Exhibit 99.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

3rd Quarter Ended September 30, 2012

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, AG with the U.S. Securities and Exchange Commission.
Phone: (646) 794-0750
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 pricing and policy term trends; increased competition; the impact of acts of terrorism and acts of war; greater frequency or security of unpredictable catastrophic events; 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; 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 (the “SEC”). 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.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

FINANCIAL SUPPLEMENT TABLE OF CONTENTS

		Page
	Basis of Presentation	4
I.	Financial Highlights
	- Consolidated Financial Highlights	5
II.	Consolidated Results
	- Consolidated Statements of Operations	6
	- Consolidated Premium Distribution Analysis by Segment and Geographic Location	7
	- Consolidated Premium Distribution Analysis by Line of Business	8
III.	Segment Results
	- Consolidated Segment Results - Current Quarter	9
	- Consolidated Segment Results - Prior Year Quarter	10
	- Consolidated Segment Results - Current Year to Date	11
	- Consolidated Segment Results - Prior Year to Date	12
	- Consolidated Incurred Loss Analysis by Segment	13
IV.	Balance Sheet Details
	- Consolidated Balance Sheets	14
	- Consolidated Total Investment Portfolio	15
	- Additional Investment Detail	16
	- Reserves for Losses and Loss Expenses	19
	- Capital Structure and Leverage Ratios	20
V.	Other
	- Share Repurchase Detail	21
	- Operating Income Reconciliation and Basic and Diluted Earnings per Share	22
	- Return on Average Shareholders’ Equity and Reconciliation of Average Shareholders’ Equity	23
	- Reconciliation of Diluted Book Value per Share	24
	- Investment Income, Book Yield and Portfolio Return	25
	- Regulation G	26

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

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, AG, 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 ratios, 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 costs 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-generally accepted accounting principles (“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 26 for further details.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED FINANCIAL HIGHLIGHTS

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012		2011		Change		2012		2011		Change
HIGHLIGHTS
Gross premiums written	$	504,420	$	442,698		13.9%	$	1,832,219	$	1,522,984		20.3%
Net premiums written		391,537		350,260		11.8%		1,475,200		1,226,934		20.2%
Net premiums earned		441,017		371,340		18.8%		1,272,654		1,061,523		19.9%
Underwriting income (loss)		52,411		60,107		(12.8%)		175,395		(6,185)		n.m.
Net income (loss)		219,647		(10,972)		n.m.		534,154		91,448		484.1%
Operating income		79,219		86,163		(8.1%)		258,042		89,005		189.9%
Total shareholders’ equity		3,435,786		3,003,074		14.4%		3,435,786		3,003,074		14.4%
Cash flows from operating activities		198,446		129,659		53.1%		500,219		491,505		1.8%
PER SHARE AND SHARE DATA
Basic earnings per share
Net income (loss)	$	6.16	$	(0.29)		n.m.	$	14.68	$	2.40		511.7%
Operating income	$	2.22	$	2.26		(1.8%)	$	7.09	$	2.34		203.0%
Diluted earnings per share
Net income (loss)	$	6.00	$	(0.29)		n.m.	$	14.28	$	2.30		520.9%
Operating income	$	2.16	$	2.19		(1.4%)	$	6.90	$	2.24		208.0%
Book value per share	$	97.05	$	78.73		23.3%	$	97.05	$	78.73		23.3%
Diluted book value per share	$	93.82	$	75.82		23.7%	$	93.82	$	75.82		23.7%
FINANCIAL RATIOS
Annualized return on average equity (ROAE), net income		26.2%		-1.5%		27.7 pts		21.7%		4.1%		17.6 pts
Annualized ROAE, operating income		9.4%		11.5%		(2.1) pts		10.5%		4.0%		6.5 pts
Financial statement portfolio return		2.2%		-1.1%		3.3 pts		4.9%		1.1%		3.8 pts
Loss and loss expense ratio		58.7%		55.4%		3.3 pts		56.9%		70.3%		(13.4) pts
Acquisition cost ratio		11.6%		10.7%		0.9 pts		11.8%		11.4%		0.4 pts
General and administrative expense ratio		17.8%		17.8%		- pts		17.5%		19.0%		(1.5) pts
Expense ratio		29.4%		28.5%		0.9 pts		29.3%		30.4%		(1.1) pts
Combined ratio		88.1%		83.9%		4.2 pts		86.2%		100.7%		(14.5) pts

