10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 001-32938

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG

(Exact Name of Registrant as Specified in Its Charter)

Switzerland	98-0681223
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

Lindenstrasse 8, 6340 Baar, Zug, Switzerland
(Address of Principal Executive Offices and Zip Code)

41-41-768-1080
(Registrant’s Telephone Number, Including Area Code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of August 1, 2011, 38,122,226 common shares were outstanding.

TABLE OF CONTENTS

PART I
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II
	Item 1. Legal Proceedings
	Item 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. [Removed and Reserved.]
	Item 5. Other Information
	Item 6. Exhibits
SIGNATURES
EXHIBIT INDEX
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
as of June 30, 2011 and December 31, 2010
(Expressed in thousands of United States dollars, except share and per share amounts)

	As of			As of
	June 30,			December 31,
	2011			2010
ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2011: $318,711; 2010: $828,544)	$	345,551		$	891,849
Fixed maturity investments trading, at fair value		6,201,034			5,769,097
Equity securities trading, at fair value		393,913			174,976
Other invested assets trading, at fair value		562,267			347,632
Total investments		7,502,765			7,183,554
Cash and cash equivalents		740,804			756,995
Restricted cash		66,853			96,373
Insurance balances receivable		653,002			529,927
Prepaid reinsurance		223,269			187,287
Reinsurance recoverable		1,013,951			927,588
Accrued investment income		39,582			40,520
Net deferred acquisition costs		112,083			96,803
Goodwill		268,376			268,376
Intangible assets		55,342			56,876
Balances receivable on sale of investments		106,486			188,408
Net deferred tax assets		19,826			19,740
Other assets		54,760			75,184
Total assets	$	10,857,099		$	10,427,631
LIABILITIES:
Reserve for losses and loss expenses	$	5,251,304		$	4,879,188
Unearned premiums		1,184,676			962,203
Reinsurance balances payable		132,661			99,732
Balances due on purchases of investments		358,837			506,978
Senior notes		797,823			797,700
Accounts payable and accrued liabilities		87,381			106,010
Total liabilities	$	7,812,682		$	7,351,811
SHAREHOLDERS’ EQUITY:
Common shares: par value CHF 15.00 per share (2011: 40,003,642; 2010: 40,003,642 shares issued and 2011: 37,945,043; 2010: 38,089,226 shares outstanding)		600,055			600,055
Additional paid-in capital		82,037			170,239
Treasury shares, at cost (2011: 2,058,599; 2010: 1,914,416)		(124,392	)		(112,811	)
Retained earnings		2,463,622			2,361,202
Accumulated other comprehensive income: net unrealized gains on investments, net of tax		23,095			57,135
Total shareholders’ equity		3,044,417			3,075,820
Total liabilities and shareholders’ equity	$	10,857,099		$	10,427,631

See accompanying notes to the consolidated financial statements.

-1-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
for the three and six months ended June 30, 2011 and 2010
(Expressed in thousands of United States dollars, except share and per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
REVENUES:
Gross premiums written	$	519,598		$	493,847		$	1,080,286		$	998,010
Premiums ceded		(123,795	)		(124,052	)		(203,612	)		(194,923	)
Net premiums written		395,803			369,795			876,674			803,087
Change in unearned premiums		(40,496	)		(30,871	)		(186,491	)		(125,839	)
Net premiums earned		355,307			338,924			690,183			677,248
Net investment income		52,368			65,594			102,576			134,496
Net realized investment gains		58,878			94,933			109,254			172,420
Net impairment charges recognized in earnings:
Total other-than-temporary impairment charges		—			—			—			(168	)
Portion of loss recognized in other comprehensive income, before taxes		—			—			—			—
Net impairment charges recognized in earnings		—			—			—			(168	)
Other income		—			616			—			913
		466,553			500,067			902,013			984,909
EXPENSES:
Net losses and loss expenses		235,813			188,722			540,265			420,876
Acquisition costs		42,971			37,938			81,053			78,722
General and administrative expenses		67,201			68,089			135,157			131,552
Amortization and impairment of intangible assets		766			891			1,533			1,783
Interest expense		13,745			9,531			27,487			19,059
Foreign exchange loss		1,184			559			742			1,635
		361,680			305,730			786,237			653,627
Income before income taxes		104,873			194,337			115,776			331,282
Income tax expense		11,073			10,378			13,356			13,583
NET INCOME		93,800			183,959			102,420			317,699
Other comprehensive loss:
Unrealized gains on investments arising during the period net of applicable deferred income tax expense for the three months ended June 30, 2011: $1,461; 2010: $471 and six months ended June 30, 2011: $2,425; 2010: $690		13,680			63,852			5,636			101,322
Reclassification adjustment for net realized investment gains included in net income, net of applicable income tax		(23,548	)		(67,891	)		(39,676	)		(112,926	)
Other comprehensive loss		(9,868	)		(4,039	)		(34,040	)		(11,604	)
COMPREHENSIVE INCOME	$	83,932		$	179,920		$	68,380		$	306,095
PER SHARE DATA
Basic earnings per share	$	2.45		$	3.66		$	2.69		$	6.34
Diluted earnings per share	$	2.36		$	3.47		$	2.57		$	5.98
Weighted average common shares outstanding		38,346,489			50,222,974			38,061,724			50,123,945
Weighted average common shares and common share equivalents outstanding		39,800,753			52,974,410			39,873,418			53,086,708
Dividends paid per share	$	—		$	0.20		$	—		$	0.40

See accompanying notes to the consolidated financial statements.

-2-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
for the six months ended June 30, 2011 and 2010
(Expressed in thousands of United States dollars, except Swiss Franc (CHF) share capital)

											Accumulated
					Additional						Other
	Share Capital		Share Capital		Paid-in			Treasury			Comprehensive			Retained
	USD		CHF		Capital			Shares			Income			Earnings			Total
December 31, 2010	$	—		600,055	$	170,239		$	(112,811	)	$	57,135		$	2,361,202		$	3,075,820
Net income		—		—		—			—			—			102,420			102,420
Dividends		—		—		—			—			—			—			—
Other comprehensive loss		—		—		—			—			(34,040	)		—			(34,040	)
Stock compensation		—		—		(34,582	)		48,419			—			—			13,837
Share repurchases		—		—		—			(60,000	)		—			—			(60,000	)
Repurchase of founder warrants		—		—		(53,620	)		—			—			—			(53,620	)
June 30, 2011	$	—		600,055	$	82,037		$	(124,392	)	$	23,095		$	2,463,622		$	3,044,417
December 31, 2009	$	1,492		—	$	1,359,934		$	—		$	149,849		$	1,702,020		$	3,213,295
Net income		—		—		—			—			—			317,699			317,699
Dividends		—		—		—			—			—			(20,109	)		(20,109	)
Other comprehensive loss		—		—		—			—			(11,604	)		—			(11,604	)
Stock compensation		23		—		18,328			—			—			—			18,351
Share repurchase		—		—		—			(49,089	)		—			—			(49,089	)
June 30, 2010	$	1,515		—	$	1,378,262		$	(49,089	)	$	138,245		$	1,999,610		$	3,468,543

See accompanying notes to the consolidated financial statements.

-3-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 2011 and 2010
(Expressed in thousands of United States dollars)

	Six Months Ended
	June 30,
	2011			2010
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income	$	102,420		$	317,699
Adjustments to reconcile net income to cash provided by operating activities:
Net realized gains on sales of investments		(52,906	)		(113,151	)
Mark to market adjustments		(77,318	)		(59,269	)
Net impairment charges recognized in earnings		—			168
Stock compensation expense		12,112			17,454
Insurance balances receivable		(123,075	)		(156,709	)
Prepaid reinsurance		(35,982	)		(15,497	)
Reinsurance recoverable		(86,363	)		(12,444	)
Accrued investment income		938			6,941
Net deferred acquisition costs		(15,280	)		(15,465	)
Net deferred tax assets		2,339			8,415
Other assets		15,686			22,318
Reserve for losses and loss expenses		372,116			158,663
Unearned premiums		222,473			141,337
Reinsurance balances payable		32,929			34,953
Accounts payable and accrued liabilities		(18,629	)		(23,806	)
Other items, net		10,386			(6,005	)
Net cash provided by operating activities		361,846			305,602
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of fixed maturity investments — available for sale		(352	)		(113,118	)
Purchases of fixed maturity investments — trading		(3,949,447	)		(6,927,637	)
Purchases of equity securities		(245,340	)		(75,473	)
Purchases of other invested assets		(240,410	)		(127,538	)
Sales of fixed maturity investments — available for sale		560,794			1,827,800
Sales of fixed maturity investments — trading		3,503,758			5,344,007
Sales of equity securities		36,295			2,019
Sales of other invested assets		36,067			1,136
Purchases of fixed assets		(2,316	)		(5,213	)
Change in restricted cash		29,520			(13,643	)
Net cash used in investing activities		(271,431	)		(87,660	)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid		—			(20,109	)
Proceeds from the exercise of stock options		4,824			3,576
Share repurchases		(60,000	)		(49,089	)
Repurchase of founder warrants		(53,620	)		—
Net cash used in financing activities		(108,796	)		(65,622	)
Effect of exchange rate changes on foreign currency cash		2,190			(1,819	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(16,191	)		150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		756,995			292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	740,804		$	442,689
Supplemental disclosure of cash flow information:
— Cash paid for income taxes	$	433		$	4,386
— Cash paid for interest expense		27,000			18,750

See accompanying notes to the consolidated financial statements.

-4-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

1. GENERAL

     Allied World Assurance Company Holdings, AG, a Swiss holding company (“Allied World Switzerland”), through its wholly-owned subsidiaries (collectively, the “Company”), provides property and casualty insurance and reinsurance on a worldwide basis through operations in Bermuda, the United States, Europe, Hong Kong and Singapore.

     On November 26, 2010, the Company received approval from the Supreme Court of Bermuda to change the place of incorporation of the ultimate parent company from Bermuda to Switzerland (the “Redomestication”), which was completed on December 1, 2010. The ultimate parent company is now Allied World Switzerland, which wholly owns the former public company, Allied World Assurance Company Holdings, Ltd (“Allied World Bermuda”). After the Redomestication, the Company continues to report under accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Company’s common shares continue to trade on the New York Stock Exchange under the symbol “AWH,” the same symbol under which the common shares were listed prior to the Redomestication. In addition, the Company remains subject to U.S. Securities and Exchange Commission (“SEC”) reporting requirements and continues to report consolidated financial results in U.S. dollars. The Company believes the Redomestication provides the ability to maintain a competitive worldwide effective corporate tax rate.

2. BASIS OF PREPARATION AND CONSOLIDATION

     These unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. GAAP for interim financial information and with Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are normal and recurring in nature and necessary for a fair presentation of financial position and results of operations as of the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year.

     The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates reflected in the Company’s financial statements include, but are not limited to:

• The premium estimates for certain reinsurance agreements,

• Recoverability of deferred acquisition costs,

• The reserve for outstanding losses and loss expenses,

• Valuation of ceded reinsurance recoverables,

• Determination of impairment of goodwill and other intangible assets,

• Valuation of financial instruments, and

• Determination of other-than-temporary impairment of investments.

     Inter-company accounts and transactions have been eliminated on consolidation and all entities meeting consolidation requirements have been included in the consolidation.

     These unaudited condensed consolidated financial statements, including these notes, should be read in conjunction with the Company’s audited consolidated financial statements, and related notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

3. NEW ACCOUNTING PRONOUNCEMENTS

     In July 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2010-20, “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” (“ASU 2010-20”). ASU 2010-20 enhances disclosures about credit quality of financing receivables and the allowance of credit losses by requiring additional information regarding the Company’s credit risk exposures and evaluating the adequacy of its allowance for credit losses. The balance sheet related disclosures for ASU 2010-20 were effective for the year ended December 31, 2010 and the income statement related disclosures were effective for the quarter ended March 31, 2011. Refer to Note 15 for the Company’s related disclosures.

     In October 2010, the FASB issued ASU 2010-26, “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts” (“ASU 2010-26”). ASU 2010-26 clarifies what costs associated with acquiring or renewing insurance contracts can be deferred and amortized over the coverage period. Under the revised guidance of ASU 2010-26, incremental direct costs that result directly from and are essential to the insurance contract and would not have been incurred had the insurance contract not been written are costs that may be capitalized, including costs relating to activities specifically performed by the Company such as underwriting, policy issuance and processing. ASU 2010-26 will be effective January 1, 2012 and early adoption is permitted. The Company has not elected early adoption and is currently evaluating the provisions of ASU 2010-26 and its potential impact on future financial statements.

     In January 2011, the FASB issued ASU 2011-01, “Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20”. In April 2011, the FASB issued ASU 2011-02 “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring” (“ASU 2011-02”). ASU 2011-02 provides further guidance on what constitutes a troubled debt restructuring. The guidance is effective for interim and annual periods beginning on or after June 15, 2011 and applies retrospectively to restructurings within the fiscal year of adoption. Refer to Note 15 for the Company’s related disclosures.

     In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 provides a consistent meaning for the term “fair value” between the FASB and International Accounting Standards Board and establishes common requirements for measuring and disclosing information related thereto. ASU 2011-04 is effective on a prospective basis for interim and annual periods beginning on or after December 15, 2011 and early adoption is prohibited. The Company is currently assessing the provisions of ASU 2011-04 and its potential impact on future financial statements.

     In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”). ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires the presentation of reclassification adjustments on the face of the financial statements from other comprehensive income to net income. ASU 2011-05 is effective on a retrospective basis for interim and annual periods beginning on or after December 15, 2011. The Company is currently assessing the provisions of ASU 2011-05 and its potential impact on future financial statements.

4. INVESTMENTS

a) Available for Sale Securities

     The amortized cost, gross unrealized gains, gross unrealized losses and fair value of the Company’s available for sale investments by category are as follows:

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
June 30, 2011
U.S. Government and Government agencies	$	37,597	$	1,419	$	—		$	39,016
States, municipalities and political subdivisions		43,343		5,323		—			48,666
Corporate debt:
Financial institutions		41,186		2,365		—			43,551
Industrials		95,583		7,656		—			103,239
Utilities		101,002		10,077		—			111,079
Total fixed maturity investments, available for sale	$	318,711	$	26,840	$	—		$	345,551
December 31, 2010
U.S. Government and Government agencies	$	85,030	$	6,923	$	—		$	91,953
Non-U.S. Government and Government agencies		138,386		9,539		(2,541	)		145,384
States, municipalities and political subdivisions		107,289		10,901		(13	)		118,177
Corporate debt:
Financial institutions		66,660		6,776		(38	)		73,398
Industrials		310,664		20,548		(2	)		331,210
Utilities		120,515		11,212		—			131,727
Total fixed maturity investments, available for sale	$	828,544	$	65,899	$	(2,594	)	$	891,849

b) Trading Securities

     Securities accounted for at fair value with changes in fair value recognized in the unaudited condensed consolidated statements of operations (“consolidated income statements”) by category are as follows:

	June 30, 2011		December 31, 2010
U.S. Government and Government agencies	$	982,274	$	1,229,720
Non-U.S. Government and Government agencies		177,529		120,793
States, municipalities and political subdivisions		108,256		127,436
Corporate debt:
Financial institutions		1,440,554		1,261,219
Industrials		772,829		627,524
Utilities		135,492		101,472
Residential mortgage-backed:
Non-agency residential		363,408		371,935
Agency residential		1,229,647		1,195,905
Commercial mortgage-backed		311,509		184,043
Asset-backed		679,536		549,050
Total fixed maturity investments, trading		6,201,034		5,769,097
Equity securities		393,913		174,976
Hedge funds (1)		562,267		347,632
Total	$	7,157,214	$	6,291,705

⁽¹⁾ Within the Company’s financial statements and footnotes “hedge funds” include the Company’s investments in both hedge funds and private equity funds.

c) Contractual Maturity Dates

     The contractual maturity dates of available for sale fixed maturity investments are as follows:

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	June 30, 2011
	Amortized Cost		Fair Value
Due within one year	$	33,343	$	33,999
Due after one year through five years		233,119		252,903
Due after five years through ten years		49,168		55,314
Due after ten years		3,081		3,335
	$	318,711	$	345,551

     Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

d) Other Invested Assets

     Included in other invested assets are the Company’s hedge fund investments. As of the balance sheet date, the Company held 21 hedge fund investments with a total fair value of $562,267, which comprised 6.8% of the total fair value of its investments and cash and cash equivalents and are summarized as follows by type of investment strategy:

					Long			Short
Hedge Fund	Fair Value as of		Unfunded		Exposure(1)			Exposure(2)			Gross			Net
Type	June 30, 2011		Commitments		(% of funded)			(% of funded)			Exposure(3)			Exposure(4)
Private equity (primary and secondary)	$	56,707	$	182,296		100	%		0	%		100	%		100	%
Mezzanine debt		1,978		113,022		100	%		0	%		100	%		100	%
Distressed		62,498		37,289		73	%		10	%		83	%		63	%
Total private equity		121,183		332,607
Equity long/short		186,142		—		104	%		67	%		171	%		37	%
Multi-strategy		170,168		—		101	%		60	%		161	%		41	%
Event driven		84,774		—		115	%		75	%		190	%		40	%
Total	$	562,267	$	332,607

(1)	Long exposure represents the ratio of the fund’s long investments in securities to the fund’s equity capital (over 100% may denote explicit borrowing).
(2)	Short exposure represents the ratio of the securities sold short to the fund’s equity capital.
(3)	Gross exposure is the addition of the long and short exposures (over 100% may denote explicit borrowing).
(4)	Net exposure is the subtraction of the short exposure from the long exposure.

• Private equity funds: These funds buy limited partnership interests from existing limited partners of primary private equity funds. As owners of private equity funds seek liquidity, they can sell their existing investments, plus any remaining commitment, to secondary market participants. The Company has invested in four private equity funds to purchase those primary limited partnership interests. The fair values of the investments in this class have been estimated using the net asset value per share of the investments. These funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund. The restriction period for these funds from initial investment ranges from eight to ten years.

• Mezzanine debt funds: Mezzanine debt funds invest primarily in privately negotiated mezzanine investments. The funds’ strategies will focus primarily on providing capital to upper middle market and middle market companies, and private equity sponsors, in connection with leveraged buyouts, mergers and acquisitions, recapitalizations, growth financings and other corporate transactions. The most common position in the capital structure will be between the senior secured debt holder and the equity, however the funds will utilize a flexible approach when structuring investments, which may include secured debt, subordinated debt, preferred stock and/or private equity. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in one mezzanine debt fund which cannot be redeemed at this

-8-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

time because the investments include restrictions that do not allow for redemption until termination of the fund. The remaining restriction period for this fund is approximately ten years.

• Distressed funds: In distressed debt investing, managers take positions in the debt of companies experiencing significant financial difficulties, including bankruptcy, or in certain positions of the capital structure of structured securities. The manager relies on the fundamental analysis of these securities, including the claims on the assets and the likely return to bondholders. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in five distressed funds, three of which (representing approximately 34% of the value of the funds in this class) are not currently eligible for redemption due to imposed lock-up periods from initial investments ranging from one to eight years. The remaining funds representing approximately 42% and 24% of the value of the funds in this class are currently eligible for quarterly redemption with a 65-day and 45-day notification period, respectively, and are subject to redemption limitations and a redemption fee if redeemed prior to January 2012, respectively.

• Equity long/short funds: In equity long/short funds, managers take long positions in companies they deem to be undervalued and short positions in companies they deem to be overvalued. Long/short managers may invest in countries, regions or sectors and vary by their use of leverage and target net long position. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in five equity long/short funds, one of which (representing approximately 24% of the value of the funds in this class) is not currently eligible for redemption due to an imposed lock-up period of eighteen months from initial investment, at which time the fund will be eligible for quarterly redemption with a 45-day notification period. The remaining four funds, representing approximately 76% of the value of the funds in this class, are currently eligible for quarterly redemption, one with a 30-day notification period or monthly redemption with a 30-day notification period and redemption fee, one with a 45-day notification period and redemption fee if redeemed prior to July 2012 and two with a 60-day notification period.

• Multi-strategy funds: These funds may utilize many strategies employed by specialized funds including distressed investing, equity long/short, merger arbitrage, convertible arbitrage, fixed income arbitrage and macro trading. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in four equity long/short funds, all of which are currently eligible for quarterly redemption. Three of the funds require notification periods before redemption which range from 45 days to 90 days. The remaining fund is currently eligible for redemption of one third of the net asset value with a 65-day notification period.

• Event driven funds: Event driven strategies seek to deploy capital into specific securities whose returns are affected by a specific event that affects the value of one or more securities of a company. Returns for such securities are linked primarily to the specific outcome of the events and not by the overall direction of the bond or stock markets. Examples could include mergers and acquisitions (arbitrage), corporate restructurings and spin-offs and capital structure arbitrage. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in two event driven funds. Approximately 52% of the value of the funds is not currently eligible for redemption due to an imposed two year lock-up period from initial investment. The remaining 48% of the value of the funds in this class is currently eligible for quarterly redemption, but is subject to redemption fees and limitations.

     Five of the Company’s hedge funds, three equity long/short funds, one multi-strategy funds and one event driven fund, had long exposure greater than 100% of the funds’ net asset value (indicating explicit leverage) of 120%, 117%, 110%, 133%, and 151%, respectively, as of June 30, 2011.

e) Net Investment Income

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Fixed maturity investments	$	50,648		$	67,552		$	101,594		$	138,650
Equity securities and other invested assets		5,015			940			7,211			1,246
Cash and cash equivalents		127			111			445			163
Expenses		(3,422	)		(3,009	)		(6,674	)		(5,563	)
Net investment income	$	52,368		$	65,594		$	102,576		$	134,496

-9-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

f) Components of Realized Gains and Losses

     Components of realized gains are summarized in the following table:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross realized gains on sale of securities	$	34,611		$	78,572		$	78,168		$	130,239
Gross realized losses on sale of securities		(3,330	)		(6,724	)		(25,262	)		(13,130	)
Treasury yield hedge		—			(3,958	)		—			(3,958	)
Futures not designated as hedges		(15,755	)		—			(20,410	)		—
Foreign exchange forwards not designated as hedges		(560	)		—			(560	)		—
Mark-to-market changes: debt securities trading		31,872			32,746			45,336			60,477
Mark-to-market changes: foreign exchange forwards and futures not designated as hedges		6,275			—			5,434			—
Mark-to-market changes: hedge funds and equity securities		5,765			(5,703	)		26,548		$	(1,208	)
Net realized investment gains	$	58,878		$	94,933		$	109,254		$	172,420
Proceeds from sale of available for sale securities	$	202,671		$	1,306,625		$	546,191		$	1,846,074
Proceeds from sale of trading securities	$	1,432,148		$	1,215,553		$	3,418,548		$	5,297,353

g) Pledged Assets

     As of June 30, 2011 and December 31, 2010, $286,393 and $280,175, respectively, of cash and cash equivalents and investments were on deposit with various state or government insurance departments or pledged in favor of ceding companies in order to comply with relevant insurance regulations. In addition, the Company has set up trust accounts to meet security requirements for inter-company reinsurance transactions. These trusts contained assets of $1,321,751 and $1,377,266 as of June 30, 2011 and December 31, 2010, respectively, and are included in fixed maturity investments.

     The Company also has facilities available for the issuance of letters of credit collateralized against the Company’s investment portfolio. The collateralized portion of these facilities is up to $1,300,000 as of June 30, 2011 and December 31, 2010. See Note 8 “Debt and Financing Arrangements” for details on the facilities.

     The following table shows the Company’s trust accounts on deposit, as well as outstanding and remaining letter of credit facilities, and the collateral committed to support the letter of credit facilities:

	As of		As of
	June 30,		December 31,
	2011		2010
Total trust accounts on deposit	$	1,608,143	$	1,657,441
Total letter of credit facilities:
Citibank Europe plc		900,000		900,000
Credit Facility		800,000		800,000
Total letter of credit facilities		1,700,000		1,700,000
Total letter of credit facilities outstanding:
Citibank Europe plc		712,454		689,851
Credit Facility		158,983		158,983
Total letter of credit facilities outstanding		871,437		848,834
Total letter of credit facilities remaining:
Citibank Europe plc		187,546		210,149
Credit Facility (1)		641,017		641,017
Total letter of credit facilities remaining		828,563		851,166
Collateral committed to support the letter of credit facilities	$	1,054,206	$	1,121,345

(1) Net of any borrowing or repayments under the Unsecured Facility (as defined in Note 8). See Note 8 for further details on the Unsecured Facility.

-10-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     Total trust accounts on deposit includes available for sale securities, trading securities and cash and cash equivalents. The fair values of the combined total cash and cash equivalents and investments held under trust were $2,662,349 and $2,778,786 as of June 30, 2011 and December 31, 2010, respectively. Of the total letters of credit facilities outstanding as of June 30, 2011 and December 31, 2010, $7,295 was used to meet security requirements for inter-company transactions and the remaining letters of credit facilities outstanding of $864,142 and $841,539 was used for third-party beneficiaries, respectively.

h) Analysis of Unrealized Losses

     As of June 30, 2011 and December 31, 2010, there were approximately nil and nine securities, respectively, in an unrealized loss position. The following table summarizes the market value of those investments in an unrealized loss position for periods less than and greater than 12 months:

	December 31, 2010
	Gross Fair		Unrealized
	Value		Loss
Less than 12 months
U.S. Government and Government agencies	$	—	$	—
Non-U.S. Government and Government agencies		34,204		(1,116	)
States, municipalities and political subdivisions		472		(13	)
Corporate debt:
Financial institutions		2,796		(38	)
Industrials		2,150		(2	)
	$	39,622	$	(1,169	)
More than 12 months
Non-U.S. Government and Government agencies	$	10,998	$	(1,425	)
	$	10,998	$	(1,425	)
	$	50,620	$	(2,594	)

i) Other-than-temporary impairment charges

     Following the Company’s review of the securities in the investment portfolio during the three and six months ended June 30, 2011, no securities were considered to be other-than-temporarily impaired.

     Following the Company’s review of the securities in the investment portfolio during the three and six months ended June 30, 2010 nil and one mortgage-backed security was considered to be other-than-temporarily impaired due to the present value of the expected cash flows being lower than the amortized cost. The $168 of other than temporary impairment (“OTTI”) during the six months ended June 30, 2010 was recognized through earnings due to credit related losses.

     The following table summarizes the amounts related to credit losses on debt securities for which a portion of the OTTI was recognized in other comprehensive income in the consolidated income statements for the three and six months ended June 30, 2010:

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2010		2010
Beginning balance of credit losses	$	1,264	$	1,096
Additions for credit loss for which OTTI was not previously recognized		—		168
Reductions for securities sold during the period (realized)		—		—
Reductions for OTTI previously recognized due to intent to sell		—		—
Additions resulting from the increase in credit losses		—		—
Reductions resulting from the improvement in expected cash flows		—		—
Ending balance of credit losses	$	1,264	$	1,264

-11-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

5. DERIVATIVE INSTRUMENTS

     The following table summarizes information on the location and amounts of derivative fair values on the unaudited condensed consolidated balance sheets (“consolidated balance sheets”):

			June 30, 2011								December 31, 2010
	Asset				Liability				Asset				Liability
	Derivative		Asset		Derivative		Liability		Derivative		Asset		Derivative		Liability
	Notional		Derivative		Notional		Derivative		Notional		Derivative		Notional		Derivative
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value		Amount		Fair Value
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts (1)	$	122,311	$	1,487	$	33,873	$	204	$	—	$	—	$	—	$	—
Interest rate futures (1)		1,797,200		4,183		142,300		32		—		—		—		—
	$	1,919,511	$	5,670	$	176,173	$	236	$	—	$	—	$	—	$	—
Relating to operating activities:
Foreign exchange contracts (2)	$	125,528	$	1,378	$	34,830	$	418	$	26,758	$	858	$	51,308	$	1,629
Total derivatives	$	2,045,039	$	7,048	$	211,003	$	654	$	26,758	$	858	$	51,308	$	1,629

(1)	Asset and liability derivatives relating to the investment portfolio are classified within “balances receivable on sale of investments” or “balances due on the purchase of investments” on the consolidated balance sheets.
(2)	Asset and liability derivatives relating to operating activities are classified within “other assets” or “other liabilities” on the consolidated balance sheets.

     The following table provides the total unrealized and realized gains (losses) on derivatives recorded in the consolidated income statement:

	Location of Gain (Loss)	Three Months Ended						Six Months Ended
	Recognized in the Consolidated	June 30,						June 30,
	Income Statements	2011			2010			2011			2010
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts	Net realized investment gains	$	723		$	—		$	723		$	—
Interest rate futures	Net realized investment losses		(10,763	)		—			(16,259	)		—
		$	(10,040	)	$	—		$	(15,536	)	$	—
Relating to operating activities:
Foreign exchange contracts	Foreign exchange gains (losses)	$	1,345		$	(1,361	)	$	2,601		$	(1,412	)
Total derivatives		$	(8,695	)	$	(1,361	)	$	(12,935	)	$	(1,412	)

Derivative Instruments not Designated as Hedging Instruments

a) Relating to Investment Portfolio

     The Company is exposed to foreign currency risk in its investment portfolio. Accordingly, the fair values of the Company’s investment portfolio are partially influenced by the change in foreign exchange rates. The Company entered into foreign currency forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities have not been designated as specific hedges for financial reporting purposes.

-12-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     The Company also purchases and sells interest rate future contracts to actively manage the duration and yield curve positioning of its fixed income portfolio. Interest rate futures can efficiently increase or decrease the overall duration of the portfolio. Additionally, interest rate future contracts can be utilized to obtain the desired position along the yield curve in order to protect against certain future yield curve shapes.

b) Relating to Operating Activities

     The Company’s insurance and reinsurance subsidiaries and branches operate in various foreign countries and consequently the Company’s underwriting portfolio is exposed to foreign currency risk. The Company manages foreign currency risk by seeking to match liabilities under the insurance policies and reinsurance contracts that it writes and that are payable in foreign currencies with cash and investments that are denominated in such currencies. When necessary, the Company may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts and currency options.

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

     In accordance with U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the hierarchy based on the input that is significant to determining such measurement. The three levels are defined as follows:

• Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.

     The following table shows the fair value of the Company’s financial instruments and where in the fair value hierarchy the fair value measurements are included as of June 30, 2011:

-13-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

					Fair value measurement using:
					Quoted prices in
					active markets				Significant
					for identical		Significant other		unobservable
	Carrying		Total fair		assets		observable inputs		inputs
	amount		value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities:
U.S. Government and Government agencies	$	39,016	$	39,016	$	39,016	$	—	$	—
States, municipalities and political subdivisions		48,666		48,666		—		48,666		—
Corporate debt		257,869		257,869		—		257,869		—
Total available for sale fixed maturity investments		345,551		345,551
Trading securities:
U.S. Government and Government agencies	$	982,274	$	982,274	$	835,748	$	146,526	$	—
Non-U.S. Government and Government agencies		177,529		177,529		—		177,529		—
States, municipalities and political subdivisions		108,256		108,256		—		108,256		—
Corporate debt		2,348,875		2,348,875		—		2,348,875		—
Mortgage-backed		1,904,564		1,904,564		—		1,687,904		216,660
Asset-backed		679,536		679,536		—		566,226		113,310
Total trading fixed maturity investments		6,201,034		6,201,034
Total fixed maturity investments		6,546,585		6,546,585
Hedge funds		562,267		562,267		—		—		562,267
Equity securities		393,913		393,913		393,913		—		—
Total investments	$	7,502,765	$	7,502,765	$	1,268,677	$	5,341,851	$	892,237
Senior notes	$	797,823	$	878,085	$	—	$	878,085	$	—

     The following describes the valuation techniques used by the Company to determine the fair value of financial instruments held as of the balance sheet date.

     U.S. government and U.S. government agencies: Comprised primarily of bonds issued by the U.S. treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. The fair values of the Company’s U.S. government securities are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The Company believes the market for U.S. treasury securities is an actively traded market given the high level of daily trading volume. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy.

     Non-U.S. government and government agencies: Comprised of fixed income obligations of non-U.S. governmental entities. The fair values of these securities are based on prices obtained from international indices and are included in the Level 2 fair value hierarchy.

     States, municipalities and political subdivisions: Comprised of fixed income obligations of U.S. domiciled state and municipality entities. The fair values of these securities are based on prices obtained from the new issue market, and are included in the Level 2 fair value hierarchy.

     Corporate debt: Comprised of bonds issued by corporations that are diversified across a wide range of issuers and industries. The fair values of corporate bonds that are short-term are priced using spread above the London Interbank Offered Rate yield curve, and the fair value of corporate bonds that are long-term are priced using the spread above the risk-free yield curve. The spreads are

-14-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

sourced from broker-dealers, trade prices and the new issue market. As the significant inputs used to price corporate bonds are observable market inputs, the fair values of corporate bonds are included in the Level 2 fair value hierarchy.

     Mortgage-backed: Primarily comprised of residential and commercial mortgages originated by both U.S. government agencies (such as the Federal National Mortgage Association) and non-U.S. government agencies originators. The fair values of mortgage-backed securities originated by U.S. government agencies and non-U.S. government agencies are based on a pricing model that incorporates prepayment speeds and spreads to determine appropriate average life of mortgage-backed securities. The spreads are sourced from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the mortgage-backed securities are observable market inputs, the fair values of these securities are included in the Level 2 fair value hierarchy, unless the significant inputs used to price the mortgage-backed securities are broker-dealer quotes and the Company is not able to determine if those quotes are based on observable market inputs, in which case the fair value is included in the Level 3 hierarchy.

     Asset-backed: Principally comprised of bonds backed by pools of automobile loan receivables, home equity loans, credit card receivables and collateralized loan obligations originated by a variety of financial institutions. The fair values of asset-backed securities are priced using prepayment speed and spread inputs that are sourced from the new issue market or broker-dealer quotes. As the significant inputs used to price the asset-backed securities are observable market inputs, the fair values of these securities are included in the Level 2 fair value hierarchy, unless the significant inputs used to price the asset-backed securities are broker-dealer quotes and the Company is not able to determine if those quotes are based on observable market inputs, in which case the fair value is included in the Level 3 hierarchy.

     Hedge funds: Comprised of hedge funds invested in a range of diversified strategies. In accordance with U.S. GAAP, the fair values of the hedge funds are based on the net asset value of the funds as reported by the fund manager which the Company believes is an unobservable input, and as such, the fair values of those hedge funds are included in the Level 3 fair value hierarchy.

     Equity securities: The fair value of the equity securities are priced from market exchanges and therefore included in the Level 1 fair value hierarchy.

     Senior notes: The fair value of the senior notes is based on trades as reported in Bloomberg. As of June 30, 2011, the 7.50% Senior Notes and 5.50% Senior Notes (each as defined in Note 8) were traded at 115.1% and 100.9% of their principal amount, providing an effective yield of 4.2% and 5.4%, respectively. The fair value of the senior notes is included in the Level 2 fair value hierarchy.

-15-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     The following is a reconciliation of the beginning and ending balance of financial instruments using significant unobservable inputs (Level 3):

	Fair value measurement using significant
	unobservable inputs (Level 3):
	Hedge funds			Mortgage-backed			Asset-backed
Three Months Ended June 30, 2011
Opening balance	$	469,999		$	234,087		$	143,829
Total realized and unrealized gains included in net income		5,435			4,251			596
Total realized and unrealized losses included in net income		(4,621	)		(2,571	)		(102	)
Purchases		94,290			29,827			32,408
Sales		(2,836	)		(34,329	)		(2,800	)
Transfers into Level 3		—			24,389			20,246
Transfers out of Level 3		—			(38,994	)		(80,867	)
Ending balance	$	562,267		$	216,660		$	113,310
Three Months Ended June 30, 2010
Opening balance	$	242,135		$	233,667		$	36,532
Total realized and unrealized gains included in net income		1,742			9,703			79
Total realized and unrealized losses included in net income		(2,906	)		(6,987	)		(279	)
Change in unrealized gains included in Other
Comprehensive Income (“OCI”)		—			1,639			9
Change in unrealized losses included in OCI		—			(205	)		—
Purchases		78,621			96,089			28,868
Sales		—			(47,560	)		(2,058	)
Transfers into Level 3		—			2,286			50,641
Transfers out of Level 3		—			(9,843	)		(10,237	)
Ending balance	$	319,592		$	278,789		$	103,555
Six Months Ended June 30, 2011
Opening balance	$	347,632		$	172,558		$	48,707
Total realized and unrealized gains included in net income		21,884			5,495			660
Total realized and unrealized losses included in net income		(9,391	)		(2,268	)		(73	)
Purchases		245,340			62,604			115,417
Sales		(43,198	)		(43,287	)		(3,226	)
Transfers into Level 3		—			86,085			32,801
Transfers out of Level 3		—			(64,527	)		(80,976	)
Ending balance	$	562,267		$	216,660		$	113,310
Six Months Ended June 30, 2010
Opening balance	$	184,725		$	253,979		$	104,871
Total realized and unrealized gains included in net income		6,584			18,084			634
Total realized and unrealized losses included in net income		(3,386	)		(7,098	)		(209	)
Change in unrealized gains included in OCI		—			5,084			51
Change in unrealized losses included in OCI		—			(447	)		(6	)
Purchases		131,669			120,943			51,181
Sales		—			(119,228	)		(5,246	)
Transfers into Level 3		—			48,731			50,739
Transfers out of Level 3		—			(41,259	)		(98,460	)
Ending balance	$	319,592		$	278,789		$	103,555

-16-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     The Company attempts to verify the significant inputs used by broker-dealers in determining the fair value of the securities priced by them. If the Company could not obtain sufficient information to determine if the broker-dealers were using significant observable inputs, such securities have been transferred to Level 3 fair value hierarchy. The Company believes the prices obtained from the broker-dealers are the best estimate of fair value of the securities being priced as the broker-dealers are typically involved in the initial pricing of the security, and the Company has compared the price per the broker-dealer to other pricing sources and noted no material differences.

     During the three and six months ended June 30, 2011, the Company transferred $38,994 and $64,527 of mortgage-backed securities, respectively and $80,867 and $80,976 of asset-backed securities, respectively, from Level 3 to Level 2 in the fair value hierarchy. During the three and six months ended June 30, 2010, the Company transferred $9,843 and $41,259 of mortgage-backed securities, respectively, and $10,237 and $98,460 of asset-backed securities, respectively, from Level 3 to Level 2 in the fair value hierarchy. The Company transferred those securities as they no longer utilized broker-dealer quotes and instead used other pricing sources that have significant observable inputs. The Company recognizes transfers between levels at the end of the reporting period.

7. RESERVE FOR LOSSES AND LOSS EXPENSES

     The reserve for losses and loss expenses consists of the following:

	June 30,		December 31,
	2011		2010
Outstanding loss reserves	$	1,462,144	$	1,166,516
Reserves for losses incurred but not reported		3,789,160		3,712,672
Reserve for losses and loss expenses	$	5,251,304	$	4,879,188

     The table below is a reconciliation of the beginning and ending liability for unpaid losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoveries.

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross liability at beginning of period	$	5,100,643		$	4,853,359		$	4,879,188		$	4,761,772
Reinsurance recoverable at beginning of period		(975,523	)		(920,480	)		(927,588	)		(919,991	)
Net liability at beginning of period		4,125,120			3,932,879			3,951,600			3,841,781
Net losses incurred related to:
Commutation of variable-rated reinsurance contracts		11,529			—			11,529			8,864
Current year		279,513			252,816			628,315			550,062
Prior years		(55,229	)		(64,094	)		(99,579	)		(138,050	)
Total incurred		235,813			188,722			540,265			420,876
Net paid losses related to:
Current year		19,579			26,704			21,279			33,410
Prior years		109,238			102,690			243,596			231,990
Total paid		128,817			129,394			264,875			265,400
Foreign exchange revaluation		5,237			(4,207	)		10,363			(9,257	)
Net liability at end of period		4,237,353			3,988,000			4,237,353			3,988,000
Reinsurance recoverable at end of period		1,013,951			932,435			1,013,951			932,435
Gross liability at end of period	$	5,251,304		$	4,920,435		$	5,251,304		$	4,920,435

     During the three and six months ended June 30, 2011, the Company commuted certain variable-rated reinsurance contracts that have swing-rated provisions, reducing ceded losses by $11,529 in accordance with the terms of the contracts resulting in a net gain of $865.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     For the three months ended June 30, 2011, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in the reinsurance segment related to the 2004 through 2007 loss years for casualty reinsurance lines and in the international insurance segment related to the 2004 through 2007 loss years for casualty lines of business.

     For the six months ended June 30, 2011, the Company had net favorable reserve development in its international and reinsurance segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in the international insurance and reinsurance segments in the 2004 through 2007 loss years related to casualty insurance and reinsurance lines of business. The Company had net unfavorable reserve development in its U.S. insurance segment due to actual loss emergence being higher than the initial expected loss emergence. The majority of the net unfavorable reserve development was recognized in the 2006 and 2010 loss years related to the professional liability line of business.

     For the three and six months ended June 30, 2010, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. For the three months ended June 30, 2010, the majority of the net favorable reserve development was recognized in the international insurance segment in the 2005 and 2008 loss years related to the general casualty and general property lines of business and in the U.S. insurance segment in the 2004 through 2005 loss years related to the professional liability and general casualty lines of business. For the six months ended June 30, 2010, the majority of the net favorable reserve development was recognized in the international and U.S. insurance segment in the 2004 through 2005 loss years related to the general casualty, professional liability and healthcare lines of business.

     While the Company has experienced favorable development in its insurance and reinsurance lines, there is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. It is not appropriate to extrapolate future redundancies based on prior years’ development. The methodology of estimating loss reserves is periodically reviewed to ensure that the key assumptions used in the actuarial models continue to be appropriate.

