Exhibit 99.2

Exhibit 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
3^rd Quarter Ended September 30, 2009


Investor Contact: Keith Lennox Phone: (646) 794-0750		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.
email: keith.lennox@awac.com

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Any forward-looking statements made in this report 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 the ability to recognize the benefits of the Darwin Professional Underwriters, Inc. acquisition; pricing and policy term trends; increased competition; the impact of acts of terrorism and acts of war; greater frequency or severity of unpredictable catastrophic events; investigations of market practices and related settlement terms; negative rating agency actions; the adequacy of our loss reserves; 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 including those related to the ongoing financial crisis; 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.

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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 Statements of Operations — Year to Date		7
- Consolidated Premium Distribution Analysis by Segment — Current Quarter		8
- Consolidated Premium Distribution Analysis by LOB — Current Quarter		9
- Consolidated Premium Distribution Analysis by Segment — Year to Date		10
- Consolidated Premium Distribution Analysis by LOB — Year to Date		11

III. Segment Results
- Consolidated Segment Results — Current Quarter		12
- Consolidated Segment Results — Prior Year Quarter		13
- Consolidated Segment Results — Current Year to Date		14
- Consolidated Segment Results — Prior Year to Date		15

IV. Balance Sheet Details
- Condensed Consolidated Balance Sheets		16
- Consolidated Investment Portfolio		17
- Consolidated Investment Portfolio — Additional Detail		18
- Reserves for Losses and Loss Expenses		20
- Capital Structure and Leverage Ratios		21

V. Other
- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Consecutive Quarters		22
- Operating Income Reconciliation and Basic and Diluted Earnings per Share — Year to Date		23
- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Consecutive Quarters		24
- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity — Year to Date		25
- Diluted Book Value per Share		26
- Annualized Investment Book Yield		27
- Regulation G		29

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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, use 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, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned 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 generally accepted accounting principles (“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 29 for further details.

Page 4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS


	THREE MONTHS ENDED						NINE MONTHS ENDED						Previous			Previous
	SEPTEMBER 30,						SEPTEMBER 30,						Quarter			Year to Date
	2009			2008			2009			2008			Change			Change

HIGHLIGHTS
Gross premiums written	$	401,837		$	290,981		$	1,374,216		$	1,134,638			38.1	%		21.1	%
Net premiums written		320,956			233,903			1,087,431			880,725			37.2	%		23.5	%
Net premiums earned		328,771			271,973			986,411			813,921			20.9	%		21.2	%
Net investment income		73,032			76,916			227,423			226,192			(5.0	%)		0.5	%
Net income (loss)		200,554			(46,367	)		445,632			163,783			532.5	%		172.1	%
Operating income		155,373			102,781			405,806			313,936			51.2	%		29.3	%
Total investments and cash & cash equivalents		7,554,159			6,464,396			7,554,159			6,464,396			16.9	%		16.9	%
Total assets		9,641,257			8,102,251			9,641,257			8,102,251			19.0	%		19.0	%
Total shareholders’ equity		3,078,894			2,272,828			3,078,894			2,272,828			35.5	%		35.5	%
Cash flows from operating activities		164,818			133,246			567,200			509,874			23.7	%		11.2	%

PER SHARE AND SHARE DATA
Basic earnings per share
Net income (loss)	$	4.05		$	(0.95	)	$	9.01		$	3.37			526.3	%		167.4	%
Operating income	$	3.13		$	2.09		$	8.21		$	6.47			49.8	%		26.9	%
Diluted earnings per share
Net income (loss)	$	3.83		$	(0.95	)	$	8.62		$	3.22			503.2	%		167.7	%
Operating income	$	2.97		$	2.03		$	7.85		$	6.17			46.2	%		27.3	%
Weighted average common shares outstanding
Basic		49,574,266			49,007,389			49,449,809			48,547,839
Diluted		52,345,913			49,007,389			51,676,006			50,869,098
Book value	$	62.07		$	46.36		$	62.07		$	46.36			33.9	%		33.9	%
Diluted book value	$	57.20		$	43.55		$	57.20		$	43.55			31.3	%		31.3	%

FINANCIAL RATIOS
Annualized return on average equity (ROAE), net income		28.7	%		(8.0	%)		22.8	%		9.9	%	36.7		pts	12.9		pts
Annualized ROAE, operating income		22.2	%		17.8	%		20.8	%		19.0	%	4.4		pts	1.8		pts
Annualized investment book yield		4.1	%		4.7	%		4.3	%		4.8	%	(0.6		)pts	(0.5		)pts

Loss and loss expense ratio		41.5	%		64.7	%		46.9	%		61.1	%	(23.2		)pts	(14.2		)pts
Acquisition cost ratio		11.1	%		10.5	%		11.2	%		10.0	%	0.6		pts	1.2		pts
General and administrative expense ratio		17.8	%		15.0	%		18.2	%		16.0	%	2.8		pts	2.2		pts

Expense ratio		28.9	%		25.5	%		29.4	%		26.0	%	3.4		pts	3.4		pts

Combined ratio		70.4	%		90.2	%		76.3	%		87.1	%	(19.8		)pts	(10.8		)pts

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — CONSECUTIVE QUARTERS


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED
	SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008			SEPTEMBER 30, 2008
Revenues
Gross premiums written	$	401,837		$	492,782		$	479,597		$	310,945		$	290,981
Net premiums written	$	320,956		$	361,438		$	405,038		$	226,503		$	233,903