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended										Nine Months Ended
	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011		September 30, 2012		September 30, 2011
Revenues
Gross premiums written	$	504,420	$	646,870	$	680,929	$	416,537	$	442,698	$	1,832,219	$	1,522,984
Net premiums written	$	391,537	$	494,710	$	588,953	$	306,832	$	350,260	$	1,475,200	$	1,226,934
Net premiums earned	$	441,017	$	429,747	$	401,890	$	395,469	$	371,340	$	1,272,654	$	1,061,523
Net investment income		39,121		42,451		47,209		45,489		47,883		128,781		150,459
Net realized investment gains (losses)		149,813		8,663		133,581		31,632		(130,809)		292,057		(21,555)
Other income		—		—		—		66,744		35,000		—		35,000
Total revenues	$	629,951	$	480,861	$	582,680	$	539,334	$	323,414	$	1,693,492	$	1,225,427
Expenses
Net losses and loss expenses	$	258,948	$	240,380	$	225,202	$	213,345	$	205,546	$	724,530	$	745,811
Acquisition costs		51,086		51,588		47,138		46,562		39,680		149,812		120,733
General and administrative expenses		78,572		73,979		70,366		70,492		66,007		222,917		201,164
Amortization of intangible assets		633		634		633		678		767		1,900		2,300
Interest expense		13,822		14,001		13,756		13,754		13,748		41,579		41,235
Foreign exchange loss (gain)		1,023		(1,019)		(81)		(549)		2,966		(77)		3,708
Total expenses	$	404,084	$	379,563	$	357,014	$	344,282	$	328,714	$	1,140,661	$	1,114,951
Income (Loss) before income taxes	$	225,867	$	101,298	$	225,666	$	195,052	$	(5,300)	$	552,831	$	110,476
Income tax expense		6,220		4,947		7,510		11,952		5,672		18,677		19,028
Net income (loss)	$	219,647	$	96,351	$	218,156	$	183,100	$	(10,972)	$	534,154	$	91,448
GAAP Ratios
Loss and loss expense ratio		58.7%		55.9%		56.0%		53.9%		55.4%		56.9%		70.3%
Acquisition cost ratio		11.6%		12.0%		11.7%		11.8%		10.7%		11.8%		11.4%
General and administrative expense ratio		17.8%		17.2%		17.5%		17.8%		17.8%		17.5%		19.0%
Expense ratio		29.4%		29.2%		29.2%		29.6%		28.5%		29.3%		30.4%
Combined ratio		88.1%		85.1%		85.2%		83.5%		83.9%		86.2%		100.7%
Per Share Data
Basic earnings per share
Net income (loss)	$	6.16	$	2.66	$	5.86	$	4.80	$	(0.29)	$	14.68	$	2.40
Operating income	$	2.22	$	2.41	$	2.46	$	2.48	$	2.26	$	7.09	$	2.34
Diluted earnings per share
Net income (loss)	$	6.00	$	2.59	$	5.70	$	4.63	$	(0.29)	$	14.28	$	2.30
Operating income	$	2.16	$	2.35	$	2.39	$	2.40	$	2.19	$	6.90	$	2.24

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY SEGMENT AND GEOGRAPHIC LOCATION

	Three Months Ended								Nine Months Ended
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
Gross Premiums Written by Segment
U.S. Insurance	$	263,129		52.2%	$	201,522		45.5%	$	733,314		40.0%	$	611,562		40.2%
International Insurance		121,315		24.1%		109,612		24.8%		418,498		22.8%		399,530		26.2%
Reinsurance		119,976		23.7%		131,564		29.7%		680,407		37.2%		511,892		33.6%
Total	$	504,420		100.0%	$	442,698		100.0%	$	1,832,219		100.0%	$	1,522,984		100.0%
Gross Premiums Written by Geographic Location
United States	$	312,807		62.0%	$	245,688		55.5%	$	1,051,355		57.4%	$	821,512		53.9%
Bermuda		108,955		21.6%		113,671		25.7%		484,313		26.4%		461,989		30.3%
Europe		46,836		9.3%		47,569		10.7%		182,220		9.9%		169,857		11.2%
Singapore		31,902		6.3%		33,252		7.5%		101,213		5.5%		58,819		3.9%
Hong Kong		3,920		0.8%		2,518		0.6%		13,118		0.8%		10,807		0.7%
Total	$	504,420		100.0%	$	442,698		100.0%	$	1,832,219		100.0%	$	1,522,984		100.0%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED PREMIUM DISTRIBUTION ANALYSIS BY LINE OF BUSINESS

	Three Months Ended								Nine Months Ended
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
	Amount		% of Total		Amount		% of Total		Amount		% of Total		Amount		% of Total
U.S. Insurance
General casualty	$	77,860		29.6%	$	54,547		27.1%	$	204,609		27.9%	$	152,070		24.9%
Professional liability		66,425		25.2%		57,039		28.3%		192,282		26.2%		170,781		27.9%
Healthcare		52,357		19.9%		42,091		20.9%		145,633		19.9%		137,664		22.5%
Programs		32,220		12.2%		26,638		13.2%		81,108		11.1%		66,792		10.9%
General property		15,653		5.9%		14,916		7.4%		71,292		9.7%		61,439		10.0%
Other		18,614		7.2%		6,291		3.1%		38,390		5.2%		22,816		3.8%
Total	$	263,129		100.0%	$	201,522		100.0%	$	733,314		100.0%	$	611,562		100.0%
International Insurance
Professional liability	$	37,741		31.1%	$	38,935		35.5%	$	121,557		29.0%	$	116,026		29.0%
General property		22,211		18.3%		24,363		22.2%		120,228		28.7%		124,893		31.3%
General casualty		32,667		26.9%		25,503		23.3%		97,517		23.3%		94,232		23.6%
Healthcare		17,746		14.6%		17,463		15.9%		58,076		13.9%		57,318		14.3%
Other		10,950		9.1%		3,348		3.1%		21,120		5.1%		7,061		1.8%
Total	$	121,315		100.0%	$	109,612		100.0%	$	418,498		100.0%	$	399,530		100.0%
Reinsurance
Property	$	59,368		49.5%	$	66,066		50.2%	$	334,717		49.2%	$	249,284		48.7%
Casualty		60,695		50.6%		56,022		42.6%		209,088		30.7%		200,838		39.2%
Specialty		(87)		-0.1%		9,476		7.2%		136,602		20.1%		61,770		12.1%
Total	$	119,976		100.0%	$	131,564		100.0%	$	680,407		100.0%	$	511,892		100.0%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT QUARTER