8. DEBT AND FINANCING ARRANGEMENTS

     In November 2010, Allied World Bermuda issued $300,000 aggregate principal amount of 5.50% Senior Notes due November 10, 2020 (“5.50% Senior Notes”), with interest on the notes payable on May 15 and November 15 of each year commencing on May 15, 2011. The 5.50% Senior Notes were offered by the underwriters at a price of 98.89% of their principal amount, providing an effective yield to investors of 5.56%. The net proceeds from the offering of the 5.50% Senior Notes were used for general corporate purposes, including the repurchase of the Company’s outstanding common shares. The 5.50% Senior Notes are Allied World Bermuda’s unsecured and unsubordinated obligations and rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness. Allied World Bermuda may redeem the 5.50% Senior Notes at any time or from time to time in whole or in part at a redemption price equal to the greater of the principal amount of the 5.50% Senior Notes to be redeemed or a make-whole price, plus accrued and unpaid interest. Allied World Bermuda has no current expectations of redeeming the notes prior to maturity. The 5.50% Senior Notes include covenants and events of default that are usual and customary, but do not contain any financial covenants.

     In 2006, Allied World Bermuda issued $500,000 aggregate principal amount of 7.50% Senior Notes due August 1, 2016 (“7.50% Senior Notes”), with interest on the notes payable on August 1 and February 1 of each year, commencing on February 1, 2007. The 7.50% Senior Notes were offered by the underwriters at a price of 99.71% of their principal amount, providing an effective yield to investors of 7.54%. The 7.50% Senior Notes can be redeemed by Allied World Bermuda prior to maturity subject to payment of a “make-whole” premium. Allied World Bermuda has no current expectations of redeeming the notes prior to maturity. The 7.50% Senior Notes include covenants and events of default that are usual and customary, but do not contain any financial covenants.

     The 5.50% Senior Notes and the 7.50% Senior Notes have been unconditionally and irrevocably guaranteed for the payment of the principal and interest by Allied World Switzerland.

     Allied World Assurance Company, Ltd has a collateralized amended letter of credit facility of $900,000 with Citibank Europe plc. that has been, and will continue to be, used to issue standby letters of credit.

     In addition, Allied World Bermuda entered into an $800,000 five-year senior credit facility (the “Credit Facility”) with a syndication of lenders. The Credit Facility consists of a $400,000 secured letter of credit facility for the issuance of standby letters of credit (the “Secured Facility”) and a $400,000 unsecured facility for the making of revolving loans and for the issuance of standby

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

letters of credit (the “Unsecured Facility”). Both the Secured Facility and the Unsecured Facility have options to increase the aggregate commitments by up to $200,000, subject to approval of the lenders. The Credit Facility will be used for general corporate purposes and to issue standby letters of credit. The Credit Facility contains representations, warranties and covenants customary for similar bank loan facilities, including a covenant to maintain a ratio of consolidated indebtedness to total capitalization as of the last day of each fiscal quarter or fiscal year of not greater than 0.35 to 1.0 and a covenant under the Unsecured Facility to maintain a certain consolidated net worth. In addition, each material insurance subsidiary must maintain a financial strength rating from A.M Best Company of at least A- under the Unsecured Facility and of at least B++ under the Secured Facility. Allied World Bermuda is in compliance with all covenants under the Credit Facility as of June 30, 2011 and December 31, 2010.

     There are a total of 13 lenders that make up the Credit Facility syndication and that have varying commitments ranging from $20,000 to $87,500. Of the 13 lenders, four have commitments of $87,500 each, four have commitments of $62,500 each, four have commitments of $45,000 each and one has a commitment of $20,000.

     In May 2010, Allied World Capital (Europe) Limited established an irrevocable standby letter of credit in order to satisfy funding requirements of the Company’s Lloyd’s Syndicate 2232. As of June 30, 2011 and December 31, 2010, the amount of the letter of credit was £67,400 ($108,258) and £53,700 ($82,838), respectively.

9. GOODWILL AND INTANGIBLE ASSETS

     The following table shows an analysis of goodwill and intangible assets:

				Intangible
				assets with		Intangible
				indefinite		assets with
	Goodwill			lives		finite lives			Total
Net balance at December 31, 2009	$	268,376		$	23,920	$	36,439		$	328,735
Additions		—			—		—			—
Amortization		—			—		(3,483	)		(3,483	)
Net balance at December 31, 2010		268,376			23,920		32,956			325,252
Additions		—			—		—			—
Amortization		—			—		(1,533	)		(1,533	)
Net balance at June 30, 2011		268,376			23,920		31,423			323,719
Gross balance		268,532			23,920		48,200			340,652
Accumulated amortization		—			—		(9,911	)		(9,911	)
Accumulated impairments		(156	)		—		(6,866	)		(7,022	)
Net balance	$	268,376		$	23,920	$	31,423		$	323,719

     The amortization of the intangible assets with definite lives for the remainder of 2011 and for the years ended December 31, 2012, 2013, 2014, 2015 and thereafter will be $1,443, $2,533, $2,533, $2,533, $2,533 and $19,846, respectively. The intangible assets will be amortized over a weighted average useful life of 12.3 years.

10. INCOME TAXES

     Under Swiss law, a resident company is subject to income tax at the federal, cantonal and communal levels that is levied on net income. Income attributable to permanent establishments or real estate located abroad is excluded from the Swiss tax base. Allied World Switzerland is a holding company and, therefore, is exempt from cantonal and communal income tax. As a result, Allied World Switzerland is subject to Swiss income tax only at the federal level. Allied World Switzerland is a resident of the Canton of Zug and, as such, is subject to an annual cantonal and communal capital tax on the taxable equity of Allied World Switzerland in Switzerland. Allied World Switzerland has a Swiss operating company resident in the Canton of Zug. The operating company is subject to federal, cantonal and communal income tax and to annual cantonal and communal capital tax.

     Under current Bermuda law, Allied World Bermuda and its Bermuda subsidiaries are not required to pay taxes in Bermuda on either income or capital gains. Allied World Bermuda and Allied World Assurance Company, Ltd have received an assurance from the Bermuda Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that in the event of any such taxes being imposed, Allied World Bermuda and Allied World Assurance Company, Ltd will be exempted until March 2035.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     Certain subsidiaries of Allied World Switzerland file U.S. federal income tax returns and various U.S. state income tax returns, as well as income tax returns in the United Kingdom, Ireland, Switzerland, Hong Kong and Singapore. The following tax years by jurisdiction are open to examination:

	Fiscal Years
U.S. Internal Revenue Service for the U.S. subsidiaries		2007 — 2010
Inland Revenue for the U.K. branches		2009 — 2010
Irish Revenue Commissioners for the Irish subsidiaries		2006 — 2010
Swiss Federal Tax Administration for the Swiss branch		2008 — 2010
Inland Revenue Department for the Hong Kong branch		2009 — 2010
Inland Revenue Department for the Singapore branch		2010

     To the best of the Company’s knowledge, there are no examinations pending by any tax authority.

     Management has deemed that all material tax positions will more likely than not be sustained based on technical merits if challenged. The Company does not expect any material unrecognized tax benefits within 12 months of January 2011.

11. SHAREHOLDERS’ EQUITY

a) Authorized shares

     The articles of association authorize the Board of Directors to increase the share capital by a maximum amount of 20% of the share capital registered in the commercial register up to CHF 119,404 or 7,690,260 voting shares, and create conditional capital of 7,200,000 voting shares. The issued share capital consists of the following:

	June 30,		December 31,
	2011		2010
Common shares issued and fully paid, CHF 15.00 per share		40,003,642		40,003,642
Share capital at end of period		600,055		600,055

	Six Months Ended
	June 30, 2011
Total shares issued at beginning and end of period		40,003,642
Treasury shares issued, balance at beginning of period		1,914,416
Shares repurchased		969,163
Shares issued out of treasury		(824,980	)
Total treasury shares at end of period		2,058,599
Total shares outstanding at end of period		37,945,043

     As of June 30, 2011, there were outstanding 37,901,183 voting common shares and 43,860 non-voting common shares.

b) Share Warrants

     In conjunction with the private placement offering at the formation of Allied World Bermuda, Allied World Bermuda granted warrant agreements to certain founding shareholders to acquire up to 5,500,000 common shares at an exercise price of $34.20 per share. These warrants were exercisable in certain limited conditions, including a public offering of common shares, and were due to expire November 21, 2011. All warrants granted have been purchased by the Company as discussed below.

     In August 2010, Allied World Bermuda repurchased a warrant owned by The Chubb Corporation (“Chubb”) in a privately negotiated transaction. The warrant entitled Chubb to purchase 2,000,000 of Allied World Bermuda’s common shares for $34.20 per share. Allied World Bermuda repurchased the warrant for an aggregate purchase price of $32,819. In November 2010, Allied World Bermuda repurchased warrants owned by GS Capital Partners and other investment funds, which are affiliates of The Goldman Sachs Group, Inc. (“Goldman Sachs”) and founding shareholders in a privately negotiated transaction. The warrants entitled Goldman Sachs to purchase 1,500,000 of Allied World Bermuda’s common shares for $34.20 per share. Allied World Bermuda repurchased the warrants for an aggregate purchase price of $37,197. In February 2011, the Company repurchased a warrant owned by American International Group, Inc. (“AIG”) in a privately negotiated transaction. The warrant entitled AIG to purchase 2,000,000 of the Company’s common shares for $34.20 per share. The Company repurchased the warrant for an aggregate purchase price of $53,620. The repurchases of the warrants were recognized as a reduction in “additional paid-in capital” on the consolidated balance sheets. The

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

repurchases were executed separately from the share repurchase program discussed in Note 11(d) below. After these repurchases, Chubb, Goldman Sachs and AIG have no warrants remaining and no other disclosed equity interest in the Company.

c) Dividends

     Under Swiss law, distributions to shareholders may be paid only if the Company has sufficient distributable profits from previous fiscal years, or if the Company has freely distributable reserves, each as presented on the audited stand-alone statutory balance sheet. Distributions to shareholders out of the share and participation capital may be made by way of a capital reduction in the form of a reduction to par value to achieve a similar result as the payment of a dividend.

     On May 5, 2011, the shareholders approved the Company’s proposal to pay dividends in the form of a distribution by way of par value reductions. The aggregate reduction amount will be paid to shareholders in quarterly installments of $0.375 per share. The Company made the first such quarterly dividend payment on August 5, 2011 to shareholders of record on July 27, 2011. The amount of the first par value reduction was CHF 0.30, based on the exchange rate as of July 18, 2011. The Company expects to distribute the remaining quarterly installments in October 2011, January 2012 and April 2012. Dividend payments are subject to Swiss law and other related factors described in the Company’s 2011 Proxy Statement and the Company’s other filings with the SEC.

     In February 2010, the Company declared a dividend of $0.20 per common share payable on April 1, 2010 to shareholders of record on March 16, 2010. The total dividend payable amounted to $10,092. In May 2010, the Company declared a quarterly dividend of $0.20 per common share, payable on June 10, 2010 to shareholders of record on May 25, 2010. The total dividend paid amounted to $10,017.

d) Share repurchase

     In May 2010, the Company established a share repurchase program in order to repurchase its common shares. Repurchases may be effected from time to time through open market purchases, privately negotiated transactions, tender offers or otherwise. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position, legal requirements and other factors. During the six months ended June 30, 2011, the Company repurchased through open market purchases 969,163 shares at a total cost of $60,000 for an average price of $61.91 per share. No shares were repurchased during the three months ended June 30, 2011 because of the merger negotiations with Transatlantic Holdings, Inc. These repurchased shares have been classified as “Treasury shares, at cost” on the consolidated balance sheets. The Company will issue shares out of treasury principally related to the Company’s employee benefit plans.

     In August 2010, the Company repurchased 5,000,000 of its common shares for $250,000, or $50.00 per share, in a privately negotiated transaction from Goldman Sachs. The shares repurchased were classified as “Treasury shares, at cost” on the consolidated balance sheets. In November 2010, the Company repurchased the remaining 3,159,793 common shares from Goldman Sachs for $185,448, or $58.69 per share. The repurchase price per common share is based on and reflects 0.5% discount from the volume-weighted average trading price of the Company’s common shares on November 5, 2010. These repurchases were executed separately from the Company’s share repurchase program discussed above.

12. EMPLOYEE BENEFIT PLANS

a) Employee option plan

     In 2001, the Company implemented the Allied World Assurance Holdings, Ltd 2001 Employee Warrant Plan, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, Ltd Second Amended and Restated 2001 Employee Stock Option Plan (the “ESOP”). Under the ESOP, up to 4,000,000 common shares may be issued.

     As part of the Redomestication, Allied World Switzerland adopted and assumed the ESOP from Allied World Bermuda which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan (the “Plan”). Allied World Switzerland has filed a registration statement on Form S-8 under the Securities Act of 1933, as amended, to register common shares issued or reserved for issuance under the Plan. These options are exercisable in certain limited conditions, expire after 10 years, and generally vest pro-rata over four years from the date of grant. The exercise price of options issued are recommended by the Compensation Committee to the Board of Directors for approval but shall not be less than 100% of the fair market value of the common shares of Allied World Switzerland on the date the option award is granted.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Six Months Ended June 30, 2011
				Weighted Average
	Options			Exercise Price
Outstanding at beginning of period		1,272,739		$	38.77
Granted		494,885			61.51
Exercised		(128,487	)		37.55
Forfeited		(27,819	)		48.54
Expired		(170	)		39.02
Outstanding at end of period		1,611,148		$	45.68

     Assumptions used in the option-pricing model are as follows:

	Options Granted During
	the Six Months Ended
	June 30, 2011
Expected term of option		5.48	years
Weighted average risk-free interest rate		2.33	%
Weighted average expected volatility		31.51	%
Dividend yield		1.00	%
Weighted average fair value on grant date	$	18.27

     The Company has assumed a weighted average annual forfeiture rate of 6.72% in determining the compensation expense over the service period.

     Compensation expense of $997 and $2,176 relating to the options has been included in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $758 and $1,550 relating to the options has been included in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2010, respectively. As of June 30, 2011 and December 31, 2010, the Company has recorded in “additional paid-in capital” on the consolidated balance sheets an amount of $41,207 and $41,505, respectively, in connection with all options granted.

b) Stock incentive plan

     In 2004, the Company implemented the Allied World Assurance Holdings, Ltd 2004 Stock Incentive Plan. As part of the Redomestication, Allied World Switzerland adopted and assumed this plan from Allied World Bermuda, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan provides for grants of restricted stock, restricted stock units (“RSUs”), dividend equivalent rights and other equity-based awards. A total of 2,000,000 common shares may be issued under the Stock Incentive Plan. To date, only RSUs have been granted. These RSUs generally vest pro-rata over four years from the date of grant or vest in the fourth or fifth year from the date of grant.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	RSUs			Value
Outstanding RSUs at beginning of period		851,078		$	39.88
RSUs granted		45,239			61.51
Performance-based RSUs granted		139,210			61.51
RSUs fully vested		(130,252	)		42.59
RSUs forfeited		(12,198	)		37.24
Outstanding RSUs at end of period		893,077		$	43.99

     The Company granted performance-based RSUs in lieu of utilizing the LTIP (as defined in Note 12(c)). The performance-based RSUs are structured in exactly the same form as shares issued under the LTIP in terms of vesting restrictions and achievement of established performance criteria. For the performance-based RSUs granted in 2010 and 2011, the Company anticipates that the performance goals are likely to be achieved. Based on the performance goals, the performance-based RSUs granted in 2010 and 2011 are expensed at 100% of the fair market value of Allied World Switzerland’s common shares on the date of grant. The expense is recognized over the performance period.

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

     Compensation expense of $3,707 and $7,529 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,327 and $7,041 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2010, respectively. The compensation expense for the RSUs is based on the fair market value of Allied World Switzerland’s common shares at the time of grant. The Company believes it is unlikely that performance-based RSUs will be forfeited as these awards are issued to senior management. Thus, no forfeiture rate is applied to the performance-based RSUs. The Company has assumed a weighted average annual forfeiture rate of 2.80%, excluding performance-based RSUs, in determining the compensation expense over the service period.

     As of June 30, 2011 and December 31, 2010, the Company has recorded $34,865 and $37,991, respectively, in “additional paid-in capital” on the consolidated balance sheets in connection with the RSUs awarded.

c) Long-term incentive plan

     In May 2006, the Company implemented the Long-Term Incentive Plan (“LTIP”), which it amended and restated in November 2007. The LTIP provides for performance-based equity awards to key employees in order to promote the long-term growth and profitability of the Company. As part of the Redomestication, Allied World Switzerland adopted and assumed the LTIP from Allied World Bermuda. Each award represents the right to receive a number of common shares in the future, based upon the achievement of established performance criteria during the applicable three-year performance period. A total of 2,000,000 common shares may be issued under the LTIP. The awards granted in 2009 will vest after the fiscal year ending December 31, 2011, subject to the achievement of the performance conditions and terms of the LTIP. The awards granted in 2008 generally vested after the fiscal year ended December 31, 2010, however, a portion of this award will vest after the fourth or fifth year from the original grant date, subject to the achievement of the performance conditions and terms of the LTIP.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	LTIP			Value
Outstanding LTIP awards at beginning of period		773,411		$	41.74
Additional LTIP awards granted due to the achievement of 2008 — 2010 performance criteria		212,938			43.27
LTIP forfeited		(13,500	)		42.48
LTIP awards vested		(638,813	)		43.27
Outstanding LTIP awards at end of period		334,036		$	39.76

     Compensation expense of $1,558 and $2,407 relating to the LTIP has been recognized in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,842 and $8,863 relating to the LTIP has been recognized in “general and administrative expenses” in the Company’s consolidated income statements for the three and six months ended June 30, 2010, respectively. The decrease in compensation expense relating to LTIP is primarily the result of the Company issuing performance-based RSUs in lieu of LTIP as discussed in Note 12(b). The compensation expense for the LTIP is based on the fair market value of Allied World Switzerland’s common shares at the time of grant. The LTIP is deemed to be an equity plan and as such, $46,852 and $77,728 have been included in “additional paid-in capital” on the consolidated balance sheets as of June 30, 2011 and December 31, 2010, respectively.

     In calculating the compensation expense and in the determination of share equivalents for the purpose of calculating diluted earnings per share, it is estimated for the unvested LTIP awards granted in 2008 and 2009 that the maximum performance goals as set by the LTIP are likely to be achieved over the performance period. Based on the performance goals, the unvested LTIP awards granted in 2008 and 2009 are expensed at 150% of the fair market value of Allied World Switzerland’s common shares on the date of grant. The expense is recognized over the performance period.

d) Cash-equivalent stock awards

     Since 2009, as part of the Company’s annual year-end compensation awards, the Company granted both stock-based awards and cash-equivalent stock awards. The cash-equivalent awards were granted to employees who received RSU, LTIP and performance-

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

based RSU awards and were granted in lieu of granting the full award as a stock-based award. The cash-equivalent RSU awards vest pro-rata over four years from the date of grant. The cash-equivalent LTIP and performance-based RSU awards vest after a three-year performance period. As the cash-equivalent awards are settled in cash, we establish a liability equal to the product of the fair market value of Allied World Switzerland’s common shares as of the end of the reporting period and the total awards outstanding. The liability is included in “accounts payable and accrued expenses” in the balance sheets and changes in the liability are recorded in “general and administrative expenses” in the consolidated income statements. For the three and six months ended June 30, 2011, the expense recognized for the cash-equivalent stock awards was $3,406 and $8,575, respectively. For the three and six months ended June 30, 2010, the expense recognized for the cash-equivalent stock awards was $3,012 and $5,321, respectively.

     The following table shows the stock related compensation expense relating to the stock options, RSUs, LTIP and cash equivalent awards:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Stock Options	$	997	$	758	$	2,176	$	1,550
RSUs		3,707		3,327		7,529		7,041
LTIP		1,558		3,842		2,407		8,863
Cash-equivalent stock awards		3,406		3,012		8,575		5,321
Total	$	9,668	$	10,939	$	20,687	$	22,775

13. EARNINGS PER SHARE

     The following table sets forth the comparison of basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Basic earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Basic earnings per share	$	2.45	$	3.66	$	2.69	$	6.34

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Diluted earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Share equivalents:
Warrants and options		333,837		1,486,465		503,529		1,534,861
Restricted stock units		507,969		456,946		503,954		469,301
LTIP awards		612,458		808,025		804,211		958,601
Weighted average common shares and common share equivalents outstanding — diluted		39,800,753		52,974,410		39,873,418		53,086,708
Diluted earnings per share	$	2.36	$	3.47	$	2.57	$	5.98

     For the three months ended June 30, 2011, a weighted average of 634,579 employee stock options and 28,256 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share. For the six months ended June 30, 2011, a weighted average of 568,359 employee stock options and 119,354 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share.

     For the three months ended June 30, 2010, a weighted average of 686,938 employee stock options and 24,833 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share. For the six months ended

-24-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

June 30, 2010, a weighted average of 600,567 employee stock options and 15,988 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share.

14. SEGMENT INFORMATION

     The determination of reportable segments is based on how senior management monitors the Company’s underwriting operations. Management monitors the performance of its direct underwriting operations based on the geographic location of the Company’s offices, the markets and customers served and the type of accounts written. The Company is currently organized into three operating segments: U.S. insurance, international insurance and reinsurance. All product lines fall within these classifications.

     The U.S. insurance segment includes the Company’s direct specialty insurance operations in the United States. This segment provides both direct property and specialty casualty insurance primarily to non-Fortune 1000 North American domiciled accounts. The international insurance segment includes the Company’s direct insurance operations in Bermuda, Europe, Singapore and Hong Kong. This segment provides both direct property and casualty insurance primarily to Fortune 1000 North American domiciled accounts and mid-sized to large non-North American domiciled accounts. The reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverages written by insurance companies. The Company presently writes reinsurance on both a treaty and a facultative basis, targeting several niche reinsurance markets.

     Responsibility and accountability for the results of underwriting operations are assigned by major line of business within each segment. Because the Company does not manage its assets by segment, investment income, interest expense and total assets are not allocated to individual reportable segments. General and administrative expenses are allocated to segments based on various factors, including staff count and each segment’s proportional share of gross premiums written.

     Management measures results for each segment on the basis of the “loss and loss expense ratio,” “acquisition cost ratio,” “general and administrative expense ratio” and the “combined ratio.” The “loss and loss expense ratio” is derived by dividing net losses and loss expenses by net premiums earned. The “acquisition cost ratio” is derived by dividing acquisition costs by net premiums earned. The “general and administrative expense ratio” is derived by dividing general and administrative expenses by net premiums earned. The “combined ratio” is the sum of the “loss and loss expense ratio,” the “acquisition cost ratio” and the “general and administrative expense ratio.”

     The following tables provide a summary of the segment results:

-25-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

				International
Three months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	226,738		$	178,593		$	114,267		$	519,598
Net premiums written		172,887			108,985			113,931			395,803
Net premiums earned		145,857			79,956			129,494			355,307
Other income		—			—			—			—
Net losses and loss expenses		(92,595	)		(72,082	)		(71,136	)		(235,813	)
Acquisition costs		(18,876	)		747			(24,842	)		(42,971	)
General and administrative expenses		(31,253	)		(20,653	)		(15,295	)		(67,201	)
Underwriting income (loss)		3,133			(12,032	)		18,221			9,322
Net investment income											52,368
Net realized investment gains											58,878
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(766	)
Interest expense											(13,745	)
Foreign exchange loss											(1,184	)
Income before income taxes										$	104,873
Loss and loss expense ratio		63.5	%		90.2	%		54.9	%		66.4	%
Acquisition cost ratio		12.9	%		(0.9	%)		19.2	%		12.1	%
General and administrative expense ratio		21.4	%		25.8	%		11.8	%		18.9	%
Combined ratio		97.8	%		115.1	%		85.9	%		97.4	%

				International
Three months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	189,663		$	167,601		$	136,583		$	493,847
Net premiums written		135,238			98,509			136,048			369,795
Net premiums earned		125,659			89,427			123,838			338,924
Other income		616			—			—			616
Net losses and loss expenses		(69,198	)		(64,580	)		(54,944	)		(188,722	)
Acquisition costs		(15,854	)		66			(22,150	)		(37,938	)
General and administrative expenses		(30,683	)		(22,657	)		(14,749	)		(68,089	)
Underwriting income		10,540			2,256			31,995			44,791
Net investment income											65,594
Net realized investment gains											94,933
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(891	)
Interest expense											(9,531	)
Foreign exchange loss											(559	)
Income before income taxes										$	194,337
Loss and loss expense ratio		55.1	%		72.2	%		44.4	%		55.7	%
Acquisition cost ratio		12.6	%		(0.1	%)		17.9	%		11.2	%
General and administrative expense ratio		24.4	%		25.3	%		11.9	%		20.1	%
Combined ratio		92.1	%		97.4	%		74.2	%		87.0	%

-26-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

Six months ended June 30, 2011	U.S. Insurance			International Insurance			Reinsurance			Total
Gross premiums written	$	410,040		$	289,918		$	380,328		$	1,080,286
Net premiums written		312,789			183,895			379,990			876,674
Net premiums earned		281,338			156,246			252,599			690,183
Other income		—			—			—			—
Net losses and loss expenses		(208,426	)		(143,266	)		(188,573	)		(540,265	)
Acquisition costs		(36,978	)		2,603			(46,678	)		(81,053	)
General and administrative expenses		(62,052	)		(41,381	)		(31,724	)		(135,157	)
Underwriting loss		(26,118	)		(25,798	)		(14,376	)		(66,292	)
Net investment income											102,576
Net realized investment gains											109,254
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(1,533	)
Interest expense											(27,487	)
Foreign exchange loss											(742	)
Income before income taxes										$	115,776
Loss and loss expense ratio		74.1	%		91.7	%		74.7	%		78.3	%
Acquisition cost ratio		13.1	%		(1.7	%)		18.5	%		11.7	%
General and administrative expense ratio		22.1	%		26.5	%		12.6	%		19.6	%
Combined ratio		109.3	%		116.5	%		105.8	%		109.6	%

				International
Six months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	351,748		$	289,023		$	357,239		$	998,010
Net premiums written		266,793			179,590			356,704			803,087
Net premiums earned		254,864			176,470			245,914			677,248
Other income		913			—			—			913
Net losses and loss expenses		(167,623	)		(122,029	)		(131,224	)		(420,876	)
Acquisition costs		(32,814	)		—			(45,908	)		(78,722	)
General and administrative expenses		(57,797	)		(44,502	)		(29,253	)		(131,552	)
Underwriting (loss) income		(2,457	)		9,939			39,529			47,011
Net investment income											134,496
Net realized investment gains											172,420
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(1,783	)
Interest expense											(19,059	)
Foreign exchange loss											(1,635	)
Income before income taxes										$	331,282
Loss and loss expense ratio		65.8	%		69.1	%		53.4	%		62.1	%
Acquisition cost ratio		12.9	%		0.0	%		18.7	%		11.6	%
General and administrative expense ratio		22.7	%		25.2	%		11.9	%		19.4	%
Combined ratio		101.4	%		94.3	%		84.0	%		93.1	%

     The following table shows an analysis of the Company’s net premiums written by geographic location of the Company’s subsidiaries. All inter-company premiums have been eliminated.

-27-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
United States	$	215,343	$	192,980	$	478,574	$	438,260
Bermuda		125,452		131,119		271,783		258,901
Europe		40,663		38,550		92,539		90,710
Singapore		10,331		5,912		25,567		9,603
Hong Kong		4,014		1,234		8,211		5,613
Total net premiums written	$	395,803	$	369,795	$	876,674	$	803,087

15. COMMITMENTS AND CONTINGENCIES

     Insurance balances receivable primarily consist of net premiums due from insureds and reinsureds. The Company believes that the counterparties to these receivables are able to meet, and will meet, all of their obligations. Consequently, the Company has not included any allowance for doubtful accounts against the receivable balance. Of the $653,002 in insurance balances receivable as of June 30, 2011, $5,698 was past due over 90 days, which represented 0.9% of the total balance. Of the $529,927 in insurance balances receivable as of December 31, 2010, $2,658 was past due over 90 days, which represented 0.5% of the total balance.

16. CONDENSED CONSOLIDATED GUARANTOR FINANCIAL STATEMENTS

     The following tables present unaudited condensed consolidating financial information for Allied World Switzerland (the “Parent Guarantor”) and Allied World Bermuda (the “Subsidiary Issuer”). The Subsidiary Issuer is a direct 100 percent-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor’s investment accounts and earnings. The Parent Guarantor fully and unconditionally guarantees the 5.50% Senior Notes and the 7.50% Senior Notes issued by Subsidiary Issuer.

-28-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

Unaudited Condensed Consolidating Balance Sheet:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of June 30, 2011	Guarantor)			Issuer)			Subsidiaries		Adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,502,765	$	—		$	7,502,765
Cash and cash equivalents		70,587			38,402			631,815		—			740,804
Insurance balances receivable		—			—			653,002		—			653,002
Prepaid reinsurance		—			—			223,269		—			223,269
Reinsurance recoverable		—			—			1,013,951		—			1,013,951
Net deferred acquisition costs		—			—			112,083		—			112,083
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			55,342		—			55,342
Balances receivable on sale of investments		—			—			106,486		—			106,486
Investments in subsidiaries		2,978,767			1,990,580			—		(4,969,347	)		—
Due (to) from subsidiaries		(1,771	)		(7,421	)		9,192		—			—
Other assets		216			61,229			173,196		(53,620	)		181,021
Total assets	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	5,251,304	$	—		$	5,251,304
Unearned premiums		—			—			1,184,676		—			1,184,676
Reinsurance balances payable		—			—			132,661		—			132,661
Balances due on purchases of investments		—			—			358,837		—			358,837
Senior notes		—			797,823			—		—			797,823
Accounts payable and accrued liabilities		3,382			18,074			65,925		—			87,381
Total liabilities		3,382			815,897			6,993,403		—			7,812,682
Total shareholders’ equity		3,044,417			1,266,893			3,756,074		(5,022,967	)		3,044,417
Total liabilities and shareholders’ equity	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of December 31, 2010	Guarantor)			Issuer)			Subsidiaries		adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,183,554	$	—		$	7,183,554
Cash and cash equivalents		138,488			125,663			492,844		—			756,995
Insurance balances receivable		—			—			529,927		—			529,927
Prepaid reinsurance		—			—			187,287		—			187,287
Reinsurance recoverable		—			—			927,588		—			927,588
Net deferred acquisition costs		—			—			96,803		—			96,803
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			56,876		—			56,876
Balances receivable on sale of investments		—			—			188,408		—			188,408
Investments in subsidiaries		2,944,975			1,981,158			—		(4,926,133	)		—
Due (to) from subsidiaries		(7,143	)		(9,419	)		16,562		—			—
Other assets		—			8,801			223,016		—			231,817
Total assets	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	4,879,188	$	—		$	4,879,188
Unearned premiums		—			—			962,203		—			962,203
Reinsurance balances payable		—			—			99,732		—			99,732
Balances due on purchases of investments		—			—			506,978		—			506,978
Senior notes		—			797,700			—		—			797,700
Accounts payable and accrued liabilities		500			18,111			87,399		—			106,010
Total liabilities		500			815,811			6,535,500		—			7,351,811
Total shareholders’ equity		3,075,820			1,290,392			3,635,741		(4,926,133	)		3,075,820
Total liabilities and shareholders’ equity	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631

-29-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

Unaudited Condensed Consolidating Income Statement:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	519,598		$	—		$	519,598
Premiums ceded		—			—			(123,795	)		—			(123,795	)
Net premiums written		—			—			395,803			—			395,803
Change in unearned premiums		—			—			(40,496	)		—			(40,496	)
Net premiums earned		—			—			355,307			—			355,307
Net investment income		15			8			52,345			—			52,368
Net realized investment gains		—			—			58,878			—			58,878
		15			8			466,530			—			466,553
EXPENSES:
Net losses and loss expenses		—			—			235,813			—			235,813
Acquisition costs		—			—			42,971			—			42,971
General and administrative expenses		4,746			1,483			60,972			—			67,201
Amortization and impairment of intangible assets		—			—			766			—			766
Interest expense		—			13,745			—			—			13,745
Foreign exchange loss (gain)		3			(17	)		1,198			—			1,184
Income tax expense		—			—			11,073			—			11,073
		4,749			15,211			352,793			—			372,753
Income (loss) before equity in earnings of consolidated subsidiaries		(4,734	)		(15,203	)		113,737			—			93,800
Equity in earnings of consolidated subsidiaries		98,534			—			—			(98,534	)		—
NET INCOME (LOSS)	$	93,800		$	(15,203	)	$	113,737		$	(98,534	)	$	93,800

-30-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	493,847		$	—		$	493,847
Premiums ceded		—		—			(124,052	)		—			(124,052	)
Net premiums written		—		—			369,795			—			369,795
Change in unearned premiums		—		—			(30,871	)		—			(30,871	)
Net premiums earned		—		—			338,924			—			338,924
Net investment income		—		20			65,574			—			65,594
Net realized investment gains (losses)		—		(3,958	)		98,891			—			94,933
Net impairment charges recognized in earnings		—		—			—			—			—
Other income		—		—			616			—			616
		—		(3,938	)		504,005			—			500,067
EXPENSES:
Net losses and loss expenses		—		—			188,722			—			188,722
Acquisition costs		—		—			37,938			—			37,938
General and administrative expenses		—		3,168			64,921			—			68,089
Amortization and impairment of intangible assets		—		—			891			—			891
Interest expense		—		9,531			—			—			9,531
Foreign exchange loss		—		—			559			—			559
Income tax expense		—		—			10,378			—			10,378
		—		12,699			303,409			—			316,108
Income (loss) before equity in earnings of consolidated subsidiaries		—		(16,637	)		200,596			—			183,959
Equity in earnings of consolidated subsidiaries		—		200,596			—			(200,596	)		—
NET INCOME (LOSS)	$	—	$	183,959		$	200,596		$	(200,596	)	$	183,959

-31-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	1,080,286		$	—		$	1,080,286
Premiums ceded		—			—			(203,612	)		—			(203,612	)
Net premiums written		—			—			876,674			—			876,674
Change in unearned premiums		—			—			(186,491	)		—			(186,491	)
Net premiums earned		—			—			690,183			—			690,183
Net investment income		45			22			102,509			—			102,576
Net realized investment gains		—			—			109,254			—			109,254
Net impairment charges recognized in earnings		—			—			—			—			—
Other income		—			—			—			—			—
		45			22			901,946			—			902,013
EXPENSES:
Net losses and loss expenses		—			—			540,265			—			540,265
Acquisition costs		—			—			81,053			—			81,053
General and administrative expenses		5,810			4,229			125,118			—			135,157
Amortization and impairment of intangible assets		—			—			1,533			—			1,533
Interest expense		—			27,487			—			—			27,487
Foreign exchange loss (gain)		(1	)		224			519			—			742
Income tax expense		—			—			13,356			—			13,356
		5,809			31,940			761,844			—			799,593
Income (loss) before equity in earnings of consolidated subsidiaries		(5,764	)		(31,918	)		140,102			—			102,420
Equity in earnings of consolidated subsidiaries		108,184			—			—			(108,184	)		—
NET INCOME (LOSS)	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420

-32-

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	998,010		$	—		$	998,010
Premiums ceded		—		—			(194,923	)		—			(194,923	)
Net premiums written		—		—			803,087			—			803,087
Change in unearned premiums		—		—			(125,839	)		—			(125,839	)
Net premiums earned		—		—			677,248			—			677,248
Net investment income		—		21			134,475			—			134,496
Net realized investment gains		—		(3,958	)		176,378			—			172,420
Net impairment charges recognized in earnings		—		—			(168	)		—			(168	)
Other income		—		—			913			—			913
		—		(3,937	)		988,846			—			984,909
EXPENSES:
Net losses and loss expenses		—		—			420,876			—			420,876
Acquisition costs		—		—			78,722			—			78,722
General and administrative expenses		—		6,651			124,901			—			131,552
Amortization and impairment of intangible assets		—		—			1,783			—			1,783
Interest expense		—		19,059			—			—			19,059
Foreign exchange loss		—		—			1,635			—			1,635
Income tax expense		—		—			13,583			—			13,583
		—		25,710			641,500			—			667,210
Income (loss) before equity in earnings of consolidated subsidiaries		—		(29,647	)		347,346			—			317,699
Equity in earnings of consolidated subsidiaries		—		347,346			—			(347,346	)		—
NET INCOME (LOSS)	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

Unaudited Condensed Consolidating Cash Flows:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420
Adjustments to reconcile net income to cash Provided by operating activities:
Equity in earnings of consolidated subsidiaries		(108,184	)		—			—			108,184			—
Dividends received from subsidiaries		—			—			—			—			—
Stock compensation expense		457			—			11,655			—			12,112
Amortization of discount on senior notes		—			122			—			—			122
Other assets		(216	)		(928	)		(358,363	)		—			(359,507	)
Accounts payable and accrued liabilities		(2,490	)		(36	)		611,415			—			608,889
Interest payable		—			—			—			—			—
Balances due to subsidiaries		—			—			—			—			—
Net cash provided by (used in) operating activities		(8,013	)		(32,760	)		404,809			—			364,036
CASH FLOWS USED IN INVESTING ACTIVITIES:
Net cash paid for acquisition		—			—			—			—			—
Purchase of fixed maturity investments — available for sale		—			—			(352	)		—			(352	)
Purchase of fixed maturity investments — trading		—			—			(3,949,447	)		—			(3,949,447	)
Purchases of equity securities and other invested assets		—			—			(485,750	)		—			(485,750	)
Sales of fixed maturity investments — available for sale		—			—			560,794			—			560,794
Sales of fixed maturity investments — trading		—			—			3,503,758			—			3,503,758
Sale of equity securities and other invested assets		—			—			72,362			—			72,362
Other		(4,496	)		—			31,700			—			27,204
Net cash used in investing activities		(4,496	)		—			(266,935	)		—			(271,431	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—			—			—			—			—
Proceeds from the exercise of stock options		4,824			—			—			—			4,824
Share repurchase		(60,000	)		—			—			—			(60,000	)
Repurchase of founder warrants		—			(53,620	)		—			—			(53,620	)
Stock compensation funding due from subsidiaries		—			—			—			—			—
Capital contribution		—			—			—			—			—
Other		(216	)		(881	)		1,097			—			—
Net cash (used in) provided by financing activities		(55,392	)		(54,501	)		1,097			—			(108,796	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(67,901	)		(87,261	)		138,971			—			(16,191	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		138,488			125,663			492,844			—			756,995
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,587		$	38,402		$	631,815		$	—		$	740,804

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of consolidated subsidiaries		—		(347,346	)		—			347,346			—
Dividends received from subsidiaries		—		80,000			—			(80,000	)		—
Stock compensation expense		—		295			17,159			—			17,454
Amortization of discount on senior notes		—		65			—			—			65
Other assets		—		847			(343,427	)		—			(342,580	)
Accounts payable and accrued liabilities		—		5,789			305,356			—			311,145
Interest payable		—		—			—			—			—
Net cash provided by (used in) operating activities		—		57,349			326,434			(80,000	)		303,783
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed maturity investments — available for sale		—		—			(113,118	)		—			(113,118	)
Purchase of fixed maturity investments — trading		—		—			(6,927,637	)		—			(6,927,637	)
Purchases of equity securities and other invested assets		—		—			(203,011	)		—			(203,011	)
Sales of fixed maturity investments — available for sale		—		—			1,827,800			—			1,827,800
Sales of fixed maturity investments — trading		—		—			5,344,007			—			5,344,007
Sale of equity securities and other invested assets		—		—			3,155			—			3,155
Other		—		(2,097	)		(16,759	)		—			(18,856	)
Net cash used in investing activities		—		(2,097	)		(85,563	)		—			(87,660	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—		(20,109	)		(80,000	)		80,000			(20,109	)
Proceeds from the exercise of stock options		—		3,576			—			—			3,576
Stock repurchase		—		(49,089	)		—			—			(49,089	)
Net cash (used in) provided by financing activities		—		(65,622	)		(80,000	)		80,000			(65,622	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—		(10,370	)		160,871			—			150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		—		53,849			238,339			—			292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	43,479		$	399,210		$	—		$	442,689

17. SUBSEQUENT EVENTS

     Allied World Switzerland entered into a definitive agreement and plan of merger (the “Merger Agreement”) on June 12, 2011 with GO Sub, LLC, a newly formed Delaware limited liability company and a wholly-owned subsidiary of Allied World Switzerland (“Merger Sub”), and Transatlantic Holdings, Inc. (“Transatlantic”), a Delaware corporation. The Merger Agreement provides for the merger of Merger Sub with and into Transatlantic, with Transatlantic continuing as the surviving corporation and a wholly-owned subsidiary of Allied World Switzerland. Transatlantic offers reinsurance capacity for a full range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets on both a treaty

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ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

and facultative basis. Upon completion of the merger, Allied World Switzerland will be the parent company of Transatlantic and Allied World Switzerland’s name will be changed to “TransAllied Group Holdings, AG.”

     Pursuant to the terms of the Merger Agreement, stockholders of Transatlantic will be entitled to receive 0.88 shares of Allied World Switzerland for each share of Transatlantic together with cash in lieu of any fractional shares, as applicable. The transaction is expected to be completed during the fourth quarter of 2011 subject to the satisfaction of customary closing conditions, including regulatory approvals. The transaction will be accounted for using the acquisition method of accounting with Transatlantic being considered the acquirer for accounting purposes. Accordingly, the assets, liabilities and commitments of Allied World Switzerland will be recorded at their fair values on the acquisition date.