Net premiums earned	$	328,771		$	333,668		$	323,972		$	302,984		$	271,973
Net investment income		73,032			76,537			77,854			82,583			76,916
Net realized investment gains/(losses)		46,861			5,093			36,602			(19,454	)		(76,849	)
Net impairment charges recognized in earnings		(1,953	)		(5,474	)		(41,963	)		(100,593	)		(75,027	)
Other income		298			369			466			746			—

Total revenues	$	447,009		$	410,193		$	396,931		$	266,266		$	197,013


Expenses
Net losses and loss expenses:
Current year	$	209,971		$	214,334		$	208,683		$	233,789		$	272,958
Prior years		(73,530	)		(36,615	)		(60,186	)		(90,258	)		(96,948	)

Total net losses and loss expenses	$	136,441		$	177,719		$	148,497		$	143,531		$	176,010
Acquisition costs		36,630			36,963			37,129			30,849			28,615
General and administrative expenses		58,586			62,560			58,430			56,115			40,794
Interest expense		9,523			9,522			10,447			10,205			9,515
Foreign exchange (gain)/loss		(273	)		(1,222	)		835			1,230			(2,728	)

Total expenses	$	240,907		$	285,542		$	255,338		$	241,930		$	252,206


Income/(loss) before income taxes	$	206,102		$	124,651		$	141,593		$	24,336		$	(55,193	)
Income tax expense/(recovery)		5,548			10,981			10,185			4,484			(8,826	)

Net income/(loss)	$	200,554		$	113,670		$	131,408		$	19,852		$	(46,367	)


GAAP Ratios
Loss and loss expense ratio		41.5	%		53.3	%		45.8	%		47.4	%		64.7	%
Acquisition cost ratio		11.1	%		11.1	%		11.5	%		10.2	%		10.5	%
General and administrative expense ratio		17.8	%		18.7	%		18.0	%		18.5	%		15.0	%

Expense ratio		28.9	%		29.8	%		29.5	%		28.7	%		25.5	%

Combined ratio		70.4	%		83.1	%		75.3	%		76.1	%		90.2	%


Per Share Data
Basic earnings per share
Net income/(loss)	$	4.05		$	2.30		$	2.67		$	0.40		$	(0.95	)
Operating income	$	3.13		$	2.28		$	2.79		$	2.88		$	2.09
Diluted earnings per share
Net income/(loss)	$	3.83		$	2.22		$	2.57		$	0.39		$	(0.95	)
Operating income	$	2.97		$	2.20		$	2.69		$	2.80		$	2.03

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS — YEAR TO DATE


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2009			SEPTEMBER 30, 2008
Revenues
Gross premiums written	$	1,374,216		$	1,134,638
Net premiums written		1,087,431			880,725

Net premiums earned	$	986,411		$	813,921
Net investment income		227,423			226,192
Net realized investment gains/(losses)		88,556			(40,500	)
Net impairment charges recognized in earnings		(49,390	)		(112,304	)
Other income		1,133			—

Total revenues	$	1,254,133		$	887,309


Expenses
Net losses and loss expenses:
Current year	$	632,988		$	687,428
Prior years		(170,331	)		(189,837	)

Total net losses and loss expenses		462,657			497,591
Acquisition costs		110,721			81,720
General and administrative expenses		179,575			130,445
Interest expense		29,492			28,538
Foreign exchange gain		(660	)		(2,651	)

Total expenses	$	781,785		$	735,643


Income before income taxes	$	472,348		$	151,666
Income tax expense/(recovery)		26,716			(12,117	)

Net income	$	445,632		$	163,783


GAAP Ratios
Loss and loss expense ratio		46.9	%		61.1	%
Acquisition cost ratio		11.2	%		10.0	%
General and administrative expense ratio		18.2	%		16.0	%

Expense ratio		29.4	%		26.0	%

Combined ratio		76.3	%		87.1	%


Per Share Data
Basic earnings per share
Net income	$	9.01		$	3.37
Operating income	$	8.21		$	6.47
Diluted earnings per share
Net income	$	8.62		$	3.22
Operating income	$	7.85		$	6.17

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — CURRENT QUARTER

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS — YEAR TO DATE

Page 11

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	169,629		$	107,768		$	124,440		$	401,837
Net premiums written	$	126,600		$	69,939		$	124,417		$	320,956
Net premiums earned	$	111,558		$	97,705		$	119,508		$	328,771
Other income	$	298		$	—		$	—		$	298

Total revenues	$	111,856		$	97,705		$	119,508		$	329,069


Expenses
Net losses and loss expenses:
Current year	$	69,641		$	71,029		$	69,301		$	209,971
Prior years		(27,570	)		(42,728	)		(3,232	)		(73,530	)

Total net losses and loss expenses	$	42,071		$	28,301		$	66,069		$	136,441
Acquisition costs		14,354			516			21,760			36,630
General and administrative expenses		26,994			19,866			11,726			58,586

Total expenses	$	83,419		$	48,683		$	99,555		$	231,657


Underwriting income	$	28,437		$	49,022		$	19,953		$	97,412

Net investment income											73,032
Net realized investment gains											46,861
Net impairment charges recognized in earnings											(1,953	)
Interest expense											(9,523	)
Foreign exchange gain											273


