Allied World Posts Poor 4Q Results - Analyst Blog

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Allied World Assurance Company Holdings ( AWH ) reported fourth quarter operating loss of $1.58 per share, narrower than the Zacks Consensus Estimate loss of $1.91. In the fourth quarter of 2011, the company reported operating earnings of $2.40 per share.

Including net realized investment gains of 43 cents and foreign exchange loss of 2 cents, Allied World reported a net loss of $1.17 per share in the fourth quarter, compared to a net income of $4.63 per share in the year-ago period.

Quarterly Operational Update

Total revenues declined 1.9% year over year to $529 million in the fourth quarter. The decline came on back of waning net investment income (down 15.7% year over year) and net realized investment gains (down 54.5% year over year). It surpassed the Zacks Consensus Estimate of $493 million.

Net written premiums in the quarter increased 18.2% year over year to $362.6 million.

Total expenses of $570.4 million in the quarter showed an increase of 65.7% year over year due to increased net loss and loss expenses (up 94.3% year over year), acquisition costs (up 20.1% y ear over year), general and administrative expenses (up 19.7% year over year) and foreign exchange loss ($0.9 million, compared to a profit of $0.5 million in the fourth quarter of 2011).

In the fourth quarter, underwriting loss for Allied World was $78.8 million compared to an underwriting profit of $65.1 million in the year-ago period.

The combined ratio deteriorated 3300 basis points year over year to 116.5%.

Segment Update

The U.S. Insurance reported underwriting loss of $35.1 million compared to an underwriting profit of $7.7 million in the prior-year period. Net premiums written in the segment were $192.1 million, up 13.6% year over year. Combined ratio deteriorated 2430 basis points to 119.3%.

The International Insurance reported underwriting loss of $24.5 million, compared to an underwriting profit of $39.4 million in the year-ago period. Net premiums written in the segment were $91.2 million, up 14.3% year over year. Combined ratio deteriorated 7650 basis points to 127.6%.

The Reinsurance segment reported underwriting loss of $19.2 million compared to an underwriting profit of $18 million in the year-ago period. Net premiums written in the quarter increased 36.9% year over year to $79.3 million. Combined ratio deteriorated 2050 basis points to 109.4%.

Full Year Highlights

Operating earnings of $5.47 per share improved 18.1% year over year.

Including net realized investment gains of $8.07 and foreign exchange losses of 2 cents, Allied World reported net income of $13.30 per share in 2012, up 92.2% year over year.

Total revenue for full year 2012 increased 25.9% year over year to $2.2 billion.

Underwriting profit in 2012 was $96.6 million, up 64% year over year.

Combined ratio improved 140 basis points to 94.5% in 2012.

Share Repurchase Update

In the fourth quarter, Allied World spent $56.9 million to buy back 713,874 shares at an average price of $79.70. In 2012, it spent $263.9 million to repurchase 3.7 million shares at an average price of $72.20 per share.

Financial Position

Allied World exited 2012 with cash and cash equivalents of $865.4 million, up 20.8% year over year.

Cash from operating activities stood at $629.4 million in 2012, up 14.8% year over year.

As of Dec 31, 2012, total assets of the company were $12 billion, up 8.2% year over year.

Shareholders' equity increased 5.6% year over year to $3.3 billion at 2012 end. The debt to capital ratio of the company improved 80 basis points year over year to 19.4% in 2012.

Business Update

In the reported quarter, the company partnered with four companies- Cunningham Lindsey , a leading loss adjusting and claim management company. Another, Aeolus Capital Management , a Bermuda-based asset management company that manages capital for investors interested in property catastrophe reinsurance and retrocession market, while MatlinPatterson , a private equity firm focused on distressed investments across a range of industries. A fourth partner, Crescent Capital Group , a privately held asset management firm that specializes in public and private below investment grade assets spanning the entire credit capital.

Performance of few other Property and Casualty Insurers

Cincinnati Financial Corp. ( CINF ) reported fourth quarter 2012 operating earnings of $1.11 per share, substantially beating the Zacks Consensus Estimate of 50 cents. Earnings were also up substantially 32% year over year. The earnings beat came on the back of increased property casualty underwriting profits.

American Financial Group Inc. 's ( AFG ) fourth quarter adjusted earnings of 67 cents breezed past the Zacks Consensus Estimate by 3.1%. However, results were down 36.2% year over year from $1.05 earned in the year-ago quarter.

XL Group Plc 's ( XL ) fourth-quarter 2012 operating income of 13 cents per share outpaced the Zacks Consensus Estimate of a loss of 35 cents. Earnings rebounded from a loss of 25 cents incurred in the year-ago quarter.

Zacks Rank

Allied World currently carries a Zacks Rank #3 (Hold).



AMER FINL GROUP (AFG): Free Stock Analysis Report

ALLIED WORLD AS (AWH): Free Stock Analysis Report

CINCINNATI FINL (CINF): Free Stock Analysis Report

XL GROUP PLC (XL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AFG , AWH , CINF , XL

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