     On May 5, 2011, the shareholders approved the Company’s proposal to pay dividends in the form of a distribution by way of par value reduction. The aggregate reduction amount will be paid to shareholders in quarterly installments of $0.375 per share. The Company made the first such quarterly dividend payment on August 5, 2011 to shareholders of record on July 27, 2011. The amount of the par value reduction was CHF 0.30, based on the exchange rate as of July 18, 2011.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. References in this Form 10-Q to the terms “we,” “us,” “our,” “the company” or other similar terms mean the consolidated operations of Allied World Assurance Company Holdings, AG, a Swiss holding company, and our consolidated subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term “Allied World Switzerland” or “Holdings” means only Allied World Assurance Company Holdings, AG. References to “Allied World Bermuda” means only Allied World Assurance Company Holdings, Ltd, a Bermuda holding company. References to “our insurance subsidiaries” may include our reinsurance subsidiaries. References in this Form 10-Q to $ are to the lawful currency of the United States and to CHF are to the lawful currency of Switzerland. References in this Form 10-Q to Holdings’ “common shares” means its registered voting shares and non-voting participation certificates.

Note on Forward-Looking Statement

     This Form 10-Q and other publicly available documents may include, and our officers and representatives may from time to time make, projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations; in “Risk Factors” in Item 1A. of this Form 10-Q; in “Risk Factors” in Item 1A. of Part I of our 2010 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 1, 2011 (the “2010 Form 10-K”); and in the “Risk Factors” and the “Special Note Regarding Forward-Looking Statements” sections of our Registration Statement on Form S-4 filed with the SEC on July 8, 2011, [as amended] (the “Form S-4”), which we filed in connection with our holding an extraordinary general meeting of shareholders to consider and vote on proposals related to the Agreement and Plan of Merger, dated as of June 12, 2011 (the “Merger Agreement”), by and among Holdings, GO Sub, LLC (“Merger Sub”) and Transatlantic Holdings, Inc. (“Transatlantic”). 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.

Overview

Our Business

     We write a diversified portfolio of property and casualty insurance and reinsurance internationally through our subsidiaries and branches based in Bermuda, Europe, Hong Kong, Singapore and the United States as well as our Lloyd’s Syndicate 2232. We manage our business through three operating segments: U.S. insurance, international insurance and reinsurance. As of June 30, 2011, we had approximately $10.9 billion of total assets, $3.0 billion of total shareholders’ equity and $3.8 billion of total capital, which includes shareholders’ equity and senior notes.

     During the three months ended June 30, 2011, we experienced rate increases on property lines which had experienced significant loss activity on a year-to-date basis. We also continued to see rate improvement on our general casualty line of business while rates continued to decline in some of our other casualty lines. We believe the premium rate decreases are generally due to increased competition and excess capacity over the past several years. Despite the challenging pricing environment, we believe that there are opportunities where certain products have adequate premium rates and that the expanded breadth of our operations allows us to target those classes of business. Given these trends, we continue to be selective in the insurance policies and reinsurance contracts we underwrite. Our consolidated gross premiums written increased by $25.8 million, or 5.2%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010, and our net income decreased by $90.2 million, or 49.0%, to $93.8 million for the same three-month period as a result of a decrease in the total return from investments as well as losses of $43.0 million from storms in the Midwestern U.S. and net unfavorable loss reserve development of $24.5 million related to the Asia-Pacific earthquakes and Australian storms occurring in the first quarter of 2011. Our consolidated gross premiums written increased by $82.3 million, or 8.2%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 and our net income decreased by $215.3 million, or 67.8%, to $102.4 million for the same six-month period. The decrease in net income for the six months ended June 30,

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2011 compared to the six months ended June 30, 2010 was primarily due to lower total return from investments and higher net losses and loss expenses from property catastrophe losses of $156.7 million in the Asia-Pacific region and $43.0 million from the Midwestern U.S. storms.

Recent Developments

     On June 12, 2011, we entered into the Merger Agreement with Transatlantic providing for a merger of equals. The combined company will operate under a holding company structure with the corporate name of TransAllied Group Holdings, AG, offering specialty insurance and reinsurance products. Under the terms of the Merger Agreement, stockholders of Transatlantic will be entitled to receive 0.88 shares of Allied World Switzerland for each share of Transatlantic common stock together with cash in lieu of any fractional shares, as applicable. The transaction is expected to be completed during the fourth quarter of 2011 subject to the satisfaction of customary closing conditions, including regulatory approvals. The transaction will be accounted for using the acquisition method of accounting for a business combination and Transatlantic will be treated as the acquirer for accounting purposes.

Financial Highlights

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	($ in millions except share, per share and percentage data)
Gross premiums written	$	519.6		$	493.8		$	1,080.3		$	998.0
Net income		93.8			184.0			102.4			317.7
Operating income		44.2			95.7			2.8			157.0
Basic earnings per share:
Net income	$	2.45		$	3.66		$	2.69		$	6.34
Operating income	$	1.15		$	1.90		$	0.08		$	3.13
Diluted earnings per share:
Net income	$	2.36		$	3.47		$	2.57		$	5.98
Operating income	$	1.11		$	1.80		$	0.07		$	2.96
Weighted average common shares outstanding:
Basic		38,346,489			50,222,974			38,061,724			50,123,945
Diluted		39,800,753			52,974,410			39,873,418			53,086,708
Basic book value per common share	$	80.23		$	70.20		$	80.23		$	70.20
Diluted book value per common share	$	76.68		$	65.18		$	76.68		$	65.18
Annualized return on average equity (ROAE), net income		12.6	%		22.5	%		6.8	%		19.9	%
Annualized ROAE, operating income		6.0	%		11.7	%		0.2	%		9.8	%

Non-GAAP Financial Measures

     In presenting the company’s results, management has included and discussed certain non-GAAP financial measures, as such term is defined in Item 10(e) of Regulation S-K 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 accounting principles generally accepted in the United States (“U.S. GAAP”).

Operating income & operating income per share

     Operating income is an internal performance measure used in the management of our operations and represents after tax operational results excluding, as applicable, net realized investment gains or losses, net impairment charges recognized in earnings, impairment of intangible assets and foreign exchange gain or loss. We exclude net realized investment gains or losses, net impairment charges recognized in earnings and net foreign exchange gain or loss from our 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 and other factors. We exclude impairment of intangible assets as these are non-recurring charges. In addition to presenting net income determined in accordance with U.S. GAAP, we believe that showing operating income enables investors, analysts, rating agencies and

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other users of our financial information to more easily analyze our results of operations and our underlying business performance. Operating income should not be viewed as a substitute for U.S. GAAP net income. The following is a reconciliation of operating income to its most closely related U.S. GAAP measure, net income.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	($ in millions except per share data)
Net income	$	93.8		$	184.0		$	102.4		$	317.7
Add after tax effect of:
Net realized investment gains		(50.8	)		(88.9	)		(100.3	)		(162.4	)
Net impairment charges recognized in earnings		—			—			—			0.1
Foreign exchange loss		1.2			0.6			0.7			1.6
Operating income	$	44.2		$	95.7		$	2.8		$	157.0
Basic per share data:
Net income	$	2.45		$	3.66		$	2.69		$	6.34
Add after tax effect of:
Net realized investment gains		(1.32	)		(1.77	)		(2.64	)		(3.24	)
Net impairment charges recognized in earnings		—			—			—			—
Foreign exchange loss		0.02			0.01			0.03			0.03
Operating income	$	1.15		$	1.90		$	0.08		$	3.13
Diluted per share data:
Net income	$	2.36		$	3.47		$	2.57		$	5.98
Add after tax effect of:
Net realized investment gains		(1.28	)		(1.68	)		(2.52	)		(3.05	)
Net impairment charges recognized in earnings		—			—			—			—
Foreign exchange loss		0.03			0.01			0.02			0.03
Operating income	$	1.11		$	1.80		$	0.07		$	2.96

Diluted book value per share

     We have included diluted book value per share because it takes into account the effect of dilutive securities; therefore, we believe it is an important measure of calculating shareholder returns.

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	As of June 30,
	2011			2010
	($ in millions except share
	and per share data)
Price per share at period end	$	57.58		$	45.38
Total shareholders’ equity	$	3,044.4		$	3,468.5
Basic common shares outstanding		37,945,043			49,407,301
Add:
Unvested restricted share units		473,967			804,644
Performance based equity awards		920,164			1,409,984
Dilutive options/warrants outstanding		1,124,438			6,667,941
Weighted average exercise price per share	$	38.83		$	34.52
Deduct:
Options bought back via treasury method		(758,342	)		(5,072,455	)
Common shares and common share equivalents outstanding		39,705,270			53,217,415
Basic book value per common share	$	80.23		$	70.20
Diluted book value per common share	$	76.68		$	65.18

Annualized return on average equity

     Annualized return on average shareholders’ equity (“ROAE”) is calculated using average equity, excluding the average after tax unrealized gains or losses on investments. We present ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of our financial information.

     Annualized operating return on average shareholders’ equity is calculated using operating income and average shareholders’ equity, excluding the average after tax unrealized gains or losses on investments.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
	($ in millions except percentage data)
Opening shareholders’ equity	$	2,951.0		$	3,338.8		$	3,075.8		$	3,213.3
Deduct: accumulated other comprehensive income		(33.0	)		(142.3	)		(57.1	)		(149.8	)
Adjusted opening shareholders’ equity	$	2,918.0		$	3,196.5		$	3,018.7		$	3,063.5
Closing shareholders’ equity	$	3,044.4		$	3,468.5		$	3,044.4		$	3,468.5
Deduct: accumulated other comprehensive income		(23.1	)		(138.3	)		(23.1	)		(138.3	)
Adjusted closing shareholders’ equity	$	3,021.3		$	3,330.2		$	3,021.3		$	3,330.2
Average shareholders’ equity	$	2,969.7		$	3,263.4		$	3,020.0		$	3,196.9
Net income available to shareholders	$	93.8		$	184.0		$	102.4		$	317.7
Annualized return on average shareholders’ equity — net income available to shareholders		12.6	%		22.5	%		6.8	%		19.9	%
Operating income available to shareholders	$	44.2		$	95.7		$	2.8		$	157.0
Annualized return on average shareholders’ equity — operating income available to shareholders		6.0	%		11.7	%		0.2	%		9.8	%

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Relevant Factors

Revenues

     We derive our revenues primarily from premiums on our insurance policies and reinsurance contracts, net of any reinsurance or retrocessional coverage purchased. Insurance and reinsurance premiums are a function of the amounts and types of policies and contracts we write, as well as prevailing market prices. Our prices are determined before our ultimate costs, which may extend far into the future, are known. In addition, our revenues include income generated from our investment portfolio, consisting of net investment income and net realized investment gains or losses. Investment income is principally derived from interest and dividends earned on investments, partially offset by investment management expenses and fees paid to our custodian bank. Net realized investment gains or losses include gains or losses from the sale of investments, as well as the change in the fair value of investments that we mark-to-market through net income.

Expenses

     Our expenses consist largely of net losses and loss expenses, acquisition costs, and general and administrative expenses. Net losses and loss expenses incurred are comprised of three main components:

• losses paid, which are actual cash payments to insureds and reinsureds, net of recoveries from reinsurers;

• outstanding loss or case reserves, which represent management’s best estimate of the likely settlement amount for known claims, less the portion that can be recovered from reinsurers; and

• reserves for losses incurred but not reported, or “IBNR”, which are reserves (in addition to case reserves) established by us that we believe are needed for the future settlement of claims. The portion recoverable from reinsurers is deducted from the gross estimated loss.

     Acquisition costs are comprised of commissions, brokerage fees and insurance taxes. Commissions and brokerage fees are usually calculated as a percentage of premiums and depend on the market and line of business. Acquisition costs are reported after (1) deducting commissions received on ceded reinsurance, (2) deducting the part of acquisition costs relating to unearned premiums and (3) including the amortization of previously deferred acquisition costs.

     General and administrative expenses include personnel expenses including stock-based compensation expense, rent expense, professional fees, information technology costs and other general operating expenses.

Ratios

     Management measures results for each segment on the basis of the “loss and loss expense ratio,” “acquisition cost ratio,” “general and administrative expense ratio,” “expense ratio” and the “combined ratio.” Because we do not manage our assets by segment, investment income, interest expense and total assets are not allocated to individual reportable segments. General and administrative expenses are allocated to segments based on various factors, including staff count and each segment’s proportional share of gross premiums written. The loss and loss expense ratio is derived by dividing net losses and loss expenses by net premiums earned. The acquisition cost ratio is derived by dividing acquisition costs by net premiums earned. The general and administrative expense ratio is derived by dividing general and administrative expenses by net premiums earned. The expense ratio is the sum of the acquisition cost ratio and the general and administrative expense ratio. The combined ratio is the sum of the loss and loss expense ratio, the acquisition cost ratio and the general and administrative expense ratio.

Critical Accounting Policies

     It is important to understand our accounting policies in order to understand our financial position and results of operations. Our unaudited condensed consolidated financial statements reflect determinations that are inherently subjective in nature and require management to make assumptions and best estimates to determine the reported values. If events or other factors cause actual results to differ materially from management’s underlying assumptions or estimates, there could be a material adverse effect on our financial condition or results of operations. We believe that some of the more critical judgments in the areas of accounting estimates and assumptions that affect our financial condition and results of operations are related to reserves for losses and loss expenses, reinsurance recoverables, premiums and acquisition costs, valuation of financial instruments and goodwill and other intangible asset

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impairment valuation. For a detailed discussion of our critical accounting policies please refer to our 2010 Form 10-K. There were no material changes in the application of our critical accounting estimates subsequent to that report.

Results of Operations

     The following table sets forth our selected consolidated statement of operations data for each of the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
				($ in millions)
Gross premiums written	$	519.6		$	493.8		$	1,080.3		$	998.0
Net premiums written	$	395.8		$	369.8		$	876.7		$	803.1
Net premiums earned		355.3			338.9			690.2			677.2
Net investment income		52.4			65.6			102.6			134.5
Net realized investment gains		58.9			94.9			109.3			172.4
Net impairment charges recognized in earnings		—			—			—			(0.2	)
Other income		—			0.6			—			0.9
	$	466.6		$	500.0		$	902.1		$	984.8
Net losses and loss expenses	$	235.8		$	188.7		$	540.3		$	420.9
Acquisition costs		43.0			37.9			81.1			78.7
General and administrative expenses		67.2			68.1			135.2			131.5
Amortization and impairment of intangible assets		0.8			0.9			1.5			1.8
Interest expense		13.7			9.4			27.5			19.0
Foreign exchange loss		1.2			0.6			0.7			1.6
	$	361.7		$	305.6		$	786.3		$	653.5
Income before income taxes	$	104.9		$	194.4		$	115.8		$	331.3
Income tax expense		11.1			10.4			13.4			13.6
Net income	$	93.8		$	184.0		$	102.4		$	317.7
Ratios
Loss and loss expense ratio		66.4	%		55.7	%		78.3	%		62.1	%
Acquisition cost ratio		12.1	%		11.2	%		11.7	%		11.6	%
General and administrative expense ratio		18.9	%		20.1	%		19.6	%		19.4	%
Expense ratio		31.0	%		31.3	%		31.3	%		31.0	%
Combined ratio		97.4	%		87.0	%		109.6	%		93.1	%

Comparison of Three Months Ended June 30, 2011 and 2010

Premiums

     Gross premiums written increased by $25.8 million, or 5.2%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The overall increase in gross premiums written was primarily the result of the following:

• Gross premiums written in our U.S. insurance segment increased by $37.0 million, or 19.5%. The increase in gross premiums written was primarily due to increased new business, including new products. This increase was partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

• Gross premiums written in our international insurance segment increased by $11.0 million, or 6.6%, primarily as a result of increased premiums in our healthcare line of business, new business including new products and rate increases within our general property line of business, partially offset by the continued trend of the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

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• Gross premiums written in our reinsurance segment decreased by $22.3 million, or 16.3%. The decrease in gross premiums written was primarily due to the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions). These decreases were partially offset by gross premiums written in our new global marine and specialty division and the continued build-out of our international platform.

     The table below illustrates our gross premiums written by geographic location for each of the periods indicated.

	Three Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
			($ in millions)
United States	$	269.2	$	247.4	$	21.8			8.8	%
Bermuda		177.9		182.3		(4.4	)		(2.4	)
Europe		58.2		57.0		1.2			2.1
Singapore		10.3		5.9		4.4			74.6
Hong Kong		4.0		1.2		2.8			233.3
	$	519.6	$	493.8	$	25.8			5.2	%

     Net premiums written increased by $26.0 million, or 7.0%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net premiums written was due to the increase in gross premiums written as well as a reduction of premiums ceded. The reduction in premiums ceded was primarily due to the commutation of certain variable-rated reinsurance contracts that have swing-rated provisions of $12.4 million. A “swing-rated” reinsurance contract links the ultimate amount of ceded premium to the ultimate loss ratio on the reinsured business. It enables the cedent to retain a greater portion of premium if the ultimate loss ratio develops at a level below the initial loss threshold set by the reinsurers but requires a higher amount of ceded premium if the ultimate loss ratio develops above the initial threshold. Swing-rated reinsurance contracts often, but not always, contain a provision limiting the maximum decrease or increase in ceded premium. In commuting these swing-rated reinsurance contracts, we reduced certain premiums previously ceded by $12.4 million and also reduced ceded IBNR by $11.5 million in accordance with the terms of the contracts. The net impact of the commutation was a net gain of $0.9 million.

     The difference between gross and net premiums written is the cost to us of purchasing reinsurance coverage, including the cost of property catastrophe reinsurance coverage. We ceded 23.8% of gross premiums written for the three months ended June 30, 2011 compared to 25.1% for the same period in 2010. The decrease in the cession percentage was primarily due to the reduction of premiums ceded of $12.4 million related to the commutation of the swing-rated reinsurance contracts.

     Net premiums earned increased by $16.4 million, or 4.8%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010 primarily due to the reduction of premiums ceded of $12.4 million related to the commutation of the swing-rated reinsurance contracts, which was fully earned. In addition, upward adjustments on estimated premiums, the majority of which were fully earned, were higher by $4.1 million during the three months ended June 30, 2011 compared to the same period in 2010. There also was a decrease in net premiums earned in our international insurance segment during the three months ended June 30, 2011 as a result of lower net premiums written in 2010. This was partially offset by higher net premiums earned for the U.S. insurance segment, driven by premium growth in our U.S. operations.

     We evaluate our business by segment, distinguishing between U.S. insurance, international insurance and reinsurance. The following chart illustrates the mix of our business on both a gross premiums written and net premiums earned basis.

	Gross						Net
	Premiums						Premiums
	Written						Earned
	Three Months Ended June 30,
	2011			2010			2011			2010
U.S. insurance		43.6	%		38.4	%		41.1	%		37.1	%
International insurance		34.4	%		33.9	%		22.5	%		26.4	%
Reinsurance		22.0	%		27.7	%		36.4	%		36.5	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

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  Net Investment Income

     Net investment income decreased by $13.2 million, or 20.1%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The decrease was due to lower yields on our fixed maturity investments as well as an increased allocation to equity securities and hedge funds, including private equity funds (together, the “hedge funds”), which contribute to our total return but carry little or no current yield. The annualized period book yield of the investment portfolio for the three months ended June 30, 2011 and 2010 was 2.7% and 3.5%, respectively, and the financial statement total return of our investment portfolio was 2.2% for the three months ended June 30, 2011. Investment management expenses of $3.4 million and $3.0 million were incurred during the three months ended June 30, 2011 and 2010, respectively. The increase in investment management expenses was primarily due to the increase in the size of our investment portfolio, as well as expenses from higher expense asset classes (equities).

     As of June 30, 2011, approximately 94.6% of our fixed income investments consisted of investment grade securities. As of June 30, 2011 and December 31, 2010, the average credit rating of our fixed income portfolio was AA as rated by Standard & Poor’s and Aa2 as rated by Moody’s. The average duration of fixed maturity investments and cash and cash equivalents was approximately 2.3 years as of June 30, 2011 and 2.6 years as of June 30, 2010.

Realized Investment Gains/Losses and Net Impairment Charges Recognized in Earnings

     During the three months ended June 30, 2011, we recognized $58.9 million in net realized investment gains compared to net realized investment gains of $94.9 million during the three months ended June 30, 2010. During the three months ended June 30, 2011 and 2010 we did not recognize any net impairment charges. Net realized investment gains of $58.9 million for the three months ended June 30, 2011 were comprised of the following:

• Net realized investment gains of $15.0 million primarily from the sale of fixed maturity securities due to the rebalancing of our portfolio.

• Net realized investment gains of $43.9 million related to mark-to-market adjustments.

	Mark-to-Market Adjustments
	for the Three Months Ended
	June 30, 2011
	($ in millions)
Fixed maturity investments accounted for as trading securities	$	31.9
Hedge funds and equity securities		5.7
Futures and foreign exchange forwards		6.3
Total	$	43.9

     Net realized investment gains of $94.9 million for the three months ended June 30, 2010 were primarily comprised of the following:

• Net realized investment gains of $71.8 million from the sale of securities.

• Net realized investment gains of $27.1 million primarily related to the mark-to-market adjustments for our hedge fund investments, equity securities and fixed maturity investments that are accounted for as trading securities.

Other Income

     The other income of $0.6 million for the three months ended June 30, 2010 represented fee income from our program administrator operations and our wholesale brokerage operations. We sold our wholesale brokerage operations during the third quarter of 2010.

  Net Losses and Loss Expenses

     Net losses and loss expenses increased by $47.1 million, or 25.0%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net losses and loss expenses was due to higher catastrophe loss activity in the current period, which included $43.0 million from storms in the Midwestern U.S. and net unfavorable loss reserve development of $24.5 million related to the Asia-Pacific earthquakes and Australian storms occurring in the first quarter of 2011. We also recognized lower

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net favorable prior year reserve development for the three months ended June 30, 2011 compared to June 30, 2010 and an $11.5 million reduction of ceded IBNR as part of the commutation of certain swing-rated reinsurance contracts.

     We recorded net favorable reserve development related to prior years of $55.2 million and $64.1 million during the three months ended June 30, 2011 and 2010, respectively. The $55.2 million of net favorable reserve development excludes the impact of the commutation of the swing-rated reinsurance contracts of $11.5 million discussed above. The following table shows the net favorable reserve development of $55.2 million by loss year for each of our segments for the three months ended June 30, 2011. In the table, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
U.S. insurance	$	—		$	(0.7	)	$	(1.8	)	$	(6.7	)	$	(1.1	)	$	(2.2	)	$	0.9		$	0.8		$	0.6		$	(10.2	)
International insurance		(0.3	)		(1.4	)		(3.0	)		(6.3	)		(9.8	)		(14.0	)		6.6			(6.0	)		22.2			(12.0	)
Reinsurance		(0.5	)		(0.8	)		(1.1	)		(12.9	)		(6.3	)		(3.9	)		(0.7	)		(0.8	)		(6.0	)		(33.0	)
	$	(0.8	)	$	(2.9	)	$	(5.9	)	$	(25.9	)	$	(17.2	)	$	(20.1	)	$	6.8		$	(6.0	)	$	16.8		$	(55.2	)

     The unfavorable reserve development in our international insurance segment for the 2010 loss year was primarily due to a casualty claim emanating from an oil field service risk.

     The following table shows the net favorable reserve development of $64.1 million by loss year for each of our segments for the three months ended June 30, 2010.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009			Total
	($ in millions)
U.S. insurance	$	(0.1	)	$	(0.8	)	$	(6.8	)	$	(10.0	)	$	(2.5	)	$	0.1		$	(0.8	)	$	0.2		$	(20.7	)
International insurance		2.6			(4.7	)		5.1			(15.0	)		(1.3	)		(3.0	)		(10.7	)		3.7			(23.3	)
Reinsurance		0.3			(1.3	)		(6.9	)		(4.1	)		(0.8	)		(1.4	)		0.2			(6.1	)		(20.1	)
	$	2.8		$	(6.8	)	$	(8.6	)	$	(29.1	)	$	(4.6	)	$	(4.3	)	$	(11.3	)	$	(2.2	)	$	(64.1	)

     The loss and loss expense ratio for the three months ended June 30, 2011 was 66.4% compared to 55.7% for the three months ended June 30, 2010. Net favorable reserve development recognized and the impact of the commutation adjustment during the three months ended June 30, 2011 reduced the loss and loss expense ratio by 15.8 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 82.2%. Net favorable reserve development recognized during the three months ended June 30, 2010 reduced the loss and loss expense ratio by 18.9 percentage points. Thus, the loss and loss expense ratio related to that loss year was 74.6%. The increase in the loss and loss expense ratio for the current loss year was primarily due to the $67.5 million of losses from catastrophes recognized during the three months ended June 30, 2011, as previously discussed, which contributed 19.0 percentage points to the current year’s loss and loss expense ratio. In comparison, $30.0 million of large individual losses contributed 8.9 percentage points to the loss and loss expense ratio for the three months ended June 30, 2010.

     The following table shows the components of the increase in net losses and loss expenses of $47.1 million for each of the periods indicated.

	Three Months Ended
	June 30,						Dollar
	2011			2010			Change
	($ in millions)
Net losses paid	$	128.7		$	129.4		$	(0.7	)
Net change in reported case reserves		116.5			72.1			44.4
Net change in IBNR		(9.4	)		(12.8	)		3.4
Net losses and loss expenses	$	235.8		$	188.7		$	47.1

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

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	Three Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, April 1	$	4,125.1		$	3,933.0
Incurred related to:
Commutation of variable-rated reinsurance contracts		11.5			—
Current period non-catastrophe		212.0			252.8
Current period property catastrophe		67.5			—
Prior period non-catastrophe		(56.5	)		(60.3	)
Prior period property catastrophe		1.3			(3.8	)
Total incurred	$	235.8		$	188.7
Paid related to:
Current period non-catastrophe		9.6			7.8
Current period property catastrophe		9.9			18.9
Prior period non-catastrophe		108.5			93.4
Prior period property catastrophe		0.7			9.3
Total paid	$	128.7		$	129.4
Foreign exchange revaluation		5.2			(4.3	)
Net reserve for losses and loss expenses, June 30		4,237.4			3,988.0
Losses and loss expenses recoverable		1,013.9			932.4
Reserve for losses and loss expenses, June 30	$	5,251.3		$	4,920.4

Acquisition Costs

     Acquisition costs increased by $5.1 million, or 13.5%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in acquisition costs was primarily due to the growth in our U.S. insurance segment which carries a higher acquisition cost ratio. Acquisition costs as a percentage of net premiums earned were 12.1% for the three months ended June 30, 2011 compared to 11.2% for the same period in 2010.

General and Administrative Expenses

     General and administrative expenses decreased by $0.9 million, or 1.3%, for the three months ended June 30, 2011 compared to the same period in 2010. The decrease in general and administrative expenses was primarily due to a decrease in performance-based incentive compensation, partially offset by an increase in salary expense due to an increase in global headcount from 684 at June 30, 2010 to 692 at June 30, 2011. We also incurred approximately $2.6 million in costs during the quarter related to our proposed merger with Transatlantic.

     Our general and administrative expense ratio was 18.9% for the three months ended June 30, 2011, which was lower than the 20.1% for the three months ended June 30, 2010. The decrease was primarily due to the factors discussed above while net premiums earned increased, particularly with the commutation of certain swing-rated reinsurance contracts.

     Our expense ratio was 31.0% for the three months ended June 30, 2011 compared to 31.3% for the three months ended June 30, 2010 primarily due to the decrease in the general and administrative expense ratio.

Amortization and Impairment of Intangible Assets

     The amortization and impairment of intangible assets decreased by $0.1 million, or 11.1%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The decrease was due to the non-compete covenants related to the acquisition of Darwin Professional Underwriters, Inc. (“Darwin”) being fully amortized during 2010. No impairment of intangible assets was recognized during the three months ended June 30, 2011 and 2010.

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Interest Expense

     Interest expense increased $4.3 million, or 45.7%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010 primarily as a result of additional interest expense on our 5.50% senior notes that were issued by Allied World Bermuda in November 2010.

Net Income

     Net income for the three months ended June 30, 2011 was $93.8 million compared to $184.0 million for the three months ended June 30, 2010. The decrease was primarily the result of higher net loss and loss expenses and lower realized investment gains and net investment income. Net income for the three months ended June 30, 2011 included a net foreign exchange loss of $1.2 million and an income tax expense of $11.1 million. Net income for the three months ended June 30, 2010 included a net foreign exchange loss of $0.6 million and an income tax expense of $10.4 million.

Comparison of Six Months Ended June 30, 2011 and 2010

Premiums

     Gross premiums written increased by $82.3 million, or 8.2%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The overall increase in gross premiums written was primarily the result of the following:

• Gross premiums written in our U.S. insurance segment increased by $58.4 million, or 16.6%. The increase in gross premiums written was primarily due to increased new business, including new products, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. This increase was partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

• Gross premiums written in our international insurance segment increased by $0.9 million, or 0.3%, due to increased premiums in our healthcare line of business as well as increased property premiums due to rate increases and new business. These increases were partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

• Gross premiums written in our reinsurance segment increased by $23.1 million, or 6.5%. The increase in gross premiums written was primarily due to increased new business, including gross premiums written by our new global marine and specialty division and the build-out of our international reinsurance platform. This increase was partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions).

     The table below illustrates our gross premiums written by geographic location for each of the periods indicated.

	Six Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
United States	$	575.8	$	523.2	$	52.6			10.1	%
Bermuda		348.3		336.4		11.9			3.5
Europe		122.3		123.2		(0.9	)		(0.7	)
Singapore		25.6		9.6		16.0			166.7
Hong Kong		8.3		5.6		2.7			48.2
	$	1,080.3	$	998.0	$	82.3			8.2	%

     Net premiums written increased by $73.6 million, or 9.2%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net premiums written was primarily due to the increase in gross premiums written. Premiums ceded was reduced by $12.4 million due to the commutation of certain variable-rated reinsurance contracts that have swing-rated provisions. In commuting these swing-rated reinsurance contracts, we reduced certain premiums previously ceded and also reduced ceded IBNR by $11.5 million in accordance with the terms of the contracts. During the six months ended June 30, 2010, net premiums written included a $9.3 million reduction in premiums ceded for the commutation of certain variable-rated reinsurance contracts.

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     The difference between gross and net premiums written is the cost to us of purchasing reinsurance coverage, including the cost of property catastrophe reinsurance coverage. We ceded 18.8% of gross premiums written for the six months ended June 30, 2011 compared to 19.5% for the same period in 2010. The decrease in the cession percentage was primarily due to the reduction of premiums ceded of $12.4 million during the six months ended June 30, 2011 compared to $9.3 million during the six months ended June 30, 2010 related to the commutation of certain swing-rated reinsurance contracts.

     Net premiums earned increased by $13.0 million, or 1.9%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. This was primarily a result of higher net premiums earned for the U.S. insurance segment, driven by premium growth of our U.S. operations. Additionally, the commutation of swing-rated reinsurance contracts during the six months ended June 30, 2011 added $12.4 million to net premiums earned compared to $9.3 million during the six months ended June 30, 2010.

     We evaluate our business by segment, distinguishing between U.S. insurance, international insurance and reinsurance. The following chart illustrates the mix of our business on both a gross premiums written and net premiums earned basis.

	Gross						Net
	Premiums						Premiums
	Written						Earned
	Six Months Ended June 30,
	2011			2010			2011			2010
U.S. insurance		38.0	%		35.2	%		40.8	%		37.6	%
International insurance		26.8	%		29.0	%		22.6	%		26.1	%
Reinsurance		35.2	%		35.8	%		36.6	%		36.3	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Net Investment Income

     Net investment income decreased by $31.9 million, or 23.7%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The decrease was due to lower yields on our fixed maturity investments as well as an increased allocation to equity securities and hedge funds, which contribute to our total return but carry little or no current yield. We increased our equity and hedge fund investments by $567.4 million between June 30, 2010 and June 30, 2011. The annualized period book yield of the investment portfolio for the six months ended June 30, 2011 and 2010 was 2.7% and 3.6%, respectively, and the financial statement total return of our investment portfolio was 2.2% for the six months ended June 30, 2011. Investment management expenses of $6.7 million and $5.6 million were incurred during the six months ended June 30, 2011 and 2010, respectively. The increase in investment management expenses was primarily due to the increase in the size of our investment portfolio, as well as expenses from higher expense asset classes (equities).

     As of June 30, 2011, approximately 94.6% of our fixed income investments consisted of investment grade securities. As of June 30, 2011 and December 31, 2010, the average credit rating of our fixed income portfolio was AA as rated by Standard & Poor’s and Aa2 as rated by Moody’s. The average duration of fixed maturity investments and cash and cash equivalents was approximately 2.3 years as of June 30, 2011 and 2.6 years as of June 30, 2010.

Realized Investment Gains/Losses and Net Impairment Charges Recognized in Earnings

     During the six months ended June 30, 2011, we recognized $109.3 million in net realized investment gains compared to net realized investment gains of $172.4 million during the six months ended June 30, 2010. During the six months ended June 30, 2011, we did not recognize any net impairment charges compared to $0.2 million during the six months ended June 30, 2010. Net realized investment gains of $109.3 million for the six months ended June 30, 2011 were comprised of the following:

• Net realized investment gains of $32.0 million primarily from the sale of fixed maturity securities due to the rebalancing of our portfolio.

• Net realized investment gains of $77.3 million related to mark-to-market adjustments.

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	Mark-to-Market Adjustments
	for the Six Months Ended
	June 30, 2011
	($ in millions)
Fixed maturity investments accounted for as trading securities	$	45.3
Hedge funds and equity securities		26.6
Futures and foreign exchange forwards		5.4
Total	$	77.3

     Net realized investment gains of $172.4 million for the six months ended June 30, 2010 were comprised primarily of the following:

• Net realized investment gains of $117.1 million from the sale of securities.

• Net realized investment gains of $59.3 million primarily related to the mark-to-market adjustments for our hedge fund investments, equity securities and fixed maturity investments that are accounted for as trading securities.

  Other Income

     The other income of $0.9 million for the six months ended June 30, 2010 represented fee income from our program administrator operations and our wholesale brokerage operations. We sold our wholesale brokerage operations during the third quarter of 2010.

  Net Losses and Loss Expenses

     Net losses and loss expenses increased by $119.4 million, or 28.4%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net losses and loss expenses was due to higher catastrophe loss activity in the current period totaling $199.7 million, which included estimated net losses and loss expenses incurred of $89.5 million for the Tohoku earthquake and tsunami, $51.2 million for the New Zealand earthquake, $43.0 million for the Midwestern U.S. storms and $16.0 million for the Australian storms. During the six months ended June 30, 2010, we incurred $116.5 million of net losses and loss expenses related to the earthquakes in Haiti, Chile and Baja, Mexico, a Connecticut power plant explosion, European Windstorm Xynthia, a mine collapse and hail storms in Australia. We also recognized lower net favorable prior year reserve development for the six months ended June 30, 2011 compared to June 30, 2010.

     We recorded net favorable reserve development related to prior years of $99.5 million and $138.1 million during the six months ended June 30, 2011 and 2010, respectively. The $99.5 million of net favorable reserve development excludes the impact of the commutation of swing-rated reinsurance contracts of $11.5 million. The following table shows the net favorable reserve development of $99.5 million by loss year for each of our segments for the six months ended June 30, 2011. In the table, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
U.S. insurance	$	(0.1	)	$	(1.4	)	$	(3.5	)	$	(12.7	)	$	23.8		$	(2.1	)	$	(0.7	)	$	(0.3	)	$	9.0		$	12.0
International insurance		1.2			(4.0	)		(1.2	)		(23.5	)		(14.3	)		(21.6	)		10.2			(7.4	)		20.0			(40.6	)
Reinsurance		(0.6	)		(3.0	)		(3.8	)		(24.7	)		(12.2	)		(7.1	)		(3.1	)		(9.5	)		(6.9	)		(70.9	)
	$	0.5		$	(8.4	)	$	(8.5	)	$	(60.9	)	$	(2.7	)	$	(30.8	)	$	6.4		$	(17.2	)	$	22.1		$	(99.5	)

     The unfavorable reserve development in our international insurance segment for the 2010 loss year was primarily due to a casualty claim emanating from an oil field service risk.

     The net favorable reserve development is a result of actual loss emergence being lower than anticipated. The unfavorable reserve development of $23.8 million in our U.S. insurance segment for the 2006 loss year was primarily due to directors and officers claims within our professional liability line of business related to a class action suit filed against a number of private equity firms alleging collusion.

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     The following table shows the net favorable reserve development of $138.1 million by loss year for each of our segments for the six months ended June 30, 2010. The $138.1 million of net favorable reserve development excludes the impact of the commutation of swing-rated reinsurance contracts of $8.9 million.

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009			Total
	($ in millions)
U.S. insurance	$	(0.5	)	$	(1.8	)	$	(14.4	)	$	(12.5	)	$	(2.3	)	$	2.2		$	3.9		$	0.8		$	(24.6	)
International insurance		2.5			(6.8	)		(14.9	)		(43.8	)		(11.3	)		(7.5	)		(3.3	)		4.3			(80.8	)
Reinsurance		(0.4	)		(1.1	)		(9.9	)		(8.1	)		(1.1	)		(2.3	)		(2.2	)		(7.6	)		(32.7	)
	$	1.6		$	(9.7	)	$	(39.2	)	$	(64.4	)	$	(14.7	)	$	(7.6	)	$	(1.6	)	$	(2.5	)	$	(138.1	)

     The loss and loss expense ratio for the six months ended June 30, 2011 was 78.3% compared to 62.1% for the six months ended June 30, 2010. Net favorable reserve development recognized and the impact of the commutation adjustment during the six months ended June 30, 2011 reduced the loss and loss expense ratio by 14.8 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 93.1%. Net favorable reserve development recognized and the impact of the commutation during the six months ended June 30, 2010 reduced the loss and loss expense ratio by 20.2 percentage points. Thus, the loss and loss expense ratio related to that loss year was 82.3%. The increase in the loss and loss expense ratio for the current loss year was primarily due to the $199.7 million of losses from global catastrophes during the six months ended June 30, 2011, as previously discussed, which contributed 28.9 percentage points to the current period’s loss and loss expense ratio.

     The following table shows the components of the increase in net losses and loss expenses of $119.4 million for each of the periods indicated.

	Six Months Ended
	June 30,				Dollar
	2011		2010		Change
	($ in millions)
Net losses paid	$	264.8	$	265.4	$	(0.6	)
Net change in reported case reserves		228.8		78.4		150.4
Net change in IBNR		46.7		77.1		(30.4	)
Net losses and loss expenses	$	540.3	$	420.9	$	119.4

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     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

	Six Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, January 1	$	3,951.6		$	3,841.8
Incurred related to:
Commutation of variable-rated reinsurance contracts		11.5			8.9
Current period non-catastrophe		428.6			485.1
Current period property catastrophe		199.7			65.0
Prior period non-catastrophe		(91.8	)		(133.4	)
Prior period property catastrophe		(7.7	)		(4.7	)
Total incurred	$	540.3		$	420.9
Paid related to:
Current period non-catastrophe		11.1			14.1
Current period property catastrophe		10.2			19.3
Prior period non-catastrophe		234.2			216.8
Prior period property catastrophe		9.3			15.2
Total paid	$	264.8		$	265.4
Foreign exchange revaluation		10.3			(9.3	)
Net reserve for losses and loss expenses, June 30		4,237.4			3,988.0
Losses and loss expenses recoverable		1,013.9			932.4
Reserve for losses and loss expenses, June 30	$	5,251.3		$	4,920.4

Acquisition Costs

     Acquisition costs increased by $2.4 million, or 3.0%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in acquisition costs was primarily due to the increase in net premiums earned. Acquisition costs as a percentage of net premiums earned were 11.7% for the six months ended June 30, 2011 compared to 11.6% for the same period in 2010.

General and Administrative Expenses

     General and administrative expenses increased by $3.7 million, or 2.8%, for the six months ended June 30, 2011 compared to the same period in 2010. The increase in general and administrative expenses was primarily due to an increase in global headcount from 684 at June 30, 2010 to 692 at June 30, 2011 offset by a decrease in performance-based incentive compensation expense. We incurred approximately $2.6 million in costs during the six months ended June 30, 2011 related to our proposed merger with Transatlantic and we incurred additional building related expenses as a result of the expansion of several of our offices.

     Our general and administrative expense ratio was 19.6% for the six months ended June 30, 2011, which was higher than the 19.4% for the six months ended June 30, 2010. The increase was primarily due to the factors discussed above.

     Our expense ratio was 31.3% for the six months ended June 30, 2011 compared to 31.0% for the six months ended June 30, 2010 primarily due to an increase in the general and administrative expense ratio.

Amortization and Impairment of Intangible Assets

     The amortization and impairment of intangible assets decreased $0.3 million, or 16.7%, for the six months ended June 30, 2011 compared the six months ended June 30, 2010. The decrease was due to the non-compete covenants related to the acquisition of Darwin being fully amortized during 2010. No impairment of intangible assets was recognized during the six months ended June 30, 2011 and June 30, 2010, respectively.

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Interest Expense

     Interest expense increased $8.5 million, or 44.7%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily as a result of additional interest expense on our 5.50% senior notes that were issued by Allied World Bermuda in November 2010.

Net Income

     Net income for the six months ended June 30, 2011 was $102.4 million compared to $317.7 million for the six months ended June 30, 2010. The decrease was primarily the result of higher net loss and loss expenses and lower realized investment gains and net investment income. Net income for the six months ended June 30, 2011 included a net foreign exchange loss of $0.7 million and an income tax expense of $13.4 million. Net income for the six months ended June 30, 2010 included a net foreign exchange loss of $1.6 million and an income tax expense of $13.6 million.

Underwriting Results by Operating Segments

     Our company is organized into three operating segments:

     U.S. Insurance Segment. The U.S. insurance segment includes our direct specialty insurance operations in the United States. This segment provides both direct property and specialty casualty insurance primarily to non-Fortune 1000 North American domiciled accounts.

     International Insurance Segment. The international insurance segment includes our direct insurance operations in Bermuda, Europe, Singapore and Hong Kong. This segment provides both direct property and casualty insurance primarily to Fortune 1000 North American domiciled accounts and mid-sized to large non-North American domiciled accounts.