Income before income taxes										$	206,102


GAAP Ratios
Loss and loss expense ratio		37.7	%		29.0	%		55.3	%		41.5	%
Acquisition cost ratio		12.9	%		0.5	%		18.2	%		11.1	%
General and administrative expense ratio		24.2	%		20.3	%		9.8	%		17.8	%

Expense ratio		37.1	%		20.8	%		28.0	%		28.9	%

Combined ratio		74.8	%		49.8	%		83.3	%		70.4	%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS
Revenues
Gross premiums written	$	64,828		$	132,612		$	93,541		$	290,981
Net premiums written	$	45,674		$	95,943		$	92,286		$	233,903

Net premiums earned	$	32,034		$	116,377		$	123,562		$	271,973

Total revenues	$	32,034		$	116,377		$	123,562		$	271,973


Expenses
Net losses and loss expenses:
Current year	$	33,718		$	141,904		$	97,336		$	272,958
Prior years		(3,990	)		(53,576	)		(39,382	)		(96,948	)

Total net losses and loss expenses	$	29,728		$	88,328		$	57,954		$	176,010
Acquisition costs		2,852			1,794			23,969			28,615
General and administrative expenses		10,609			18,483			11,702			40,794

Total expenses	$	43,189		$	108,605		$	93,625		$	245,419


Underwriting (loss) income	$	(11,155	)	$	7,772		$	29,937		$	26,554

Net investment income											76,916
Net realized investment losses											(76,849	)
Net impairment charges recognized in earnings											(75,027	)
Interest expense											(9,515	)
Foreign exchange gain											2,728


Loss before income taxes										$	(55,193	)


GAAP Ratios
Loss and loss expense ratio		92.8	%		75.9	%		46.9	%		64.7	%
Acquisition cost ratio		8.9	%		1.5	%		19.4	%		10.5	%
General and administrative expense ratio		33.1	%		15.9	%		9.5	%		15.0	%

Expense ratio		42.0	%		17.4	%		28.9	%		25.5	%

Combined ratio		134.8	%		93.3	%		75.8	%		90.2	%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	505,710		$	425,672		$	442,834		$	1,374,216
Net premiums written	$	369,912		$	275,066		$	442,453		$	1,087,431
Net premiums earned	$	327,850		$	320,706		$	337,855		$	986,411
Other income	$	1,133		$	—		$	—		$	1,133

Total revenues	$	328,983		$	320,706		$	337,855		$	987,544


Expenses
Net losses and loss expenses:
Current year	$	198,739		$	231,727		$	202,522		$	632,988
Prior years		(55,649	)		(90,132	)		(24,550	)		(170,331	)

Total net losses and loss expenses	$	143,090		$	141,595		$	177,972		$	462,657
Acquisition costs		42,308			3,243			65,170			110,721
General and administrative expenses		86,518			58,599			34,458			179,575

Total expenses	$	271,916		$	203,437		$	277,600		$	752,953


Underwriting income	$	57,067		$	117,269		$	60,255		$	234,591

Net investment income											227,423
Net realized investment gains											88,556
Net impairment charges recognized in earnings											(49,390	)
Interest expense											(29,492	)
Foreign exchange gain											660


Income before income taxes										$	472,348


GAAP Ratios
Loss and loss expense ratio		43.6	%		44.2	%		52.7	%		46.9	%
Acquisition cost ratio		12.9	%		1.0	%		19.3	%		11.2	%
General and administrative expense ratio		26.4	%		18.3	%		10.2	%		18.2	%

Expense ratio		39.3	%		19.3	%		29.5	%		29.4	%

Combined ratio		82.9	%		63.5	%		82.2	%		76.3	%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008


	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTALS

Revenues
Gross premiums written	$	166,314		$	548,433		$	419,891		$	1,134,638
Net premiums written	$	104,437		$	358,036		$	418,252		$	880,725
Net premiums earned	$	93,758		$	357,116		$	363,047		$	813,921

Total revenues	$	93,758		$	357,116		$	363,047		$	813,921


Expenses
Net losses and loss expenses:
Current year	$	79,764		$	356,193		$	251,471		$	687,428
Prior years		(10,973	)		(114,709	)		(64,155	)		(189,837	)

Total net losses and loss expenses	$	68,791		$	241,484		$	187,316		$	497,591
Acquisition costs		8,469			2,249			71,002			81,720
General and administrative expenses		39,452			59,091			31,902			130,445

Total expenses	$	116,712		$	302,824		$	290,220		$	709,756


Underwriting (loss) income	$	(22,954	)	$	54,292		$	72,827		$	104,165

Net investment income											226,192
Net realized investment losses											(40,500	)
Net impairment charges recognized in earnings											(112,304	)
Interest expense											(28,538	)
Foreign exchange gain											2,651


Income before income taxes										$	151,666


GAAP Ratios
Loss and loss expense ratio		73.4	%		67.6	%		51.6	%		61.1	%
Acquisition cost ratio		9.0	%		0.6	%		19.6	%		10.0	%
General and administrative expense ratio		42.1	%		16.5	%		8.8	%		16.0	%

Expense ratio		51.1	%		17.1	%		28.4	%		26.0	%

Combined ratio		124.5	%		84.7	%		80.0	%		87.1	%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONDENSED CONSOLIDATED BALANCE SHEETS


	SEPTEMBER 30, 2009		DECEMBER 31, 2008

ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2009: $5,464,105; 2008: $5,872,031)	$	5,673,793	$	6,032,029
Fixed maturity investments trading, at fair value		1,372,287		—
Other invested assets trading, at fair value		162,125		69,902
Other invested assets available for sale, at fair value (cost: 2009: nil; 2008: $89,229)		—		55,199