	Three Months Ended September 30, 2012
	U.S.     Insurance		International     Insurance		Reinsurance		Consolidated     Totals
Revenues
Gross premiums written	$	263,129	$	121,315	$	119,976	$	504,420
Net premiums written	$	200,779	$	71,199	$	119,559	$	391,537
Net premiums earned	$	173,948	$	85,329	$	181,740	$	441,017
Total revenues	$	173,948	$	85,329	$	181,740	$	441,017
Expenses
Net losses and loss expenses	$	109,111	$	15,099	$	134,738	$	258,948
Acquisition costs		22,696		(266)		28,656		51,086
General and administrative expenses		37,388		22,920		18,264		78,572
Total expenses	$	169,195	$	37,753	$	181,658	$	388,606
Underwriting income	$	4,753	$	47,576	$	82	$	52,411
Net investment income								39,121
Net realized investment gains								149,813
Amortization of intangible assets								(633)
Interest expense								(13,822)
Foreign exchange loss								(1,023)
Income before income taxes							$	225,867
GAAP Ratios
Loss and loss expense ratio		62.7%		17.7%		74.1%		58.7%
Acquisition cost ratio		13.0%		(0.3%)		15.8%		11.6%
General and administrative expense ratio		21.5%		26.9%		10.0%		17.8%
Expense ratio		34.5%		26.6%		25.8%		29.4%
Combined ratio		97.2%		44.3%		99.9%		88.1%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR QUARTER

	Three Months Ended September 30, 2011
	U.S.     Insurance		International     Insurance		Reinsurance		Consolidated     Totals
Revenues
Gross premiums written	$	201,522	$	109,612	$	131,564	$	442,698
Net premiums written	$	157,310	$	61,386	$	131,564	$	350,260
Net premiums earned	$	150,474	$	80,175	$	140,691	$	371,340
Total revenues	$	150,474	$	80,175	$	140,691	$	371,340
Expenses
Net losses and loss expenses	$	85,720	$	43,666	$	76,160	$	205,546
Acquisition costs		19,549		(343)		20,474		39,680
General and administrative expenses		28,945		21,558		15,504		66,007
Total expenses	$	134,214	$	64,881	$	112,138	$	311,233
Underwriting income	$	16,260	$	15,294	$	28,553	$	60,107
Net investment income								47,883
Net realized investment losses								(130,809)
Other income - termination fee								35,000
Amortization of intangible assets								(767)
Interest expense								(13,748)
Foreign exchange loss								(2,966)
Loss before income taxes							$	(5,300)
GAAP Ratios
Loss and loss expense ratio		57.0%		54.5%		54.1%		55.4%
Acquisition cost ratio		13.0%		(0.4%)		14.6%		10.7%
General and administrative expense ratio		19.2%		26.9%		11.0%		17.8%
Expense ratio		32.2%		26.5%		25.6%		28.5%
Combined ratio		89.2%		81.0%		79.7%		83.9%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – CURRENT YEAR TO DATE

	Nine Months Ended September 30, 2012
	U.S.     Insurance		International     Insurance		Reinsurance		Consolidated     Totals
Revenues
Gross premiums written	$	733,314	$	418,498	$	680,407	$	1,832,219
Net premiums written	$	551,286	$	255,150	$	668,764	$	1,475,200
Net premiums earned	$	490,091	$	247,805	$	534,758	$	1,272,654
Total revenues	$	490,091	$	247,805	$	534,758	$	1,272,654
Expenses
Net losses and loss expenses	$	309,889	$	75,432	$	339,209	$	724,530
Acquisition costs		63,918		(1,376)		87,270		149,812
General and administrative expenses		103,162		66,969		52,786		222,917
Total expenses	$	476,969	$	141,025	$	479,265	$	1,097,259
Underwriting income	$	13,122	$	106,780	$	55,493	$	175,395
Net investment income								128,781
Net realized investment gains								292,057
Amortization of intangible assets								(1,900)
Interest expense								(41,579)
Foreign exchange gain								77
Income before income taxes							$	552,831
GAAP Ratios
Loss and loss expense ratio		63.2%		30.4%		63.4%		56.9%
Acquisition cost ratio		13.0%		(0.6%)		16.3%		11.8%
General and administrative expense ratio		21.0%		27.0%		9.9%		17.5%
Expense ratio		34.0%		26.4%		26.2%		29.3%
Combined ratio		97.2%		56.8%		89.6%		86.2%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED SEGMENT RESULTS – PRIOR YEAR TO DATE

	Nine Months Ended September 30, 2011
	U.S. Insurance		International Insurance		Reinsurance		Consolidated Totals
Revenues
Gross premiums written	$	611,562	$	399,530	$	511,892	$	1,522,984
Net premiums written	$	470,099	$	245,281	$	511,554	$	1,226,934
Net premiums earned	$	431,812	$	236,421	$	393,290	$	1,061,523
Total revenues	$	431,812	$	236,421	$	393,290	$	1,061,523
Expenses
Net losses and loss expenses	$	294,146	$	186,932	$	264,733	$	745,811
Acquisition costs		56,527		(2,946)		67,152		120,733
General and administrative expenses		90,997		62,939		47,228		201,164
Total expenses	$	441,670	$	246,925	$	379,113	$	1,067,708
Underwriting (loss) income	$	(9,858)	$	(10,504)	$	14,177	$	(6,185)
Net investment income								150,459
Net realized investment losses								(21,555)
Other income - termination fee								35,000
Amortization of intangible assets								(2,300)
Interest expense								(41,235)
Foreign exchange loss								(3,708)
Income before income taxes							$	110,476
GAAP Ratios
Loss and loss expense ratio		68.1%		79.1%		67.3%		70.3%
Acquisition cost ratio		13.1%		(1.2%)		17.1%		11.4%
General and administrative expense ratio		21.1%		26.6%		12.0%		19.0%
Expense ratio		34.2%		25.4%		29.1%		30.4%
Combined ratio		102.3%		104.5%		96.4%		100.7%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED INCURRED LOSS ANALYSIS BY SEGMENT