     Reinsurance Segment. Our reinsurance segment has operations in Bermuda, Europe, Singapore and the United States. This segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverages written by insurance companies. We presently write reinsurance on both a treaty and a facultative basis, targeting several niche reinsurance markets.

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U.S. Insurance Segment

     The following table summarizes the underwriting results and associated ratios for the U.S. insurance segment for each of the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	($ in millions)
Revenues
Gross premiums written	$	226.7		$	189.7		$	410.1		$	351.7
Net premiums written		172.9			135.2			312.8			266.8
Net premiums earned		145.9			125.7			281.3			254.9
Other income		—			0.6			—			0.9
Expenses
Net losses and loss expenses	$	92.6		$	69.2		$	208.4		$	167.6
Acquisition costs		18.9			15.9			37.0			32.8
General and administrative expenses		31.3			30.7			62.0			57.8
Underwriting income (loss)		3.1			10.5			(26.1	)		(2.4	)
Ratios
Loss and loss expense ratio		63.5	%		55.1	%		74.1	%		65.8	%
Acquisition cost ratio		12.9	%		12.6	%		13.1	%		12.9	%
General and administrative expense ratio		21.4	%		24.4	%		22.1	%		22.7	%
Expense ratio		34.3	%		37.0	%		35.2	%		35.6	%
Combined ratio		97.8	%		92.1	%		109.3	%		101.4	%

Comparison of Three Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written increased by $37.0 million, or 19.5%, for the three months ended June 30, 2011 compared to the same period in 2010. The increase in gross premiums written was primarily due to new business from existing products and $16.0 million in premiums from new products, specifically in our general casualty, environmental and inland marine lines of business, where we believe profitable underwriting opportunities exist. The increase was partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Three Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
Professional liability(1)	$	58.8	$	51.6	$	7.2			14.0	%
General casualty		56.5		38.4		18.1			47.1
Healthcare		50.2		41.1		9.1			22.1
General property		32.9		30.0		2.9			9.7
Programs		20.3		26.2		(5.9	)		(22.5	)
Other		8.0		2.4		5.6			233.3
	$	226.7	$	189.7	$	37.0			19.5	%

(1) Includes our i-bind line of business

     Net premiums written increased by $37.7 million, or 27.9%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net premiums written was primarily due to higher gross premiums written, as well as a reduction of premiums ceded. The reduction in premiums ceded was primarily due to the commutation of certain variable-rated reinsurance contracts that have swing-rated provisions of $12.4 million. In commuting these swing-rated reinsurance contracts, we reduced certain premiums previously ceded and also reduced ceded losses by $11.5 million in accordance with the terms of the contracts. The net impact of the commutation was a net gain of $0.9 million. We ceded 23.8% of gross premiums written for the three months ended June 30, 2011 compared to 28.7% for the same period in 2010. The decrease in the cession percentage was

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primarily due to the reduction of premiums ceded of $12.4 million related to the commutation of the swing-rated reinsurance contracts.

     Net premiums earned increased $20.2 million, or 16.1%, for the three months ended June 30, 2011 compared to the same period in 2010 primarily due to the growth of our U.S. insurance operations during 2010 and 2011 and $12.4 million from the commutation which was fully earned.

     Net losses and loss expenses. Net losses and loss expenses increased by $23.4 million, or 33.8%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net losses and loss expenses was primarily due to the growth of the U.S. insurance operations, the reduction of ceded IBNR for the commutation of swing-rated reinsurance contracts of $11.5 million and lower net favorable reserve development recognized. Catastrophe losses of $3.0 million from the Tohoku earthquake and tsunami (business interruption claims) and $2.0 million from the Midwestern U.S. storms were also recognized during the three months ended June 30, 2011.

     Overall, our U.S. insurance segment recorded net favorable reserve development of $10.2 million during the three months ended June 30, 2011 compared to net favorable reserve development of $20.9 million for the three months ended June 30, 2010, as shown in the tables below. The $10.2 million of net favorable reserve development recorded during the three months ended June 30, 2011 excludes the impact of the commutation of swing-rated reinsurance contracts of $11.5 million. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
Professional liability	$	—		$	(0.1	)	$	(0.1	)	$	(0.6	)	$	(0.2	)	$	(2.0	)	$	—		$	(1.1	)	$	0.6		$	(3.5	)
Healthcare		(0.1	)		(0.4	)		(1.3	)		(0.7	)		(0.9	)		0.3			(0.5	)		0.7			(0.9	)		(3.8	)
General casualty		0.1			(0.2	)		(0.4	)		(5.4	)		—			—			—			0.1			—			(5.8	)
General property		—			—			—			—			—			—			0.7			0.2			0.3			1.2
Programs		—			—			—			—			—			(0.5	)		0.7			0.9			0.6			1.7
	$	—		$	(0.7	)	$	(1.8	)	$	(6.7	)	$	(1.1	)	$	(2.2	)	$	0.9		$	0.8		$	0.6		$	(10.2	)

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009			Total
	($ in millions)
Professional liability	$	—		$	—		$	(0.2	)	$	(5.6	)	$	(1.0	)	$	(1.4	)	$	(0.8	)	$	1.7		$	(7.3	)
Healthcare		(0.4	)		(0.3	)		0.1			(1.9	)		(1.4	)		0.5			0.7			(1.3	)		(4.0	)
General casualty		0.3			(0.4	)		(7.6	)		(1.5	)		—			—			—			—			(9.2	)
General property		—			(0.1	)		0.9			(1.0	)		(0.2	)		(0.3	)		(0.5	)		—			(1.2	)
Programs		—			—			—			—			0.1			1.2			(0.3	)		(0.2	)		0.8
	$	(0.1	)	$	(0.8	)	$	(6.8	)	$	(10.0	)	$	(2.5	)	$	—		$	(0.9	)	$	0.2		$	(20.9	)

     The loss and loss expense ratio for the three months ended June 30, 2011 was 63.5% compared to 55.1% for the three months ended June 30, 2010. Net favorable reserve development recognized and the impact of the commutation adjustment to ceded IBNR during the three months ended June 30, 2011 decreased the loss and loss expense ratio by 6.3 percentage points. Thus, the loss and loss expense ratio for the current loss year was 69.8%. In comparison, net favorable reserve development during the three months ended June 30, 2010 decreased the loss and loss expense ratio by 16.6 percentage points. Thus, the loss and loss expense ratio for that loss year was 71.7%.

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

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	Three Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, April 1	$	1,109.9		$	972.0
Incurred related to:
Commutation of variable-rated reinsurance contracts		11.5			—
Current period non-catastrophe		86.3			90.1
Current period property catastrophe		5.0			—
Prior period non-catastrophe		(10.2	)		(22.1	)
Prior period property catastrophe		—			1.2
Total incurred	$	92.6		$	69.2
Paid related to:
Current period non-catastrophe		4.2			2.3
Current period property catastrophe		0.5			—
Prior period non-catastrophe		39.2			29.3
Prior period property catastrophe		—			3.9
Total paid	$	43.9		$	35.5
Net reserve for losses and loss expenses, June 30		1,158.6			1,005.7
Losses and loss expenses recoverable		421.4			378.0
Reserve for losses and loss expenses, June 30	$	1,580.0		$	1,383.7

     Acquisition costs. Acquisition costs increased by $3.0 million, or 18.9%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase was primarily caused by increased net premiums earned. The acquisition cost ratio increased to 12.9% for the three months ended June 30, 2011 from 12.6% for the same period in 2010.

     General and administrative expenses. General and administrative expenses increased by $0.6 million, or 2.0%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The decrease in the general and administrative expense ratio from 24.4% for the three months ended June 30, 2010 to 21.4% for the same period in 2011 was a result of the increase in net premiums earned as well as our expense management initiatives.

  Comparison of Six Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written increased by $58.4 million, or 16.6%, for the six months ended June 30, 2011 compared to the same period in 2010. The increase in gross premiums written was primarily due to new business from existing products and higher volume from new products, specifically in our general casualty, environmental and inland marine lines of business, where we believe profitable underwriting opportunities exist. The increase was partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition.

     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Six months ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
Professional liability(1)	$	113.8	$	96.8	$	17.0			17.6	%
General casualty		97.5		66.4		31.1			46.8
Healthcare		95.6		88.6		7.0			7.9
General property		46.5		46.5		—			—
Programs		40.2		51.0		(10.8	)		(21.2	)
Other		16.5		2.4		14.1			587.5
	$	410.1	$	351.7	$	58.4			16.6	%

(1) Includes our i-bind line of business

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     Net premiums written increased by $46.0 million, or 17.2%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net premiums written was primarily due to higher gross premiums written and due to the commutation of certain variable-rated reinsurance contracts that have swing-rated provisions of $12.4 million. In commuting these swing-rated reinsurance contracts, we reduced certain premiums previously ceded and also reduced ceded losses by $11.5 million in accordance with the terms of the contracts. The net impact of the commutation was a net gain of $0.9 million. For the six months ended June 30, 2010, the commutation of certain variable-rated reinsurance contracts reduced premiums ceded by $9.3 million. We ceded 23.7% of gross premiums written for the six months ended June 30, 2011 compared to 24.2% for the same period in 2010. The decrease in the ceded premium ratio was primarily due to the commutation of certain variable-rated reinsurance contracts with swing-rated provisions of $12.4 million during the six months ended June 30, 2011 compared to $9.3 million during the six months ended June 30, 2010.

     Net premiums earned increased $26.4 million, or 10.4%, for the six months ended June 30, 2011 compared to the same period in 2010 primarily due to the growth of our U.S. insurance operations during 2010. Additionally, the commutation of swing-rated reinsurance contracts during the six months ended June 30, 2011 added $12.4 million to net premiums earned compared to $9.3 million during the six months ended June 30, 2010.

     Net losses and loss expenses. Net losses and loss expenses increased by $40.8 million, or 24.3%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net losses and loss expenses was primarily due to growth of the U.S. insurance operations and unfavorable prior year reserve development in the 2006 loss year related to directors and officers claims within our professional liability line of business related to a class action suit filed against a number of private equity firms alleging collusion.

     Overall, our U.S. insurance segment recorded net unfavorable reserve development of $12.0 million during the six months ended June 30, 2011 compared to net favorable reserve development of $24.6 million for the six months ended June 30, 2010, as shown in the tables below. The $12.0 million of net unfavorable reserve development recorded during the six months ended June 30, 2011 excludes the impact of the commutation of swing-rated reinsurance contracts of $11.5 million. The $24.6 million of net favorable reserve development recorded during the six months ended June 30, 2010 excludes the impact of the commutation of swing-rated reinsurance contracts of $8.9 million. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
										($ in millions)
Professional liability	$	—		$	(0.1	)	$	(0.2	)	$	(1.3	)	$	24.1		$	(2.2	)	$	0.5		$	(2.7	)	$	6.9		$	25.0
Healthcare		(0.2	)		(0.9	)		(1.8	)		0.3			(0.3	)		0.7			(1.7	)		1.2			(0.8	)		(3.5	)
General casualty		0.1			(0.4	)		(1.2	)		(11.1	)		—			—			—			—			—			(12.6	)
General property		—			—			(0.3	)		(0.6	)		—			—			(0.3	)		—			1.4			0.2
Programs		—			—			—			—			—			(0.6	)		0.8			1.2			1.5			2.9
	$	(0.1	)	$	(1.4	)	$	(3.5	)	$	(12.7	)	$	23.8		$	(2.1	)	$	(0.7	)	$	(0.3	)	$	9.0		$	12.0

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009			Total
	($ in millions)
Professional liability	$	—		$	—		$	(0.7	)	$	(5.8	)	$	(1.2	)	$	(0.9	)	$	0.1		$	1.7		$	(6.8	)
Healthcare		(0.8	)		(0.7	)		(0.6	)		(3.6	)		(1.0	)		0.5			1.7			(1.3	)		(5.8	)
General casualty		0.3			(1.0	)		(14.0	)		(1.5	)		—			(1.0	)		3.6			—			(13.6	)
General property		—			(0.1	)		0.9			(1.6	)		(0.2	)		1.5			(1.5	)		—			(1.0	)
Programs		—			—			—			—			—			2.1			—			0.5			2.6
	$	(0.5	)	$	(1.8	)	$	(14.4	)	$	(12.5	)	$	(2.4	)	$	2.2		$	3.9		$	0.9		$	(24.6	)

     The loss and loss expense ratio for the six months ended June 30, 2011 was 74.1% compared to 65.8% for the six months ended June 30, 2010. Net unfavorable reserve development and the impact of a commutation adjustment to ceded IBNR recognized during the six months ended June 30, 2011 increased the loss and loss expense ratio by 4.6 percentage points. Thus, the loss and loss expense ratio for the current loss year was 69.5%. In comparison, net favorable reserve development and the impact of a commutation

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adjustment to ceded IBNR recognized in the six months ended June 30, 2010 decreased the loss and loss expense ratio by 8.8 percentage points. Thus, the loss and loss expense ratio for that loss year was 74.6%, which includes a $12.0 million net loss on a Connecticut power plant explosion.

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

	Six Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, January 1	$	1,035.1		$	901.9
Incurred related to:
Commutation of variable-rated reinsurance contracts		11.5			8.9
Current period non-catastrophe		179.9			183.3
Current period property catastrophe		5.0			—
Prior period non-catastrophe		13.6			(25.6	)
Prior period property catastrophe		(1.6	)		1.0
Total incurred	$	208.4		$	167.6
Paid related to:
Current period non-catastrophe		4.8			2.9
Current period property catastrophe		0.5			—
Prior period non-catastrophe		79.6			57.3
Prior period property catastrophe		—			3.6
Total paid	$	84.9		$	63.8
Net reserve for losses and loss expenses, June 30		1,158.6			1,005.7
Losses and loss expenses recoverable		421.4			378.0
Reserve for losses and loss expenses, June 30	$	1,580.0		$	1,383.7

     Acquisition costs. Acquisition costs increased by $4.2 million, or 12.8%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase was primarily caused by increased net premiums earned. The acquisition cost ratio increased to 13.1% for the six months ended June 30, 2011 from 12.9% for the same period in 2010.

     General and administrative expenses. General and administrative expenses increased by $4.2 million, or 7.3%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in general and administrative expenses was due to an increase in headcount offset by a decrease in performance-based incentive compensation. The decrease in the general and administrative expense ratio from 22.7% for the six months ended June 30, 2010 to 22.1% for the same period in 2011 was primarily caused by increased net premiums earned.

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International Insurance Segment

     The following table summarizes the underwriting results and associated ratios for the international insurance segment for each of the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	($ in millions)
Revenues
Gross premiums written	$	178.6		$	167.6		$	289.9		$	289.0
Net premiums written		109.0			98.5			183.9			179.6
Net premiums earned		80.0			89.4			156.3			176.4
Expenses
Net losses and loss expenses	$	72.1		$	64.6		$	143.3		$	122.0
Acquisition costs		(0.7	)		(0.1	)		(2.6	)		—
General and administrative expenses		20.7			22.6			41.4			44.5
Underwriting (loss) income		(12.1	)		2.3			(25.8	)		9.9
Ratios
Loss and loss expense ratio		90.2	%		72.2	%		91.7	%		69.1	%
Acquisition cost ratio		(0.9	%)		(0.1	%)		(1.7	%)		0.0	%
General and administrative expense ratio		25.8	%		25.3	%		26.5	%		25.2	%
Expense ratio		24.9	%		25.2	%		24.8	%		25.2	%
Combined ratio		115.1	%		97.4	%		116.5	%		94.3	%

Comparison of Three Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written increased by $11.0 million, or 6.6%, for the three months ended June 30, 2011 compared to the same period in 2010. The increase was primarily a result of new business, including from new products, specifically in our small to mid-sized enterprise (“SME”) insurance products and our trade credit line of business. In addition, we increased premiums in our healthcare line of business and experienced rate increases within our general property line of business. These increases were partially offset by the continued trend of the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) and increased competition in our international insurance segment.

     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Three Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
General property	$	63.3	$	59.7	$	3.6			6.0	%
Professional liability		48.2		50.5		(2.3	)		(4.6	)
General casualty		45.3		45.1		0.2			0.4
Healthcare		19.2		12.3		6.9			56.1
Other		2.6		—		2.6			n/a
	$	178.6	$	167.6	$	11.0			6.6	%

     Net premiums written increased $10.5 million, or 10.7%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. We ceded to reinsurers 39.0% of gross premiums written for the three months ended June 30, 2011 compared to 41.2% for the three months ended June 30, 2010. Net premiums written increased at a higher percentage than gross premiums written due to the non-renewal of international catastrophe coverage which resulted in approximately $2.0 million decrease in ceded premiums written.

     Net premiums earned decreased $9.4 million, or 10.5%, primarily due to lower net premiums written during 2010.

     Net losses and loss expenses. Net losses and loss expenses increased by $7.5 million, or 11.6%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net losses and loss expenses was due to lower prior year net favorable development and to higher catastrophe loss activity during the three months ended June 30, 2011. We recognized losses of $16.0 million resulting from storms in the Midwestern U.S., a $12.5 million increase in estimated losses from the Tohoku

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earthquake and tsunami, a $3.0 million increase in estimated losses related to the New Zealand earthquake and a $1.0 million decrease related to the Australian storms. In comparison, net losses and loss expenses incurred during the three months ended June 30, 2010 included net losses of $24.0 million from a mine collapse, the Baja, Mexico earthquake and the Tennessee floods.

     Overall, our international insurance segment recorded net favorable reserve development of $12.0 million during the three months ended June 30, 2011 compared to net favorable reserve development of $23.2 million for the three months ended June 30, 2010, as shown in the tables below. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
General property	$	—		$	—		$	(0.3	)	$	(0.2	)	$	(0.4	)	$	(1.5	)	$	(7.4	)	$	(6.0	)	$	(0.3	)	$	(16.1	)
Professional liability		(0.1	)		(0.1	)		(1.4	)		(3.4	)		(1.8	)		(4.1	)		14.0			—			—			3.1
General casualty		(0.2	)		(1.1	)		(0.8	)		(2.2	)		(7.1	)		(4.4	)		—			—			22.5			6.7
Healthcare		—			(0.2	)		(0.5	)		(0.5	)		(0.5	)		(4.0	)		—			—			—			(5.7	)
	$	(0.3	)	$	(1.4	)	$	(3.0	)	$	(6.3	)	$	(9.8	)	$	(14.0	)	$	6.6		$	(6.0	)	$	22.2		$	(12.0	)

     The unfavorable reserve development in our international insurance segment for the 2010 loss year was primarily due to a casualty claim emanating from an oil field service risk.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009		Total
	($ in millions)
General property	$	—		$	(0.1	)	$	—		$	(1.6	)	$	(0.4	)	$	(1.5	)	$	(10.7	)	$	3.7	$	(10.6	)
Professional liability		—			(3.6	)		3.9			(2.8	)		7.9			—			—			—		5.4
General casualty		2.7			(0.6	)		1.6			(10.1	)		(1.5	)		(1.5	)		—			—		(9.4	)
Healthcare		(0.1	)		(0.3	)		(0.4	)		(0.5	)		(7.3	)		—			—			—		(8.6	)
	$	2.6		$	(4.6	)	$	5.1		$	(15.0	)	$	(1.3	)	$	(3.0	)	$	(10.7	)	$	3.7	$	(23.2	)

     The loss and loss expense ratio for the three months ended June 30, 2011 was 90.2%, compared to 72.2% for the three months ended June 30, 2010. The net favorable reserve development recognized during the three months ended June 30, 2011 decreased the loss and loss expense ratio by 15.0 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 105.2%. Comparatively, the net favorable reserve development recognized during the three months ended June 30, 2010 decreased the loss and loss expense ratio by 26.0 percentage points. Thus, the loss and loss expense ratio related to that period’s business was 98.2%. The increase in the loss and loss expense ratio for the current loss year was primarily due to the $30.5 million of catastrophe losses, which contributed 38.1 percentage points to the loss and loss expense ratio.

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

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	Three Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, April 1	$	1,721.8		$	1,776.0
Incurred related to:
Current period non-catastrophe		53.6			87.8
Current period property catastrophe		30.5			—
Prior period non-catastrophe		(12.2	)		(18.3	)
Prior period property catastrophe		0.2			(4.9	)
Total incurred	$	72.1		$	64.6
Paid related to:
Current period non-catastrophe		1.9			2.9
Current period property catastrophe		4.9			18.9
Prior period non-catastrophe		17.1			27.5
Prior period property catastrophe		0.2			4.2
Total paid	$	24.1		$	53.5
Foreign exchange revaluation		5.2			(4.3	)
Net reserve for losses and loss expenses, June 30		1,775.0			1,782.8
Losses and loss expenses recoverable		592.0			554.7
Reserve for losses and loss expenses, June 30	$	2,367.0		$	2,337.5

     Acquisition costs. Acquisition costs decreased by $0.6 million for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The negative cost represents ceding commissions received on ceded premiums in excess of the brokerage fees and commissions paid on gross premiums written. The acquisition cost ratio decreased from negative 0.1% for the three months ended June 30, 2010 to negative 0.9% for the three months ended June 30, 2011.

     General and administrative expenses. General and administrative expenses decreased $1.9 million, or 8.4%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The decrease in general and administrative expenses was primarily due to a decrease in salaries, benefits and incentive compensation expense. The general and administrative expense ratios for the three months ended June 30, 2011 and 2010 were 25.8% and 25.3%, respectively.

Comparison of Six Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written increased by $0.9 million, or 0.3%, for the six months ended June 30, 2011 compared to the same period in 2010. The increase in gross premiums written was primarily a result of new business, including from new products, specifically related to our SME insurance products and our trade credit line of business. In addition, we increased premiums in our healthcare line of business and experienced rate increases within our general property line of business. These increases were partially offset by the continued trend of the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions) including the non-renewal of one general property policy that was previously written during the six months ended June 30, 2010 for $5.1 million and the non-renewal of several policies totaling $10.1 million in our general casualty line of business.

     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Six Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
General property	$	100.5	$	99.4	$	1.1			1.1	%
Professional liability		77.1		77.7		(0.6	)		(0.8	)
General casualty		68.7		76.8		(8.1	)		(10.5	)
Healthcare		39.9		35.1		4.8			13.7
Other		3.7		—		3.7			n/a
	$	289.9	$	289.0	$	0.9			0.3	%

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     Net premiums written increased $4.3 million, or 2.4%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. Net premiums written increased at a higher percentage than gross premiums written due to the non-renewal of international catastrophe coverage which resulted in approximately $2.0 million decrease in ceded premiums written. We ceded to reinsurers 36.6% of gross premiums written for the six months ended June 30, 2011 compared to 37.9% for the six months ended June 30, 2010.

     Net premiums earned decreased $20.1 million, or 11.4%, primarily due to lower net premiums written during 2010.

     Net losses and loss expenses. Net losses and loss expenses increased by $21.3 million, or 17.5%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net losses and loss expenses was due to lower net favorable prior year reserve development and higher catastrophe loss activity in the current period, which included net losses and loss expenses incurred of $42.0 million related to the Tohoku earthquake and tsunami, $16.0 million related to the storms in the Midwestern U.S, $12.7 million related to the New Zealand earthquake and $3.0 million related to the Australian storms.

     Overall, our international insurance segment recorded net favorable reserve development of $40.6 million during the six months ended June 30, 2011 compared to net favorable reserve development of $80.8 million for the six months ended June 30, 2010, as shown in the tables below. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
General property	$	—		$	—		$	(0.7	)	$	(2.3	)	$	0.3		$	(1.6	)	$	(12.8	)	$	(14.6	)	$	(2.5	)	$	(34.2	)
Professional liability		2.0			(1.1	)		(3.9	)		(7.7	)		(10.0	)		(4.1	)		23.0									(1.8	)
General casualty		(0.7	)		(2.4	)		4.4			(12.5	)		4.2			(12.0	)		—			7.2			22.5			10.7
Healthcare		(0.1	)		(0.5	)		(0.9	)		(1.0	)		(8.8	)		(4.0	)											(15.3	)
	$	1.2		$	(4.0	)	$	(1.1	)	$	(23.5	)	$	(14.3	)	$	(21.7	)	$	10.2		$	(7.4	)	$	20.0		$	(40.6	)

     The unfavorable reserve development in our international insurance segment for the 2010 loss year was primarily due to a casualty claim emanating from an oil field service risk.

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2010
	2002			2003			2004			2005			2006			2007			2008			2009		Total
	($ in millions)
General property	$	—		$	(0.2	)	$	(0.3	)	$	(2.2	)	$	(5.7	)	$	(6.1	)	$	(14.6	)	$	4.3	$	(24.8	)
Professional liability		—			(3.8	)		0.6			(20.7	)		7.9			—			—			—		(16.0	)
General casualty		2.7			(2.2	)		(14.3	)		(12.5	)		(6.2	)		(1.5	)		11.3			—		(22.7	)
Healthcare		(0.2	)		(0.6	)		(0.8	)		(8.4	)		(7.3	)		—			—			—		(17.3	)
	$	2.5		$	(6.8	)	$	(14.8	)	$	(43.8	)	$	(11.3	)	$	(7.6	)	$	(3.3	)	$	4.3	$	(80.8	)

     The loss and loss expense ratio for the six months ended June 30, 2011 was 91.7%, compared to 69.1% for the six months ended June 30, 2010. The net favorable reserve development recognized during the six months ended June 30, 2011 decreased the loss and loss expense ratio by 26.0 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 117.7%. Comparatively, the net favorable reserve development recognized during the six months ended June 30, 2010 decreased the loss and loss expense ratio by 45.8 percentage points. Thus, the loss and loss expense ratio related to that period’s business was 114.9%. The increase in the loss and loss expense ratio for the current loss year was primarily due to higher loss activity in the current loss year compared to prior years. Loss activity during the six months ended June 30, 2010 included $81.5 million related to the earthquakes in Haiti, Chile and Baja, Mexico, a mine collapse and Tennessee floods and contributed 46.2 percentage points to that year’s loss and loss expense ratio. The $73.7 million of losses from the Australian storms, New Zealand earthquake, Tohoku earthquake and tsunami and Midwestern U.S. storms during the six months ended June 30, 2011 contributed 47.2 percentage points to the current period’s loss and loss expense ratio.

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     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

	Six Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, January 1	$	1,695.7		$	1,790.1
Incurred related to:
Current period non-catastrophe		110.2			152.8
Current period property catastrophe		73.7			50.0
Prior period non-catastrophe		(36.7	)		(76.5	)
Prior period property catastrophe		(3.9	)		(4.3	)
Total incurred	$	143.3		$	122.0
Paid related to:
Current period non-catastrophe		2.2			8.6
Current period property catastrophe		5.2			18.9
Prior period non-catastrophe		63.2			83.5
Prior period property catastrophe		3.7			9.0
Total paid	$	74.3		$	120.0
Foreign exchange revaluation		10.3			(9.3	)
Net reserve for losses and loss expenses, June 30		1,775.0			1,782.8
Losses and loss expenses recoverable		592.0			554.7
Reserve for losses and loss expenses, June 30	$	2,367.0		$	2,337.5

     Acquisition costs. Acquisition costs decreased by $2.6 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The negative cost represents ceding commissions received on ceded premiums in excess of the brokerage fees and commissions paid on gross premiums written. The acquisition cost ratio decreased from 0.0% for the six months ended June 30, 2010 to negative 1.7% for the six months ended June 30, 2011.

     General and administrative expenses. General and administrative expenses decreased $3.1 million, or 7.0%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The decrease in general and administrative expenses was primarily due to a decrease in salaries, benefits and incentive compensation expense offset by an increase in professional fees for our Lloyd’s of London Syndicate 2232 of $2.1 million. The general and administrative expense ratios for the six months ended June 30, 2011 and 2010 were 26.5% and 25.2%, respectively. The increase was due to a lower decrease in general and administrative expenses compared to the decrease in net premiums earned.

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Reinsurance Segment

     The following table summarizes the underwriting results and associated ratios for the reinsurance segment for each of the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	($ in millions)
Revenues
Gross premiums written	$	114.3		$	136.6		$	380.3		$	357.2
Net premiums written		113.9			136.0			380.0			356.7
Net premiums earned		129.4			123.8			252.6			245.9
Expenses
Net losses and loss expenses	$	71.1		$	54.9		$	188.6		$	131.2
Acquisition costs		24.8			22.1			46.7			45.9
General and administrative expenses		15.3			14.8			31.7			29.3
Underwriting income (loss)		18.2			32.0			(14.4	)		39.5
Ratios
Loss and loss expense ratio		54.9	%		44.4	%		74.7	%		53.4	%
Acquisition cost ratio		19.2	%		17.9	%		18.5	%		18.7	%
General and administrative expense ratio		11.8	%		11.9	%		12.6	%		11.9	%
Expense ratio		31.0	%		29.8	%		31.1	%		30.6	%
Combined ratio		85.9	%		74.2	%		105.8	%		84.0	%

Comparison of Three Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written decreased by $22.3 million, or 16.3%, for the three months ended June 30, 2011 compared to the same period in 2010. The decrease in gross premiums written was primarily due to the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions). These decreases were partially offset by gross premiums written in our new global marine and specialty division and the continued build-out of our international platform.

     The table below illustrates our gross premiums written by geographic location for our reinsurance operations.

	Three Months Ended
	June 30,
	2011		2010
	($ in millions)
Bermuda	$	55.0	$	69.4
United States		42.5		57.7
Europe		6.8		3.7
Singapore		10.0		5.8
	$	114.3	$	136.6

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     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Three Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
Property reinsurance	$	49.2	$	53.1	$	(3.9	)		(7.3	)%
General casualty reinsurance*		32.1		28.4		3.7			13.0
International reinsurance		19.0		27.1		(8.1	)		(29.9	)
Professional liability reinsurance		4.7		23.7		(19.0	)		(80.2	)
Specialty reinsurance		9.3		4.3		5.0			116.3
	$	114.3	$	136.6	$	(22.3	)		(16.3	)%

* Includes our facultative reinsurance line of business

     Net premiums written decreased by $22.1 million, or 16.3%, consistent with the decrease in gross premiums written. Net premiums earned increased $5.6 million, or 4.5%, as a result of the increase in net premiums written during the year ended December 31, 2010 and the six months ended June 30, 2011. In addition, upward adjustments on estimated premiums, the majority of which were fully earned, were higher by $4.1 million during the three months ended June 30, 2011 compared to the same period in 2010. Premiums related to our reinsurance business earn at a slower rate than those related to our direct insurance business. Direct insurance premiums typically earn ratably over the term of a policy. Reinsurance premiums under a quota share reinsurance contract are typically earned over the same period as the underlying policies, or risks, covered by the contract. As a result, the earning pattern of a quota share reinsurance contract may extend up to 24 months, reflecting the inception dates of the underlying policies. Property catastrophe premiums and premiums for other treaties written on a losses occurring basis earn ratably over the term of the reinsurance contract.

     Net losses and loss expenses. Net losses and loss expenses increased by $16.2 million, or 29.5%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in net losses and loss expenses was due to higher loss activity in the current period, which included net losses and loss expenses incurred of $25.0 million resulting from the Midwestern U.S. storms and changes in estimated net losses of $10.0 million related to the New Zealand earthquake offset by a $3.0 million decrease related to the Australian storms and the Tohoku earthquake. The current period’s losses were partially offset by higher net favorable prior year reserve development recognized during the three months ended June 30, 2011 compared to the same period in 2010.

     Overall, our reinsurance segment recorded net favorable prior year reserve development of $33.0 million and $20.0 million during the three months ended June 30, 2011 and 2010, respectively, as shown in the tables below. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
Property reinsurance	$	(0.1	)	$	(0.2	)	$	(0.5	)	$	(0.6	)	$	—		$	0.1		$	0.4		$	(0.2	)	$	0.3		$	(0.8	)
International reinsurance		—			—			(0.4	)		(1.1	)		(0.1	)		(1.8	)		(0.4	)		(0.7	)		(5.0	)		(9.5	)
General casualty reinsurance		—			0.3			0.5			(6.6	)		(0.9	)		(0.7	)		(0.2	)		—			—			(7.6	)
Professional liability reinsurance		(0.4	)		(0.9	)		(0.5	)		(4.6	)		(5.3	)		(0.7	)		(0.5	)		—			—			(12.9	)
Specialty reinsurance		—			—			(0.2	)		—			—			(0.8	)		—			0.1			(1.3	)		(2.2	)
	$	(0.5	)	$	(0.8	)	$	(1.1	)	$	(12.9	)	$	(6.3	)	$	(3.9	)	$	(0.7	)	$	(0.8	)	$	(6.0	)	$	(33.0	)

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	Loss Reserve Development by Loss Year
	For the Three Months Ended June 30, 2011
	2002		2003			2004			2005			2006			2007			2008		2009			Total
	($ in millions)
Property reinsurance	$	—	$	—		$	—		$	(0.1	)	$	—		$	—		$	—	$	(6.0	)	$	(6.1	)
International reinsurance		—		(0.1	)		—			—			—			(1.5	)		—		(0.1	)		(1.7	)
General casualty reinsurance		—		0.1			(2.7	)		(1.2	)		(0.3	)		(0.1	)		—		—			(4.2	)
Professional liability reinsurance		0.4		(1.3	)		(4.1	)		(2.7	)		(0.5	)		(0.2	)		—		—			(8.4	)
Specialty reinsurance		—		—			(0.1	)		(0.1	)		—			0.4			0.2		—			0.4
	$	0.4	$	(1.3	)	$	(6.9	)	$	(4.1	)	$	(0.8	)	$	(1.4	)	$	0.2	$	(6.1	)	$	(20.0	)

     The loss and loss expense ratio for the three months ended June 30, 2011 was 54.9%, compared to 44.4% for the three months ended June 30, 2010. Net favorable reserve development recognized during the three months ended June 30, 2011 reduced the loss and loss expense ratio by 25.5 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 80.4%. In comparison, net favorable reserve development recognized in the three months ended June 30, 2010 reduced the loss and loss expense ratio by 16.2 percentage points. Thus, the loss and loss expense ratio related to that loss year was 60.6%. The increase in the loss and loss expense ratio for the current loss year was primarily due to the $32.0 million of catastrophe losses, which contributed 24.7 percentage points to the loss and loss expense ratio.

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

	Three Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, April 1	$	1,293.4		$	1,185.0
Incurred related to:
Current period non-catastrophe		72.1			74.9
Current period property catastrophe		32.0			—
Prior period non-catastrophe		(34.1	)		(19.9	)
Prior period property catastrophe		1.1			(0.1	)
Total incurred	$	71.1		$	54.9
Paid related to:
Current period non-catastrophe		3.5			2.6
Current period property catastrophe		4.5			—
Prior period non-catastrophe		52.2			36.6
Prior period property catastrophe		0.5			1.2
Total paid	$	60.7		$	40.4
Net reserve for losses and loss expenses, June 30		1,303.8			1,199.5
Losses and loss expenses recoverable		0.5			(0.3	)
Reserve for losses and loss expenses, June 30	$	1,304.3		$	1,199.2

     Acquisition costs. Acquisition costs increased by $2.7 million, or 12.2%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010 primarily as a result of a change in business mix with more weight to contracts carrying higher acquisition cost ratios. The acquisition cost ratio was 19.2% for the three months ended June 30, 2011 compared to 17.9% for the three months ended June 30, 2010.

     General and administrative expenses. General and administrative expenses increased $0.5 million, or 3.4%, for the three months ended June 30, 2011 compared to the three months ended June 30, 2010. The increase in general and administrative expenses was primarily due an increase in staff and related costs resulting from growth in our international platform. The general and administrative expense ratios for the three months ended June 30, 2011 and 2010 were 11.8% and 11.9%, respectively.

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Comparison of Six Months Ended June 30, 2011 and 2010

     Premiums. Gross premiums written increased by $23.1 million, or 6.5%, for the six months ended June 30, 2011 compared to the same period in 2010. The increase in gross premiums written was primarily due to $21.1 million of new business related to our new global marine and specialty division in addition to increased writings in our international reinsurance lines of business with the build out of our London and Singapore offices, including business written through our Lloyd’s Syndicate 2232. These increases were partially offset by the non-renewal of business that did not meet our underwriting requirements (which included inadequate pricing and/or terms and conditions).

     The table below illustrates our gross premiums written by geographic location for our reinsurance operations.

	Six Months Ended
	June 30,
	2011		2010
	($ in millions)
Bermuda	$	152.4	$	149.6
United States		165.8		171.5
Europe		37.2		26.6
Singapore		24.9		9.5
	$	380.3	$	357.2

     The table below illustrates our gross premiums written by line of business for each of the periods indicated.

	Six Months Ended
	June 30,				Dollar			Percentage
	2011		2010		Change			Change
	($ in millions)
Property reinsurance	$	125.2	$	113.8	$	11.4			10.0	%
General casualty reinsurance*		87.8		95.4		(7.6	)		(8.0	)
International reinsurance		77.1		68.1		9.0			13.2
Professional liability reinsurance		40.3		60.0		(19.7	)		(32.8	)
Specialty reinsurance		49.9		19.9		30.0			150.8
	$	380.3	$	357.2	$	23.1			6.5	%

* Includes our facultative reinsurance line of business

     Net premiums written increased by $23.3 million, or 6.5%, consistent with the increase in gross premiums written. Net premiums earned increased $6.7 million, or 2.7%, as a result of the increase in net premiums written. Premiums related to our reinsurance business earn at a slower rate than those related to our direct insurance business. Direct insurance premiums typically earn ratably over the term of a policy. Reinsurance premiums under a quota share reinsurance contract are typically earned over the same period as the underlying policies, or risks, covered by the contract. As a result, the earning pattern of a quota share reinsurance contract may extend up to 24 months, reflecting the inception dates of the underlying policies. Property catastrophe premiums and premiums for other treaties written on a losses occurring basis earn ratably over the term of the reinsurance contract.

     Net losses and loss expenses. Net losses and loss expenses increased by $57.4 million, or 43.8%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in net losses and loss expenses was due to higher loss activity in the current period, which included net losses and loss expenses incurred from the Tohoku earthquake and tsunami of $44.5 million, $38.5 million from the New Zealand earthquake, $25.0 million related to the Midwestern U.S. storms and $13.0 million related to the Australian storms. The increase was partially offset by higher net favorable prior year reserve development.

     Overall, our reinsurance segment recorded net favorable prior year reserve development of $70.9 million and $32.7 million during the six months ended June 30, 2011 and 2010, respectively, as shown in the tables below. In the tables, a negative number represents net favorable reserve development and a positive number represents net unfavorable reserve development.

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	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			2010			Total
	($ in millions)
Property reinsurance	$	(0.1	)	$	(0.5	)	$	(0.7	)	$	(1.9	)	$	(1.0	)	$	(2.1	)	$	(1.2	)	$	(1.0	)	$	0.3		$	(8.2	)
International		—			(0.1	)		(1.0	)		(2.6	)		(0.2	)		(2.0	)		(0.6	)		(2.8	)		(6.7	)		(16.0	)
General casualty		(0.2	)		(1.7	)		(1.3	)		(11.7	)		(1.6	)		(1.1	)		(0.3	)		—			2.9			(15.0	)
Professional liability
reinsurance		(0.3	)		(0.7	)		(0.6	)		(8.5	)		(9.4	)		(1.1	)		(0.8	)		—			—			(21.4	)
Specialty reinsurance		—			—			(0.2	)		—			—			(0.8	)		(0.2	)		(5.7	)		(3.4	)		(10.3	)
	$	(0.6	)	$	(3.0	)	$	(3.8	)	$	(24.7	)	$	(12.2	)	$	(7.1	)	$	(3.1	)	$	(9.5	)	$	(6.9	)	$	(70.9	)

	Loss Reserve Development by Loss Year
	For the Six Months Ended June 30, 2011
	2002			2003			2004			2005			2006			2007			2008			2009			Total
	($ in millions)
Property reinsurance	$	—		$	—		$	(0.1	)	$	(1.4	)	$	—		$	—		$	0.7		$	(7.5	)	$	(8.3	)
International reinsurance		(0.1	)		(0.2	)		(0.1	)		(0.2	)		—			(1.5	)		—			(0.1	)		(2.2	)
General casualty reinsurance		—			0.9			(2.8	)		(4.1	)		(0.6	)		(0.1	)		—			—			(6.7	)
Professional liability reinsurance		(0.3	)		(1.8	)		(6.8	)		(2.8	)		(0.5	)		(0.2	)		—			—			(12.4	)
Specialty reinsurance		—			—			(0.1	)		0.4			—			(0.5	)		(2.9	)		—			(3.1	)
	$	(0.4	)	$	(1.1	)	$	(9.9	)	$	(8.1	)	$	(1.1	)	$	(2.3	)	$	(2.2	)	$	(7.6	)	$	(32.7	)

     The loss and loss expense ratio for the six months ended June 30, 2011 was 74.7%, compared to 53.4% for the six months ended June 30, 2010. Net favorable reserve development recognized during the six months ended June 30, 2011 reduced the loss and loss expense ratio by 28.1 percentage points. Thus, the loss and loss expense ratio related to the current loss year was 102.8%. In comparison, net favorable reserve development recognized in the six months ended June 30, 2010 reduced the loss and loss expense ratio by 13.3 percentage points. Thus, the loss and loss expense ratio related to that loss year was 66.7%. The increase in the loss and loss expense ratio for the current loss year was primarily due to the $121.0 million of catastrophe losses from the Australian storms, Midwestern U.S. storms, New Zealand earthquake and Tohoku earthquake and tsunami during the six months ended June 30, 2011, discussed above, which contributed 47.9 percentage points to the loss and loss expense ratio for the six months ended June 30, 2011.

     The table below is a reconciliation of the beginning and ending reserves for losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.