Total investments		7,208,205		6,157,130
Cash and cash equivalents		345,954		706,267
Securities lending collateral		—		171,026
Insurance balances receivable		407,617		347,941
Prepaid reinsurance		198,136		192,582
Reinsurance recoverable		913,964		888,314
Accrued investment income		56,319		50,671
Deferred acquisition costs		102,976		86,181
Goodwill		268,532		268,532
Intangible assets		68,215		71,410
Net balances on purchases and sales of investments		—		12,371
Net deferred tax assets		20,984		22,452
Other assets		50,355		47,603

TOTAL ASSETS	$	9,641,257	$	9,022,480


LIABILITIES
Reserve for losses and loss expenses	$	4,749,602	$	4,576,828
Unearned premiums		1,036,933		930,358
Reinsurance balances payable		99,315		95,129
Securities lending payable		—		177,010
Net balances on purchases and sales of investments		110,040		—
Syndicated loan		—		243,750
Senior notes		498,888		498,796
Accounts payable and accrued liabilities		67,585		83,747

TOTAL LIABILITIES	$	6,562,363	$	6,605,618


SHAREHOLDERS’ EQUITY
Common shares, par value $0.03 per share:
issued and outstanding 2009: 49,602,354; 2008: 49,036,159 shares	$	1,488	$	1,471
Additional paid-in capital		1,341,661		1,314,785
Retained earnings		1,550,702		994,974
Accumulated other comprehensive income: net unrealized gains on investments, net of tax		185,043		105,632

TOTAL SHAREHOLDERS’ EQUITY	$	3,078,894	$	2,416,862

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,641,257	$	9,022,480


Book value per share	$	62.07	$	49.29
Diluted book value per share		57.20		46.05

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED TOTAL INVESTMENT PORTFOLIO


	SEPTEMBER 30, 2009					JUNE 30, 2009					MARCH 31, 2009					DECEMBER 31, 2008					SEPTEMBER 30, 2008
	FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET					FAIR MARKET
	VALUE					VALUE					VALUE					VALUE					VALUE
MARKET VALUE
Fixed maturities available for sale	$	5,673,793		75.1	%	$	6,286,561		87.6	%	$	5,808,176		86.5	%	$	6,032,029		87.9	%	$	5,433,260		84.0	%
Fixed maturities trading		1,372,287		18.2	%		233,583		3.2	%		—		—			—		—			—		—
Other invested assets trading		162,125		2.1	%		132,694		1.8	%		139,199		2.1	%		69,902		1.0	%		167,674		2.6	%
Other invested assets available for sale		—		—			4		0.0	%		58,305		0.9	%		55,199		0.8	%		71,528		1.1	%
Cash and cash equivalents		345,954		4.6	%		534,742		7.4	%		704,419		10.5	%		706,267		10.3	%		791,934		12.3	%

Total	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%	$	6,863,397		100.0	%	$	6,464,396		100.0	%


ASSET ALLOCATION BY MARKET VALUE
U.S. government and agencies	$	1,364,043		18.1	%	$	1,514,542		21.1	%	$	1,474,343		22.0	%	$	1,770,235		25.8	%	$	1,822,516		28.2	%
Non-U.S. government securities		454,676		6.0	%		384,531		5.3	%		297,258		4.4	%		280,156		4.1	%		128,381		2.0	%
Corporate securities		2,410,484		31.9	%		2,129,275		29.6	%		1,643,561		24.5	%		1,361,970		19.8	%		1,248,723		19.3	%
State, municipalities and political subdivisions		323,916		4.3	%		343,382		4.8	%		374,504		5.6	%		369,619		5.4	%		56,964		0.9	%
Mortgage-backed securities		2,043,514		27.1	%		1,918,539		26.7	%		1,843,933		27.5	%		2,089,937		30.5	%		2,069,074		32.0	%
Asset-backed securities		449,447		5.9	%		229,875		3.2	%		174,577		2.5	%		160,112		2.3	%		107,602		1.6	%
Fixed income sub-total		7,046,080		93.3	%		6,520,144		90.7	%		5,808,176		86.5	%		6,032,029		87.9	%		5,433,260		84.0	%
Global high-yield bond fund		—		—			4		0.0	%		58,305		0.9	%		55,199		0.8	%		71,528		1.1	%
Hedge funds		161,840		2.1	%		132,560		1.8	%		120,708		1.8	%		48,573		0.7	%		167,674		2.6	%
Equity securities		285		0.0	%		134		0.0	%		18,491		0.3	%		21,329		0.3	%		—		—
Cash & cash equivalents		345,954		4.6	%		534,742		7.5	%		704,419		10.5	%		706,267		10.3	%		791,934		12.3	%

Total	$	7,554,159		100.0	%	$	7,187,584		100.0	%	$	6,710,099		100.0	%	$	6,863,397		100.0	%	$	6,464,396		100.0	%