	Three Months Ended								Nine Months Ended
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
	Amount		% of NPE(1)		Amount		% of NPE(1)		Amount		% of NPE(1)		Amount		% of NPE(1)(2)
U.S. Insurance
Current year - non-catastrophe	$	115,663		66.4%	$	104,085		69.2%	$	329,823		67.3%	$	283,998		67.7%
Current year - property catastrophe		1,675		1.0%		3,500		2.3%		1,675		0.3%		8,500		2.0%
Prior year		(8,227)		(4.7%)		(21,865)		(14.5%)		(21,609)		(4.4%)		(9,881)		(2.4%)
Impact of prior year commutation(3)		-		0.0%		-		0.0%		-		0.0%		11,529		0.8%
Net losses and loss expenses	$	109,111		62.7%	$	85,720		57.0%	$	309,889		63.2%	$	294,146		68.1%
International Insurance
Current year - non-catastrophe	$	51,754		60.7%	$	53,066		66.3%	$	161,494		65.2%	$	163,325		69.1%
Current year - property catastrophe		2,325		2.7%		10,450		13.0%		2,325		0.9%		84,100		35.6%
Prior year		(38,980)		(45.7%)		(19,850)		(24.8%)		(88,387)		(35.7%)		(60,493)		(25.6%)
Net losses and loss expenses	$	15,099		17.7%	$	43,666		54.5%	$	75,432		30.4%	$	186,932		79.1%
Reinsurance
Current year - non-catastrophe	$	142,685		78.4%	$	76,469		54.3%	$	365,771		68.4%	$	214,963		54.7%
Current year - property catastrophe		1,000		0.6%		19,500		13.9%		1,000		0.2%		140,500		35.7%
Prior year		(8,947)		(4.9%)		(19,809)		(14.1%)		(27,562)		(5.2%)		(90,730)		(23.1%)
Net losses and loss expenses	$	134,738		74.1%	$	76,160		54.1%	$	339,209		63.4%	$	264,733		67.3%
Consolidated
Current year - non-catastrophe	$	310,102		70.3%	$	233,620		63.0%	$	857,088		67.3%	$	662,286		63.1%
Current year - property catastrophe		5,000		1.1%		33,450		9.0%		5,000		0.4%		233,100		22.2%
Prior year		(56,154)		(12.7%)		(61,524)		(16.6%)		(137,558)		(10.8%)		(161,104)		(15.4%)
Impact of prior year commutation(3)		-		0.0%		-		0.0%		-		0.0%		11,529		0.4%
Net losses and loss expenses	$	258,948		58.7%	$	205,546		55.4%	$	724,530		56.9%	$	745,811		70.3%

(1) “NPE” means net premiums earned.

(2) Current year and prior year losses as a % of net premiums earned are calculated excluding the effect of the commutation on net premiums earned.

(3) Reflects the impact of a commutation of a prior year contract in the nine months ended September 30, 2011, which increased prior year net losses and loss expenses by $11.5 million and increased net premiums earned by $12.4 million.

Page 13

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED BALANCE SHEETS

	As of     September 30, 2012		As of     December 31, 2011
ASSETS
Fixed maturity investments available for sale, at fair value	$	29,085	$	244,016
Fixed maturity investments trading, at fair value		7,125,860		6,254,686
Equity securities trading, at fair value		490,418		367,483
Other invested assets trading, at fair value		564,702		540,409
Total investments		8,210,065		7,406,594
Cash and cash equivalents		639,517		633,996
Restricted cash		46,923		82,608
Insurance balances receivable		754,978		652,158
Prepaid reinsurance		262,163		226,721
Reinsurance recoverable		1,077,522		1,002,919
Accrued investment income		32,348		38,263
Net deferred acquisition costs		127,527		100,334
Goodwill		268,376		268,376
Intangible assets		51,998		53,898
Balances receivable on sale of investments		756,570		580,443
Net deferred tax assets		23,185		22,646
Other assets		60,817		53,202
TOTAL ASSETS	$	12,311,989	$	11,122,158
LIABILITIES
Reserve for losses and loss expenses	$	5,450,787	$	5,225,143
Unearned premiums		1,316,399		1,078,412
Reinsurance balances payable		120,432		124,539
Balances due on purchases of investments		1,075,069		616,728
Senior notes		798,147		797,949
Dividends payable		—		14,302
Accounts payable and accrued liabilities		115,369		116,063
TOTAL LIABILITIES	$	8,876,203	$	7,973,136
SHAREHOLDERS’ EQUITY
Common shares: 2012: par value CHF 12.98 per share and 2011: par value CHF 14.03 per share (2012: 37,083,742; 2011: 40,003,642 shares issued and 2012: 35,402,558; 2011: 37,742,131 shares outstanding)	$	477,246	$	557,153
Additional paid-in capital		—		78,225
Treasury shares, at cost (2012: 1,681,184; 2011: 2,261,511)		(120,944)		(136,590)
Retained earnings		3,078,099		2,635,750
Accumulated other comprehensive income		1,385		14,484
TOTAL SHAREHOLDERS’ EQUITY	$	3,435,786	$	3,149,022
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	12,311,989	$	11,122,158
Book value per share	$	97.05	$	83.44
Diluted book value per share	$	93.82	$	80.11