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	Six Months Ended
	June 30,
	2011			2010
	($ in millions)
Net reserves for losses and loss expenses, January 1	$	1,220.8		$	1,149.8
Incurred related to:
Current period non-catastrophe		138.5			148.9
Current period property catastrophe		121.0			15.0
Prior period non-catastrophe		(68.7	)		(31.3	)
Prior period property catastrophe		(2.2	)		(1.4	)
Total incurred	$	188.6		$	131.2
Paid related to:
Current period non-catastrophe		4.1			2.5
Current period property catastrophe		4.5			0.4
Prior period non-catastrophe		91.4			76.0
Prior period property catastrophe		5.6			2.6
Total paid	$	105.6		$	81.5
Net reserve for losses and loss expenses, June 30		1,303.8			1,199.5
Losses and loss expenses recoverable		0.5			(0.3	)
Reserve for losses and loss expenses, June 30	$	1,304.3		$	1,199.2

     Acquisition costs. Acquisition costs increased by $0.8 million, or 1.7%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily as a result of the increase in earned premium. The acquisition cost ratio was 18.5% for the six months ended June 30, 2011, compared to 18.7% for the six months ended June 30, 2010.

     General and administrative expenses. General and administrative expenses increased $2.4 million, or 8.2%, for the six months ended June 30, 2011 compared to the six months ended June 30, 2010. The increase in general and administrative expenses was primarily due to an increase in salary and related costs in addition to professional fees related to the operation of Lloyd’s Syndicate 2232. The general and administrative expense ratios for the six months ended June 30, 2011 and 2010 were 12.6% and 11.9%, respectively.

Reserves for Losses and Loss Expenses

     Reserves for losses and loss expenses by segment were comprised of the following:

	U.S. Insurance						International Insurance						Reinsurance					Total
	June 30,			Dec. 31,			June 30,			Dec. 31,			June 30,			Dec. 31,		June 30,			Dec. 31,
	2011			2010			2011			2010			2011			2010		2011			2010
	($ in millions)
Case reserves	$	364.9		$	295.3		$	684.2		$	498.3		$	413.1		$	373.0	$	1,462.2		$	1,166.5
IBNR		1,215.1			1,136.4			1,682.8			1,728.4			891.2			847.8		3,789.1			3,712.7
Reserve for losses and loss expenses		1,580.0			1,431.7			2,367.0			2,226.7			1,304.3			1,220.8		5,251.3			4,879.2
Reinsurance recoverables		(421.4	)		(396.6	)		(592.0	)		(531.0	)		(0.5	)		—		(1,013.9	)		(927.6	)
Net reserve for losses and loss expenses	$	1,158.6		$	1,035.1		$	1,775.0		$	1,695.7		$	1,303.8		$	1,220.8	$	4,237.4		$	3,951.6

     We participate in certain lines of business where claims may not be reported for many years. Accordingly, management does not solely rely upon reported claims on these lines for estimating ultimate liabilities. We also use statistical and actuarial methods to estimate expected ultimate losses and loss expenses. Loss reserves do not represent an exact calculation of liability. Rather, loss reserves are estimates of what we expect the ultimate resolution and administration of claims will cost. These estimates are based on various factors including underwriters’ expectations about loss experience, actuarial analysis, comparisons with the results of industry benchmarks and loss experience to date. Loss reserve estimates are refined as experience develops and as claims are reported and resolved. Establishing an appropriate level of loss reserves is an inherently uncertain process. Ultimate losses and loss expenses may differ from our reserves, possibly by material amounts.

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     The following tables provide our ranges of loss and loss expense reserve estimates by business segment as of June 30, 2011:

	Reserve for Losses and Loss Expenses
	Gross of Reinsurance Recoverable(1)
	Carried		Low		High
	Reserves		Estimate		Estimate
	($ in millions)
U.S. insurance	$	1,580.0	$	1,279.5	$	1,731.2
International insurance		2,367.0		1,809.7		2,682.9
Reinsurance		1,304.3		1,016.0		1,505.6

	Reserve for Losses and Loss Expenses
	Net of Reinsurance Recoverable(2)
	Carried		Low		High
	Reserves		Estimate		Estimate
	($ in millions)
U.S. insurance	$	1,158.6	$	933.1	$	1,264.5
International insurance		1,775.0		1,342.7		2,022.4
Reinsurance		1,303.8		1,015.5		1,504.4

(1)	For statistical reasons, it is not appropriate to add together the ranges of each business segment in an effort to determine the low and high range around the consolidated loss reserves. On a gross basis, the consolidated low estimate is $4,370.9 million and the consolidated high estimate is $5,653.9 million.
(2)	For statistical reasons, it is not appropriate to add together the ranges of each business segment in an effort to determine the low and high range around the consolidated loss reserves. On a net basis, the consolidated low estimate is $3,510.9 million and the consolidated high estimate is $4,571.6 million.

     Our range for each business segment was determined by utilizing multiple actuarial loss reserving methods along with various assumptions of reporting patterns and expected loss ratios by loss year. The various outcomes of these techniques were combined to determine a reasonable range of required loss and loss expense reserves. While we believe our approach to determine the range of loss and loss expense is reasonable, there are no assurances that actual loss experience will be within the ranges of loss and loss expense noted above.

     Our selection of the actual carried reserves is generally above the midpoint of the range. We believe that we should be prudent in our reserving practices due to the lengthy reporting patterns and relatively large limits of net liability for any one risk of our direct excess casualty business and of our casualty reinsurance business. Thus, due to this uncertainty regarding estimates for reserve for losses and loss expenses, we have carried our consolidated reserve for losses and loss expenses, net of reinsurance recoverable, above the midpoint of the low and high estimates for the consolidated net losses and loss expenses. We believe that relying on the more prudent actuarial indications is appropriate for these lines of business.

Reinsurance Recoverable

     The following table illustrates our reinsurance recoverable as of June 30, 2011 and December 31, 2010:

	Reinsurance Recoverable
	As of		As of
	June 30,		December 31,
	2011		2010
	($ in millions)
Ceded case reserves	$	262.6	$	206.2
Ceded IBNR reserves		751.3		721.4
Reinsurance recoverable	$	1,013.9	$	927.6

     We remain obligated for amounts ceded in the event our reinsurers do not meet their obligations. Accordingly, we have evaluated the reinsurers that are providing reinsurance protection to us and will continue to monitor their credit ratings and financial stability. We generally have the right to terminate our treaty reinsurance contracts at any time, upon prior written notice to the reinsurer, under specified circumstances, including the assignment to the reinsurer by A.M. Best of a financial strength rating of less than “A-.”

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Approximately 95% of ceded reserves as of June 30, 2011 were recoverable from reinsurers who had an A.M. Best rating of “A-” or higher.

Liquidity and Capital Resources

General

     As of June 30, 2011 and December 31, 2010, our shareholders’ equity was $3.0 billion and $3.1 billion, respectively. The decrease was impacted by our share and warrant repurchase activities of $113.6 million during the six months ended June 30, 2011.

     Holdings is a holding company and transacts no business of its own. Cash flows to Holdings may comprise dividends, advances and loans from its subsidiary companies. Holdings is therefore reliant on receiving dividends and other permitted distributions from its subsidiaries to make dividend payments on its common shares. Under Swiss law, distributions to shareholders may be paid out only if the company has sufficient distributable profits from previous fiscal years, or if the company has freely distributable reserves, each as presented on the audited annual stand-alone statutory balance sheet. Distributions to shareholders out of the share and participation capital may be made by way of a capital reduction in the form of a reduction in the par value of the common shares to achieve a similar result as the payment of a dividend.

     Allied World Bermuda is a holding company and transacts no business of its own. Cash flows to Allied World Bermuda may comprise dividends, advances and loans from its subsidiary companies. Allied World Bermuda is therefore reliant on receiving dividends and other permitted distributions from its subsidiaries to make principal and interest payments on its senior notes.

Capital Activities

     In May 2010, the company established a share repurchase program in order to repurchase Holdings’ common shares. Repurchases under the authorization may be effected from time to time through open market purchases, privately negotiated transactions, and tender offers or otherwise. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the company’s capital position, legal requirements and other factors. During the six months ended June 30, 2011, we repurchased through open-market purchases 969,163 shares at a total cost of $60.0 million, for an average price of $61.91 per share. No shares were repurchased during the three months ended June 30, 2011 because of the merger negotiations with Transatlantic. We have classified these repurchased shares as “treasury shares, at cost” on the consolidated balance sheets.

     In November 2010, Allied World Bermuda issued $300 million senior notes due in 2020. The senior notes bear interest at an annual rate of 5.50% per year and were priced to yield 5.56%. Interest on the senior notes is payable semi-annually on May 15 and November 15 of each year commencing on May 15, 2011. The net proceeds from the offering of the senior notes were used for general corporate purposes, including the repurchase of the company’s outstanding common shares. The senior notes are the company’s unsecured and unsubordinated obligations and rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness. We may redeem the senior notes at any time or from time to time in whole or in part at a redemption price equal to the greater of the principal amount of the senior notes to be redeemed or a make-whole price, plus accrued and unpaid interest. The senior notes includes covenants and events of default that are usual and customary, but do not contain any financial covenants. In addition, these senior notes as well as the 7.50% senior notes issued in 2006 have been unconditionally and irrevocably guaranteed for the payment of the principal and interest by Holdings.

     In February 2011, we repurchased a warrant owned by American International Group, Inc. (“AIG”) in a privately negotiated transaction. The warrant entitled AIG to purchase 2,000,000 of our common shares for $34.20 per share. We repurchased the warrant for an aggregate purchase price of $53.6 million. The repurchase of the warrant was recognized as a reduction in “additional paid-in capital” in the consolidated balance sheets. The repurchase was executed separately from the company’s share repurchase program.

     We believe our company’s capital position continues to remain well within the range needed for our business requirements and we have sufficient liquidity to fund our ongoing operations.

Restrictions and Specific Requirements

     The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet various defined statutory ratios, including solvency and liquidity requirements. Some jurisdictions also place restrictions on the declaration and payment of dividends and other distributions.

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     The payment of dividends from Holdings’ Bermuda domiciled operating subsidiary is, under certain circumstances, limited under Bermuda law, which requires our Bermuda operating subsidiary to maintain certain measures of solvency and liquidity. Holdings’ U.S. domiciled operating subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. In particular, payments of dividends by Allied World Assurance Company (U.S.) Inc., Allied World National Assurance Company, Allied World Reinsurance Company, Darwin National Assurance Company, Darwin Select Insurance Company and Vantapro Specialty Insurance Company are subject to restrictions on statutory surplus pursuant to the respective states in which these insurance companies are domiciled. Each state requires prior regulatory approval of any payment of extraordinary dividends. In addition, Allied World Assurance Company, AG is subject to Swiss financial and regulatory restrictions limiting its ability to declare and pay dividends and Allied World Assurance Company (Europe) Limited and Allied World Assurance Company (Reinsurance) Limited are subject to regulatory restrictions limiting their ability to declare and pay any dividends without the consent of the Central Bank of Ireland. We also have branch operations in Canada, Hong Kong and Singapore, which have regulatory restrictions limiting their ability to declare and pay dividends. We also have insurance subsidiaries that are the parent company for other insurance subsidiaries, which means that dividends and other distributions will be subject to multiple layers of regulations in order to dividend funds to Holdings. The inability of the subsidiaries of Holdings to pay dividends and other permitted distributions could have a material adverse effect on Holdings’ cash requirements and our ability to make principal, interest and dividend payments on the senior notes and common shares.

     Holdings’ operating subsidiary in Bermuda, Allied World Assurance Company, Ltd, is neither licensed nor admitted as an insurer, nor is it accredited as a reinsurer, in any jurisdiction in the United States. As a result, it is generally required to post collateral security with respect to any reinsurance liabilities it assumes from ceding insurers domiciled in the United States in order for U.S. ceding companies to obtain credit on their U.S. statutory financial statements with respect to insurance liabilities ceded to them. Under applicable statutory provisions, the security arrangements may be in the form of letters of credit, reinsurance trusts maintained by trustees or funds-withheld arrangements where assets are held by the ceding company.

     Allied World Assurance Company, Ltd uses trust accounts primarily to meet security requirements for inter-company and certain reinsurance transactions. We also have cash and cash equivalents and investments on deposit with various state or government insurance departments or pledged in favor of ceding companies in order to comply with relevant insurance regulations. In addition, Allied World Assurance Company, Ltd currently has access to up to $1.7 billion in letters of credit under two letter of credit facilities, $900 million with Citibank Europe plc and $800 million with a syndication of lenders described below. These facilities are used to provide security to reinsureds and are collateralized by us, at least to the extent of letters of credit outstanding at any given time. The letters of credit issued under the credit facility with Citibank Europe plc are deemed to be automatically extended without amendment for twelve months from the expiry date, or any future expiration date unless at least 30 days prior to any expiration date Citibank Europe plc notifies us that they elect not to consider the letters of credit renewed for any such additional period. If Citibank Europe plc no longer provides capacity under the credit facility it may limit our ability to meet our security requirements and would require us to obtain other sources of security at terms that may not be favorable to us.

     In November 2007, we entered into an $800 million five-year senior credit facility (the “Credit Facility”) with a syndication of lenders. The Credit Facility consists of a $400 million secured letter of credit facility for the issuance of standby letters of credit (the “Secured Facility”) and a $400 million unsecured facility for the making of revolving loans and for the issuance of standby letters of credit (the “Unsecured Facility”). Both the Secured Facility and the Unsecured Facility have options to increase the aggregate commitments by up to $200 million, subject to approval of the lenders. The Credit Facility will be used for general corporate purposes and to issue standby letters of credit. The Credit Facility contains representations, warranties and covenants customary for similar bank loan facilities, including a covenant to maintain a ratio of consolidated indebtedness to total capitalization as of the last day of each fiscal quarter or fiscal year of not greater than 0.35 to 1.0 and a covenant under the Unsecured Facility to maintain a certain consolidated net worth. In addition, each material insurance subsidiary must maintain a financial strength rating from A.M. Best Company of at least A- under the Unsecured Facility and of at least B++ under the Secured Facility. As of June 30, 2011 we had a consolidated indebtedness to total capitalization of 0.21 to 1.0 and all of our subsidiaries had a financial strength rating from A.M. Best of A. The Unsecured Facility required a minimum net worth as of June 30, 2011 of $1.4 billion and our net worth as calculated according to the Unsecured Facility was $3.0 billion as of June 30, 2011. Based on the results of these financial calculations, we were in compliance with all covenants under the Credit Facility as of June 30, 2011.

     There are a total of 13 lenders that make up the Credit Facility syndication and they have varying commitments ranging from $20.0 million to $87.5 million. Of the 13 lenders, four have commitments of $87.5 million each, four have commitments of $62.5 million each, four have commitments of $45.0 million each and one has a commitment of $20.0 million.

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     In May 2010, Allied World Capital (Europe) Limited established an irrevocable standby letter of credit in order to satisfy funding requirements of our Lloyd’s Syndicate 2232. As of June 30, 2011, the amount of the letter of credit was £67.4 million ($108.3 million).

     Security arrangements with ceding insurers may subject our assets to security interests or require that a portion of our assets be pledged to, or otherwise held by, third parties. Both of our letter of credit facilities are fully collateralized by assets held in custodial accounts at the Bank of New York Mellon held for the benefit of the banks. Although the investment income derived from our assets while held in trust accrues to our benefit, the investment of these assets is governed by the terms of the letter of credit facilities or the investment regulations of the state or territory of domicile of the ceding insurer, which may be more restrictive than the investment regulations applicable to us under Bermuda law. The restrictions may result in lower investment yields on these assets, which may adversely affect our profitability.

     The following shows our trust accounts on deposit, as well as outstanding and remaining letter of credit facilities and the collateral committed to support the letter of credit facilities as of June 30, 2011 and December 31, 2010:

	As of		As of
	June 30,		December 31,
	2011		2010
	($ in millions)
Total trust accounts on deposit	$	1,608.1	$	1,657.4
Total letter of credit facilities:
Citibank Europe plc		900.0		900.0
Credit Facility		800.0		800.0
Total letter of credit facilities		1,700.0		1,700.0
Total letter of credit facilities outstanding:
Citibank Europe plc		712.5		689.8
Credit Facility		159.0		159.0
Total letter of credit facilities outstanding		871.5		848.8
Total letter of credit facilities remaining:
Citibank Europe plc		187.5		210.2
Credit Facility(1)		641.0		641.0
Total letter of credit facilities remaining		828.5		851.2
Collateral committed to support the letter of credit facilities	$	1,054.2	$	1,121.3

(1) Net of any borrowing or repayments under the Unsecured Facility.

     As of June 30, 2011, we had a combined unused letter of credit capacity of $828.5 million from the Credit Facility and Citibank Europe plc. We believe that this remaining capacity is sufficient to meet our future letter of credit needs.

     We do not currently anticipate that the restrictions on liquidity resulting from restrictions on the payment of dividends by our subsidiary companies or from assets committed in trust accounts or to collateralize the letter of credit facilities will have a material impact on our ability to carry out our normal business activities, including interest and dividend payments, respectively, on our senior notes and common shares.

Sources and Uses of Funds

     Our sources of funds primarily consist of premium receipts net of commissions, investment income, net proceeds from capital raising activities that may include the issuance of common shares, senior notes and other debt or equity issuances, and proceeds from sales and redemption of investments. Cash is used primarily to pay losses and loss expenses, purchase reinsurance, pay general and administrative expenses and taxes, and pay dividends and interest, with the remainder made available to our investment portfolio managers for investment in accordance with our investment policy.

     Cash flows from operating activities for the six months ended June 30, 2011 were $361.8 million compared to $305.6 million for the six months ended June 30, 2010. The increase in cash flows from operations was impacted by increased premium writings in the six months ended June 30, 2011 compared to the six months ended June 30, 2010.

     Cash flows from investing activities consist primarily of proceeds on the sale of investments and payments for investments acquired in addition to an increase in restricted cash. We had net cash used in investing activities of $271.4 million for the six months

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ended June 30, 2011 compared to $87.7 million for the six months ended June 30, 2010. The increase in cash flows used in investing activities reflects additional investment of our operating cash flow.

     Cash flows used in financing activities consist primarily of capital raising activities, which include the issuance of common shares or debt and the payment of dividends or the repayment of debt. Cash flows used in financing activities were $108.8 million for six months ended June 30, 2011 compared to $65.6 million for the six months ended June 30, 2010. The increase in cash flows used in financing activities was due to the repurchase of the founder warrant and common shares totaling $113.6 million during the six months ended June 30, 2011 compared to share repurchases of $49.1 million during the six months ended June 30, 2010.

     On May 5, 2011, the shareholders approved our proposal to pay dividends in the form of a distribution by way of par value reduction. The aggregate reduction amount will be paid to shareholders in quarterly installments of $0.375 per share. We made the first such quarterly dividend payment on August 5, 2011 to shareholders of record on July 27, 2011. The amount of the first par value reduction was CHF 0.30, based on the exchange rate as of July 18, 2011. The Company expects to distribute the remaining quarterly installments in October 2011, January 2012 and April 2012. Dividend payments are subject to Swiss law and other related factors described in our 2011 Proxy Statement and our other filings with the SEC.

     Our funds are primarily invested in liquid, high-grade fixed income securities. As of June 30, 2011 and December 31, 2010, 94.6% and 96.2%, respectively, of our fixed income portfolio consisted of investment grade securities. As of June 30, 2011 and December 31, 2010, net accumulated unrealized gains on our available for sale fixed maturity investments were $23.1 million and $57.1 million, respectively. The decrease in net unrealized gains was due to selling certain available for sale securities during the six months ended June 30, 2011 and reinvesting the proceeds in fixed maturity investments where mark-to-market changes are reflected in the consolidated statements of operations and comprehensive income. We expect this trend to continue for the remainder of 2011. The maturity distribution of our fixed income portfolio (on a fair value basis) as of June 30, 2011 and December 31, 2010 was as follows:

	As of		As of
	June 30,		December 31,
	2011		2010
	($ in millions)
Due in one year or less	$	348.1	$	249.3
Due after one year through five years		2,756.9		3,119.9
Due after five years through ten years		761.9		867.9
Due after ten years		95.6		122.9
Mortgage-backed		1,904.6		1,751.9
Asset-backed		679.5		549.0
Total	$	6,546.6	$	6,660.9

     We have investments in various hedge funds, the market value of which was $562.3 million as of June 30, 2011. Each of these funds have redemption notice requirements. For each of our hedge funds, liquidity is allowed after certain defined periods based on the terms of each hedge fund. See Note 4(d) “Investments — Other Invested Assets” to our unaudited condensed consolidated financial statements for additional details on our hedge fund investments.

     We do not believe that inflation has had a material effect on our consolidated results of operations. The potential exists, after a catastrophe loss, for the development of inflationary pressures in a local economy. The effects of inflation are considered implicitly in pricing. Loss reserves are established to recognize likely loss settlements at the date payment is made. Those reserves inherently recognize the effects of inflation. The actual effects of inflation on our results cannot be accurately known, however, until claims are ultimately resolved.

Financial Strength Ratings

     Financial strength ratings represent the opinions of rating agencies on our capacity to meet our obligations. The rating agencies consider a number of quantitative and qualitative factors in determining an insurance company’s financial strength ratings. Quantitative considerations of an insurance company include the evaluation of financial statements, historical operating results and, through the use of proprietary capital models, the measure of investment and insurance risks relative to capital. Among the qualitative considerations are management strength, business profile, market conditions and established risk management practices used, among other things, to manage risk exposures and limit capital volatility. Some of our reinsurance treaties contain special funding and termination clauses that are triggered in the event that we or one of our subsidiaries is downgraded by one of the major rating agencies to levels specified in the treaties, or our capital is significantly reduced. If such an event were to happen, we would be required, in certain instances, to post collateral in the form of letters of credit and/or trust accounts against existing outstanding losses, if any,

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related to the treaty. In a limited number of instances, the subject treaties could be cancelled retroactively or commuted by the cedent and might affect our ability to write business.

     The following were the financial strength ratings of all of our operating insurance and reinsurance subsidiaries as of August 1, 2011, except as noted below:

A.M. Best	A/stable
Moody’s*	A2/stable
Standard & Poor’s**	A/positive

*

Moody’s financial strength ratings are for Allied World Assurance Company, Ltd, Allied World Assurance Company (U.S.) Inc., Allied World National Assurance Company and Allied World Reinsurance Company only.

**

Standard & Poor’s financial strength ratings are for Allied World Assurance Company, Ltd, Allied World Assurance Company (U.S.) Inc., Allied World National Assurance Company, Allied World Reinsurance Company, Allied World Assurance Company (Europe) Limited and Allied World Assurance Company (Reinsurance) Limited only. Standard & Poor’s revised its rating and outlook from A-/positive to A/ CreditWatch with positive implications on June 13, 2011.

     We believe that the quantitative and qualitative factors that influence our ratings are supportive of our ratings.

Long-Term Debt

     In July 2006, Allied World Bermuda issued $500.0 million aggregate principal amount of 7.50% senior notes due August 1, 2016, with interest payable August 1 and February 1 each year, commencing February 1, 2007. Allied World Bermuda can redeem the senior notes prior to maturity, subject to payment of a “make-whole” premium; however, Allied World Bermuda currently has no intention of redeeming the notes.

     In November 2010, Allied World Bermuda issued $300.0 million aggregate principal amount of 5.50% senior notes due November 1, 2020, with interest payable May 15 and November 15 each year, commencing May 15, 2011. Allied World Bermuda can redeem the senior notes prior to maturity, subject to payment of a “make-whole” premium; however, Allied World Bermuda currently has no intention of redeeming the notes.

     The senior notes issued in 2006 and 2010 have been unconditionally and irrevocably guaranteed for the payment of the principal and interest by Holdings.

Off-Balance Sheet Arrangements

     As of June 30, 2011, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     We believe that we are principally exposed to three types of market risk: interest rate risk, credit risk and currency risk.

     The fixed income securities in our investment portfolio are subject to interest rate risk and credit risk. Any changes in interest rates and credit spreads have a direct effect on the market values of fixed income securities. As interest rates rise, the market values fall, and vice versa. As credit spreads widen, the market values fall, and vice versa.

     The changes in market values as a result of changes in interest rates is determined by calculating hypothetical June 30, 2011 ending prices based on yields adjusted to reflect the hypothetical changes in interest rates, comparing such hypothetical ending prices to actual ending prices, and multiplying the difference by the principal amount of the security. The sensitivity analysis is based on estimates. The estimated changes of our fixed maturity investments and cash and cash equivalents are presented below and actual changes for interest rate shifts could differ significantly.

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	Interest Rate Shift in Basis Points
	-200			-100			-50			0			+50			+100			+200
	($ in millions)
Total market value	$	7,507.4		$	7,470.4		$	7,424.5		$	7,354.2		$	7,275.0		$	7,196.4		$	7,039.5
Market value change from base		153.2			116.2			70.3			0.0			(79.2	)		(157.8	)		(314.7	)
Change in unrealized appreciation/(depreciation)		2.1	%		1.6	%		1.0	%		0.0	%		(1.1	)%		(2.1	)%		(4.3	)%

     The changes in market values as a result of changes in credit spreads are determined by calculating hypothetical June 30, 2011 ending prices adjusted to reflect the hypothetical changes in credit spreads, comparing such hypothetical ending prices to actual ending prices, and multiplying the difference by the principal amount of the security. The sensitivity analysis is based on estimates. The estimated changes of our non-cash, non-U.S. treasury fixed maturity investments are presented below and actual changes in credit spreads could differ significantly.

	Credit Spread Shift in Basis Points
	-200			-100			-50			0			+50			+100			+200
	($ in millions)
Total market value	$	5,998.5		$	5,835.2		$	5,753.5		$	5,671.8		$	5,590.1		$	5,508.5		$	5,345.1
Market value change from base		326.7			163.4			81.7			0.0			(81.7	)		(163.3	)		(326.7	)
Change in unrealized appreciation/(depreciation)		5.8	%		2.9	%		1.4	%		0.0	%		(1.4	)%		(2.9	)%		(5.8	)%

     As a holder of fixed income securities, we also have exposure to credit risk. In an effort to minimize this risk, our investment guidelines have been defined to ensure that the assets held are well diversified and are primarily high-quality securities. As of June 30, 2011 we held assets totaling $6.5 billion of fixed income securities. Of those assets, approximately 5.4% were rated below investment grade (Ba1/BB+ or lower) with the remaining 94.6% rated in the investment grade category. The average credit quality of the investment grade portfolios was AA by Standard & Poor’s.

     As of June 30, 2011, we held $2,606.7 million, or 31.4%, of our total investments and cash and cash equivalents in corporate bonds. These corporate bonds had an average credit rating of AA- by Standards & Poor’s.

     As of June 30, 2011, we held $1,904.6 million, or 22.9%, of our total investments and cash and cash equivalents in mortgage-backed securities, which included agency pass-through mortgage-backed securities, non-agency mortgage-backed securities and commercial mortgage-backed securities. The agency pass-through mortgage-backed securities, non-agency mortgage-backed securities and commercial mortgage-backed securities represented 14.8%, 4.4% and 3.7%, respectively, of our total investments and cash and cash equivalents. In addition, 99.3% of our commercial mortgage-backed securities and 63.9% of our core non-agency residential mortgage-backed securities were rated “AAA” by Standard & Poor’s and Fitch as of June 30, 2011. These agency pass-through mortgage-backed securities are exposed to prepayment risk, which occurs when holders of individual mortgages increase the frequency with which they prepay the outstanding principal before the maturity date to refinance at a lower interest rate cost. Given the proportion that these securities comprise of the overall portfolio, and the current interest rate environment and condition of the credit market, prepayment risk is not considered significant at this time.

     Additionally as of June 30, 2011, we held $206.5 million of high yield (below investment grade) non-agency residential mortgage-backed securities, which is included in the $1,904.6 million referenced in the preceding paragraph. As of June 30, 2011, 87.0% of those assets were rated below investment grade, and the average credit rating of this below investment grade portfolio was B- by Standard & Poor’s.

     As of June 30, 2011, we held investments in hedge funds with a fair value of $562.3 million. Investments in these funds involve certain risks related to, among other things, the illiquid nature of the fund shares, the limited operating history of the fund, as well as risks associated with the strategies employed by the managers of the funds. The funds’ objectives are generally to seek attractive long-term returns with lower volatility by investing in a range of diversified investment strategies. As our reserves and capital continue to build, we may consider additional investments in these or other alternative investments.

     The U.S. dollar is our reporting currency and the functional currency of all of our operating subsidiaries. We enter into insurance policies and reinsurance contracts where the premiums receivable and losses payable are denominated in currencies other than the U.S. dollar. In addition, we maintain a portion of our investments and liabilities in currencies other than the U.S. dollar, primarily Euro, British Sterling, Swiss Franc and the Canadian dollar. Receivables in non-U.S. currencies are generally converted into U.S.

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dollars at the time of receipt. When we incur a liability in a non-U.S. currency, we carry such liability on our books in the original currency. These liabilities are converted from the non-U.S. currency to U.S. dollars at the time of payment. As a result, we have an exposure to foreign currency risk resulting from fluctuations in exchange rates. We utilize a hedging strategy whose objective is to minimize the potential loss of value caused by currency fluctuations by using foreign currency forward contract derivatives that expire in 90 days from purchase.

     As of June 30, 2011 and 2010, approximately 2.2% and 2.2%, respectively, of our aggregate invested assets were denominated in currencies other than the U.S. dollar. Of our business written during the six months ended June 30, 2011 and 2010, approximately 12% was written in currencies other than the U.S. dollar.

     Our foreign exchange loss/gain for the six months ended June 30, 2011 and 2010 and the year ended December 31, 2010 are set forth in the chart below.

	Six Months						Year
	Ended						Ended
	June 30,						December 31,
	2011			2010			2010
	($ in millions)
Realized exchange gain (loss)	$	3.5		$	(4.8	)	$	(2.0	)
Unrealized exchange (loss) gain		(4.2	)		3.2			1.6
Foreign exchange loss	$	(0.7	)	$	(1.6	)	$	(0.4	)

Item 4. Controls and Procedures.

     In connection with the preparation of this quarterly report, our management has performed an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2011. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosures. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2011, our company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosures.

     Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide an absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

     No changes were made in our internal controls over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f), during the quarter ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

     We are and in the future may become involved in various claims and legal proceedings that arise in the normal course of our business. On June 12, 2011, we entered into the Merger Agreement. The Merger Agreement provides for the merger of Merger Sub, an indirect wholly-owned subsidiary of ours, with and into Transatlantic, with Transatlantic continuing as the surviving corporation and our indirect wholly-owned subsidiary post-merger.

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     Litigation Related to the Merger with Transatlantic

     In connection with the merger, five putative stockholder class action lawsuits have been filed against Transatlantic, Holdings, and the members of the Transatlantic board of directors challenging the merger: Ivers v. Transatlantic Holdings, Inc., et al. (filed June 17, 2011 in the Court of Chancery of the State of Delaware), Clark v. Transatlantic Holdings, Inc., et al. (filed June 17, 2011 in the Supreme Court of the State of New York, County of New York and amended on June 22, 2011), Sutton v. Transatlantic Holdings, Inc., et al. (filed June 17, 2011 in the Supreme Court of the State of New York, County of New York), Jaroslawicz v. Transatlantic Holdings, Inc., et al. (filed June 21, 2011 in the Supreme Court of the State of New York, County of New York) and Kramer v. Transatlantic Holdings, Inc., et al. (filed June 30, 2011 in the Court of Chancery of the State of Delaware) (collectively, the “Lawsuits”). Each of the Lawsuits has been filed against Transatlantic, the members of the Transatlantic board of directors, and Holdings. In addition, other than the Jaroslawicz action, each of the Lawsuits names as a defendant Merger Sub. Plaintiffs in each Lawsuit assert that the members of the Transatlantic board of directors breached their fiduciary duties and that Holdings and/or its subsidiaries aided and abetted the alleged breaches of fiduciary duties. In addition, in the Clark action, plaintiffs allege that Transatlantic aided and abetted its directors’ alleged breaches of fiduciary duty. The Lawsuits seek, among other relief, to enjoin the merger.

     On June 29-30, 2011, the defendants moved to dismiss or stay the three actions pending in New York — the Clark, Sutton, and Jaroslawicz actions —on the grounds that the Ivers and Kramer actions are parallel proceedings pending in the Delaware Court of Chancery seeking the same relief as the three New York actions. On July 25, 2011, the plaintiffs in the three New York actions moved to consolidate those actions into a single action. The court has not ruled on either of these motions.

     On July 21, 2011, Vice Chancellor Parsons of the Delaware Court of Chancery of the State of Delaware entered an order consolidating the two Delaware actions and requiring the Delaware plaintiffs to file a consolidated amended complaint. The Delaware plaintiffs filed the Verified Consolidated Amended Class Action Complaint, a Motion for Preliminary Injunction and a Motion for Expedited Proceedings on August 1, 2011. On August 8, 2011, the defendants moved to dismiss the Verified Consolidated Amended Class Action Complaint and to oppose the Delaware plaintiffs’ Motion for Expedited Proceedings. The motions are currently pending before the court.

     Holdings, Transatlantic, and their respective directors believe these lawsuits are without merit and intend to defend them vigorously.

Item 1A. Risk Factors.

     Our business is subject to a number of risks, including those identified in Item 1A. of Part I of our 2010 Form 10-K, that could have a material effect on our business, results of operations, financial condition and/or liquidity and that could cause our operating results to vary significantly from period to period. There have been no material changes to the risk factors described in our 2010 Form 10-K, except as set forth in the “Risk Factors” and “Special Note Regarding Forward-Looking Statements” sections of the Form S-4 and below. The risks described in our 2010 Form 10-K and our Form S-4 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial could also have a material effect on our business, results of operations, financial condition and/or liquidity.

     Pursuant to the terms of the Merger Agreement, which was unanimously approved by our board of directors and Transatlantic’s board of directors, each outstanding share of Transatlantic common stock will be converted into the right to receive 0.88 Holdings shares. Please see Note 17 of the notes to the consolidated financial statements for more information about the Merger Agreement.

     Our proposed merger with Transatlantic may present certain risks to our business and operations prior to the closing, including, among other things, risks that:

• our operations will be restricted by the terms of the Merger Agreement, which may cause us to forgo otherwise beneficial business opportunities;

• the proposed merger disrupts our current business plans and operations;

• our management’s attention being directed toward the completion of the merger and being diverted away from our day-to-day business operations and the execution of our current business plans;

• current and prospective employees may experience uncertainty about their future roles with the company, which might adversely affect our ability to attract and retain employees who generate and service our business;

• we may incur significantly higher transaction costs than we currently anticipate, such as legal, financing and accounting fees, and other costs, fees, expenses and charges related to the merger, whether or not the merger is completed; and

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• the merger may not be completed, which may have an adverse effect on our stock price and future business and financial results.

     In addition, certain risks may continue to exist after the closing of the merger, including, among other things, risks that:

• the inability to successfully combine the businesses in a manner that permits the combined company to achieve the full synergies anticipated to result from the merger;

• the future results of the combined company will suffer if the combined company does not effectively manage its operations following the merger; and

• the occurrence of severe catastrophic events may cause the combined company’s financial results to be volatile and may affect the financial results of the combined company differently than such an event would have affected the financial results of either us or Transatlantic on a stand-alone basis.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     In May 2010, the company established a share repurchase program in order to repurchase Holdings’ common shares. Repurchases may be effected from time to time through open market purchases, privately negotiated transactions and tender offers or otherwise. There were no repurchases made under this program during the second quarter of 2011 because of the merger negotiations with Transatlantic. As of June 30, 2011, the company had $200.9 million of remaining capacity available under the share repurchase program.

Item 3. Defaults Upon Senior Securities.

     None.

Item 4. [Removed and Reserved.]

Item 5. Other Information.

     None.

Item 6. Exhibits.

Exhibit
Number	Description
2.1(1)	Agreement and Plan of Merger by and among Allied World Assurance Company Holdings, AG, GO Sub, LLC and Transatlantic Holdings, Inc., dated as of June 12, 2011.
3.1(2)	Articles of Association of Allied World Assurance Company Holdings, AG, as amended and restated.
10.1†	Form of Option Grant Notice and Option Agreement under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan.
10.2†	Form of RSU Award Agreement for employees under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
10.3†	Form of RSU Award Agreement for non-employee directors under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
10.4†	Form of Performance-Based RSU Award Agreement under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
31.1	Certification by Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.1**	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2011 and 2010, (iii) the Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and (v) the Notes to the Consolidated Financial Statements.

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(1)	Incorporated herein by reference to the Current Report on Form 8-K of Allied World Assurance Company Holdings, AG filed with the SEC on June 14, 2011.
(2)	Incorporated herein by reference to the Current Report on Form 8-K of Allied World Assurance Company Holdings, AG filed with the SEC on August 1, 2011.
†	Management contract or compensatory plan, contract or arrangement.
*	These certifications are being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18 United States Code) and are not being filed as part of this report.
**	In accordance with Rule 406T of Regulation S-T, the information in Exhibit 101.1 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act and otherwise is not subject to liability under these sections.

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SIGNATURES

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

	ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
Dated: August 9, 2011	By:	/s/ Scott A. Carmilani
	Name:	Scott A. Carmilani
	Title:	President and Chief Executive Officer
Dated: August 9, 2011	By:	/s/ Joan H. Dillard
	Name:	Joan H. Dillard
	Title:	Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit
Number	Description
2.1(1)	Agreement and Plan of Merger by and among Allied World Assurance Company Holdings, AG, GO Sub, LLC and Transatlantic Holdings, Inc., dated as of June 12, 2011.
3.1(2)	Articles of Association of Allied World Assurance Company Holdings, AG, as amended and restated.
10.1†	Form of Option Grant Notice and Option Agreement under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan.
10.2†	Form of RSU Award Agreement for employees under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
10.3†	Form of RSU Award Agreement for non-employee directors under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
10.4†	Form of Performance-Based RSU Award Agreement under the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan.
31.1	Certification by Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.1**	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2011 and 2010, (iii) the Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2011 and 2010, (iv) the Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 and (v) the Notes to the Consolidated Financial Statements.

(1)	Incorporated herein by reference to the Current Report on Form 8-K of Allied World Assurance Company Holdings, AG filed with the SEC on June 14, 2011.
(2)	Incorporated herein by reference to the Current Report on Form 8-K of Allied World Assurance Company Holdings, AG filed with the SEC on August 1, 2011.
†	Management contract or compensatory plan, contract or arrangement.
*	These certifications are being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18 United States Code) and are not being filed as part of this report.
**	In accordance with Rule 406T of Regulation S-T, the information in Exhibit 101.1 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act and otherwise is not subject to liability under these sections.

EX-10.1

EXHIBIT 10.1

OPTION GRANT NOTICE

          Allied World Assurance Company Holdings, AG (the “Company”), pursuant to its Third Amended and Restated 2001 Employee Stock Option Plan (the “Plan”), hereby grants to Holder options to purchase the number of the Company’s registered shares (the “Common Shares”) set forth below. The Options are subject to all of the terms and conditions as set forth herein and in the Option Agreement (attached hereto or previously provided to Holder in connection with a prior grant), and in the Plan, all of which are incorporated herein in their entirety.

Holder:
Date of Grant:
Number of Common Shares Subject to Option:
Exercise Price per Share:
Expiration Date:	Ten Years from the Date of Grant
Type of Grant:	Nonqualified Stock Option
Vesting Schedule:	Options shall vest and become exercisable in accordance with the following schedule:
	Twenty five percent (25%) shall vest and become exercisable on each of the first, second, third and fourth anniversaries of the Date of Grant.

THE UNDERSIGNED HOLDER ACKNOWLEDGES RECEIPT OF THIS GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN, AND, AS AN EXPRESS CONDITION TO THE GRANT OF OPTIONS HEREUNDER, AGREES TO BE BOUND BY THE TERMS THIS GRANT NOTICE, THE OPTION AGREEMENT AND THE PLAN.

ALLIED WORLD ASSURANCE COMPANY	HOLDER
HOLDINGS, AG
By:
Signature	Signature
Title:	Date:
Date:

OPTION AGREEMENT
UNDER THE
ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
THIRD AMENDED AND RESTATED 2001 EMPLOYEE STOCK OPTION PLAN

          Pursuant to the Option Grant Notice (the “Grant Notice”) delivered to Holder (as defined in the Grant Notice), and subject to the terms of this Option Agreement (this “Option Agreement”) and the Allied World Assurance Company Holdings, AG, Third Amended and Restated 2001 Employee Stock Option Plan (the “Plan”), Allied World Assurance Company Holdings, AG (the “Company”) and Holder agree as follows. Capitalized terms not otherwise defined herein shall have the same meaning as set forth in the Plan.

     1. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Holder options to purchase up to the number of Common Shares provided in the Grant Notice, at an exercise price per share as provided in the Grant Notice (the “Options”). The Company may make one or more additional grants of options to Holder under this Option Agreement by providing Holder with a new Grant Notice, which may also include any terms and conditions differing from this Option Agreement. The Company reserves all rights with respect to the granting of additional options hereunder and makes no implied promise to grant additional options.

     2. Vesting. Subject to the limitations contained herein, the Options shall vest as provided in the Grant Notice; provided, however, that, except as may otherwise be provided in any employment agreement between the Company and Holder that is effective immediately prior to Holder’s termination of employment or service, all vesting shall cease upon Holder’s termination of employment or service, as applicable, with the Company.

     3. Exercise of Options Following Termination of Employment or Service.

          The provisions of Section 7(c) of the Plan are incorporated herein by reference and made a part hereof.