FIXED INCOME CREDIT QUALITY BY MARKET VALUE
U.S. government and agencies	$	1,364,043		19.4	%	$	1,514,542		23.2	%	$	1,474,343		25.4	%	$	1,770,235		29.3	%	$	1,822,516		33.5	%
AAA/Aaa		3,314,343		47.0	%		3,081,380		47.3	%		2,734,874		47.1	%		3,244,639		53.8	%		2,568,888		47.3	%
AA/Aa		571,871		8.1	%		465,556		7.1	%		444,081		7.6	%		166,244		2.8	%		361,887		6.6	%
A/A		1,323,415		18.8	%		1,159,173		17.8	%		882,140		15.2	%		685,461		11.4	%		524,584		9.7	%
BBB/Baa		324,007		4.6	%		283,552		4.3	%		265,541		4.6	%		156,132		2.6	%		155,379		2.9	%
BB		29,082		0.4	%		1,499		0.0	%		3,709		0.1	%		8,350		0.1	%		—		—
B/B		29,248		0.4	%		11,395		0.2	%		2,172		0.0	%		969		0.0	%		6		0.0	%
CCC+ and below		90,071		1.3	%		3,047		0.0	%		1,316		0.0	%		—		—			—		—

Total	$	7,046,080		100.0	%	$	6,520,144		100.0	%	$	5,808,176		100.0	%	$	6,032,030		100.0	%	$	5,433,260		100.0	%


STATISTICS
Annualized book yield, year to date		4.3	%				4.4	%				4.6	%				4.7	%				4.8	%
Duration	3.2 years					3.0 years					2.8 years					3.3 years					3.4 years
Average credit quality (S&P)	AA					AA+					AA+					AA+					AA+

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
SEPTEMBER 30, 2009


			AVERAGE	PORTFOLIO
	FAIR MARKET VALUE		RATING	PERCENTAGE
Cash & cash equivalents	$	345,954	AAA		4.6	%
U.S. government securities		840,345	AAA		11.1	%
U.S. government agencies		523,698	AAA		7.0	%
Non-U.S. government securities		454,676	AAA		6.0	%
Mortgage-backed securities:
Agency MBS		1,173,238	AAA		15.5	%
Non-agency RMBS		273,653	AA		3.6	%
Non-agency RMBS — Non investment grade strategy		139,204	B+		1.9	%
CMBS		457,419	AAA		6.1	%
Total mortgage-backed securities		2,043,514			27.1	%
Corporate securities:
Financials		1,156,823	AA-		15.3	%
Industrials		1,084,989	A		14.4	%
Utilities		168,672	BBB+		2.2	%
Total corporate securities		2,410,484			31.9	%
Asset-backed securities
Credit cards		128,906	AAA		1.7	%
Auto receivables		207,686	AAA		2.7	%
Other		112,855	AAA		1.5	%
Total asset-backed securities		449,447			5.9	%

State, municipalities and political subdivisions		323,916	AA		4.3	%
Hedge Funds		161,840	N/A		2.1	%
Equities		285	N/A		0.0	%

Total Investment Portfolio	$	7,554,159			100.0	%

TOP 10 CORPORATE EXPOSURES


			PORTFOLIO
CORPORATE	FAIR MARKET VALUE		PERCENTAGE
Verizon Communications Inc	$	86,845		1.1	%
Bank of America Corp		80,486		1.1	%
JPMorgan Chase & Co		73,992		1.0	%
Citigroup Inc		61,089		0.8	%
AT&T Inc		57,741		0.8	%
HSBC Holdings PLC		55,326		0.7	%
Wells Fargo & Co		53,296		0.7	%
Morgan Stanley		53,140		0.7	%
France Telecom SA		51,975		0.7	%
Enel SpA		43,956		0.6	%

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
INVESTMENT PORTFOLIO — ADDITIONAL DETAIL
SEPTEMBER 30, 2009

NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL
NON INVESTMENT GRADE STRATEGY


																			AVERAGE
																	TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		FAIR VALUE		ENHANCEMENT**

2007	$	—	$	—	$	—	$	8,743	$	—	$	—	$	37,303	$	—	$	46,046		31.5	%
2006		—		5,952		4,854		684		6,671		17,285		38,825		—		74,271		17.2	%
2005 and prior		7,581		359		—		2,480		4,582		—		3,885		—		18,887		30.8	%

Total*	$	7,581	$	6,311	$	4,854	$	11,907	$	11,253	$	17,285	$	80,013	$	—	$	139,204		23.7	%


*		Included in the above is fair value of $4.3 million of subprime mortgages rated BB.

NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES DETAIL
CORE FIXED INCOME ACCOUNT


																			AVERAGE
																	TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		FAIR VALUE		ENHANCEMENT**

2007	$	2,076	$	—	$	33	$	—	$	—	$	—	$	6,676	$	—	$	8,785		17.5	%
2006		33,401		—		10,924		—		381		—		—		663		45,369		17.4	%
2005 and prior		167,794		—		2,974		26,681		17,448		1,883		2,719		—		219,499		10.1	%

Total	$	203,271	$	—	$	13,931	$	26,681	$	17,829	$	1,883	$	9,395	$	663	$	273,653		11.6	%


*		Included in the above is fair value of $1.3 million of subprime mortgages rated AAA.

COMMERCIAL MORTGAGE BACKED SECURITIES DETAIL


																			AVERAGE
																	TOTAL		CREDIT
Vintage	AAA		AA		A		BBB		BB		B		CCC		CC		FAIR VALUE		ENHANCEMENT**

2006	$	145,240	$	—	$	—	$	168	$	—	$	—	$	—	$	—	$	145,408		26.1	%
2005 and prior		277,405		34,200		406		—		—		—		—		—		312,011		30.3	%

Total	$	422,645	$	34,200	$	406	$	168	$	—	$	—	$	—	$	—	$	457,419		27.4	%


**		Average credit enhancement is the amount, reported as a percentage, of subordination and/or overcollateralization available to support the security.