Page 14

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CONSOLIDATED TOTAL INVESTMENT PORTFOLIO

	Fair Value September 30, 2012			Fair Value December 31, 2011
FAIR VALUE
Fixed maturity securities	$	7,154,945	80.4%	$	6,498,702	80.0%
Equity securities		490,418	5.5%		367,483	4.5%
Other invested assets trading		564,702	6.4%		540,409	6.7%
Cash and cash equivalents		686,440	7.7%		716,604	8.8%
Total	$	8,896,505	100.0%	$	8,123,198	100.0%
ASSET ALLOCATION BY FAIR VALUE
U.S. government securities	$	1,487,589	16.7%	$	1,087,633	13.4%
U.S. government agencies		390,988	4.4%		224,262	2.7%
Non-U.S. government and government agencies		309,471	3.5%		256,756	3.2%
State, municipalities and political subdivisions		41,542	0.5%		167,381	2.1%
Corporate securities		2,237,187	25.1%		2,431,381	29.9%
Mortgage-backed securities		2,251,957	25.3%		1,818,091	22.4%
Asset-backed securities		436,211	4.9%		513,198	6.3%
Fixed income sub-total		7,154,945	80.4%		6,498,702	80.0%
Private equity (funded)		124,195	1.4%		108,865	1.3%
Hedge funds		440,507	5.0%		431,544	5.4%
Equity securities		490,418	5.5%		367,483	4.5%
Cash and cash equivalents		686,440	7.7%		716,604	8.8%
Total	$	8,896,505	100.0%	$	8,123,198	100.0%
FIXED INCOME CREDIT QUALITY BY FAIR VALUE
U.S. government and agencies	$	1,878,577	26.3%	$	1,311,895	20.2%
AAA/Aaa		984,569	13.8%		1,336,221	20.6%
AA/Aa		2,237,030	31.3%		1,656,861	25.4%
A/A		976,493	13.6%		1,148,138	17.7%
BBB/Baa		391,457	5.5%		565,105	8.7%
BB		211,538	3.0%		168,095	2.6%
B/B		212,605	3.0%		103,324	1.6%
CCC+ and below		262,676	3.5%		209,063	3.2%
Total	$	7,154,945	100.0%	$	6,498,702	100.0%
STATISTICS
Annualized book yield, year to date		2.1%			2.5%
Duration*		1.9 years			1.9 years
Average credit quality (S&P)		AA-			AA-

* Includes only cash and cash equivalents and fixed maturity investments

Page 15

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL

	Fair Value   September 30,   2012		Average   Rating	Portfolio   Percentage
Cash and cash equivalents	$	686,440	AAA		7.7%
U.S. government securities		1,487,589	AA+		16.7%
U.S. government agencies		390,988	AA+		4.4%
Non-U.S. government and government agencies		309,471	AA+		3.5%
State, municipalities and political subdivisions		41,542	AA-		0.5%
Mortgage-backed securities:
Agency MBS		1,606,201	AA+		18.1%
Non-agency RMBS		107,375	A		1.2%
Non-agency RMBS - Non investment grade		230,287	CCC		2.6%
CMBS		308,094	AA+		3.4%
Total mortgage-backed securities		2,251,957			25.3%
Corporate securities:
Financials		1,031,764	A+		11.6%
Industrials		1,145,621	BBB		12.9%
Utilities		59,802	BBB		0.6%
Total corporate securities		2,237,187			25.1%
Asset-backed securities:
Credit cards		26,087	AAA		0.3%
Auto receivables		34,433	AAA		0.4%
Student Loans		160,001	AA+		1.8%
Collateralized loan obligations		193,663	AA+		2.2%
Other		22,027	AAA		0.2%
Total asset-backed securities		436,211			4.9%
Private equity		124,195	N/A		1.4%
Hedge funds		440,507	N/A		5.0%
Equities		490,418	N/A		5.5%
Total investment portfolio	$	8,896,505			100.0%

Top 10 Corporate Exposures
Corporate	Fair Value   September 30,   2012		Portfolio   Percentage
Bank of America Corp.	$	54,525		0.6%
Citigroup Inc.		49,021		0.6%
JPMorgan Chase & Co.		37,481		0.4%
Morgan Stanley		36,651		0.4%
Wells Fargo & Co.		30,422		0.3%
AT&T Inc.		30,361		0.3%
DNB ASA		29,761		0.3%
Anheuser-Busch InBev NV		29,760		0.3%
Mitsubishi UFJ Financial		27,946		0.3%
American Express Co.		27,329		0.3%
Other Invested Asset Fund Details	Fair Value September 30, 2012		Unfunded Commitments
Private Equity:
Primary and secondary	$	87,241	$	158,129
Mezzanine debt		27,444		89,000
Distressed		9,510		8,800
Total private equity		124,195		255,929
Hedge Funds:
Distressed		42,248		-
Equity long/short		170,023		-
Multi-strategy		140,141		-
Global macro		19,246		-
Event driven		68,849		-
Total hedge funds		440,507		-
Total other invested assets	$	564,702	$	255,929

Page 16

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL

	September 30, 2012						December 31, 2011
	Non-Agency RMBS				Commercial Mortgage  Backed Securities		Non-Agency RMBS				Commercial Mortgage  Backed Securities
Credit Quality by Fair Value	Non Investment Grade Strategy		Core Fixed Income Account				Non Investment Grade Strategy		Core Fixed Income Account
AAA	$	7,241	$	38,156	$	211,594	$	12,073	$	72,415	$	299,960
AA		584		16,267		68,776		391		7,642		30,466
A		-		13,496		24,992		-		8,077		531
BBB		6,774		14,032		2,732		287		1,515		414
BB		-		14,896		-		2,978		16,635		-
B		8,359		9,928		-		3,587		12,257		-
CCC		120,285		600		-		97,611		1,347		-
CC		13,978		-		-		10,289		457		-
D		73,066		-		-		55,266		-		-
Total fair value	$	230,287	$	107,375	$	308,094	$	182,482	$	120,345	$	331,371
Average credit rating		CCC		A		AA+		CCC		A+		AAA
Average credit enhancement **		15.7%		13.4%		33.3%		20.1%		10.9%		36.1%