     4. Method of Exercising Options. The Options may be exercised by the delivery of notice of the number of Common Shares with respect to which the Options are being exercised accompanied by payment in full of the purchase price of such shares. Such notice shall be delivered either (x) in writing to the Company at its principal office or at such other address as may be established by the Committee, to the attention of the Company Secretary; or (y) to a third-party stock plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding Options under the Plan, in either case of (x) or (y), as communicated to the Holder in a manner consistent with the terms of Section 10 hereof. Payment for such shares may be made (a) in immediately available funds in United States dollars, by certified or bank cashier’s check or wire transfer payable to the Company or third-party administrator, as applicable; (b) through a broker-assisted cashless exercise program established by the third-party stock plan administrator; or (c) by any other means approved by the Committee. Anything herein to the contrary notwithstanding, the Company shall not directly or indirectly extend or maintain credit, or arrange for the extension of credit, in the form of a personal loan to or for any director or executive officer of the Company

through the Plan in violation of Section 402 of the Sarbanes-Oxley Act of 2002 (“Section 402 of SOX”), and to the extent that any form of payment would, in the opinion of the Company’s counsel, result in a violation of Section 402 of SOX, such form of payment shall not be available.

     5. Issuance of Shares. If Holder elects to receive Common Shares after exercise of an Option, then as promptly as practical after receipt of such notification and full payment of such purchase price and any required income tax withholding amount (as provided in Section 9 hereof), the Company shall issue or transfer, or cause such issue or transfer, to Holder the number of shares with respect to which the Options have been so exercised, and shall either (a) deliver, or cause to be delivered, to Holder a certificate or certificates therefor, registered in Holder’s name or (b) cause such shares to be credited to Holder’s account at the third-party stock plan administrator.

     6. Company; Holder.

          (a) The term “Company” as used in this Agreement with reference to employment shall include the Company and its subsidiaries.

          (b) Whenever the word “Holder” is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Options may be transferred by will or by the laws of descent and distribution, the word “Holder” shall be deemed to include such person or persons.

     7. Non-Transferability. The Options are not transferable by Holder except (a) by will or the laws of descent and distribution, to the Company; (b) to or for the benefit of any spouse, child or grandchild of Holder; or (c) to a trust or partnership for the benefit of any of the foregoing. Except as otherwise provided herein, no assignment or transfer of the Options, or of the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise, shall vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Options shall terminate and become of no further effect.

     8. Rights as Shareholder. Holder or a transferee of the Options shall have no rights as a shareholder with respect to any share covered by the Options until Holder shall have become the holder of record or the beneficial owner of such share, and no adjustment shall be made for dividends or distributions or other rights in respect of such share for which the record date is prior to the date upon which Holder shall become the holder of record or the beneficial owner thereof.

     9. Tax Withholding. The provisions of Section 12 of the Plan are incorporated herein by reference and made a part hereof.

     10. Notice. Every notice or other communication relating to this Agreement between the Company and Holder shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided, provided that, unless and until some other address be so designated, all notices or communications by Holder to the Company shall be

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mailed or delivered to the Company at its principal executive office, to the attention of the Company Secretary, and all notices or communications by the Company to Holder may be given to Holder personally or may be mailed to Holder at Holder’s last known address, as reflected in the Company’s records. Notwithstanding the above, all notices and communications between the Holder and any third-party stock plan administrator shall be mailed, delivered, transmitted or sent in accordance with the procedures established by such third-party stock plan administrator and communicated to Holder from time to time.

     11. No Right to Continued Service. This Agreement does not confer upon Holder any right to continue as an employee or service provided to the Company.

     12. Binding Effect. This Agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.

     13. Waiver and Amendments. Any waiver, alteration, amendment or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Committee. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

     14. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, without regard to the principles of conflicts of law thereof. Notwithstanding anything contained in this Option Agreement, the Grant Notice or the Plan to the contrary, if any suit or claim is instituted by Holder or the Company relating to this Option Agreement, the Grant Notice or the Plan, Holder hereby submits to the exclusive jurisdiction of and venue in the courts of Switzerland.

     15. Plan. The terms and provisions of the Plan are incorporated herein by reference. Capitalized terms used herein which are not defined herein shall have the meanings attributable thereto in the Plan. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Agreement, the Plan shall govern and control.

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EX-10.2

Exhibit 10.2

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
THIRD AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
RSU AWARD AGREEMENT

          This RSU Award Agreement (this “RSU Agreement”) sets forth the terms and conditions of an award (this “Award”) of restricted stock units (“RSUs”) granted to you under the Allied World Assurance Company Holdings, AG, Third Amended and Restated 2004 Stock Incentive Plan (the “Plan”).

     1. The Plan. This Award is made pursuant to the Plan, the terms of which are incorporated in this RSU Agreement. Capitalized terms used in this RSU Agreement that are not defined in this RSU Agreement, or in the attached Glossary of Terms, have the meanings as used or defined in the Plan.

     2. Award. The number of RSUs subject to this Award is set forth at the end of this RSU Agreement. Each RSU constitutes an unfunded and unsecured promise of Allied World to deliver (or cause to be delivered) to you, subject to the terms of this RSU Agreement, one Allied World registered share (the “Share” or the “Shares” as the context requires) (or cash equal to the Fair Market Value thereof) on the applicable Delivery Date as provided herein. Until such delivery, you have only the rights of a general unsecured creditor, and no rights as a shareholder of Allied World. THIS AWARD IS SUBJECT TO ALL TERMS, CONDITIONS AND PROVISIONS OF THE PLAN AND THIS AWARD AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE CHOICE OF FORUM PROVISIONS SET FORTH IN PARAGRAPH 15.

     3. Vesting and Delivery.

          (a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 4 and 6, twenty five percent (25%) of the RSUs shall vest on each of the first, second, third and fourth anniversaries of the Date of Grant specified at the end of this RSU Agreement (each, a “Vesting Date”). Unless the Committee determines otherwise, and except as provided in this Paragraph 3 or in Paragraph 6, if your Employment terminates for any reason prior to a Vesting Date, your rights in respect of all of your then unvested RSUs shall terminate, and no Shares (and/or cash) shall be delivered in respect of such RSUs.

          (b) Delivery. Except as provided in this Paragraph 3 and in Paragraphs 4, 6, 8 and 9, on the Delivery Dates, the Company shall issue or transfer to you, or cause to be issued or transferred to you, the number of Shares underlying the RSUs to be delivered, and shall either (i) deliver, or cause to be delivered, to you a certificate or certificates therefor, registered in your name; or (ii) cause such Shares to be credited to your account at a third-party stock plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding Awards under the Plan. You shall be deemed the beneficial owner of the Shares at the close of business on a Delivery Date and shall be entitled to any dividend or distribution that has not already been made with respect to such Shares if the record date for such dividend or distribution is after the close of business on such Delivery Date. The Company may, at its option, deliver, or cause to be delivered, cash in lieu of all or any portion of the Shares otherwise deliverable on a Delivery Date specified at the end of this RSU

Agreement. Such cash payment shall equal the product of the number of Shares to be delivered on a Delivery Date and the Fair Market Value of one Share on such Delivery Date.

          (c) Death or Termination Due to Disability. Notwithstanding any other provision of this RSU Agreement, if you die or are terminated due to Disability prior to any Delivery Date, and provided your rights in respect of your RSUs have not previously terminated, then in lieu of delivery on such Delivery Date and any subsequent Delivery Dates, the Shares (and/or cash) corresponding to your outstanding RSUs shall be delivered to you or the representative of your estate, as applicable, as soon as practicable after the date of death or termination due to Disability, as applicable, and after such documentation, as may be requested by the Company or third-party stock plan administrator, is provided to the Company or such third-party stock plan administrator, as applicable, but in no event later than March 15 of the fiscal year immediately following the year in which such death or termination occurred. Such issuance or transfer (or delivery of cash in lieu thereof) shall be on the terms set forth in Paragraph 3(b) applicable to Shares deliverable on a regularly scheduled Delivery Date. Shares (and/or cash) delivered pursuant to this Section 3(c) as a result of your termination due to Disability shall remain subject to repayment under Paragraph 6(b) until the regularly scheduled Delivery Date for such Shares (and/or cash).

          (d) Delay in Delivery. Notwithstanding anything contained herein to the contrary, any delivery of Shares or cash otherwise required to be made hereunder to you at any date as a result of the termination of your Employment for any reason shall be delayed for such period of time as may be necessary to meet the requirements of section 409A(a)(2)(B)(i) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and shall be delivered and/or paid on the earliest date on which such delivery or payments can be made without violating the requirements of section 409A(a)(2)(B)(i) of the Code.

     4. Termination of RSUs and Non-Delivery of Shares.

          (a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c) and 6, your rights in respect of your outstanding RSUs shall immediately terminate, and no Shares (and/or cash) shall be delivered in respect of such unvested RSUs, if at any time prior to a Vesting Date your Employment with the Company terminates for any reason, or you are otherwise no longer actively Employed by the Company.

          (b) Unless the Committee determines otherwise, and except as provided in Paragraph 6, your rights in respect of all of your RSUs (whether or not vested) shall immediately terminate, and no Shares (and/or cash) shall be delivered in respect of such RSUs, if at any time prior to a Delivery Date:

     (i) you attempt to have any dispute under this RSU Agreement or the Plan resolved in any manner that is not provided for by Paragraph 15;

     (ii) any event that constitutes Cause has occurred;

     (iii) you in any manner, directly or indirectly, (A) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Company, (B) interfere with or damage (or attempt to interfere with or damage)

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any relationship between the Company and any such Client or (C) Solicit any person who is an employee of the Company to resign from the Company or to apply for or accept employment with any Competitive Enterprise; or

     (iv) you fail to certify to Allied World, in accordance with procedures established by the Committee with respect to a Delivery Date that you have complied, or the Committee determines that you have failed as of a Delivery Date to comply, with all of the terms and conditions of this RSU Agreement. By accepting the delivery of Shares (and/or cash) under this RSU Agreement, you shall be deemed to have represented and certified at such time that you have complied with all the terms and conditions of this RSU Agreement.

          (c) Unless the Committee determines otherwise, if a Delivery Date in respect of any of your outstanding RSUs occurs, and Shares (and/or cash) with respect to such outstanding RSUs would be deliverable under the terms and conditions of this RSU Agreement, except that you have not complied with the conditions or your obligations under Paragraph 4(b)(iv), all of your rights with respect to your outstanding RSUs shall terminate no later than the Delivery Date for such Shares.

     5. Repayment. If following the delivery of Shares (and/or cash), the Committee determines that all terms and conditions of this RSU Agreement in respect of such delivery were not satisfied, the Company shall be entitled to receive, and you shall be obligated to pay the Company immediately upon demand therefor, the Fair Market Value of the Shares (determined as of the Delivery Date) and the amount of cash (to the extent that cash was delivered to you) delivered with respect to the Delivery Date, without reduction for any Shares (and/or cash) applied to satisfy withholding tax or other obligations in respect of such Shares (and/or cash).

     6. Retirement.

          (a) Notwithstanding any other provision of this RSU Agreement, but subject to Paragraph 6(b), if your Employment with the Company is terminated by reason of Retirement, the condition set forth in Paragraph 4(a) shall be waived with respect to your then outstanding unvested RSUs. To the extent that the Company’s agreement herein to waive the condition set forth in Paragraph 4(a) results in taxable income to you prior to a Delivery Date as a result of Section 457A of the Code or any successor provision, then on your Retirement Eligibility Date, the Company shall issue or transfer to you, or cause to be issued or transferred to you, that number of Shares having an aggregate Fair Market Value (or their cash equivalent) equal to the amount of any such taxes so incurred by you. The accelerated issuance or transfer (or delivery of cash in lieu thereof) set forth in the immediately preceding sentence shall be made pursuant to the terms set forth in Paragraph 3(b) applicable to Shares deliverable on a regularly scheduled Delivery Date. The balance of the Shares underlying the RSUs (or their cash equivalent) shall be delivered to you on the applicable Delivery Dates pursuant to Paragraph 3(a) notwithstanding any subsequent termination of your Employment due to Retirement prior to any such Delivery Date. The Shares issued or transferred to you (or cash in lieu thereof) on your Retirement Eligibility Date pursuant to this Paragraph 6(a) shall be deemed to have been delivered with respect to each subsequent vesting tranche on a pro rata basis, and the number of Shares (and/or cash) to be delivered on each subsequent Delivery Date shall be reduced accordingly. Except as

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otherwise provided in this Paragraph 6(a), all other conditions of this RSU Agreement shall continue to apply.

          (b) Without limiting the application of Paragraph 4(b) or Paragraph 4(c), your rights in respect of any outstanding RSUs that become vested solely by reason of Paragraph 6(a) shall terminate immediately if, following the termination of your Employment with the Company by reason of Disability or Retirement and prior to a Delivery Date you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation interest in, any Competitive Enterprise or (ii) associate in any capacity (including, but not limited to, association as an officer, employee, partner, director, consultant, agent or advisor) with any Competitive Enterprise, in which case no Shares (and/or cash) otherwise deliverable with respect to such Delivery Date shall be delivered, and to the extent that Shares (and/or cash) otherwise scheduled to be delivered on such Delivery Date have already been delivered to you on an accelerated basis upon your termination of Employment due to Disability or upon your Retirement Eligibility Date, the Company shall be entitled to receive, and you shall be obligated to pay the Company immediately upon demand therefor, the Fair Market Value of the Shares (determined as of such Delivery Date) and the amount of cash (to the extent that cash was delivered to you) delivered with respect to such Delivery Date without reduction for any Shares (and/or cash) applied to satisfy withholding tax or other obligations in respect of such Shares (and/or cash).

     7. Non-transferability. Except as otherwise may be provided by the Committee, the limitations set forth in Section 3.5 of the Plan shall apply. Any assignment in violation of the provisions of this Paragraph 7 shall be null and void.

     8. Withholding, Consent and Legends.

          (a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding taxes (in accordance with Section 3.3 of the Plan).

          (b) Your rights in respect of your RSUs are conditioned on the receipt by the Company or third-party stock plan administrator, as applicable, to the full satisfaction of the Committee of any required consents (as defined in Section 3.4 of the Plan) that the Committee may determine to be necessary or advisable (including, without limitation, your consenting to deductions from your wages, or another arrangement satisfactory to the Committee, to reimburse the Company for advances made on your behalf to satisfy withholding and other tax obligations in connection with this Award).

          (c) Allied World may affix to Certificates representing Shares issued pursuant to this RSU Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under a separate agreement with Allied World). Allied World may advise the transfer agent to place a stop transfer order against any legended Shares.

     9. Rights of Offset. The Company shall have the right to offset, or cause to be offset, against the obligation to deliver Shares (and/or cash) under this RSU Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans or amounts repayable to the Company pursuant to tax equalization, housing,

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automobile or other employee programs) you then owe to the Company and any amounts the Committee otherwise deems appropriate.

     10. No Rights to Continued Employment. Nothing in this RSU Agreement or the Plan shall be construed as giving you any right to continued Employment by the Company or affect any right that the Company may have to terminate or alter the terms and conditions of your Employment.

     11. Successors and Assigns of Allied World. The terms and conditions of this RSU Agreement shall be binding upon, and shall inure to the benefit of, Allied World and its successor entities.

     12. Committee Discretion. The Committee shall have full discretion with respect to any actions to be taken or determinations to be made in connection with this RSU Agreement, and its determinations shall be final, binding and conclusive.

     13. Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this RSU Agreement, and the Board may amend the Plan in any respect; provided, that, notwithstanding the foregoing and Sections 1.3.1(i), 1.3.1(ii) and 3.1 of the Plan, no such amendment shall materially adversely affect your rights and obligations under this RSU Agreement without your consent, except that the Committee reserves the right to accelerate the delivery of the Shares and in its discretion provide that such Shares may not be transferable until the Delivery Date on which such Shares otherwise would have been delivered (and that in respect of such Shares you may remain subject to the repayment obligations of Paragraph 5 in the circumstances under which the Shares would not have been delivered pursuant to Paragraph 4 or Paragraph 6). Any amendment of this RSU Agreement shall be in writing signed by an authorized member of the Committee or a person or persons designated by the Committee.

     14. Adjustment. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, amalgamation, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the corporate structure or the Shares, subsequent to the date of the Date of Grant, the Committee or the Board shall make such equitable adjustments, designed to protect dilution or enlargement of rights, as it may deem appropriate, in the number and kind of Shares covered by the RSUs subject to this RSU Agreement.

     15. Governing Law; Venue. THIS AWARD SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN CONSIDERATION OF YOUR ACCEPTANCE OF THIS AWARD, YOU HEREBY EXPRESSLY SUBMIT TO THE EXCLUSIVE JURISDITION OF AND VENUE IN THE COURTS OF SWITZERLAND WITH RESPECT TO ANY SUIT OR CLAIM INSTITUTED BY THE COMPANY OR YOU RELATING TO THIS AWARD.

     16. Headings. The headings in this RSU Agreement are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof.

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          IN WITNESS WHEREOF, Allied World has caused this RSU Agreement to be duly executed and delivered as of the Date of Grant.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
By:
	Name:
	Title:

Recipient:

Total Number of RSUs:

• RSUs to be Settled in Cash:

• RSUs to be Settled in Shares:

Date of Grant:
Delivery Dates:
Receipt Acknowledge:
Address:
		Street
	City,	State	Zip Code
	Social Security No./Local I.D. No.

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Glossary of Terms

Solely for purposes of this Award of RSUs, the following terms shall have the meanings set forth below. Capitalized terms not defined in this Glossary of Terms shall have the meanings as used or defined in the applicable RSU Agreement or the Plan.

          “Cause” means, in the absence of any employment agreement between you and the Company otherwise defining Cause, (i) your conviction, whether following trial or by plea of guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a misdemeanor charge involving fraud, false statements or misleading omissions, wrongful taking, embezzlement, bribery, forgery, counterfeiting or extortion; (B) on a felony charge; or (C) on an equivalent charge to those in clauses (A) and (B) in jurisdictions which do not use those designations; (ii) your engaging in any conduct which constitutes an employment disqualification under applicable law (including statutory disqualification as defined under the Exchange Act); (iii) your failure to perform your duties to the Company; (iv) your violation of any securities or commodities laws, any rules or regulations issued pursuant to such laws, or the rules and regulations of any securities or commodities exchange or association of which Allied World or any of its subsidiaries or affiliates is a member; (v) your violation of any Company policy concerning hedging or confidential or proprietary information, or your material violation of any other Company policy as in effect from time to time; (vi) your engaging in any act or making any statement which impairs, impugns, denigrates, disparages or negatively reflects upon the name, reputation or business interests of the Company; or (vii) your engaging in any conduct detrimental to the Company. In the event there is an employment agreement between you and the Company defining Cause, “Cause” shall have the meaning provided in such agreement. The determination as to whether “Cause” has occurred shall be made by the Committee in its sole discretion, unless otherwise provided in an employment agreement between you and the Company. The Committee shall also have the authority in its sole discretion to waive the consequences under the Plan or any RSU Agreement of the existence or occurrence of any of the events, acts or omissions constituting “Cause.”

          “Client” means any client or prospective client of the Company to whom you provided services, or for whom you transacted business, or whose identity became known to you in connection with your relationship with or Employment by the Company.

          “Competitive Enterprise” means a business enterprise that (i) engages in any activity, or (ii) owns or controls a significant interest in any entity that engages in any activity, that, in either case, competes anywhere with any activity in which the Company is engaged. The activities covered by the previous sentence include, without limitation, all insurance and re-insurance, and insurance and reinsurance related activities, and asset management located in Switzerland and abroad.

          “Delivery Date” means each date specified as the Delivery Date in the Award (or as soon as practicable, but in no case more that 10 days, thereafter).

          “Disability” means, in the absence of any employment agreement between you and the Company otherwise defining Disability, (i) total disability as defined in the long-term disability plan of the Company, as in effect from time to time, or (ii) if there is no such plan at

the applicable time, physical or mental incapacity as determined solely by the Committee. In the event there is an employment agreement between you and the Company defining Disability, “Disability” shall have the meaning provided in such agreement.

          “Fair Market Value” means, with respect to a Share on any day, the fair market value as determined in accordance with a valuation methodology approved by the Committee and consistent with the requirements of Section 409A of the Code, or if there is a public market for the shares on such date, (i) the methodology as determined by the Committee in its sole and absolute discretion, or (ii) if the Committee has not set forth a pricing methodology, the closing price of the Shares on such stock exchange on which the shares are principally trading on the date in question, or, if there were no sales on such date, on the closest preceding date on which there were sales of shares.

          “Retirement” means any termination of your Employment other than for Cause following the date you attain age 65.

          “Retirement Eligibility Date” means the date on which you attain age 65.

          “Solicit” means any direct or indirect communication of any kind whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner, to take or refrain from taking any action.

EX-10.3

Exhibit 10.3

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
THIRD AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN
RSU AWARD AGREEMENT

          This RSU Award Agreement (this “RSU Agreement") sets forth the terms and conditions of an award (this “Award”) of restricted stock units (“RSUs”) granted to you under the Allied World Assurance Company Holdings, AG, Third Amended and Restated 2004 Stock Incentive Plan (the “Plan”).

     1. The Plan. This Award is made pursuant to the Plan, the terms of which are incorporated in this RSU Agreement. Capitalized terms used in this RSU Agreement that are not defined in this RSU Agreement, or in the attached Glossary of Terms, have the meanings as used or defined in the Plan.

     2. Award. The number of RSUs subject to this Award is set forth at the end of this RSU Agreement. Each RSU constitutes an unfunded and unsecured promise of Allied World to deliver (or cause to be delivered) to you, subject to the terms of this RSU Agreement, one Allied World registered share (the “Share” or the “Shares” as the context requires) (or cash equal to the Fair Market Value thereof) on the Delivery Date as provided herein. Until such delivery, you have only the rights of a general unsecured creditor, and no rights as a shareholder of Allied World. THIS AWARD IS SUBJECT TO ALL TERMS, CONDITIONS AND PROVISIONS OF THE PLAN AND THIS AWARD AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE CHOICE OF FORUM PROVISIONS SET FORTH IN PARAGRAPH 15.

     3. Vesting and Delivery.

          (a) Vesting. Except as provided in this Paragraph 3 and in Paragraphs 4 and 6, one hundred percent (100%) of the RSUs shall vest and become exercisable on the first anniversary of the Date of Grant specified at the end of this RSU Agreement (the “Vesting Date”). Unless the Committee determines otherwise, and except as provided in Paragraph 6, if your service to the Company as a member of its Board of Directors (“Board Service”) terminates for any reason prior to the Vesting Date, your rights in respect of all of your then unvested RSUs shall terminate, and no Shares (and/or cash) shall be delivered in respect of such RSUs.

          (b) Delivery. Except as provided in this Paragraph 3 and in Paragraphs 4, 6, 8 and 9, on the Delivery Date, the Company shall issue or transfer to you, or cause to be issued or transferred to you, the number of Shares underlying the RSUs to be delivered, and shall either (i) deliver, or cause to be delivered, to you a certificate or certificates therefor, registered in your name; or (ii) cause such Shares to be credited to your account at a third-party stock plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding Awards under the Plan. You shall be deemed the beneficial owner of the Shares at the close of business on the Delivery Date and shall be entitled to any dividend or distribution that has not already been made with respect to such Shares if the record date for such dividend or distribution is after the close of business on such Delivery Date.

The Company may, at its option, deliver, or cause to be delivered, cash in lieu of all or any portion of the Shares otherwise deliverable on the Delivery Date specified at the end of this RSU Agreement. Such cash payment shall equal the product of the number of Shares to be delivered on the Delivery Date and the Fair Market Value of one Share on such Delivery Date.

          (c) Death. Notwithstanding any other provision of this RSU Agreement, if you die prior to the Delivery Date, and provided your rights in respect of your RSUs have not previously terminated, the Shares (and/or cash) corresponding to your outstanding RSUs shall be delivered to the representative of your estate as soon as practicable after the date of death and after such documentation, as may be requested by the Company or third-party stock plan administrator, is provided to the Company or such third-party stock plan administrator, as applicable.

          (d) Delay in Delivery. Notwithstanding anything contained herein to the contrary, any delivery of Shares or cash otherwise required to be made hereunder to you at any date as a result of the termination of your Board Service for any reason shall be delayed for such period of time as may be necessary to meet the requirements of section 409A(a)(2)(B)(i) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and shall be delivered and/or paid on the earliest date on which such delivery or payments can be made without violating the requirements of section 409A(a)(2)(B)(i) of the Code.

     4. Termination of RSUs and Non-Delivery of Shares.

          (a) Unless the Committee determines otherwise, and except as provided in Paragraphs 3(c) and 6, your rights in respect of your outstanding RSUs shall immediately terminate, and no Shares (and/or cash) shall be delivered in respect of such unvested RSUs, if at any time prior to the Vesting Date your Board Service to the Company terminates for any reason, or you are otherwise no longer actively serving as a member of the Company’s Board of Directors.

          (b) Unless the Committee determines otherwise, and except as provided in Paragraph 6, your rights in respect of all of your RSUs (whether or not vested) shall immediately terminate, and no Shares (and/or cash) shall be delivered in respect of such RSUs, if at any time prior to the Delivery Date:

     (i) you attempt to have any dispute under this RSU Agreement or the Plan resolved in any manner that is not provided for by Paragraph 15;

     (ii) any event that constitutes Cause has occurred;

     (iii) you in any manner, directly or indirectly, (A) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Company, (B) interfere with or damage (or attempt to interfere with or damage) any relationship between the Company and any such Client or (C) Solicit any person who is an employee of the Company to resign from the Company or to apply for or accept employment with any Competitive Enterprise; or

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     (iv) you fail to certify to Allied World, in accordance with procedures established by the Committee with respect to the Delivery Date that you have complied, or the Committee determines that you have failed as of the Delivery Date to comply, with all of the terms and conditions of this RSU Agreement. By accepting the delivery of Shares (and/or cash) under this RSU Agreement, you shall be deemed to have represented and certified at such time that you have complied with all the terms and conditions of this RSU Agreement.

          (c) Unless the Committee determines otherwise, if the Delivery Date in respect of any of your outstanding RSUs occurs, and Shares (and/or cash) with respect to such outstanding RSUs would be deliverable under the terms and conditions of this RSU Agreement, except that you have not complied with the conditions or your obligations under Paragraph 4(b)(iv), all of your rights with respect to your outstanding RSUs shall terminate no later than the Delivery Date for such Shares.

     5. Repayment. If following the delivery of Shares (and/or cash), the Committee determines that all terms and conditions of this RSU Agreement in respect of such delivery were not satisfied, the Company shall be entitled to receive, and you shall be obligated to pay the Company immediately upon demand therefor, the Fair Market Value of the Shares (determined as of the Delivery Date) and the amount of cash (to the extent that cash was delivered to you) delivered with respect to the Delivery Date, without reduction for any Shares (and/or cash) applied to satisfy withholding tax or other obligations in respect of such Shares (and/or cash).

     6. Disability and Retirement

          (a) Notwithstanding any other provision of this RSU Agreement, but subject to Paragraph 6(b), if your Board Service to the Company is terminated by reason of Disability or Retirement, the condition set forth in Paragraph 4(a) shall be waived with respect to your then outstanding unvested RSUs (as a result of which your unvested outstanding RSUs shall vest on the Vesting Date), but all other conditions of this RSU Agreement shall continue to apply.

          (b) Without limiting the application of Paragraph 4(b) or Paragraph 4(c), your rights in respect of any outstanding RSUs that become vested solely by reason of Paragraph 6(a) shall terminate immediately, and no Shares (and/or cash) shall be delivered in respect of such outstanding RSUs if, following the termination of your Board Service to the Company by reason of Disability or Retirement and prior to the Delivery Date you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation interest in, any Competitive Enterprise or (ii) associate in any capacity (including, but not limited to, association as an officer, employee, partner, director, consultant, agent or advisor) with any Competitive Enterprise.

     7. Non-transferability. Except as otherwise may be provided by the Committee, the limitations set forth in Section 3.5 of the Plan shall apply. Any assignment in violation of the provisions of this Paragraph 7 shall be null and void.

     8. Withholding, Consent and Legends.

          (a) The delivery of Shares is conditioned on your satisfaction of any applicable withholding taxes (in accordance with Section 3.3 of the Plan).

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          (b) Your rights in respect of your RSUs are conditioned on the receipt by the Company or third-party stock plan administrator, as applicable, to the full satisfaction of the Committee of any required consents (as defined in Section 3.4 of the Plan) that the Committee may determine to be necessary or advisable (including, without limitation, your consenting to deductions from your wages, or another arrangement satisfactory to the Committee, to reimburse the Company for advances made on your behalf to satisfy withholding and other tax obligations in connection with this Award).

          (c) Allied World may affix to Certificates representing Shares issued pursuant to this RSU Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under a separate agreement with Allied World). Allied World may advise the transfer agent to place a stop transfer order against any legended Shares.

     9. Rights of Offset. The Company shall have the right to offset, or cause to be offset, against the obligation to deliver Shares (and/or cash) under this RSU Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans or amounts repayable to the Company for any reason) you then owe to the Company and any amounts the Committee otherwise deems appropriate.

     10. No Rights to Continued Board Service. Nothing in this RSU Agreement or the Plan shall be construed as giving you any right to continued Board Service or affect any right that the Company may have to terminate or alter the terms and conditions of your Board Service.

     11. Successors and Assigns of Allied World. The terms and conditions of this RSU Agreement shall be binding upon, and shall inure to the benefit of, Allied World and its successor entities.

     12. Committee Discretion. The Committee shall have full discretion with respect to any actions to be taken or determinations to be made in connection with this RSU Agreement, and its determinations shall be final, binding and conclusive.

     13. Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this RSU Agreement, and the Board may amend the Plan in any respect; provided, that, notwithstanding the foregoing and Sections 1.3.1(i), 1.3.1(ii) and 3.1 of the Plan, no such amendment shall materially adversely affect your rights and obligations under this RSU Agreement without your consent, except that the Committee reserves the right to accelerate the delivery of the Shares and in its discretion provide that such Shares may not be transferable until the Delivery Date on which such Shares otherwise would have been delivered (and that in respect of such Shares you may remain subject to the repayment obligations of Paragraph 5 in the circumstances under which the Shares would not have been delivered pursuant to Paragraph 4 or Paragraph 6). Any amendment of this RSU Agreement shall be in writing signed by an authorized member of the Committee or a person or persons designated by the Committee.

     14. Adjustment. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, amalgamation, consolidation, rights offering,

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separation, reorganization or liquidation, or any other change in the corporate structure or the Shares, subsequent to the date of the Date of Grant, the Committee or the Board shall make such equitable adjustments, designed to protect dilution or enlargement of rights, as it may deem appropriate, in the number and kind of Shares covered by the RSUs subject to this RSU Agreement.

     15. Governing Law; Venue. THIS AWARD SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN CONSIDERATION OF YOUR ACCEPTANCE OF THIS AWARD, YOU HEREBY EXPRESSLY SUBMIT TO THE EXCLUSIVE JURISDITION OF AND VENUE IN THE COURTS OF SWITZERLAND WITH RESPECT TO ANY SUIT OR CLAIM INSTITUTED BY THE COMPANY OR YOU RELATING TO THIS AWARD.

     16. Headings. The headings in this RSU Agreement are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof.

     IN WITNESS WHEREOF, Allied World has caused this RSU Agreement to be duly executed and delivered as of the Date of Grant.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
By:
	Name:	Wesley D. Dupont
	Title:	EVP, General Counsel & Corporate Secretary

Recipient:

Number of RSUs:

Date of Grant:

Delivery Date:

Receipt

Acknowledge:
Address:
	Street
	City,	State	Zip Code
	Social Security No./Local I.D. No.

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Glossary of Terms

Solely for purposes of this Award of RSUs, the following terms shall have the meanings set forth below. Capitalized terms not defined in this Glossary of Terms shall have the meanings as used or defined in the applicable RSU Agreement or the Plan.

          “Cause” means, in the absence of any employment agreement between you and the Company otherwise defining Cause, (i) your conviction, whether following trial or by plea of guilty or nolo contendere (or similar plea), in a criminal proceeding (A) on a misdemeanor charge involving fraud, false statements or misleading omissions, wrongful taking, embezzlement, bribery, forgery, counterfeiting or extortion; (B) on a felony charge; or (C) on an equivalent charge to those in clauses (A) and (B) in jurisdictions which do not use those designations; (ii) your engaging in any conduct which constitutes an employment disqualification under applicable law (including statutory disqualification as defined under the Exchange Act); (iii) your failure to perform your duties to the Company; (iv) your violation of any securities or commodities laws, any rules or regulations issued pursuant to such laws, or the rules and regulations of any securities or commodities exchange or association of which Allied World or any of its subsidiaries or affiliates is a member; (v) your violation of any Company policy concerning hedging or confidential or proprietary information, or your material violation of any other Company policy as in effect from time to time; (vi) your engaging in any act or making any statement which impairs, impugns, denigrates, disparages or negatively reflects upon the name, reputation or business interests of the Company; or (vii) your engaging in any conduct detrimental to the Company. In the event there is an employment agreement between you and the Company defining Cause, “Cause” shall have the meaning provided in such agreement. The determination as to whether “Cause” has occurred shall be made by the Committee in its sole discretion, unless otherwise provided in an employment agreement between you and the Company. The Committee shall also have the authority in its sole discretion to waive the consequences under the Plan or any RSU Agreement of the existence or occurrence of any of the events, acts or omissions constituting “Cause.”

          “Client” means any client or prospective client of the Company to whom you provided services, or for whom you transacted business, or whose identity became known to you in connection with your relationship with or Board Service to the Company.

          “Competitive Enterprise” means a business enterprise that (i) engages in any activity, or (ii) owns or controls a significant interest in any entity that engages in any activity, that, in either case, competes anywhere with any activity in which the Company is engaged. The activities covered by the previous sentence include, without limitation, all insurance and re-insurance, and insurance and reinsurance related activities, and asset management located in Switzerland and abroad.

          “Delivery Date” means the date specified as the Delivery Date in the Award (or as soon as practicable, but in no case more that 10 days, thereafter).

          “Disability” means, in the absence of any employment agreement between you and the Company otherwise defining Disability, (i) total disability as defined in the long-term disability plan of the Company, as in effect from time to time, or (ii) if there is no such plan at

the applicable time, physical or mental incapacity as determined solely by the Committee. In the event there is an employment agreement between you and the Company defining Disability, “Disability” shall have the meaning provided in such agreement.

          “Fair Market Value” means, with respect to a Share on any day, the fair market value as determined in accordance with a valuation methodology approved by the Committee and consistent with the requirements of Section 409A of the Code, or if there is a public market for the shares on such date, the closing price of the Shares on such stock exchange on which the shares are principally trading on the date in question, or, if there were no sales on such date, on the closest preceding date on which there were sales of shares.

          “Retirement” means any termination of your Board Service other than for Cause following the date you attain age 65.

          “Solicit” means any direct or indirect communication of any kind whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner, to take or refrain from taking any action.

EX-10.4

Exhibit 10.4

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
PERFORMANCE-BASED RSU AWARD AGREEMENT

          This Performance-Based RSU Award Agreement (this “Agreement”) sets forth the terms and conditions of a target award (this “Award”) consisting of restricted stock units that settle in cash and/or Common Shares (collectively, the “RSUs”), granted to you under the Allied World Assurance Company Holdings, AG, Third Amended and Restated 2004 Stock Incentive Plan (the “Plan”).

     1. The Plan. This Award is made pursuant to the Plan, the terms and conditions of which are incorporated in this Agreement. Capitalized terms used in this Agreement are defined herein or in the attached Glossary of Terms.

     2. Award. The target number of RSUs subject to this Award (i.e., the Target Cash-Settled RSUs and Target Share-Settled RSUs) is set forth at the end of this Agreement (this target number assumes 100% achievement of the Selected Performance Criteria). Each Award constitutes an unfunded and unsecured promise of Allied World to deliver (or cause to be delivered) to you a certain number of Common Shares (the “Share” or the “Shares” as the context requires) and/or cash on the settlement date, subject to the terms of this Agreement. Until such delivery of Shares, except as otherwise provided in Paragraph 3, you have only the rights of a general unsecured creditor, and no rights as a shareholder of Allied World. THIS AWARD IS SUBJECT TO ALL TERMS, CONDITIONS AND PROVISIONS OF THE PLAN AND THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE CHOICE OF FORUM PROVISIONS SET FORTH IN PARAGRAPH 14.

     3. Vesting and Delivery.

          (a) Determination of Performance Percentage. As soon as practicable following the end of a Performance Period, the Committee shall determine the Performance Period Percentage applicable to such Performance Period. The determination of the Committee of the Performance Period Percentage shall be final, binding and conclusive for all purposes under this Agreement and the Plan.

          (b) Time and Form of Payment. Except as provided in this Paragraph 3 and in Paragraphs 4, 7 and 8, as soon as practicable following the Committee’s determination of the Performance Period Percentage as described in Paragraph 3(a), the Company shall:

       (i) issue or transfer to you, or cause to be issued or transferred to you, the number of Shares underlying your Share-Settled RSUs, and shall either (i) deliver, or cause to be delivered, to you a Certificate or Certificates therefor, registered in your name; or (ii) cause such Shares to be credited to your account at a third-party stock plan administrator as may be arranged for by the Company or the Committee from time to time for purposes of the administration of outstanding awards under the Plan. You shall be deemed the beneficial owner of the Shares at the close of business on the date on which the Committee determines the Performance Period Percentage and you shall be entitled to any dividend or distribution that has not already been made with respect to such Shares if the record date for such dividend or distribution is after the close of

business on the date on which the Committee determines the Performance Period Percentage; and/or

          (ii) transfer to you, or cause to be transferred to you, an amount of cash equal to the aggregate Fair Market Value of the Shares underlying your Cash-Settled RSUs, determined as of the date on which the Performance Period Percentage is approved by the Committee pursuant to Paragraph 3(a). Your Award shall be settled as soon as practicable following the Committee’s determination.

               (c) Termination of Employment due to Death or Disability. In the event that your employment is terminated due to your death or Disability at any time prior to the end of a Performance Period, you or your estate or beneficiaries, as the case may be, shall be entitled to (i) 25% of the Award, if such termination occurs during the first (1^st) fiscal year of the Performance Period, (ii) 50% of the Award, if such termination occurs during the second (2^nd) fiscal year of the Performance Period, or (iii) 75% of the Award, if such termination occurs during the third (3^rd) fiscal year of the Performance Period. The Award payable under this Paragraph 3(c) shall be settled in Shares and/or cash, as applicable, as soon as practicable following your termination of employment due to death or Disability, as the case may be, but in no event later than March 15 of the fiscal year immediately following the year in which such termination occurred.

          (d) Delay in Delivery. Notwithstanding anything contained herein to the contrary, any delivery of Shares or cash otherwise required to be made hereunder to you at any date as a result of the termination of your employment for any reason shall be delayed for such period of time as may be necessary to meet the requirements of section 409A(a)(2)(B)(i) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and shall be delivered and/or paid on the earliest date on which such delivery or payments can be made without violating the requirements of section 409A(a)(2)(B)(i) of the Code.

     4. Termination of the Awards.

          (a) Unless the Committee determines otherwise, and except as provided in Paragraph 3(c), your rights in respect of your Award shall immediately terminate, and no Shares and/or cash shall be delivered in respect of such Award, if at any time prior to the date on which the Committee determines the Performance Period Percentage your employment with the Company terminates for any reason.

          (b) Unless the Committee determines otherwise, and except as provided in Paragraph 3(c), your rights in respect of your Award (whether or not vested) shall immediately terminate, and no Shares and/or cash shall be delivered in respect of such Award, if at any time prior to the settlement date:

       (i) you attempt to have any dispute under this Agreement or the Plan resolved in any manner that is not provided for by Paragraph 14;

       (ii) you in any manner, directly or indirectly, (A) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Company, (B) interfere with or damage (or attempt to interfere with or damage)

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any relationship between the Company and any such Client or (C) Solicit any person who is an employee of the Company to resign from the Company or to apply for or accept employment with any Competitive Enterprise; or

       (iii) you fail to certify to Allied World, in accordance with procedures established by the Committee that you have complied, or the Committee determines that you have failed to comply, with all of the terms and conditions of this Agreement. By accepting the delivery of Shares and/or cash under this Agreement, you shall be deemed to have represented and certified at such time that you have complied with all the terms and conditions of this Agreement.

          (c) Unless the Committee determines otherwise, if on the settlement date in respect of any Shares and/or cash that would be deliverable under the terms and conditions of this Agreement, except that you have not complied with the conditions or your obligations under Paragraph 4(b)(iii), all of your rights with respect to your Award shall terminate prior to settlement. In addition, except as otherwise required by law or with the express prior written consent of the Board, you shall keep the amount of your Award strictly confidential and you expressly agree that any breach of this Agreement to keep such information confidential may result in forfeiture of the Award and/or immediate termination of your employment.

          (d) Without limiting the application of Paragraph 4(b) or Paragraph 4(c), your rights in respect of your Award that become vested solely by reason of a Disability shall terminate immediately, and no Shares and/or cash shall be delivered in respect of such Award if, following the termination of your employment with the Company by reason of Disability prior to the settlement date you (i) form, or acquire a 5% or greater equity ownership, voting or profit participation interest in, any Competitive Enterprise or (ii) associate in any capacity (including, but not limited to, association as an officer, employee, partner, director, consultant, agent or advisor) with any Competitive Enterprise.

          (e) The settlement of the Award as set forth herein (including there being no settlement of the Award based on a determination by the Committee that (i) the minimum Performance Period Percentage was not met or (ii) you failed to comply with the terms and conditions of this Agreement) shall extinguish the Company’s entire obligation hereunder in respect of your Award, and you shall not be entitled to any further payment in respect thereof.

     5. Repayment. If following the delivery of Shares and/or cash, the Committee determines that all terms and conditions of this Agreement in respect of such delivery were not satisfied, the Company shall be entitled to receive, and you shall be obligated to pay the Company immediately upon demand therefor, the Fair Market Value of the Shares and the amount of cash received by you with respect to your Award, without reduction for any Shares and/or cash applied to satisfy withholding tax or other obligations in respect of such Shares and/or cash.

     6. Non-transferability. Except as otherwise may be provided by the Committee, the limitations set forth in Section 3.5 of the Plan shall apply to this entire award. Any assignment in violation of the provisions of this Paragraph 6 shall be null and void.