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RESERVES FOR LOSSES AND LOSS EXPENSES


	AT SEPTEMBER 30, 2009
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL

Case reserves (net of reinsurance recoverable)	$	185,173		$	387,479		$	293,425		$	866,077
IBNR (net of reinsurance recoverable)		695,059			1,432,172			842,330			2,969,561

Total	$	880,232		$	1,819,651		$	1,135,755		$	3,835,638

IBNR/Total reserves (net of reinsurance recoverable)		79.0	%		78.7	%		74.2	%		77.4	%


	AT DECEMBER 31, 2008
	U.S.			INTERNATIONAL						CONSOLIDATED
	INSURANCE			INSURANCE			REINSURANCE			TOTAL

Case reserves (net of reinsurance recoverable)	$	160,807		$	385,323		$	255,985		$	802,115
IBNR (net of reinsurance recoverable)		658,554			1,411,707			816,138			2,886,399

Total	$	819,361		$	1,797,030		$	1,072,123		$	3,688,514

IBNR/Total reserves (net of reinsurance recoverable)		80.4	%		78.6	%		76.1	%		78.3	%

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CAPITAL STRUCTURE AND LEVERAGE RATIOS


	SEPTEMBER 30,			JUNE 30,			MARCH 31,			DECEMBER 31,			SEPTEMBER 30,
	2009			2009			2009			2008			2008

Senior notes	$	498,888		$	498,857		$	498,826		$	498,796		$	498,767
Syndicated loan		—			—			—			243,750			—
Shareholders’ equity		3,078,894			2,741,427			2,491,860			2,416,862			2,272,828

Total capitalization	$	3,577,782		$	3,240,284		$	2,990,686		$	3,159,408		$	2,771,595


Leverage ratios
Debt to total capitalization		13.9	%		15.4	%		16.7	%		23.5	%		18.0	%

Closing shareholders’ equity	$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862		$	2,272,828
Add/deduct: accumulated other comprehensive (income)/loss		(185,043	)		(48,669	)		(48,204	)		(105,632	)		19,775

Adjusted shareholders’ equity	$	2,893,851		$	2,692,758		$	2,443,656		$	2,311,230		$	2,292,603

Net premiums written (trailing 12 months)	$	1,313,935		$	1,226,882		$	1,185,694		$	1,107,228		$	1,070,107
Net premiums written (trailing 12 months) to adjusted shareholders’ equity		0.45			0.46			0.49			0.48			0.47

Total investments and cash & cash equivalents	$	7,554,159		$	7,187,584		$	6,710,099		$	6,863,397		$	6,464,396
Total investments and cash & cash equivalents to adjusted shareholders’ equity		2.61			2.67			2.75			2.97			2.82

Reserve for losses and loss expenses	$	4,749,602		$	4,713,727		$	4,603,078		$	4,576,828		$	4,198,761
Deduct: reinsurance recoverable		(913,964	)		(909,716	)		(880,390	)		(888,314	)		(777,283	)

Net reserve for losses and loss expenses	$	3,835,638		$	3,804,011		$	3,722,688		$	3,688,514		$	3,421,478
Net reserve for losses and loss expenses to adjusted shareholders’ equity		1.33			1.41			1.52			1.60			1.49

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED		THREE MONTHS ENDED
	SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008		SEPTEMBER 30, 2008

Net income/(loss)	$	200,554		$	113,670		$	131,408		$	19,852	$	(46,367	)
Add:
Net realized investment (gains)/losses		(46,861	)		(5,093	)		(36,602	)		19,454		76,849
Net impairment charges in earnings		1,953			5,474			41,963			100,593		75,027
Foreign exchange (gains)/losses		(273	)		(1,222	)		835			1,230		(2,728	)

Operating income	$	155,373		$	112,829		$	137,604		$	141,129	$	102,781


Weighted average common shares outstanding
Basic		49,574,266			49,523,459			49,248,118			49,028,249		49,007,389
Diluted		52,345,913			51,257,887			51,120,049			50,366,814		50,669,262	*

Basic per share data
Net income/(loss)	$	4.05		$	2.30		$	2.67		$	0.40	$	(0.95	)
Add:
Net realized investment (gains)/losses		(0.95	)		(0.10	)		(0.74	)		0.40		1.57
Net impairment charges in earnings		0.04			0.11			0.85			2.05		1.53
Foreign exchange (gains)/losses		(0.01	)		(0.03	)		0.01			0.03		(0.06	)

Operating income	$	3.13		$	2.28		$	2.79		$	2.88	$	2.09


Diluted per share data
Net income/(loss)	$	3.83		$	2.22		$	2.57		$	0.39	$	(0.92)	*
Add:
Net realized investment (gains)/losses		(0.89	)		(0.10	)		(0.71	)		0.39		1.52
Net impairment charges in earnings		0.04			0.11			0.82			2.00		1.48
Foreign exchange (gains)/losses		(0.01	)		(0.03	)		0.01			0.02		(0.05	)

Operating income	$	2.97		$	2.20		$	2.69		$	2.80	$	2.03


*		For the net loss for the three months ended September 30, 2008, because operating income is positive, we are using the fully diluted weighted average common shares outstanding.