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

Page 17

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

ADDITIONAL INVESTMENT DETAIL

TOTAL EXPOSURE BY ASSET TYPE AND REGION - SEPTEMBER 30, 2012

				Sovereign Guaranteed Financial Institutions				Mortgage-Backed Securities						Asset- Backed Securities		Corporate Securities
Region	Country	Sovereign*				State and Municipalities		Agency MBS		RMBS		CMBS				Financials		Industrials		Utilities		Equity Securities		Total Exposure
Africa	South Africa	$	9,619	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	6,320	$	-	$	-	$	15,939
Australia	Australia		38,473		48,552		-		-		-		-		-		25,291		23,950		-		5,012		141,278
Europe	Belgium		-		21,972		-		-		-		-		-		-		24,614		-		-		46,586
	Denmark		-		34,858		-		-		-		-		-		-		-		-		-		34,858
	France		-		-		-		-		-		-		6,615		24,996		28,343		-		8,151		68,105
	Germany		27,549		43,598		-		-		-		-		2,792		1,316		17,100		-		-		92,355
	Ireland		-		-		-		-		-		-		-		-		85		-		-		85
	Italy		-		-		-		-		-		-		-		-		1,291		1,822		-		3,113
	Luxembourg		-		-		-		-		-		-		-		-		13,301		-		-		13,301
	Netherlands		-		39,931		-		-		-		-		-		18,156		15,132		-		11,513		84,732
	Norway		-		12,769		-		-		-		-		-		53,605		2,784		-		5,545		74,703
	Russia		-		-		-		-		-		-		-		2,676		7,431		2,202		-		12,309
	Spain		-		-		-		-		-		-		-		-		13,230		-		-		13,230
	Sweden		-		-		-		-		-		-		-		34,466		-		-		-		34,466
	Switzerland		10,719		-		-		-		-		-		-		16,768		3,747		-		23,782		55,016
	United Kingdom		25,946		5,476		-		-		7,733		-		15,525		92,909		70,546		610		-		218,745
	Total		64,214		158,604		-		-		7,733		-		24,932		244,892		197,604		4,634		48,991		751,604
Latin	Brazil		-		-		-		-		-		-		-		696		9,014		4,172		-		13,882
America	Chile		-		-		-		-		-		-		-		251		-		-		3,606		3,857
	Colombia		-		-		-		-		-		-		-		-		-		-		-		-
	Mexico		9,209		-		-		-		-		-		-		-		1,873		-		-		11,082
	Puerto Rico		-		-		-		-		-		-		-		-		308		-		-		308
	Total		9,209		-		-		-		-		-		-		947		11,195		4,172		3,606		29,129
North	Bermuda		-		-		-		-		-		-		-		-		1,634		-		3,081		4,715
America	Canada		74,831		22,642		-		-		-		-		-		71,561		37,818		535		23,138		230,525
	Cayman Islands		-		-		-		-		-		-		145,470		-		-		-		-		145,470
	United States		1,906,537		-		41,542		1,606,201		329,929		308,094		265,809		505,003		839,885		47,220		318,195		6,168,415
	Total		1,981,368		22,642		41,542		1,606,201		329,929		308,094		411,279		576,564		879,337		47,755		344,414		6,549,125
Asia /	China		-		-		-		-		-		-		-		-		-		-		17,862		17,862
Middle East	Hong Kong		-		-		-		-		-		-		-		-		3,356		-		4,161		7,517
	India		-		-		-		-		-		-		-		-		-		-		-		-
	Indonesia		-		-		-		-		-		-		-		-		-		-		6,333		6,333
	Israel		-		-		-		-		-		-		-		-		631		-		9,396		10,027
	Japan		-		-		-		-		-		-		-		28,951		16,866		-		2,803		48,620
	Malaysia		-		-		-		-		-		-		-		-		-		-		-		-
	Philippines		-		-		-		-		-		-		-		-		-		-		8,997		8,997
	Qatar		-		-		-		-		-		-		-		-		6,362		-		-		6,362
	Singapore		-		-		-		-		-		-		-		-		-		-		30,217		30,217
	South Korea		-		6,155		-		-		-		-		-		2,176		-		3,241		-		11,572
	Taiwan		-		-		-		-		-		-		-		-		-		-		8,626		8,626
	UAE		-		-		-		-		-		-		-		2,155		-		-		-		2,155
	Total		-		6,155		-		-		-		-		-		33,282		27,215		3,241		88,395		158,288
	Grand Total	$	2,102,883	$	235,953	$	41,542	$	1,606,201	$	337,662	$	308,094	$	436,211	$	880,976	$	1,145,621	$	59,802	$	490,418	$	7,645,363

* Allied World has no direct exposure to any of the Sovereign governments of Portugal, Italy, Ireland, Greece or Spain.

Page 18

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RESERVE FOR LOSSES AND LOSS EXPENSES

	As of September 30, 2012
	U.S. Insurance		International Insurance		Reinsurance		Consolidated Total
Case reserves (net of reinsurance recoverable)	$	378,317	$	388,378	$	459,973	$	1,226,668
IBNR (net of reinsurance recoverable)		946,992		1,226,660		972,945		3,146,597
Total	$	1,325,309	$	1,615,038	$	1,432,918	$	4,373,265
IBNR/Total reserves (net of reinsurance recoverable)		71.5%		76.0%		67.9%		72.0%
	As of December 31, 2011
	U.S. Insurance		International Insurance		Reinsurance		Consolidated Total
Case reserves (net of reinsurance recoverable)	$	313,750	$	400,292	$	455,940	$	1,169,982
IBNR (net of reinsurance recoverable)		910,383		1,284,434		857,425		3,052,242
Total	$	1,224,133	$	1,684,726	$	1,313,365	$	4,222,224
IBNR/Total reserves (net of reinsurance recoverable)		74.4%		76.2%		65.3%		72.3%