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     7. Withholding, Consent and Legends.

          (a) The delivery of Shares and/or cash is conditioned on your satisfaction of any applicable withholding taxes (in accordance with Section 3.3 of the Plan).

          (b) Your rights in respect of your Award are conditioned on the receipt by the Company or third-party stock plan administrator, as applicable, to the full satisfaction of the Committee of any required consents (as defined in Section 3.4 of the Plan) that the Committee may determine to be necessary or advisable (including, without limitation, your consenting to deductions from your wages, or another arrangement satisfactory to the Committee, to reimburse the Company for advances made on your behalf to satisfy withholding and other tax obligations in connection with this Award).

          (c) Allied World may affix to Certificates representing Shares issued pursuant to this Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under a separate agreement with Allied World). Allied World may advise the transfer agent to place a stop transfer order against any legended Shares.

     8. Rights of Offset. The Company shall have the right to offset, or cause to be offset, against the obligation to deliver Shares and/or cash under this Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) you then owe to the Company and any amounts the Committee otherwise deems appropriate.

     9. No Rights to Continued Employment. Nothing in this Agreement or the Plan shall be construed as giving you any right to continued employment by the Company or affect any right that the Company may have to terminate or alter the terms and conditions of your employment.

     10. Successors and Assigns of Allied World. The terms and conditions of this Agreement shall be binding upon, and shall inure to the benefit of, Allied World and its successor entities.

     11. Committee Discretion. The Committee shall have full discretion with respect to any actions to be taken or determinations to be made in connection with this Agreement, and its determinations shall be final, binding and conclusive.

     12. Amendment. The Committee reserves the right at any time to amend the terms and conditions set forth in this Agreement as permitted by the Plan, and the Board may amend the Plan in any respect. Notwithstanding the foregoing, no such amendment shall materially adversely affect your rights and obligations under this Agreement without your consent. Any amendment of this Agreement shall be in writing signed by an authorized member of the Committee or a person or persons designated by the Committee.

     13. Adjustment. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, amalgamation, consolidation, rights offering,

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separation, reorganization or liquidation, or any other change in the corporate structure or the Shares, subsequent to the date of the Date of Grant, the Committee or the Board shall make such equitable adjustments, designed to protect dilution or enlargement of rights, as it may deem appropriate in accordance with the Plan.

     14. Governing Law; Venue. THIS AWARD SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN CONSIDERATION OF YOUR ACCEPTANCE OF THIS AWARD, YOU HEREBY EXPRESSLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF AND VENUE IN THE COURTS OF SWITZERLAND WITH RESPECT TO ANY SUIT OR CLAIM INSTITUTED BY THE COMPANY OR YOU RELATING TO THIS AWARD.

     15. Headings. The headings in this Agreement are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof.

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          IN WITNESS WHEREOF, Allied World has caused this Agreement to be duly executed and delivered as of the Date of Grant.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG
By:
	Name:
	Title:

Recipient:

Target Numbers for the Award:

• Target Share-Settled RSUs (the “Target Share-Settled RSUs”):

• Target Cash-Settled RSUs (the “Target Cash-Settled RSUs”):

Date of Grant:

Receipt Acknowledge:
Address:
	Street
	City,	State	Zip Code
	Social Security No./Local I.D. No.

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Glossary of Terms

Solely for purposes of this Award, the following terms shall have the meanings set forth below. Capitalized terms not defined in this Glossary of Terms shall have the meanings as used or defined in the Agreement.

          “Allied World” means Allied World Assurance Company Holdings, AG or a successor entity.

          “Board” means the Board of Directors of Allied World.

          “Cash-Settled RSUs” means, with respect to any Performance Period, the number of Common Shares equal to your Target Cash-Settled RSUs multiplied by the Performance Period Percentage for such Performance Period.

          “Certificate” means a share certificate (or other appropriate document or evidence of ownership) representing Common Shares of Allied World.

          “Client” means any client or prospective client of the Company to whom the Company provided services, or for whom the Company transacted business, or whose identity became known to you in connection with your relationship with or employment by the Company.

          “Committee” means the Compensation Committee of the Board; provided, however, if at any time during the term of the Plan the Compensation Committee is not comprised of any members, the full Board shall be deemed to be the Committee hereunder until such time that the Compensation Committee of the Board has at least one member.

          “Common Shares” means the registered shares of Allied World.

          “Company” means Allied World and its subsidiaries.

          “Competitive Enterprise” means a business enterprise that (i) engages in any activity, or (ii) owns or controls a significant interest in any entity that engages in any activity, that, in either case, competes anywhere with any activity in which the Company is engaged. The activities covered by the previous sentence include, without limitation, all insurance and re-insurance, and insurance and reinsurance related activities, and asset management located in Switzerland and abroad.

          “Disability” means, in the absence of any employment agreement between you and the Company otherwise defining Disability, any physical or mental disability or infirmity that prevents the performance of your employment duties for a period of (i) ninety (90) consecutive days or (ii) one hundred twenty (120) non-consecutive days during any twelve (12) month period. Any question as to the existence, extent or potentiality of your Disability upon which you and the Company cannot agree shall be determined by a qualified, independent physician selected by the Company and approved by you (which approval shall not be unreasonably withheld). In the event there is an employment agreement between you and the Company defining Disability, “Disability” shall have the meaning provided in such agreement.

          “Fair Market Value” means, with respect to a Common Share on any day, the fair market value as determined in accordance with a valuation methodology approved by the Committee and consistent with the requirements of Section 409A of the Code, or if there is a public market for the shares on such date, (i) the methodology as determined by the Committee in its sole and absolute discretion, or (ii) if the Committee has not set forth a pricing methodology, the closing price of the Common Shares on such stock exchange on which the shares are principally trading on the date in question, or, if there were no sales on such date, on the closest preceding date on which there were sales of shares.

          “Performance Criteria” means one or more of the following performance metrics: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share; (v) book value per share; (vi) return on shareholders’ equity; (vii) return on investment; (viii) stock price; (ix) improvements in capital structure; (x) revenue or sales; and (xi) total return to shareholders.

          “Performance Period” means the three consecutive fiscal year period ending on [    ].

          “Performance Period Percentage” means, unless otherwise determined by the Committee, for any Performance Period, a percentage determined as a function of percentage achievement of the Selected Performance Criteria, as follows:

Percentage Achievement of Selected
Performance Criteria	Performance Period Percentage
Less than 80%	0%
80%	50%
100%	100%
120% or greater	150%

To the extent the percentage achievement of the Selected Performance Criteria falls between any level set forth on the table above, the Performance Period Percentage shall be the Performance Period Percentage for the percentage achievement level immediately below that actually obtained plus 2.50% for each whole percentage achievement in excess of such stated level (e.g., at 90% achievement of the Selected Performance Criteria, the Performance Period Percentage will equal 50% plus 25%, or 75%).

          “Selected Performance Criteria” means, with respect to a Performance Period, the Performance Criteria that are selected to measure the performance of the Company over the Performance Period.

          “Share-Settled RSUs” means, with respect to any Performance Period, the number of Common Shares equal to your Target Share-Settled RSUs multiplied by the Performance Period Percentage for such Performance Period.

          “Solicit” means any direct or indirect communication of any kind whatsoever, regardless of by whom initiated, inviting, advising, encouraging or requesting any person or entity, in any manner, to take or refrain from taking any action.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Scott A. Carmilani, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Allied World Assurance Company Holdings, AG;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 9, 2011	By:	/s/ Scott A. Carmilani
	Name:	Scott A. Carmilani
	Title:	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Joan H. Dillard, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Allied World Assurance Company Holdings, AG;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 9, 2011	By:	/s/ Joan H. Dillard
	Name:	Joan H. Dillard
	Title:	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Allied World Assurance Company Holdings, AG (the “Company”), hereby certifies, to such officer’s knowledge, that:

     The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2011	By:	/s/ Scott A. Carmilani
	Name:	Scott A. Carmilani
	Title:	President and Chief Executive Officer

     The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report.

EX-32.2

Exhibit 32.2

CERTIFICATION

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Allied World Assurance Company Holdings, AG (the “Company”), hereby certifies, to such officer’s knowledge, that:

     The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 9, 2011	By:	/s/ Joan H. Dillard
	Name:	Joan H. Dillard
	Title:	Executive Vice President and Chief Financial Officer

     The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report.

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Fair Value of Financial Instruments (Narrative) (Details)	6 Months Ended
	Jun. 30, 2011
Senior Notes [Member] | 5.50% Senior Notes [Member]
Senior notes, interest rate	5.50%
Debt instrument interest rate traded percentage	100.90%
Debt instrument interest rate effective yield percentage	5.40%
Senior Notes [Member] | 7.50% Senior Notes [Member]
Senior notes, interest rate	7.50%
Debt instrument interest rate traded percentage	115.10%
Debt instrument interest rate effective yield percentage	4.20%
5.50% Senior Notes [Member]
Senior notes, interest rate	5.50%
7.50% Senior Notes [Member]
Senior notes, interest rate	7.50%

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Condensed Consolidated Balance Sheets (Parenthetical) In Thousands, except Share data	Jun. 30, 2011 USD ($)	Jun. 30, 2011 CHF	Dec. 31, 2010 USD ($)	Dec. 31, 2010 CHF
Condensed Consolidated Balance Sheets
Amortized costs of fixed maturity investments available for sale, at fair value	$ 318,711		$ 828,544
Common shares, par value		15.00		15
Common shares, issued	40,003,642	40,003,642	40,003,642	40,003,642
Common shares, outstanding	37,945,043	37,945,043	38,089,226	38,089,226
Treasury stock, shares	2,058,599	2,058,599	1,914,416	1,914,416

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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
REVENUES:
Gross premiums written	$ 519,598	$ 493,847	$ 1,080,286	$ 998,010
Premiums ceded	(123,795)	(124,052)	(203,612)	(194,923)
Net premiums written	395,803	369,795	876,674	803,087
Change in unearned premiums	(40,496)	(30,871)	(186,491)	(125,839)
Net premiums earned	355,307	338,924	690,183	677,248
Net investment income	52,368	65,594	102,576	134,496
Net realized investment gains	58,878	94,933	109,254	172,420
Net impairment charges recognized in earnings:
Total other-than-temporary impairment charges				(168)
Portion of loss recognized in other comprehensive income, before taxes
Net impairment charges recognized in earnings				(168)
Other income		616		913
Total revenues	466,553	500,067	902,013	984,909
EXPENSES:
Net losses and loss expenses	235,813	188,722	540,265	420,876
Acquisition costs	42,971	37,938	81,053	78,722
General and administrative expenses	67,201	68,089	135,157	131,552
Amortization and impairment of intangible assets	766	891	1,533	1,783
Interest expense	13,745	9,531	27,487	19,059
Foreign exchange (gain) loss	1,184	559	742	1,635
Total expenses	361,680	305,730	786,237	653,627
Income before income taxes	104,873	194,337	115,776	331,282
Income tax expense	11,073	10,378	13,356	13,583
NET INCOME	93,800	183,959	102,420	317,699
Other comprehensive loss:
Unrealized gains on investments arising during the period net of applicable deferred income tax (expense) for the three months ended June 30, 2011: $1,461; 2010: $(471) and six months ended June 30, 2011: $2,425; 2010: $(690)	13,680	63,852	5,636	101,322
Reclassification adjustment for net realized investment gains included in net income, net of applicable income tax	(23,548)	(67,891)	(39,676)	(112,926)
Other comprehensive loss	(9,868)	(4,039)	(34,040)	(11,604)
COMPREHENSIVE INCOME	$ 83,932	$ 179,920	$ 68,380	$ 306,095
PER SHARE DATA
Basic earnings per share	$ 2.45	$ 3.66	$ 2.69	$ 6.34
Diluted earnings per share	$ 2.36	$ 3.47	$ 2.57	$ 5.98
Weighted average common shares outstanding	38,346,489	50,222,974	38,061,724	50,123,945
Weighted average common shares and common share equivalents outstanding	39,800,753	52,974,410	39,873,418	53,086,708
Dividends paid per share		$ 0.20		$ 0.40

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
Insurance balances receivable	$ 653,002	$ 529,927
Past due over 90 days	5,698	2,658
Percentage of premium receivables greater than 90 days past due	0.90%	0.50%
Allied World Switzerland (Parent Guarantor) [Member]
Insurance balances receivable

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Reserve for Losses and Loss Expenses (Schedule of Reserve for Losses and Loss Expenses) (Details) (USD $) In Thousands	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2009
Reserve for Losses and Loss Expenses
Outstanding loss reserves	$ 1,462,144		$ 1,166,516
Reserves for losses incurred but not reported	3,789,160		3,712,672
Reserve for losses and loss expenses	$ 5,251,304	$ 5,100,643	$ 4,879,188	$ 4,920,435	$ 4,853,359	$ 4,761,772

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Condensed Consolidated Guarantor Financial Statements

6 Months Ended

Jun. 30, 2011

Condensed Consolidated Guarantor Financial Statements

Condensed Consolidated Guarantor Financial Statements

16. CONDENSED CONSOLIDATED GUARANTOR FINANCIAL STATEMENTS

     The following tables present unaudited condensed consolidating financial information for Allied World Switzerland (the "Parent Guarantor") and Allied World Bermuda (the "Subsidiary Issuer"). The Subsidiary Issuer is a direct 100 percent-owned subsidiary of the Parent Guarantor. Investments in subsidiaries are accounted for by the Parent Guarantor under the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are reflected in the Parent Guarantor's investment accounts and earnings. The Parent Guarantor fully and unconditionally guarantees the 5.50% Senior Notes and the 7.50% Senior Notes issued by Subsidiary Issuer.

Unaudited Condensed Consolidating Balance Sheet:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of June 30, 2011	Guarantor)			Issuer)			Subsidiaries		Adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,502,765	$	—		$	7,502,765
Cash and cash equivalents		70,587			38,402			631,815		—			740,804
Insurance balances receivable		—			—			653,002		—			653,002
Prepaid reinsurance		—			—			223,269		—			223,269
Reinsurance recoverable		—			—			1,013,951		—			1,013,951
Net deferred acquisition costs		—			—			112,083		—			112,083
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			55,342		—			55,342
Balances receivable on sale of investments		—			—			106,486		—			106,486
Investments in subsidiaries		2,978,767			1,990,580			—		(4,969,347	)		—
Due (to) from subsidiaries		(1,771	)		(7,421	)		9,192		—			—
Other assets		216			61,229			173,196		(53,620	)		181,021
Total assets	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	5,251,304	$	—		$	5,251,304
Unearned premiums		—			—			1,184,676		—			1,184,676
Reinsurance balances payable		—			—			132,661		—			132,661
Balances due on purchases of investments		—			—			358,837		—			358,837
Senior notes		—			797,823			—		—			797,823
Accounts payable and accrued liabilities		3,382			18,074			65,925		—			87,381
Total liabilities		3,382			815,897			6,993,403		—			7,812,682
Total shareholders' equity		3,044,417			1,266,893			3,756,074		(5,022,967	)		3,044,417
Total liabilities and shareholders' equity	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of December 31, 2010	Guarantor)			Issuer)			Subsidiaries		adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,183,554	$	—		$	7,183,554
Cash and cash equivalents		138,488			125,663			492,844		—			756,995
Insurance balances receivable		—			—			529,927		—			529,927
Prepaid reinsurance		—			—			187,287		—			187,287
Reinsurance recoverable		—			—			927,588		—			927,588
Net deferred acquisition costs		—			—			96,803		—			96,803
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			56,876		—			56,876
Balances receivable on sale of investments		—			—			188,408		—			188,408
Investments in subsidiaries		2,944,975			1,981,158			—		(4,926,133	)		—
Due (to) from subsidiaries		(7,143	)		(9,419	)		16,562		—			—
Other assets		—			8,801			223,016		—			231,817
Total assets	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	4,879,188	$	—		$	4,879,188
Unearned premiums		—			—			962,203		—			962,203
Reinsurance balances payable		—			—			99,732		—			99,732
Balances due on purchases of investments		—			—			506,978		—			506,978
Senior notes		—			797,700			—		—			797,700
Accounts payable and accrued liabilities		500			18,111			87,399		—			106,010
Total liabilities		500			815,811			6,535,500		—			7,351,811
Total shareholders' equity		3,075,820			1,290,392			3,635,741		(4,926,133	)		3,075,820
Total liabilities and shareholders' equity	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631

Unaudited Condensed Consolidating Income Statement:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	519,598		$	—		$	519,598
Premiums ceded		—			—			(123,795	)		—			(123,795	)
Net premiums written		—			—			395,803			—			395,803
Change in unearned premiums		—			—			(40,496	)		—			(40,496	)
Net premiums earned		—			—			355,307			—			355,307
Net investment income		15			8			52,345			—			52,368
Net realized investment gains		—			—			58,878			—			58,878
		15			8			466,530			—			466,553
EXPENSES:
Net losses and loss expenses		—			—			235,813			—			235,813
Acquisition costs		—			—			42,971			—			42,971
General and administrative expenses		4,746			1,483			60,972			—			67,201
Amortization and impairment of intangible assets		—			—			766			—			766
Interest expense		—			13,745			—			—			13,745
Foreign exchange loss (gain)		3			(17	)		1,198			—			1,184
Income tax expense		—			—			11,073			—			11,073
		4,749			15,211			352,793			—			372,753
Income (loss) before equity in earnings of consolidated
subsidiaries		(4,734	)		(15,203	)		113,737			—			93,800
Equity in earnings of consolidated subsidiaries		98,534			—			—			(98,534	)		—
NET INCOME (LOSS)	$	93,800		$	(15,203	)	$	113,737		$	(98,534	)	$	93,800

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	493,847		$	—		$	493,847
Premiums ceded		—		—			(124,052	)		—			(124,052	)
Net premiums written		—		—			369,795			—			369,795
Change in unearned premiums		—		—			(30,871	)		—			(30,871	)
Net premiums earned		—		—			338,924			—			338,924
Net investment income		—		20			65,574			—			65,594
Net realized investment gains (losses)		—		(3,958	)		98,891			—			94,933
Net impairment charges recognized in earnings		—		—			—			—			—
Other income		—		—			616			—			616
		—		(3,938	)		504,005			—			500,067
EXPENSES:
Net losses and loss expenses		—		—			188,722			—			188,722
Acquisition costs		—		—			37,938			—			37,938
General and administrative expenses		—		3,168			64,921			—			68,089
Amortization and impairment of intangible assets		—		—			891			—			891
Interest expense		—		9,531			—			—			9,531
Foreign exchange loss		—		—			559			—			559
Income tax expense		—		—			10,378			—			10,378
		—		12,699			303,409			—			316,108
Income (loss) before equity in earnings of consolidated subsidiaries		—		(16,637	)		200,596			—			183,959
Equity in earnings of consolidated subsidiaries		—		200,596			—			(200,596	)		—
NET INCOME (LOSS)	$	—	$	183,959		$	200,596		$	(200,596	)	$	183,959

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	1,080,286		$	—		$	1,080,286
Premiums ceded		—			—			(203,612	)		—			(203,612	)
Net premiums written		—			—			876,674			—			876,674
Change in unearned premiums		—			—			(186,491	)		—			(186,491	)
Net premiums earned		—			—			690,183			—			690,183
Net investment income		45			22			102,509			—			102,576
Net realized investment gains		—			—			109,254			—			109,254
Net impairment charges recognized in earnings		—			—			—			—			—
Other income		—			—			—			—			—
		45			22			901,946			—			902,013
EXPENSES:
Net losses and loss expenses		—			—			540,265			—			540,265
Acquisition costs		—			—			81,053			—			81,053
General and administrative expenses		5,810			4,229			125,118			—			135,157
Amortization and impairment of intangible assets		—			—			1,533			—			1,533
Interest expense		—			27,487			—			—			27,487
Foreign exchange loss (gain)		(1	)		224			519			—			742
Income tax expense		—			—			13,356			—			13,356
		5,809			31,940			761,844			—			799,593
Income (loss) before equity in earnings of consolidated subsidiaries		(5,764	)		(31,918	)		140,102			—			102,420
Equity in earnings of consolidated subsidiaries		108,184			—			—			(108,184	)		—
NET INCOME (LOSS)	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	998,010		$	—		$	998,010
Premiums ceded		—		—			(194,923	)		—			(194,923	)
Net premiums written		—		—			803,087			—			803,087
Change in unearned premiums		—		—			(125,839	)		—			(125,839	)
Net premiums earned		—		—			677,248			—			677,248
Net investment income		—		21			134,475			—			134,496
Net realized investment gains		—		(3,958	)		176,378			—			172,420
Net impairment charges recognized in earnings		—		—			(168	)		—			(168	)
Other income		—		—			913			—			913
		—		(3,937	)		988,846			—			984,909
EXPENSES:
Net losses and loss expenses		—		—			420,876			—			420,876
Acquisition costs		—		—			78,722			—			78,722
General and administrative expenses		—		6,651			124,901			—			131,552
Amortization and impairment of intangible assets		—		—			1,783			—			1,783
Interest expense		—		19,059			—			—			19,059
Foreign exchange loss		—		—			1,635			—			1,635
Income tax expense		—		—			13,583			—			13,583
		—		25,710			641,500			—			667,210
Income (loss) before equity in earnings of consolidated subsidiaries		—		(29,647	)		347,346			—			317,699
Equity in earnings of consolidated subsidiaries		—		347,346			—			(347,346	)		—
NET INCOME (LOSS)	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699

Unaudited Condensed Consolidating Cash Flows:

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420
Adjustments to reconcile net income to cash Provided by operating activities:
Equity in earnings of consolidated subsidiaries		(108,184	)		—			—			108,184			—
Dividends received from subsidiaries		—			—			—			—			—
Stock compensation expense		457			—			11,655			—			12,112
Amortization of discount on senior notes		—			122			—			—			122
Other assets		(216	)		(928	)		(358,363	)		—			(359,507	)
Accounts payable and accrued liabilities		(2,490	)		(36	)		611,415			—			608,889
Interest payable		—			—			—			—			—
Balances due to subsidiaries		—			—			—			—			—
Net cash provided by (used in) operating activities		(8,013	)		(32,760	)		404,809			—			364,036
CASH FLOWS USED IN INVESTING ACTIVITIES:
Net cash paid for acquisition		—			—			—			—			—
Purchase of fixed maturity investments — available for sale		—			—			(352	)		—			(352	)
Purchase of fixed maturity investments — trading		—			—			(3,949,447	)		—			(3,949,447	)
Purchases of equity securities and other invested assets		—			—			(485,750	)		—			(485,750	)
Sales of fixed maturity investments — available for sale		—			—			560,794			—			560,794
Sales of fixed maturity investments — trading		—			—			3,503,758			—			3,503,758
Sale of equity securities and other invested assets		—			—			72,362			—			72,362
Other		(4,496	)		—			31,700			—			27,204
Net cash used in investing activities		(4,496	)		—			(266,935	)		—			(271,431	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—			—			—			—			—
Proceeds from the exercise of stock options		4,824			—			—			—			4,824
Share repurchase		(60,000	)		—			—			—			(60,000	)
Repurchase of founder warrants		—			(53,620	)		—			—			(53,620	)
Stock compensation funding due from subsidiaries		—			—			—			—			—
Capital contribution		—			—			—			—			—
Other		(216	)		(881	)		1,097			—			—
Net cash (used in) provided by financing activities		(55,392	)		(54,501	)		1,097			—			(108,796	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(67,901	)		(87,261	)		138,971			—			(16,191	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		138,488			125,663			492,844			—			756,995
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,587		$	38,402		$	631,815		$	—		$	740,804

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of consolidated subsidiaries		—		(347,346	)		—			347,346			—
Dividends received from subsidiaries		—		80,000			—			(80,000	)		—
Stock compensation expense		—		295			17,159			—			17,454
Amortization of discount on senior notes		—		65			—			—			65
Other assets		—		847			(343,427	)		—			(342,580	)
Accounts payable and accrued liabilities		—		5,789			305,356			—			311,145
Interest payable		—		—			—			—			—
Net cash provided by (used in) operating activities		—		57,349			326,434			(80,000	)		303,783
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed maturity investments — available for sale		—		—			(113,118	)		—			(113,118	)
Purchase of fixed maturity investments — trading		—		—			(6,927,637	)		—			(6,927,637	)
Purchases of equity securities and other invested assets		—		—			(203,011	)		—			(203,011	)
Sales of fixed maturity investments — available for sale		—		—			1,827,800			—			1,827,800
Sales of fixed maturity investments — trading		—		—			5,344,007			—			5,344,007
Sale of equity securities and other invested assets		—		—			3,155			—			3,155
Other		—		(2,097	)		(16,759	)		—			(18,856	)
Net cash used in investing activities		—		(2,097	)		(85,563	)		—			(87,660	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—		(20,109	)		(80,000	)		80,000			(20,109	)
Proceeds from the exercise of stock options		—		3,576			—			—			3,576
Stock repurchase		—		(49,089	)		—			—			(49,089	)
Net cash (used in) provided by financing activities		—		(65,622	)		(80,000	)		80,000			(65,622	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—		(10,370	)		160,871			—			150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		—		53,849			238,339			—			292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	43,479		$	399,210		$	—		$	442,689

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 01, 2011
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2011
Entity Registrant Name	Allied World Assurance Co Holdings, AG
Trading Symbol	AWH
Entity Central Index Key	0001163348
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		38,122,226

XML



Derivative Instruments (Derivative Fair Values on the Condensed Consolidated Balance Sheets) (Details) (Derivatives Not Designated as Hedging Instruments [Member], USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Investment Portfolio [Member]
Asset Derivative Notional Amount	$ 1,919,511
Asset Derivative Fair Value	5,670
Liability Derivative Notional Amount	176,173
Liability Derivative Fair Value	236
Investment Portfolio [Member] | Foreign Exchange Contracts [Member]
Asset Derivative Notional Amount	122,311	[1]
Asset Derivative Fair Value	1,487	[1]
Liability Derivative Notional Amount	33,873	[1]
Liability Derivative Fair Value	204	[1]
Investment Portfolio [Member] | Interest Rate Futures [Member]
Asset Derivative Notional Amount	1,797,200	[1]
Asset Derivative Fair Value	4,183	[1]
Liability Derivative Notional Amount	142,300	[1]
Liability Derivative Fair Value	32	[1]
Operating Activities [Member]
Asset Derivative Notional Amount	2,045,039		26,758
Asset Derivative Fair Value	7,048		858
Liability Derivative Notional Amount	211,003		51,308
Liability Derivative Fair Value	654		1,629
Operating Activities [Member] | Foreign Exchange Contracts [Member]
Asset Derivative Notional Amount	125,528	[2]	26,758	[2]
Asset Derivative Fair Value	1,378	[2]	858	[2]
Liability Derivative Notional Amount	34,830	[2]	51,308	[2]
Liability Derivative Fair Value	$ 418	[2]	$ 1,629	[2]

[1] Asset and liability derivatives relating to the investment portfolio are classified within "balances receivable on sale of investments" or "balances due on the purchase of investments" on the consolidated balance sheets.

[2] Asset and liability derivatives relating to operating activities are classified within "other assets" or "other liabilities" on the consolidated balance sheets.

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Employee Benefit Plans (Policy)

6 Months Ended

Jun. 30, 2011

Employee Benefit Plans

Share-based compensation, option and incentive plans policy

12. EMPLOYEE BENEFIT PLANS

a) Employee option plan

     In 2001, the Company implemented the Allied World Assurance Holdings, Ltd 2001 Employee Warrant Plan, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, Ltd Second Amended and Restated 2001 Employee Stock Option Plan (the "ESOP"). Under the ESOP, up to 4,000,000 common shares may be issued.

     As part of the Redomestication, Allied World Switzerland adopted and assumed the ESOP from Allied World Bermuda which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan (the "Plan"). Allied World Switzerland has filed a registration statement on Form S-8 under the Securities Act of 1933, as amended, to register common shares issued or reserved for issuance under the Plan. These options are exercisable in certain limited conditions, expire after 10 years, and generally vest pro-rata over four years from the date of grant. The exercise price of options issued are recommended by the Compensation Committee to the Board of Directors for approval but shall not be less than 100% of the fair market value of the common shares of Allied World Switzerland on the date the option award is granted.

	Six Months Ended June 30, 2011
				Weighted Average
	Options			Exercise Price
Outstanding at beginning of period		1,272,739		$	38.77
Granted		494,885			61.51
Exercised		(128,487	)		37.55
Forfeited		(27,819	)		48.54
Expired		(170	)		39.02
Outstanding at end of period		1,611,148		$	45.68

     Assumptions used in the option-pricing model are as follows:

	Options Granted During
	the Six Months Ended
	June 30, 2011
Expected term of option	5.48 years
Weighted average risk-free interest rate		2.33	%
Weighted average expected volatility		31.51	%
Dividend yield		1.00	%
Weighted average fair value on grant date	$	18.27

     The Company has assumed a weighted average annual forfeiture rate of 6.72% in determining the compensation expense over the service period.

     Compensation expense of $997 and $2,176 relating to the options has been included in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $758 and $1,550 relating to the options has been included in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. As of June 30, 2011 and December 31, 2010, the Company has recorded in "additional paid-in capital" on the consolidated balance sheets an amount of $41,207 and $41,505, respectively, in connection with all options granted.

b) Stock incentive plan

     In 2004, the Company implemented the Allied World Assurance Holdings, Ltd 2004 Stock Incentive Plan. As part of the Redomestication, Allied World Switzerland adopted and assumed this plan from Allied World Bermuda, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan provides for grants of restricted stock, restricted stock units ("RSUs"), dividend equivalent rights and other equity-based awards. A total of 2,000,000 common shares may be issued under the Stock Incentive Plan. To date, only RSUs have been granted. These RSUs generally vest pro-rata over four years from the date of grant or vest in the fourth or fifth year from the date of grant.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	RSUs			Value
Outstanding RSUs at beginning of period		851,078		$	39.88
RSUs granted		45,239			61.51
Performance-based RSUs granted		139,210			61.51
RSUs fully vested		(130,252	)		42.59
RSUs forfeited		(12,198	)		37.24
Outstanding RSUs at end of period		893,077		$	43.99

     The Company granted performance-based RSUs in lieu of utilizing the LTIP (as defined in Note 12(c)). The performance-based RSUs are structured in exactly the same form as shares issued under the LTIP in terms of vesting restrictions and achievement of established performance criteria. For the performance-based RSUs granted in 2010 and 2011, the Company anticipates that the performance goals are likely to be achieved. Based on the performance goals, the performance-based RSUs granted in 2010 and 2011 are expensed at 100% of the fair market value of Allied World Switzerland's common shares on the date of grant. The expense is recognized over the performance period.

     Compensation expense of $3,707 and $7,529 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,327 and $7,041 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. The compensation expense for the RSUs is based on the fair market value of Allied World Switzerland's common shares at the time of grant. The Company believes it is unlikely that performance-based RSUs will be forfeited as these awards are issued to senior management. Thus, no forfeiture rate is applied to the performance-based RSUs. The Company has assumed a weighted average annual forfeiture rate of 2.80%, excluding performance-based RSUs, in determining the compensation expense over the service period.

     As of June 30, 2011 and December 31, 2010, the Company has recorded $34,865 and $37,991, respectively, in "additional paid-in capital" on the consolidated balance sheets in connection with the RSUs awarded.

c) Long-term incentive plan

     In May 2006, the Company implemented the Long-Term Incentive Plan ("LTIP"), which it amended and restated in November 2007. The LTIP provides for performance-based equity awards to key employees in order to promote the long-term growth and profitability of the Company. As part of the Redomestication, Allied World Switzerland adopted and assumed the LTIP from Allied World Bermuda. Each award represents the right to receive a number of common shares in the future, based upon the achievement of established performance criteria during the applicable three-year performance period. A total of 2,000,000 common shares may be issued under the LTIP. The awards granted in 2009 will vest after the fiscal year ending December 31, 2011, subject to the achievement of the performance conditions and terms of the LTIP. The awards granted in 2008 generally vested after the fiscal year ended December 31, 2010, however, a portion of this award will vest after the fourth or fifth year from the original grant date, subject to the achievement of the performance conditions and terms of the LTIP.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	LTIP			Value
Outstanding LTIP awards at beginning of period		773,411		$	41.74
Additional LTIP awards granted due to the achievement of 2008 — 2010 performance criteria		212,938			43.27
LTIP forfeited		(13,500	)		42.48
LTIP awards vested		(638,813	)		43.27
Outstanding LTIP awards at end of period		334,036		$	39.76

     Compensation expense of $1,558 and $2,407 relating to the LTIP has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,842 and $8,863 relating to the LTIP has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. The decrease in compensation expense relating to LTIP is primarily the result of the Company issuing performance-based RSUs in lieu of LTIP as discussed in Note 12(b). The compensation expense for the LTIP is based on the fair market value of Allied World Switzerland's common shares at the time of grant. The LTIP is deemed to be an equity plan and as such, $46,852 and $77,728 have been included in "additional paid-in capital" on the consolidated balance sheets as of June 30, 2011 and December 31, 2010, respectively.

     In calculating the compensation expense and in the determination of share equivalents for the purpose of calculating diluted earnings per share, it is estimated for the unvested LTIP awards granted in 2008 and 2009 that the maximum performance goals as set by the LTIP are likely to be achieved over the performance period. Based on the performance goals, the unvested LTIP awards granted in 2008 and 2009 are expensed at 150% of the fair market value of Allied World Switzerland's common shares on the date of grant. The expense is recognized over the performance period.

d) Cash-equivalent stock awards

     Since 2009, as part of the Company's annual year-end compensation awards, the Company granted both stock-based awards and cash-equivalent stock awards. The cash-equivalent awards were granted to employees who received RSU, LTIP and performance-based RSU awards and were granted in lieu of granting the full award as a stock-based award. The cash-equivalent RSU awards vest pro-rata over four years from the date of grant. The cash-equivalent LTIP and performance-based RSU awards vest after a three-year performance period. As the cash-equivalent awards are settled in cash, we establish a liability equal to the product of the fair market value of Allied World Switzerland's common shares as of the end of the reporting period and the total awards outstanding. The liability is included in "accounts payable and accrued expenses" in the balance sheets and changes in the liability are recorded in "general and administrative expenses" in the consolidated income statements. For the three and six months ended June 30, 2011, the expense recognized for the cash-equivalent stock awards was $3,406 and $8,575, respectively. For the three and six months ended June 30, 2010, the expense recognized for the cash-equivalent stock awards was $3,012 and $5,321, respectively.

     The following table shows the stock related compensation expense relating to the stock options, RSUs, LTIP and cash equivalent awards:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Stock Options	$	997	$	758	$	2,176	$	1,550
RSUs		3,707		3,327		7,529		7,041
LTIP		1,558		3,842		2,407		8,863
Cash-equivalent stock awards		3,406		3,012		8,575		5,321
Total	$	9,668	$	10,939	$	20,687	$	22,775

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Investments (Schedule of Amounts Related to Credit Losses on Debt Securities for which Portion of the OTTI was Recognized in Other Comprehensive Income) (Details) (USD $) In Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2010
Investments
Beginning balance of credit losses	$ 1,264	$ 1,096
Additions for credit loss for which OTTI was not previously recognized		168
Reductions for securities sold during the period (realized)
Reductions for OTTI previously recognized due to intent to sell
Additions resulting from the increase in credit losses
Reductions resulting from the improvement in expected cash flows
Ending balance of credit losses	$ 1,264	$ 1,264

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Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments

Derivative Instruments

5. DERIVATIVE INSTRUMENTS

     The following table summarizes information on the location and amounts of derivative fair values on the unaudited condensed consolidated balance sheets ("consolidated balance sheets"):

			June 30, 2011								December 31, 2010
	Asset				Liability				Asset				Liability
	Derivative		Asset		Derivative		Liability		Derivative		Asset		Derivative		Liability
	Notional		Derivative		Notional		Derivative		Notional		Derivative		Notional		Derivative
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value		Amount		Fair Value
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts (1)	$	122,311	$	1,487	$	33,873	$	204	$	—	$	—	$	—	$	—
Interest rate futures (1)		1,797,200		4,183		142,300		32		—		—		—		—
	$	1,919,511	$	5,670	$	176,173	$	236	$	—	$	—	$	—	$	—
Relating to operating activities:
Foreign exchange contracts (2)	$	125,528	$	1,378	$	34,830	$	418	$	26,758	$	858	$	51,308	$	1,629
Total derivatives	$	2,045,039	$	7,048	$	211,003	$	654	$	26,758	$	858	$	51,308	$	1,629

(1)	Asset and liability derivatives relating to the investment portfolio are classified within "balances receivable on sale of investments" or "balances due on the purchase of investments" on the consolidated balance sheets.
(2)	Asset and liability derivatives relating to operating activities are classified within "other assets" or "other liabilities" on the consolidated balance sheets.

     The following table provides the total unrealized and realized gains (losses) on derivatives recorded in the consolidated income statement:

	Location of Gain (Loss)	Three Months Ended						Six Months Ended
	Recognized in the Consolidated	June 30,						June 30,
	Income Statements	2011			2010			2011			2010
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts	Net realized investment gains	$	723		$	—		$	723		$	—
Interest rate futures	Net realized investment losses		(10,763	)		—			(16,259	)		—
		$	(10,040	)	$	—		$	(15,536	)	$	—
Relating to operating activities:
Foreign exchange contracts	Foreign exchange gains (losses)	$	1,345		$	(1,361	)	$	2,601		$	(1,412	)
Total derivatives		$	(8,695	)	$	(1,361	)	$	(12,935	)	$	(1,412	)
									~~~~~a

Derivative Instruments not Designated as Hedging Instruments

a) Relating to Investment Portfolio

     The Company is exposed to foreign currency risk in its investment portfolio. Accordingly, the fair values of the Company's investment portfolio are partially influenced by the change in foreign exchange rates. The Company entered into foreign currency forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities have not been designated as specific hedges for financial reporting purposes.

     The Company also purchases and sells interest rate future contracts to actively manage the duration and yield curve positioning of its fixed income portfolio. Interest rate futures can efficiently increase or decrease the overall duration of the portfolio. Additionally, interest rate future contracts can be utilized to obtain the desired position along the yield curve in order to protect against certain future yield curve shapes.

b) Relating to Operating Activities

     The Company's insurance and reinsurance subsidiaries and branches operate in various foreign countries and consequently the Company's underwriting portfolio is exposed to foreign currency risk. The Company manages foreign currency risk by seeking to match liabilities under the insurance policies and reinsurance contracts that it writes and that are payable in foreign currencies with cash and investments that are denominated in such currencies. When necessary, the Company may also use derivatives to economically hedge un-matched foreign currency exposures, specifically forward contracts and currency options.

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Investments (Tables)

6 Months Ended

Jun. 30, 2011

Investments

Schedule of Available for Sale Securities

			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses			Fair Value
June 30, 2011
U.S. Government and Government agencies	$	37,597	$	1,419	$	—		$	39,016
States, municipalities and political subdivisions		43,343		5,323		—			48,666
Corporate debt:
Financial institutions		41,186		2,365		—			43,551
Industrials		95,583		7,656		—			103,239
Utilities		101,002		10,077		—			111,079
Total fixed maturity investments, available for sale	$	318,711	$	26,840	$	—		$	345,551
December 31, 2010
U.S. Government and Government agencies	$	85,030	$	6,923	$	—		$	91,953
Non-U.S. Government and Government agencies		138,386		9,539		(2,541	)		145,384
States, municipalities and political subdivisions		107,289		10,901		(13	)		118,177
Corporate debt:
Financial institutions		66,660		6,776		(38	)		73,398
Industrials		310,664		20,548		(2	)		331,210
Utilities		120,515		11,212		—			131,727
Total fixed maturity investments, available for sale	$	828,544	$	65,899	$	(2,594	)	$	891,849

Schedule of Trading Securities

	June 30, 2011		December 31, 2010
U.S. Government and Government agencies	$	982,274	$	1,229,720
Non-U.S. Government and Government agencies		177,529		120,793
States, municipalities and political subdivisions		108,256		127,436
Corporate debt:
Financial institutions		1,440,554		1,261,219
Industrials		772,829		627,524
Utilities		135,492		101,472
Residential mortgage-backed:
Non-agency residential		363,408		371,935
Agency residential		1,229,647		1,195,905
Commercial mortgage-backed		311,509		184,043
Asset-backed		679,536		549,050
Total fixed maturity investments, trading		6,201,034		5,769,097
Equity securities		393,913		174,976
Hedge funds (1)		562,267		347,632
Total	$	7,157,214	$	6,291,705

⁽¹⁾ Within the Company's financial statements and footnotes "hedge funds" include the Company's investments in both hedge funds and private equity funds.

Schedule of Contractual Maturity Dates of Available for Sale Fixed Maturity Investments

	June 30, 2011
	Amortized Cost		Fair Value
Due within one year	$	33,343	$	33,999
Due after one year through five years		233,119		252,903
Due after five years through ten years		49,168		55,314
Due after ten years		3,081		3,335
	$	318,711	$	345,551

Schedule of Investments and Cash and Cash Equivalents

					Long			Short
Hedge Fund	Fair Value as of		Unfunded		Exposure(1)			Exposure(2)			Gross			Net
Type	June 30, 2011		Commitments		(% of funded)			(% of funded)			Exposure(3)			Exposure(4)
Private equity (primary and secondary)	$	56,707	$	182,296		100	%		0	%		100	%		100	%
Mezzanine debt		1,978		113,022		100	%		0	%		100	%		100	%
Distressed		62,498		37,289		73	%		10	%		83	%		63	%
Total private equity		121,183		332,607
Equity long/short		186,142		—		104	%		67	%		171	%		37	%
Multi-strategy		170,168		—		101	%		60	%		161	%		41	%
Event driven		84,774		—		115	%		75	%		190	%		40	%
Total	$	562,267	$	332,607

(1)	Long exposure represents the ratio of the fund's long investments in securities to the fund's equity capital (over 100% may denote explicit borrowing).
(2)	Short exposure represents the ratio of the securities sold short to the fund's equity capital.
(3)	Gross exposure is the addition of the long and short exposures (over 100% may denote explicit borrowing).
(4)	Net exposure is the subtraction of the short exposure from the long exposure.