Page 22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
OPERATING INCOME RECONCILIATION AND
BASIC AND DILUTED EARNINGS PER SHARE INFORMATION


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2009			SEPTEMBER 30, 2008

Net income	$	445,632		$	163,783
Add:
Net realized investment (gains)/losses		(88,556	)		40,500
Net impairment charges in earnings		49,390			112,304
Foreign exchange gain		(660	)		(2,651	)

Operating income	$	405,806		$	313,936


Weighted average common shares outstanding
Basic		49,449,809			48,547,839
Diluted		51,676,006			50,869,098

Basic per share data
Net income	$	9.01		$	3.37
Add:
Net realized investment (gains)/losses		(1.79	)		0.83
Net impairment charges in earnings		1.00			2.32
Foreign exchange gain		(0.01	)		(0.05	)

Operating income	$	8.21		$	6.47


Diluted per share data
Net income	$	8.62		$	3.22
Add:
Net realized investment (gains)/losses		(1.72	)		0.80
Net impairment charges in earnings		0.96			2.20
Foreign exchange gain		(0.01	)		(0.05	)

Operating income	$	7.85		$	6.17

Page 23

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY


	THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED			THREE MONTHS ENDED
	SEPTEMBER 30, 2009			JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008			SEPTEMBER 30, 2008

Opening shareholders’ equity	$	2,741,427		$	2,491,860		$	2,416,862		$	2,272,828		$	2,378,046
Deduct/add: accumulated other comprehensive (income)/loss		(48,669	)		(48,204	)		(105,632	)		19,775			(39,048	)

Adjusted opening shareholders’ equity	$	2,692,758		$	2,443,656		$	2,311,230		$	2,292,603		$	2,338,998

Closing shareholders’ equity	$	3,078,894		$	2,741,427		$	2,491,860		$	2,416,862		$	2,272,828
Deduct/add: accumulated other comprehensive (income)/loss		(185,043	)		(48,669	)		(48,204	)		(105,632	)		19,775

Adjusted closing shareholders’ equity	$	2,893,851		$	2,692,758		$	2,443,656		$	2,311,230		$	2,292,603

Average shareholders’ equity	$	2,793,305		$	2,568,207		$	2,377,443		$	2,301,917		$	2,315,801

Net income/(loss) available to shareholders	$	200,554		$	113,670		$	131,408		$	19,852		$	(46,367	)
Annualized net income/(loss) available to shareholders		802,216			454,680			525,632			79,408			(185,468	)

Annualized return on average shareholders’ equity — net income/(loss) available to shareholders		28.7	%		17.7	%		22.1	%		3.4	%		(8.0	%)


Operating income available to shareholders	$	155,373		$	112,829		$	137,604		$	141,129		$	102,781
Annualized operating income available to shareholders		621,492			451,316			550,416			564,516			411,124

Annualized return on average shareholders’ equity — operating income available to shareholders		22.2	%		17.6	%		23.2	%		24.5	%		17.8	%

Page 24

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND
RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY


	NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2009			SEPTEMBER 30, 2008

Opening shareholders’ equity	$	2,416,862		$	2,239,842
Deduct: accumulated other comprehensive (income)/loss		(105,632	)		(136,214	)

Adjusted opening shareholders’ equity	$	2,311,230		$	2,103,628

Closing shareholders’ equity	$	3,078,894		$	2,272,828
Deduct: accumulated other comprehensive (income)/loss		(185,043	)		19,775

Adjusted closing shareholders’ equity	$	2,893,851		$	2,292,603

Average shareholders’ equity	$	2,602,541		$	2,198,116

Net income available to shareholders	$	445,632		$	163,783
Annualized net income available to shareholders		594,176			218,377

Annualized return on average shareholders’ equity — net income available to shareholders		22.8	%		9.9	%


Operating income available to shareholders	$	405,806		$	313,936
Annualized operating income available to shareholders		541,075			418,581

Annualized return on average shareholders’ equity — operating income available to shareholders		20.8	%		19.0	%

Page 25

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
DILUTED BOOK VALUE PER SHARE


	SEPTEMBER 30,			DECEMBER 31,			SEPTEMBER 30,
	2009			2008			2008

Price per share at period end	$	47.93		$	40.60		$	35.52

Total shareholders’ equity	$	3,078,894		$	2,416,862		$	2,272,828

Basic common shares outstanding		49,602,354			49,036,159			49,022,495

Add: unvested restricted share units		925,437			971,907			905,621

Add: performance based equity awards		1,329,661			1,345,903			1,345,903

Add: dilutive options/warrants outstanding		6,951,447			6,371,151			6,865,351
Weighted average exercise price per share	$	34.34		$	33.38		$	30.79
Deduct: options bought back via treasury method		(4,980,125	)		(5,237,965	)		(5,951,910	)


Common shares and common share equivalents outstanding		53,828,774			52,487,155			52,187,460

Basic book value per common share	$	62.07		$	49.29		$	46.36
Diluted book value per common share	$	57.20		$	46.05		$	43.55

Page 26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	THREE MONTHS ENDED			THREE MONTHS ENDED			NINE MONTHS ENDED			NINE MONTHS ENDED
	SEPTEMBER 30, 2009			SEPTEMBER 30, 2008			SEPTEMBER 30, 2009			SEPTEMBER 30, 2008

Net investment income	$	73,032		$	76,916		$	227,423		$	226,192
Deduct: annual and non-recurring items		N/A			735			880			7,138