Page 19

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

CAPITAL STRUCTURE AND LEVERAGE RATIOS

	As of September 30, 2012		As of December 31, 2011
Senior notes	$	798,147	$	797,949
Shareholders’ equity		3,435,786		3,149,022
Total capitalization	$	4,233,933	$	3,946,971
Leverage ratios
Debt to total capitalization		18.9%		20.2%
Closing shareholders’ equity	$	3,435,786	$	3,149,022
Deduct: accumulated other comprehensive income		(1,385)		(14,484)
Adjusted shareholders’ equity	$	3,434,401	$	3,134,538
Net premiums written (trailing 12 months)	$	1,782,032	$	1,533,766
Net premiums written (trailing 12 months) to adjusted shareholders’ equity		0.52		0.49
Total investments and cash & cash equivalents	$	8,896,505	$	8,123,198
Total investments and cash & cash equivalents to adjusted shareholders’ equity		2.59		2.59
Reserve for losses and loss expenses	$	5,450,787	$	5,225,143
Deduct: reinsurance recoverable		(1,077,522)		(1,002,919)
Net reserve for losses and loss expenses	$	4,373,265		4,222,224
Net reserve for losses and loss expenses to adjusted shareholders’ equity		1.27		1.35

Page 20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

SHARE REPURCHASE DETAIL

Period	Aggregate Cost of Shares Repurchased		Number of Shares Repurchased		Average Price paid Per Share Repurchased		Average Diluted Book Value Per Share(1)		Average Repurchase Price to Diluted Book Value		Remaining Share Repurchase Authorization
Three Months Ended:
March 31, 2011	$	60,000		969,163	$	61.91	$	74.26		83.4%
June 30, 2011		-		-		-		75.46		NA
September 30, 2011		-		-		-		76.05		NA
December 31, 2011		26,700		450,000		59.33		77.77		76.3%
Total - 2011	$	86,700		1,419,163	$	61.09	$	75.37		81.1%
Three Months Ended:
March 31, 2012	$	93,023		1,430,804	$	65.01	$	82.80		78.5%
June 30, 2012		66,436		905,383		73.38		86.86		84.5%
September 30, 2012		47,590		605,898		78.54		91.03		86.3%
Total - 2012	$	207,049		2,942,085	$	70.37	$	85.74		82.1%	$	467,125

(1) Average of beginning and ending diluted book value per share for each period presented and weighted average total.

Page 21

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

OPERATING INCOME RECONCILIATION AND

BASIC AND DILUTED EARNINGS PER SHARE INFORMATION

	Three Months Ended															Nine Months Ended
	September 30, 2012			June 30, 2012			March 31, 2012			December 31, 2011			September 30, 2011			September 30, 2012			September 30, 2011
Net income (loss)	$	219,647		$	96,351		$	218,156		$	183,100		$	(10,972)		$	534,154		$	91,448
Add after tax effect of:
Net realized investment (gains) losses		(141,451	)		(8,014	)		(126,570	)		(26,332	)		126,440			(276,035	)		26,119
Other income - termination fee		-			-			-			(61,538	)		(32,270)			-			(32,270	)
Foreign exchange loss (gain)		1,023			(1,019	)		(81	)		(549	)		2,966			(77	)		3,708
Operating income	$	79,219		$	87,318		$	91,505		$	94,681		$	86,164		$	258,042		$	89,005
Weighted average common shares outstanding
Basic		35,652,768			36,288,596			37,205,166			38,138,558			38,110,368			36,379,514			38,078,116
Diluted		36,616,734			37,189,722			38,284,635			39,524,273			39,340,710	*		37,393,093			39,759,780
Basic per share data
Net income (loss)	$	6.16		$	2.66		$	5.86		$	4.80		$	(0.29)		$	14.68		$	2.40
Add after tax effect of:
Net realized investment (gains) losses		(3.97	)		(0.22	)		(3.40	)		(0.69	)		3.32			(7.59	)		0.69
Other income - termination fee		-			-			-			(1.62	)		(0.85)			-			(0.85	)
Foreign exchange loss (gain)		0.03			(0.03	)		-			(0.01	)		0.08			-			0.10
Operating income	$	2.22		$	2.41		$	2.46		$	2.48		$	2.26		$	7.09		$	2.34
Diluted per share data
Net income (loss)	$	6.00		$	2.59		$	5.70		$	4.63		$	(0.29)	*	$	14.28		$	2.30
Add after tax effect of:
Net realized investment (gains) losses		(3.86	)		(0.22	)		(3.31	)		(0.67	)		3.21			(7.38	)		0.66
Other income - termination fee		-			-			-			(1.56	)		(0.82)			-			(0.81	)
Foreign exchange loss (gain)		0.02			(0.02	)		-			-			0.09			-			0.09
Operating income	$	2.16		$	2.35		$	2.39		$	2.40		$	2.19		$	6.90		$	2.24

* Diluted weighted average common shares outstanding were only used in the calculation of diluted operating income per share. There were no common share equivalents included in calculating diluted earnings per share as there was a net loss and any additional shares would prove to be anti-dilutive.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RETURN ON AVERAGE SHAREHOLDERS’ EQUITY AND RECONCILIATION OF AVERAGE SHAREHOLDERS’ EQUITY

