTAL
Case reserves (net of reinsurance recoverable)		$	251,216			$	154,381			$	205,506			$	611,103
IBNR (net of reinsurance recoverable)			130,464				1,603,902				649,705				2,384,071
Total		$	381,680			$	1,758,283			$	855,211			$	2,995,174
IBNR/Total reserves (net of reinsurance recoverable)			34.2	%			91.2	%			76.0	%			79.6	%

						AT DECEMBER 31, 2006
														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTAL
Case reserves (net of reinsurance recoverable)		$	284,284			$	149,619			$	197,366			$	631,269
IBNR (net of reinsurance recoverable)			139,703				1,541,549				635,371				2,316,623
Total		$	423,987			$	1,691,168			$	832,737			$	2,947,892
IBNR/Total reserves (net of reinsurance recoverable)			32.9	%			91.2	%			76.3	%			78.6	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CAPITAL STRUCTURE

		MARCH 31,				DECEMBER 31,				SEPTEMBER 30,				JUNE 30,				MARCH 31,
		2007				2006				2006				2006				2006
Senior notes/long-term debt		$	498,602			$	498,577			$	498,543			$	500,000			$	500,000
Shareholders’ equity			2,355,978				2,220,084				2,094,872				1,565,062				1,478,907
Total capitalization		$	2,854,580			$	2,718,661			$	2,593,415			$	2,065,062			$	1,978,907
Leverage ratios
Debt to total capitalization			17.5	%			18.3	%			19.2	%			24.2	%			25.3	%
Annual net premiums written (trailing 12 months)		$	1,236,937			$	1,306,596			$	1,309,428			$	1,261,132			$	1,210,800
Closing shareholders’ equity		$	2,355,978			$	2,220,084			$	2,094,872			$	1,565,062			$	1,478,907
Deduct/(add): accumulated other comprehensive income (loss)			31,481				6,464				3,447				(83,144	)			(64,988	)
Adjusted shareholders’ equity		$	2,324,497			$	2,213,620			$	2,091,425			$	1,648,206			$	1,543,895
Net premiums written (trailing 12 months) to adjusted shareholders’ equity			0.53				0.59				0.63				0.77				0.78