Allied World Assurance Company Holdings, AG
) reported fourth-quarter 2013 operating net income of $2.17 per
share, missing the Zacks Consensus Estimate of $2.40 by 10.4%.
However, the results surged from the year-ago quarter operating
net loss of $1.58 a share.
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Allied World's net income, including net realized investment
gains of $1.86 per share and net foreign exchange loss of 2 cents
per share, jumped to $4.01 per share, rebounding from a net loss
of $1.17 per share reported in the fourth quarter of 2012.
The year-over-year bottom-line improvement came on the back of
top-line growth, better prior-year reserve development and lower
Allied World's total revenue, excluding net realized investment
gains, grossed $571.8 million in the quarter, almost in line with
the Zacks Consensus Estimate of $572 million. However, the
results improved 11.1% year over year. Top-line growth was
attributable to higher net earned premiums as well as higher net
Net earned premiums improved 10.1% from the year-ago period.
The increase in earned premiums and lower losses drove
underwriting income to $41.9 million from $78.8 million of
underwriting loss reported in the prior-year quarter.
Allied World's total expenses narrowed 12.7% year over year to
$498.1 million in the quarter, primarily due to lower net losses
and loss expenses. However, the decrease was partially offset by
higher acquisition costs and general and administrative expenses.
Lower loss ratio drove a year-over-year improvement of 2450 basis
points (bps) in combined ratio. The figure stood at 92% in the
Gross premiums written climbed 11.7% year over year to $291.1
million on the back of new business across present lines, new
lines of business and increased premium rates across all business
The segment incurred an underwriting loss of $45.7 million
propelled by higher net losses and loss expenses compared with
underwriting loss of $35.1 million reported a year ago.
Combined ratio deteriorated 250 bps to 121.8% in the reported
Gross premiums written increased 19.9% year over year to $187.8
million, driven by inclusion of new aviation business and better
performances at small professional liability lines in the U.K.
Underwriting income of $25.7 million during the reported quarter
improved significantly from the year-ago quarter's underwriting
loss number. The increase was primarily supported by lower net
losses and loss expenses.
Substantially lower loss ratio led to 5690 bps improvement in the
combined ratio that stood at 70.7% in the fourth quarter.
Gross premium written during the quarter under review decreased
4.1% year over year to $76.6 million.
Lower net losses and loss expenses and higher net earned premiums
guided the segment to achieve an underwriting income of $61.8
million compared with an underwriting loss of $19.2 million in
the prior-year quarter.
Combined ratio in this segment improved 3650 bps year over year
Full-Year 2013 Highlights
Allied World's net operating income for full year 2013 was $10.41
per share, surging 90.3% from the prior-year number. Growth was
boosted by better results across all the segments.
Including net realized investment gains of $1.77 per share, and
foreign exchange loss of 23 cents, Allied World's net income for
2013 came in at $11.95 per share, decreasing 10.1% from the 2012
Excluding net realized investment gains, Allied World reported
total revenue of $2.16 billion, up 12.9% year over year. The
revenue growth was catalyzed by increase in net earned premiums.
Allied World exited the reported quarter with cash and cash
equivalents of $681.3 million that dropped 43.7% from the end of
Total assets of Allied World also decreased 3.5% to $11.94
billion as of Dec 31, 2013 from the end of the sequentially prior
Allied World's long-term debt of $798.5 million was almost in
line with the third-quarter end level.
Share Repurchase and Dividend Updates
Allied World spent $51.5 million to buy back 0.48 million shares
in the quarter.
Allied World paid three of the four quarterly dividends during
2013 and the remaining one is expected to be paid on Apr 3, 2014.
Allied World presently bears a Zacks Rank #3 (Hold). Some
better-ranked stocks in the property and casualty insurance
Greenlight Capital Re, Ltd.
Navigators Group Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).