	Three Months Ended										Nine Months Ended
	September 30, 2012		June 30, 2012		March 31, 2012		December 31, 2011		September 30, 2011		September 30, 2012		September 30, 2011
Opening shareholders’ equity	$	3,283,901	$	3,245,821	$	3,149,022	$	3,003,074	$	3,044,417	$	3,149,022	$	3,075,820
Deduct: accumulated other comprehensive income		(1,414)		(2,325)		(14,484)		(17,796)		(23,095)		(14,484)		(57,135)
Adjusted opening shareholders’ equity	$	3,282,487	$	3,243,496	$	3,134,538	$	2,985,278	$	3,021,322	$	3,134,538	$	3,018,685
Closing shareholders’ equity	$	3,435,786	$	3,283,901	$	3,245,821	$	3,149,022	$	3,003,074	$	3,435,786	$	3,003,074
Deduct: accumulated other comprehensive income		(1,385)		(1,414)		(2,325)		(14,484)		(17,796)		(1,385)		(17,796)
Adjusted closing shareholders’ equity	$	3,434,401	$	3,282,487	$	3,243,496	$	3,134,538	$	2,985,278	$	3,434,401	$	2,985,278
Average adjusted shareholders’ equity	$	3,358,444	$	3,262,992	$	3,189,017	$	3,059,908	$	3,003,300	$	3,284,470	$	3,001,982
Net income (loss) available to shareholders	$	219,647	$	96,351	$	218,156	$	183,100	$	(10,972)	$	534,154	$	91,448
Annualized net income (loss) available to shareholders	$	878,588	$	385,404	$	872,624	$	732,400	$	(43,888)	$	712,205	$	121,931
Annualized return on average shareholders’ equity - net income (loss) available to shareholders		26.2%		11.8%		27.4%		23.9%		(1.5%)		21.7%		4.1%
Operating income available to shareholders	$	79,219	$	87,318	$	91,505	$	94,681	$	86,164	$	258,042	$	89,005
Annualized operating income available to shareholders	$	316,876	$	349,272	$	366,020	$	378,724	$	344,656	$	344,056	$	118,673
Annualized return on average shareholders’ equity - operating income available to shareholders		9.4%		10.7%		11.5%		12.4%		11.5%		10.5%		4.0%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

RECONCILIATION OF DILUTED BOOK VALUE PER SHARE

	As of September 30, 2012			As of December 31, 2011		As of September 30, 2011
Price per share at period end	$	77.25		$	62.93	$	53.71
Total shareholders’ equity	$	3,435,786		$	3,149,022	$	3,003,074
Basic common shares outstanding		35,402,558			37,742,131		38,145,557
Add: unvested restricted share units		179,986			249,251		256,672
Add: performance based equity awards		508,130			889,939		898,014
Add: employee purchase plan		5,925			11,053		1,215
Add: dilutive options/warrants outstanding		1,306,837			1,525,853		1,107,305
Weighted average exercise price per share	$	46.14		$	45.72	$	38.80
Deduct: options bought back via treasury method		(780,502	)		(1,108,615)		(799,914	)
Common shares and common share equivalents outstanding		36,622,934			39,309,612		39,608,849
Basic book value per common share	$	97.05		$	83.44	$	78.73
Year-to-date percentage change in basic book value per common share		16.3%			6.0%
Diluted book value per common share	$	93.82		$	80.11	$	75.82
Year-to-date percentage change in dilutive book value per common share		17.1%			5.7%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

INVESTMENT INCOME, BOOK YIELD AND PORTFOLIO RETURN

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
NET INVESTMENT INCOME
Fixed maturity investments	$	36,778	$	47,877	$	120,883	$	149,471
Equity securities and other invested assets		5,375		3,397		18,093		10,608
Cash and cash equivalents		640		166		1,797		611
Expenses		(3,672)		(3,557)		(11,992)		(10,231)
Net investment income	$	39,121	$	47,883	$	128,781	$	150,459
NET REALIZED INVESTMENT GAINS (LOSSES)
Gross realized gains on sale of invested assets	$	27,210	$	44,674	$	119,154	$	122,842
Gross realized losses on sale of invested assets		(6,686)		(10,634)		(43,355)		(35,896)
Net realized and unrealized losses on derivatives		(962)		(43,285)		(192)		(58,821)
Mark-to-market changes: debt securities trading		99,821		(46,078)		144,024		(742)
Mark-to-market changes: other invested assets and equity securities		30,430		(75,486)		72,426		(48,938)
Net realized investment gains (losses)	$	149,813	$	(130,809)	$	292,057	$	(21,555)
NET UNREALIZED GAINS ON INVESTMENTS
Opening balance	$	2,176	$	26,840	$	17,619	$	63,305
Closing balance		2,131		20,916		2,131		20,916
Change in net unrealized gains on investments	$	(45)	$	(5,924)	$	(15,488)	$	(42,389)
TOTAL FINANCIAL STATEMENT PORTFOLIO RETURN	$	188,889	$	(88,850)	$	405,350	$	86,515
ANNUALIZED INVESTMENT BOOK YIELD
Net investment income, recurring	$	39,121	$	47,883	$	128,781	$	150,459
Annualized net investment income		156,484		191,532		171,708		200,612
Average aggregate invested assets, at cost	$	8,223,397	$	7,926,573	$	8,143,931	$	7,774,423
Annualized investment book yield		1.9%		2.4%		2.1%		2.6%
FINANCIAL STATEMENT PORTFOLIO RETURN
Total financial statement portfolio return	$	188,889	$	(88,850)	$	405,350	$	86,515
Average aggregate invested assets, at fair value	$	8,449,366	$	8,048,140	$	8,332,460	$	7,878,280
Financial statement portfolio return		2.2%		(1.1%)		4.9%		1.1%

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

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, net foreign exchange gain or loss, impairment of intangible assets and other non-recurring items. The company excludes net realized investment gains or losses, net impairment charges recognized in earnings, net foreign exchange gain or loss and other non-recurring items from its calculation of operating income because these amounts are heavily influenced by and fluctuate in part according to the availability of market opportunities and other factors. 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 and the company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. See page 22 for the 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 credit spread 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 page 23 for the 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 page 22 for the reconciliation of net income to operating income and page 23 for the reconciliation 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 an important measure of calculating shareholder returns. See page 24 for the 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. Aggregate invested assets includes cash and cash equivalents, fixed maturity securities, equity securities, other invested assets and the net balances receivable or payable on purchases and sales of investments. 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 page 25 for the calculation of annualized investment book yield.

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