Net investment income, recurring	$	73,032		$	76,181		$	226,543		$	219,054

Annualized net investment income, recurring	$	292,128		$	304,723		$	302,057		$	292,072

Add: annual and non-recurring items		N/A			735			880			7,138

Normalized net investment income	$	292,128		$	305,458		$	302,937		$	299,210

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,456,549		$	5,685,111		$	5,872,031		$	5,595,943
Other invested assets, available for sale, cost		4			81,241			89,229			291,458
Equity securities, cost		46			—			—			—
Other invested assets, at cost		146,485			178,266			21,493			—
Cash and cash equivalents		475,668			439,933			100,198			202,582
Restricted cash		59,074			84,492			655,828			67,886
Balances receivable on sale of investments		266,610			96,801			50,439			84,998
Balances due on purchase of investments		(359,216	)		(107,054	)		12,371			(141,462	)

Opening aggregate invested assets	$	7,045,220		$	6,458,790		$	6,801,589		$	6,101,405

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,815,658		$	5,440,019		$	6,815,658		$	5,440,019
Other invested assets, available for sale, cost		—			81,262			—			81,262
Equity securities, cost		46			—			46			—
Other invested assets, cost		168,704			180,716			168,704			180,716
Cash and cash equivalents		345,954			744,245			345,954			744,245
Restricted cash		—			47,689			—			47,689
Balances receivable on sale of investments		—			36,264			—			36,264
Balances due on purchase of investments		(110,040	)		(68,681	)		(110,040	)		(68,681	)

Closing aggregate invested assets	$	7,220,322		$	6,461,514		$	7,220,322		$	6,461,514

Average aggregate invested assets	$	7,132,771		$	6,460,152		$	7,010,956		$	6,281,460

Annualized investment book yield		4.1	%		4.7	%		4.3	%		4.8	%

Page 27

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
ANNUALIZED INVESTMENT BOOK YIELD


	SIX MONTHS ENDED			THREE MONTHS ENDED			TWELVE MONTHS ENDED
	JUNE 30, 2009			MARCH 31, 2009			DECEMBER 31, 2008

Net investment income	$	154,391		$	77,854		$	308,775
Deduct: annual and non-recurring items		880			N/A			14,540	*

Net investment income, recurring	$	153,511		$	77,854		$	294,235

Annualized net investment income, recurring	$	307,022		$	311,416		$	294,235

Add: annual and non-recurring items		880			N/A			6,619	*

Normalized net investment income	$	307,902		$	311,416		$	300,854

Opening aggregate invested assets:
Fixed maturity investments, amortized cost	$	5,872,031		$	5,872,031		$	5,595,943
Other invested assets, available for sale, cost		89,229			89,229			291,458
Other invested assets, at cost		21,493			21,493			—
Cash and cash equivalents		100,198			100,198			202,582
Restricted cash		655,828			655,828			67,886
Balances receivable on sale of investments		50,439			50,439			84,998
Balances due on purchase of investments		12,371			12,371			(141,462	)

Opening aggregate invested assets	$	6,801,589		$	6,801,589		$	6,101,405

Closing aggregate invested assets:
Fixed maturity investments, amortized cost	$	6,456,549		$	5,712,331		$	5,872,031
Other invested assets, available for sale, cost		4			89,250			89,229
Equity securities, cost		46			20,985			21,493
Other invested assets, at cost		146,485			139,790			100,198
Cash and cash equivalents		475,668			645,070			655,828
Restricted cash		59,074			59,349			50,439
Balances receivable on sale of investments		266,610			97,907			12,371
Balances due on purchase of investments		(359,216	)		(94,253	)		—

Closing aggregate invested assets	$	7,045,220		$	6,670,429		$	6,801,589

Average aggregate invested assets	$	6,923,405		$	6,736,009		$	6,451,497

Annualized investment book yield		4.4	%		4.6	%		4.7	%


*		Includes an annual dividend received at the beginning of the year and excludes the annual dividend received at the end of the year.

Page 28

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
REGULATION G

In presenting the company’s results, management has included and discussed certain non-GAAP financial measures. 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

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, net impairment charges recognized in earnings and foreign exchange gain or loss. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings and net foreign exchange gain or loss 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 distorts the analysis of trends in its 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. See pages 22 and 23 for reconciliation of operating income to net income.

ANNUALIZED RETURN ON AVERAGE SHAREHOLDERS’ EQUITY (“ROAE”)

Annualized return on average shareholders’ equity 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 and risk premium 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. See pages 24 and 25 for reconciliation of average shareholders’ equity.

ANNUALIZED OPERATING RETURN ON AVERAGE SHAREHOLDERS’ EQUITY

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. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average shareholders’ equity explanation above. See pages 22 and 23 for the reconciliation of net income to operating income and pages 24 and 25 for the reconciliations of average shareholders’ equity.

DILUTED BOOK VALUE PER SHARE

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. See page 26 for a reconciliation of diluted book value per share to basic book value per share.

ANNUALIZED INVESTMENT BOOK YIELD

Annualized investment book yield is calculated by dividing normalized net investment income by average aggregate invested assets at book value. In calculating annualized investment book yield, normalized net investment income for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net investment income. Normalized net investment income is adjusted for known annual or non-recurring items. The company utilizes and presents the investment yield in order to better disclose the performance of the company’s investments and to show the components of the company’s ROAE. See pages 27 and 28 for reconciliation of annualized investment book yield.

Page 29