Schedule of Net Investment Income

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Fixed maturity investments	$	50,648		$	67,552		$	101,594		$	138,650
Equity securities and other invested assets		5,015			940			7,211			1,246
Cash and cash equivalents		127			111			445			163
Expenses		(3,422	)		(3,009	)		(6,674	)		(5,563	)
Net investment income	$	52,368		$	65,594		$	102,576		$	134,496

Schedule of Realized Gains and Losses

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross realized gains on sale of securities	$	34,611		$	78,572		$	78,168		$	130,239
Gross realized losses on sale of securities		(3,330	)		(6,724	)		(25,262	)		(13,130	)
Treasury yield hedge		—			(3,958	)		—			(3,958	)
Futures not designated as hedges		(15,755	)		—			(20,410	)		—
Foreign exchange forwards not designated as hedges		(560	)		—			(560	)		—
Mark-to-market changes: debt securities trading		31,872			32,746			45,336			60,477
Mark-to-market changes: foreign exchange forwards and futures not designated as hedges		6,275			—			5,434			—
Mark-to-market changes: hedge funds and equity securities		5,765			(5,703	)		26,548		$	(1,208	)
Net realized investment gains	$	58,878		$	94,933		$	109,254		$	172,420
Proceeds from sale of available for sale securities	$	202,671		$	1,306,625		$	546,191		$	1,846,074
Proceeds from sale of trading securities	$	1,432,148		$	1,215,553		$	3,418,548		$	5,297,353

Schedule of Company's Trust Accounts on Deposits, Outstanding and Remaining Letter of Credit Facilities, Collateral Committed to Support the Letter of Credit Facilities

	As of		As of
	June 30,		December 31,
	2011		2010
Total trust accounts on deposit	$	1,608,143	$	1,657,441
Total letter of credit facilities:
Citibank Europe plc		900,000		900,000
Credit Facility		800,000		800,000
Total letter of credit facilities		1,700,000		1,700,000
Total letter of credit facilities outstanding:
Citibank Europe plc		712,454		689,851
Credit Facility		158,983		158,983
Total letter of credit facilities outstanding		871,437		848,834
Total letter of credit facilities remaining:
Citibank Europe plc		187,546		210,149
Credit Facility (1)		641,017		641,017
Total letter of credit facilities remaining		828,563		851,166
Collateral committed to support the letter of credit facilities	$	1,054,206	$	1,121,345

(1) Net of any borrowing or repayments under the Unsecured Facility (as defined in Note 8). See Note 8 for further details on the Unsecured Facility.

Summarizes the Market Value of those Investments in an Unrealized Loss Position for Periods Less Than and Greater Than 12 Months

	December 31, 2010
	Gross Fair		Unrealized
	Value		Loss
Less than 12 months
U.S. Government and Government agencies	$	—	$	—
Non-U.S. Government and Government agencies		34,204		(1,116	)
States, municipalities and political subdivisions		472		(13	)
Corporate debt:
Financial institutions		2,796		(38	)
Industrials		2,150		(2	)
	$	39,622	$	(1,169	)
More than 12 months
Non-U.S. Government and Government agencies	$	10,998	$	(1,425	)
	$	10,998	$	(1,425	)
	$	50,620	$	(2,594	)

Schedule of Amounts Related to Credit Losses on Debt Securities for which Portion of the OTTI was Recognized in Other Comprehensive Income

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2010		2010
Beginning balance of credit losses	$	1,264	$	1,096
Additions for credit loss for which OTTI was not previously recognized		—		168
Reductions for securities sold during the period (realized)		—		—
Reductions for OTTI previously recognized due to intent to sell		—		—
Additions resulting from the increase in credit losses		—		—
Reductions resulting from the improvement in expected cash flows		—		—
Ending balance of credit losses	$	1,264	$	1,264

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Investments (Schedule of Net Investment Income) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net investment income	$ 52,368	$ 65,594	$ 102,576	$ 134,496
Fixed Maturity Investments [Member]
Net investment income	50,648	67,552	101,594	138,650
Equity Securities and Other Invested Assets [Member]
Net investment income	5,015	940	7,211	1,246
Cash and Cash Equivalents [Member]
Net investment income	127	111	445	163
Expenses [Member]
Net investment income	$ (3,422)	$ (3,009)	$ (6,674)	$ (5,563)

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Investments (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2010	Jun. 30, 2011	Dec. 31, 2010
Pledged Assets, cash and cash equivalents and investments		$ 286,393	$ 280,175
Collateralized portion of the facilites		1,300,000
Trusts contained assets		1,321,751	1,377,266
Percentage of long exposure greater than fund's net asset value		100.00%
Combined total cash and cash equivalents and investments		2,662,349	2,778,786
Total letter of credit facilities outstanding		871,437	848,834
Remaining credit facility used for third-party beneficiaries		828,563	851,166
Number of securities in an unrealized loss position		0	9
Other than temporary impairment	168
Other Invested Assets [Member]
Number of hedge fund investments held		21
Total fair value		562,267
Fair value of its investments and cash and cash equivalents		6.80%
Private Equity Funds [Member]
Number of hedge fund investments held		4
Private Equity Funds [Member] | Minimum [Member]
Remaining restriction period of funds		8Y
Private Equity Funds [Member] | Maximum [Member]
Remaining restriction period of funds		10Y
Distressed Funds [Member]
Number of hedge fund investments held		5
Funds not eligible for redemption		3
Percentage, value of the fund representing		34.00%
Distressed Funds [Member] | Minimum [Member]
Remaining restriction period of funds		1Y
Distressed Funds [Member] | Maximum [Member]
Remaining restriction period of funds		8Y
Distressed Funds [Member] | Sixty Five Day Notification Period [Member]
Percentage, value of the fund representing		42.00%
Redemption notification period, days		65D
Distressed Funds [Member] | Forty Five Day Notification Period [Member]
Percentage, value of the fund representing		24.00%
Redemption notification period, days		45D
Equity Long/Short Funds [Member]
Number of hedge fund investments held		5
Funds not eligible for redemption		1
Percentage, value of the fund representing		24.00%
Number of long exposure funds		3
Net asset value, explicit leverage		117.00%
Number Of Funds Remaining		4
Equity Long/Short Funds [Member] | Minimum [Member]
Net asset value, explicit leverage		110.00%
Redemption notification period, days		45D
Equity Long/Short Funds [Member] | Maximum [Member]
Remaining restriction period of funds		18M
Net asset value, explicit leverage		120.00%
Redemption notification period, days		90D
Equity Long/Short Funds [Member] | Thirty, Forty Five, And Sixty Day Notification Period [Member]
Percentage, remaining value of fund representing		76.00%
Equity Long/Short Funds [Member] | Sixty Five Day Notification Period [Member]
Redemption notification period, days		65D
Equity Long/Short Funds [Member] | Forty Five Day Notification Period [Member]
Number of hedge fund investments held		1
Redemption notification period, days		45D
Equity Long/Short Funds [Member] | Thirty Day Notification Period [Member]
Number of hedge fund investments held		1
Redemption notification period, days		30D
Equity Long/Short Funds [Member] | Sixty Day Notification Period [Member]
Number of hedge fund investments held		2
Redemption notification period, days		60D
Multi-strategy Funds [Member]
Number of hedge fund investments held		4
Funds not eligible for redemption		3
Number of long exposure funds		1
Net asset value, explicit leverage		133.00%
Multi-strategy Funds [Member] | Minimum [Member]
Redemption notification period, days		45D
Multi-strategy Funds [Member] | Maximum [Member]
Redemption notification period, days		90D
Multi-strategy Funds [Member] | Sixty Five Day Notification Period [Member]
Net asset value, percentage		33.33%
Hedge Funds [Member]
Number of long exposure funds		5
Event Driven Funds [Member]
Number of hedge fund investments held		2
Percentage, value of the fund representing		52.00%
Percentage, remaining value of fund representing		48.00%
Number of long exposure funds		1
Net asset value, explicit leverage		151.00%
Event Driven Funds [Member] | Maximum [Member]
Remaining restriction period of funds		2Y
Pledged Assets [Member]
Total letter of credit facilities outstanding		7,295	7,295
Remaining credit facility used for third-party beneficiaries		$ 864,142	$ 841,539

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Basis of Preparation and Consolidation (Policy)

6 Months Ended

Jun. 30, 2011

Basis of Preparation and Consolidation

Basis of presentation

     These unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. GAAP for interim financial information and with Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are normal and recurring in nature and necessary for a fair presentation of financial position and results of operations as of the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year.

Use Of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates reflected in the Company's financial statements include, but are not limited to:

• The premium estimates for certain reinsurance agreements,

• Recoverability of deferred acquisition costs,

• The reserve for outstanding losses and loss expenses,

• Valuation of ceded reinsurance recoverables,

• Determination of impairment of goodwill and other intangible assets,

• Valuation of financial instruments, and

• Determination of other-than-temporary impairment of investments.

Consolidation

     Inter-company accounts and transactions have been eliminated on consolidation and all entities meeting consolidation requirements have been included in the consolidation.

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

10. INCOME TAXES

     Under Swiss law, a resident company is subject to income tax at the federal, cantonal and communal levels that is levied on net income. Income attributable to permanent establishments or real estate located abroad is excluded from the Swiss tax base. Allied World Switzerland is a holding company and, therefore, is exempt from cantonal and communal income tax. As a result, Allied World Switzerland is subject to Swiss income tax only at the federal level. Allied World Switzerland is a resident of the Canton of Zug and, as such, is subject to an annual cantonal and communal capital tax on the taxable equity of Allied World Switzerland in Switzerland. Allied World Switzerland has a Swiss operating company resident in the Canton of Zug. The operating company is subject to federal, cantonal and communal income tax and to annual cantonal and communal capital tax.

     Under current Bermuda law, Allied World Bermuda and its Bermuda subsidiaries are not required to pay taxes in Bermuda on either income or capital gains. Allied World Bermuda and Allied World Assurance Company, Ltd have received an assurance from the Bermuda Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, that in the event of any such taxes being imposed, Allied World Bermuda and Allied World Assurance Company, Ltd will be exempted until March 2035.

     Certain subsidiaries of Allied World Switzerland file U.S. federal income tax returns and various U.S. state income tax returns, as well as income tax returns in the United Kingdom, Ireland, Switzerland, Hong Kong and Singapore. The following tax years by jurisdiction are open to examination:

	Fiscal Years
U.S. Internal Revenue Service for the U.S. subsidiaries		2007— 2010
Inland Revenue for the U.K. branches		2009 — 2010
Irish Revenue Commissioners for the Irish subsidiaries		2006 — 2010
Swiss Federal Tax Administration for the Swiss branch		2008 — 2010
Inland Revenue Department for the Hong Kong branch		2009 — 2010
Inland Revenue Department for the Singapore branch		2010

     To the best of the Company's knowledge, there are no examinations pending by any tax authority.

     Management has deemed that all material tax positions will more likely than not be sustained based on technical merits if challenged. The Company does not expect any material unrecognized tax benefits within 12 months of January 2011.

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General

6 Months Ended

Jun. 30, 2011

General

General

1. GENERAL

     Allied World Assurance Company Holdings, AG, a Swiss holding company ("Allied World Switzerland"), through its wholly-owned subsidiaries (collectively, the "Company"), provides property and casualty insurance and reinsurance on a worldwide basis through operations in Bermuda, the United States, Europe, Hong Kong and Singapore.

     On November 26, 2010, the Company received approval from the Supreme Court of Bermuda to change the place of incorporation of the ultimate parent company from Bermuda to Switzerland (the "Redomestication"), which was completed on December 1, 2010. The ultimate parent company is now Allied World Switzerland, which wholly owns the former public company, Allied World Assurance Company Holdings, Ltd ("Allied World Bermuda"). After the Redomestication, the Company continues to report under accounting principles generally accepted in the United States of America ("U.S. GAAP") and the Company's common shares continue to trade on the New York Stock Exchange under the symbol "AWH," the same symbol under which the common shares were listed prior to the Redomestication. In addition, the Company remains subject to U.S. Securities and Exchange Commission ("SEC") reporting requirements and continues to report consolidated financial results in U.S. dollars. The Company believes the Redomestication provides the ability to maintain a competitive worldwide effective corporate tax rate.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2011

Earnings Per Share

Comparison of Basic and Diluted Earnings Per Share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Basic earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Basic earnings per share	$	2.45	$	3.66	$	2.69	$	6.34

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Diluted earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Share equivalents:
Warrants and options		333,837		1,486,465		503,529		1,534,861
Restricted stock units		507,969		456,946		503,954		469,301
LTIP awards		612,458		808,025		804,211		958,601
Weighted average common shares and common share equivalents outstanding — diluted		39,800,753		52,974,410		39,873,418		53,086,708
Diluted earnings per share	$	2.36	$	3.47	$	2.57	$	5.98

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Reserve for Losses and Loss Expenses

6 Months Ended

Jun. 30, 2011

Reserve for Losses and Loss Expenses

Reserve for Losses and Loss Expenses

7. RESERVE FOR LOSSES AND LOSS EXPENSES

     The reserve for losses and loss expenses consists of the following:

	June 30,		December 31,
	2011		2010
Outstanding loss reserves	$	1,462,144	$	1,166,516
Reserves for losses incurred but not reported		3,789,160		3,712,672
Reserve for losses and loss expenses	$	5,251,304	$	4,879,188

     The table below is a reconciliation of the beginning and ending liability for unpaid losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoveries.

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross liability at beginning of period	$	5,100,643		$	4,853,359		$	4,879,188		$	4,761,772
Reinsurance recoverable at beginning of period		(975,523	)		(920,480	)		(927,588	)		(919,991	)
Net liability at beginning of period		4,125,120			3,932,879			3,951,600			3,841,781
Net losses incurred related to:
Commutation of variable-rated reinsurance contracts		11,529			—			11,529			8,864
Current year		279,513			252,816			628,315			550,062
Prior years		(55,229	)		(64,094	)		(99,579	)		(138,050	)
Total incurred		235,813			188,722			540,265			420,876
Net paid losses related to:
Current year		19,579			26,704			21,279			33,410
Prior years		109,238			102,690			243,596			231,990
Total paid		128,817			129,394			264,875			265,400
Foreign exchange revaluation		5,237			(4,207	)		10,363			(9,257	)
Net liability at end of period		4,237,353			3,988,000			4,237,353			3,988,000
Reinsurance recoverable at end of period		1,013,951			932,435			1,013,951			932,435
Gross liability at end of period	$	5,251,304		$	4,920,435		$	5,251,304		$	4,920,435

     During the three and six months ended June 30, 2011, the Company commuted certain variable-rated reinsurance contracts that have swing-rated provisions, reducing ceded losses by $11,529 in accordance with the terms of the contracts resulting in a net gain of $865.

     For the three months ended June 30, 2011, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in the reinsurance segment related to the 2004 through 2007 loss years for casualty reinsurance lines and in the international insurance segment related to the 2004 through 2007 loss years for casualty lines of business.

     For the six months ended June 30, 2011, the Company had net favorable reserve development in its international and reinsurance segments due to actual loss emergence being lower than the initial expected loss emergence. The majority of the net favorable reserve development was recognized in the international insurance and reinsurance segments in the 2004 through 2007 loss years related to casualty insurance and reinsurance lines of business. The Company had net unfavorable reserve development in its U.S. insurance segment due to actual loss emergence being higher than the initial expected loss emergence. The majority of the net unfavorable reserve development was recognized in the 2006 and 2010 loss years related to the professional liability line of business.

     For the three and six months ended June 30, 2010, the Company had net favorable reserve development in each of its segments due to actual loss emergence being lower than the initial expected loss emergence. For the three months ended June 30, 2010, the majority of the net favorable reserve development was recognized in the international insurance segment in the 2005 and 2008 loss years related to the general casualty and general property lines of business and in the U.S. insurance segment in the 2004 through 2005 loss years related to the professional liability and general casualty lines of business. For the six months ended June 30, 2010, the majority of the net favorable reserve development was recognized in the international and U.S. insurance segment in the 2004 through 2005 loss years related to the general casualty, professional liability and healthcare lines of business.

     While the Company has experienced favorable development in its insurance and reinsurance lines, there is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. It is not appropriate to extrapolate future redundancies based on prior years' development. The methodology of estimating loss reserves is periodically reviewed to ensure that the key assumptions used in the actuarial models continue to be appropriate.

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Employee Benefit Plans

6 Months Ended

Jun. 30, 2011

Employee Benefit Plans

Employee Benefit Plans

12. EMPLOYEE BENEFIT PLANS

a) Employee option plan

     In 2001, the Company implemented the Allied World Assurance Holdings, Ltd 2001 Employee Warrant Plan, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, Ltd Second Amended and Restated 2001 Employee Stock Option Plan (the "ESOP"). Under the ESOP, up to 4,000,000 common shares may be issued.

     As part of the Redomestication, Allied World Switzerland adopted and assumed the ESOP from Allied World Bermuda which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2001 Employee Stock Option Plan (the "Plan"). Allied World Switzerland has filed a registration statement on Form S-8 under the Securities Act of 1933, as amended, to register common shares issued or reserved for issuance under the Plan. These options are exercisable in certain limited conditions, expire after 10 years, and generally vest pro-rata over four years from the date of grant. The exercise price of options issued are recommended by the Compensation Committee to the Board of Directors for approval but shall not be less than 100% of the fair market value of the common shares of Allied World Switzerland on the date the option award is granted.

	Six Months Ended June 30, 2011
				Weighted Average
	Options			Exercise Price
Outstanding at beginning of period		1,272,739		$	38.77
Granted		494,885			61.51
Exercised		(128,487	)		37.55
Forfeited		(27,819	)		48.54
Expired		(170	)		39.02
Outstanding at end of period		1,611,148		$	45.68

     Assumptions used in the option-pricing model are as follows:

	Options Granted During
	the Six Months Ended
	June 30, 2011
Expected term of option	5.48 years
Weighted average risk-free interest rate		2.33	%
Weighted average expected volatility		31.51	%
Dividend yield		1.00	%
Weighted average fair value on grant date	$	18.27

     The Company has assumed a weighted average annual forfeiture rate of 6.72% in determining the compensation expense over the service period.

     Compensation expense of $997 and $2,176 relating to the options has been included in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $758 and $1,550 relating to the options has been included in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. As of June 30, 2011 and December 31, 2010, the Company has recorded in "additional paid-in capital" on the consolidated balance sheets an amount of $41,207 and $41,505, respectively, in connection with all options granted.

b) Stock incentive plan

     In 2004, the Company implemented the Allied World Assurance Holdings, Ltd 2004 Stock Incentive Plan. As part of the Redomestication, Allied World Switzerland adopted and assumed this plan from Allied World Bermuda, which was subsequently amended, restated and renamed the Allied World Assurance Company Holdings, AG Third Amended and Restated 2004 Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan provides for grants of restricted stock, restricted stock units ("RSUs"), dividend equivalent rights and other equity-based awards. A total of 2,000,000 common shares may be issued under the Stock Incentive Plan. To date, only RSUs have been granted. These RSUs generally vest pro-rata over four years from the date of grant or vest in the fourth or fifth year from the date of grant.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	RSUs			Value
Outstanding RSUs at beginning of period		851,078		$	39.88
RSUs granted		45,239			61.51
Performance-based RSUs granted		139,210			61.51
RSUs fully vested		(130,252	)		42.59
RSUs forfeited		(12,198	)		37.24
Outstanding RSUs at end of period		893,077		$	43.99

     The Company granted performance-based RSUs in lieu of utilizing the LTIP (as defined in Note 12(c)). The performance-based RSUs are structured in exactly the same form as shares issued under the LTIP in terms of vesting restrictions and achievement of established performance criteria. For the performance-based RSUs granted in 2010 and 2011, the Company anticipates that the performance goals are likely to be achieved. Based on the performance goals, the performance-based RSUs granted in 2010 and 2011 are expensed at 100% of the fair market value of Allied World Switzerland's common shares on the date of grant. The expense is recognized over the performance period.

     Compensation expense of $3,707 and $7,529 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,327 and $7,041 relating to the issuance of the RSUs, including the performance-based RSUs, has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. The compensation expense for the RSUs is based on the fair market value of Allied World Switzerland's common shares at the time of grant. The Company believes it is unlikely that performance-based RSUs will be forfeited as these awards are issued to senior management. Thus, no forfeiture rate is applied to the performance-based RSUs. The Company has assumed a weighted average annual forfeiture rate of 2.80%, excluding performance-based RSUs, in determining the compensation expense over the service period.

     As of June 30, 2011 and December 31, 2010, the Company has recorded $34,865 and $37,991, respectively, in "additional paid-in capital" on the consolidated balance sheets in connection with the RSUs awarded.

c) Long-term incentive plan

     In May 2006, the Company implemented the Long-Term Incentive Plan ("LTIP"), which it amended and restated in November 2007. The LTIP provides for performance-based equity awards to key employees in order to promote the long-term growth and profitability of the Company. As part of the Redomestication, Allied World Switzerland adopted and assumed the LTIP from Allied World Bermuda. Each award represents the right to receive a number of common shares in the future, based upon the achievement of established performance criteria during the applicable three-year performance period. A total of 2,000,000 common shares may be issued under the LTIP. The awards granted in 2009 will vest after the fiscal year ending December 31, 2011, subject to the achievement of the performance conditions and terms of the LTIP. The awards granted in 2008 generally vested after the fiscal year ended December 31, 2010, however, a portion of this award will vest after the fourth or fifth year from the original grant date, subject to the achievement of the performance conditions and terms of the LTIP.

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	LTIP			Value
Outstanding LTIP awards at beginning of period		773,411		$	41.74
Additional LTIP awards granted due to the achievement of 2008 — 2010 performance criteria		212,938			43.27
LTIP forfeited		(13,500	)		42.48
LTIP awards vested		(638,813	)		43.27
Outstanding LTIP awards at end of period		334,036		$	39.76

     Compensation expense of $1,558 and $2,407 relating to the LTIP has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2011, respectively. Compensation expense of $3,842 and $8,863 relating to the LTIP has been recognized in "general and administrative expenses" in the Company's consolidated income statements for the three and six months ended June 30, 2010, respectively. The decrease in compensation expense relating to LTIP is primarily the result of the Company issuing performance-based RSUs in lieu of LTIP as discussed in Note 12(b). The compensation expense for the LTIP is based on the fair market value of Allied World Switzerland's common shares at the time of grant. The LTIP is deemed to be an equity plan and as such, $46,852 and $77,728 have been included in "additional paid-in capital" on the consolidated balance sheets as of June 30, 2011 and December 31, 2010, respectively.

     In calculating the compensation expense and in the determination of share equivalents for the purpose of calculating diluted earnings per share, it is estimated for the unvested LTIP awards granted in 2008 and 2009 that the maximum performance goals as set by the LTIP are likely to be achieved over the performance period. Based on the performance goals, the unvested LTIP awards granted in 2008 and 2009 are expensed at 150% of the fair market value of Allied World Switzerland's common shares on the date of grant. The expense is recognized over the performance period.

d) Cash-equivalent stock awards

     Since 2009, as part of the Company's annual year-end compensation awards, the Company granted both stock-based awards and cash-equivalent stock awards. The cash-equivalent awards were granted to employees who received RSU, LTIP and performance-based RSU awards and were granted in lieu of granting the full award as a stock-based award. The cash-equivalent RSU awards vest pro-rata over four years from the date of grant. The cash-equivalent LTIP and performance-based RSU awards vest after a three-year performance period. As the cash-equivalent awards are settled in cash, we establish a liability equal to the product of the fair market value of Allied World Switzerland's common shares as of the end of the reporting period and the total awards outstanding. The liability is included in "accounts payable and accrued expenses" in the balance sheets and changes in the liability are recorded in "general and administrative expenses" in the consolidated income statements. For the three and six months ended June 30, 2011, the expense recognized for the cash-equivalent stock awards was $3,406 and $8,575, respectively. For the three and six months ended June 30, 2010, the expense recognized for the cash-equivalent stock awards was $3,012 and $5,321, respectively.

     The following table shows the stock related compensation expense relating to the stock options, RSUs, LTIP and cash equivalent awards:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Stock Options	$	997	$	758	$	2,176	$	1,550
RSUs		3,707		3,327		7,529		7,041
LTIP		1,558		3,842		2,407		8,863
Cash-equivalent stock awards		3,406		3,012		8,575		5,321
Total	$	9,668	$	10,939	$	20,687	$	22,775

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Condensed Consolidated Guarantor Financial Statements (Schedule of Condensed Consolidating Income Statement) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Gross premiums written	$ 519,598	$ 493,847	$ 1,080,286	$ 998,010
Premiums ceded	(123,795)	(124,052)	(203,612)	(194,923)
Net premiums written	395,803	369,795	876,674	803,087
Change in unearned premiums	(40,496)	(30,871)	(186,491)	(125,839)
Net premiums earned	355,307	338,924	690,183	677,248
Net investment income	52,368	65,594	102,576	134,496
Net realized investment gains (losses)	58,878	94,933	109,254	172,420
Net impairment charges recognized in earnings				(168)
Other income		616		913
Total revenues	466,553	500,067	902,013	984,909
Net losses and loss expenses	235,813	188,722	540,265	420,876
Acquisition costs	42,971	37,938	81,053	78,722
General and administrative expenses	67,201	68,089	135,157	131,552
Amortization of intangible assets			1,533		3,483
Amortization and impairment of intangible assets	766	891	1,533	1,783
Interest expense	13,745	9,531	27,487	19,059
Foreign exchange (gain) loss	1,184	559	742	1,635
Income tax expense	11,073	10,378	13,356	13,583
Total Expenses	372,753	316,108	799,593	667,210
Income (loss) before equity in earnings of consolidated subsidiaries	93,800	183,959	102,420	317,699
Equity in earnings of consolidated subsidiaries
NET INCOME (LOSS)	93,800	183,959	102,420	317,699
Allied World Switzerland (Parent Guarantor) [Member]
Gross premiums written
Premiums ceded
Net premiums written
Change in unearned premiums
Net premiums earned
Net investment income	15		45
Net realized investment gains (losses)
Net impairment charges recognized in earnings
Other income
Total revenues	15		45
Net losses and loss expenses
Acquisition costs
General and administrative expenses	4,746		5,810
Amortization and impairment of intangible assets
Interest expense
Foreign exchange (gain) loss	3		(1)
Income tax expense
Total Expenses	4,749		5,809
Income (loss) before equity in earnings of consolidated subsidiaries	(4,734)		(5,764)
Equity in earnings of consolidated subsidiaries	98,534		108,184
NET INCOME (LOSS)	93,800		102,420
Allied World Bermuda (Subsidiary Issuer) [Member]
Gross premiums written
Premiums ceded
Net premiums written
Change in unearned premiums
Net premiums earned
Net investment income	8	20	22	21
Net realized investment gains (losses)		(3,958)		(3,958)
Net impairment charges recognized in earnings
Other income
Total revenues	8	(3,938)	22	(3,937)
Net losses and loss expenses
Acquisition costs
General and administrative expenses	1,483	3,168	4,229	6,651
Amortization and impairment of intangible assets
Interest expense	13,745	9,531	27,487	19,059
Foreign exchange (gain) loss	(17)		224
Income tax expense
Total Expenses	15,211	12,699	31,940	25,710
Income (loss) before equity in earnings of consolidated subsidiaries	(15,203)	(16,637)	(31,918)	(29,647)
Equity in earnings of consolidated subsidiaries		200,596		347,346
NET INCOME (LOSS)	(15,203)	183,959	(31,918)	317,699
Other Allied World Subsidiaries [Member]
Gross premiums written	519,598	493,847	1,080,286	998,010
Premiums ceded	(123,795)	(124,052)	(203,612)	(194,923)
Net premiums written	395,803	369,795	876,674	803,087
Change in unearned premiums	(40,496)	(30,871)	(186,491)	(125,839)
Net premiums earned	355,307	338,924	690,183	677,248
Net investment income	52,345	65,574	102,509	134,475
Net realized investment gains (losses)	58,878	98,891	109,254	176,378
Net impairment charges recognized in earnings				(168)
Other income		616		913
Total revenues	466,530	504,005	901,946	988,846
Net losses and loss expenses	235,813	188,722	540,265	420,876
Acquisition costs	42,971	37,938	81,053	78,722
General and administrative expenses	60,972	64,921	125,118	124,901
Amortization and impairment of intangible assets	766	891	1,533	1,783
Interest expense
Foreign exchange (gain) loss	1,198	559	519	1,635
Income tax expense	11,073	10,378	13,356	13,583
Total Expenses	352,793	303,409	761,844	641,500
Income (loss) before equity in earnings of consolidated subsidiaries	113,737	200,596	140,102	347,346
Equity in earnings of consolidated subsidiaries
NET INCOME (LOSS)	113,737	200,596	140,102	347,346
Consolidating Adjustments [Member]
Gross premiums written
Premiums ceded
Net premiums written
Change in unearned premiums
Net premiums earned
Net investment income
Net realized investment gains (losses)
Net impairment charges recognized in earnings
Other income
Total revenues
Net losses and loss expenses
Acquisition costs
General and administrative expenses
Amortization and impairment of intangible assets
Interest expense
Foreign exchange (gain) loss
Income tax expense
Total Expenses
Income (loss) before equity in earnings of consolidated subsidiaries
Equity in earnings of consolidated subsidiaries	(98,534)	(200,596)	(108,184)	(347,346)
NET INCOME (LOSS)	$ (98,534)	$ (200,596)	$ (108,184)	$ (347,346)

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Debt and Financing Arrangements

6 Months Ended

Jun. 30, 2011

Debt and Financing Arrangements

Debt and Financing Arrangements

8. DEBT AND FINANCING ARRANGEMENTS

     In November 2010, Allied World Bermuda issued $300,000 aggregate principal amount of 5.50% Senior Notes due November 10, 2020 ("5.50% Senior Notes"), with interest on the notes payable on May 15 and November 15 of each year commencing on May 15, 2011. The 5.50% Senior Notes were offered by the underwriters at a price of 98.89% of their principal amount, providing an effective yield to investors of 5.56%. The net proceeds from the offering of the 5.50% Senior Notes were used for general corporate purposes, including the repurchase of the Company's outstanding common shares. The 5.50% Senior Notes are Allied World Bermuda's unsecured and unsubordinated obligations and rank equally in right of payment with all existing and future unsecured and unsubordinated indebtedness. Allied World Bermuda may redeem the 5.50% Senior Notes at any time or from time to time in whole or in part at a redemption price equal to the greater of the principal amount of the 5.50% Senior Notes to be redeemed or a make-whole price, plus accrued and unpaid interest. Allied World Bermuda has no current expectations of redeeming the notes prior to maturity. The 5.50% Senior Notes include covenants and events of default that are usual and customary, but do not contain any financial covenants.

     In 2006, Allied World Bermuda issued $500,000 aggregate principal amount of 7.50% Senior Notes due August 1, 2016 ("7.50% Senior Notes"), with interest on the notes payable on August 1 and February 1 of each year, commencing on February 1, 2007. The 7.50% Senior Notes were offered by the underwriters at a price of 99.71% of their principal amount, providing an effective yield to investors of 7.54%. The 7.50% Senior Notes can be redeemed by Allied World Bermuda prior to maturity subject to payment of a "make-whole" premium. Allied World Bermuda has no current expectations of redeeming the notes prior to maturity. The 7.50% Senior Notes include covenants and events of default that are usual and customary, but do not contain any financial covenants.

     The 5.50% Senior Notes and the 7.50% Senior Notes have been unconditionally and irrevocably guaranteed for the payment of the principal and interest by Allied World Switzerland.

     Allied World Assurance Company, Ltd has a collateralized amended letter of credit facility of $900,000 with Citibank Europe plc. that has been, and will continue to be, used to issue standby letters of credit.

     In addition, Allied World Bermuda entered into an $800,000 five-year senior credit facility (the "Credit Facility") with a syndication of lenders. The Credit Facility consists of a $400,000 secured letter of credit facility for the issuance of standby letters of credit (the "Secured Facility") and a $400,000 unsecured facility for the making of revolving loans and for the issuance of standby letters of credit (the "Unsecured Facility"). Both the Secured Facility and the Unsecured Facility have options to increase the aggregate commitments by up to $200,000, subject to approval of the lenders. The Credit Facility will be used for general corporate purposes and to issue standby letters of credit. The Credit Facility contains representations, warranties and covenants customary for similar bank loan facilities, including a covenant to maintain a ratio of consolidated indebtedness to total capitalization as of the last day of each fiscal quarter or fiscal year of not greater than 0.35 to 1.0 and a covenant under the Unsecured Facility to maintain a certain consolidated net worth. In addition, each material insurance subsidiary must maintain a financial strength rating from A.M Best Company of at least A- under the Unsecured Facility and of at least B++ under the Secured Facility. Allied World Bermuda is in compliance with all covenants under the Credit Facility as of June 30, 2011 and December 31, 2010.

     There are a total of 13 lenders that make up the Credit Facility syndication and that have varying commitments ranging from $20,000 to $87,500. Of the 13 lenders, four have commitments of $87,500 each, four have commitments of $62,500 each, four have commitments of $45,000 each and one has a commitment of $20,000.

     In May 2010, Allied World Capital (Europe) Limited established an irrevocable standby letter of credit in order to satisfy funding requirements of the Company's Lloyd's Syndicate 2232. As of June 30, 2011 and December 31, 2010, the amount of the letter of credit was £67,400 ($108,258) and £53,700 ($82,838), respectively.

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2011

Income Taxes

Schedule of Tax Years Open to Examination by Jurisdiction

	Fiscal Years
U.S. Internal Revenue Service for the U.S. subsidiaries		2007— 2010
Inland Revenue for the U.K. branches		2009 — 2010
Irish Revenue Commissioners for the Irish subsidiaries		2006 — 2010
Swiss Federal Tax Administration for the Swiss branch		2008 — 2010
Inland Revenue Department for the Hong Kong branch		2009 — 2010
Inland Revenue Department for the Singapore branch		2010

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2011

Fair Value of Financial Instruments

Fair Value of Financial Instruments

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

     In accordance with U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3). A fair value measurement will fall within the level of the hierarchy based on the input that is significant to determining such measurement. The three levels are defined as follows:

• Level 1: Observable inputs to the valuation methodology that are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2: Observable inputs to the valuation methodology other than quoted market prices (unadjusted) for identical assets or liabilities in active markets. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3: Inputs to the valuation methodology that are unobservable for the asset or liability.

     The following table shows the fair value of the Company's financial instruments and where in the fair value hierarchy the fair value measurements are included as of June 30, 2011:

					Fair value measurement using:
					Quoted prices in				Significant
					active markets for		Significant other		unobservable
	Carrying				identical assets		observable inputs		inputs
	amount		Total fair value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities:
U.S. Government and Government agencies	$	39,016	$	39,016	$	39,016	$	—	$	—
States, municipalities and political subdivisions		48,666		48,666		—		48,666		—
Corporate debt		257,869		257,869		—		257,869		—
Total available for sale fixed maturity investments		345,551		345,551
Trading securities:
U.S. Government and Government agencies	$	982,274	$	982,274	$	835,748	$	146,526	$	—
Non-U.S. Government and Government agencies		177,529		177,529		—		177,529		—
States, municipalities and political subdivisions		108,256		108,256		—		108,256		—
Corporate debt		2,348,875		2,348,875		—		2,348,875		—
Mortgage-backed		1,904,564		1,904,564		—		1,687,904		216,660
Asset-backed		679,536		679,536		—		566,226		113,310
Total trading fixed maturity investments		6,201,034		6,201,034
Total fixed maturity investments		6,546,585		6,546,585
Hedge funds		562,267		562,267		—		—		562,267
Equity securities		393,913		393,913		393,913		—		—
Total investments	$	7,502,765	$	7,502,765	$	1,268,677	$	5,341,851	$	892,237
Senior notes	$	797,823	$	878,085	$	—	$	878,085	$	—

     The following describes the valuation techniques used by the Company to determine the fair value of financial instruments held as of the balance sheet date.

     U.S. government and U.S. government agencies: Comprised primarily of bonds issued by the U.S. treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association. The fair values of the Company's U.S. government securities are based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The Company believes the market for U.S. treasury securities is an actively traded market given the high level of daily trading volume. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy.

     Non-U.S. government and government agencies: Comprised of fixed income obligations of non-U.S. governmental entities. The fair values of these securities are based on prices obtained from international indices and are included in the Level 2 fair value hierarchy.

     States, municipalities and political subdivisions: Comprised of fixed income obligations of U.S. domiciled state and municipality entities. The fair values of these securities are based on prices obtained from the new issue market, and are included in the Level 2 fair value hierarchy.

     Corporate debt: Comprised of bonds issued by corporations that are diversified across a wide range of issuers and industries. The fair values of corporate bonds that are short-term are priced using spread above the London Interbank Offered Rate yield curve, and the fair value of corporate bonds that are long-term are priced using the spread above the risk-free yield curve. The spreads are sourced from broker-dealers, trade prices and the new issue market. As the significant inputs used to price corporate bonds are observable market inputs, the fair values of corporate bonds are included in the Level 2 fair value hierarchy.

     Mortgage-backed: Primarily comprised of residential and commercial mortgages originated by both U.S. government agencies (such as the Federal National Mortgage Association) and non-U.S. government agencies originators. The fair values of mortgage-backed securities originated by U.S. government agencies and non-U.S. government agencies are based on a pricing model that incorporates prepayment speeds and spreads to determine appropriate average life of mortgage-backed securities. The spreads are sourced from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the mortgage-backed securities are observable market inputs, the fair values of these securities are included in the Level 2 fair value hierarchy, unless the significant inputs used to price the mortgage-backed securities are broker-dealer quotes and the Company is not able to determine if those quotes are based on observable market inputs, in which case the fair value is included in the Level 3 hierarchy.

     Asset-backed: Principally comprised of bonds backed by pools of automobile loan receivables, home equity loans, credit card receivables and collateralized loan obligations originated by a variety of financial institutions. The fair values of asset-backed securities are priced using prepayment speed and spread inputs that are sourced from the new issue market or broker-dealer quotes. As the significant inputs used to price the asset-backed securities are observable market inputs, the fair values of these securities are included in the Level 2 fair value hierarchy, unless the significant inputs used to price the asset-backed securities are broker-dealer quotes and the Company is not able to determine if those quotes are based on observable market inputs, in which case the fair value is included in the Level 3 hierarchy.

     Hedge funds: Comprised of hedge funds invested in a range of diversified strategies. In accordance with U.S. GAAP, the fair values of the hedge funds are based on the net asset value of the funds as reported by the fund manager which the Company believes is an unobservable input, and as such, the fair values of those hedge funds are included in the Level 3 fair value hierarchy.

     Equity securities: The fair value of the equity securities are priced from market exchanges and therefore included in the Level 1 fair value hierarchy.

     Senior notes: The fair value of the senior notes is based on trades as reported in Bloomberg. As of June 30, 2011, the 7.50% Senior Notes and 5.50% Senior Notes (each as defined in Note 8) were traded at 115.1% and 100.9% of their principal amount, providing an effective yield of 4.2% and 5.4%, respectively. The fair value of the senior notes is included in the Level 2 fair value hierarchy.

     The following is a reconciliation of the beginning and ending balance of financial instruments using significant unobservable inputs
(Level 3):

	Fair value measurement using significant
	unobservable inputs (Level 3):
	Hedge funds			Mortgage-backed			Asset-backed
Three Months Ended June 30, 2011
Opening balance	$	469,999		$	234,087		$	143,829
Total realized and unrealized gains included in net income		5,435			4,251			596
Total realized and unrealized losses included in net income		(4,621	)		(2,571	)		(102	)
Purchases		94,290			29,827			32,408
Sales		(2,836	)		(34,329	)		(2,800	)
Transfers into Level 3		—			24,389			20,246
Transfers out of Level 3		—			(38,994	)		(80,867	)
Ending balance	$	562,267		$	216,660		$	113,310
Three Months Ended June 30, 2010
Opening balance	$	242,135		$	233,667		$	36,532
Total realized and unrealized gains included in net income		1,742			9,703			79
Total realized and unrealized losses included in net income		(2,906	)		(6,987	)		(279	)
Change in unrealized gains included in Other
Comprehensive Income ("OCI")		—			1,639			9
Change in unrealized losses included in OCI		—			(205	)		—
Purchases		78,621			96,089			28,868
Sales		—			(47,560	)		(2,058	)
Transfers into Level 3		—			2,286			50,641
Transfers out of Level 3		—			(9,843	)		(10,237	)
Ending balance	$	319,592		$	278,789		$	103,555
Six Months Ended June 30, 2011
Opening balance	$	347,632		$	172,558		$	48,707
Total realized and unrealized gains included in net income		21,884			5,495			660
Total realized and unrealized losses included in net income		(9,391	)		(2,268	)		(73	)
Purchases		245,340			62,604			115,417
Sales		(43,198	)		(43,287	)		(3,226	)
Transfers into Level 3		—			86,085			32,801
Transfers out of Level 3		—			(64,527	)		(80,976	)
Ending balance	$	562,267		$	216,660		$	113,310
Six Months Ended June 30, 2010
Opening balance	$	184,725		$	253,979		$	104,871
Total realized and unrealized gains included in net income		6,584			18,084			634
Total realized and unrealized losses included in net income		(3,386	)		(7,098	)		(209	)
Change in unrealized gains included in OCI		—			5,084			51
Change in unrealized losses included in OCI		—			(447	)		(6	)
Purchases		131,669			120,943			51,181
Sales		—			(119,228	)		(5,246	)
Transfers into Level 3		—			48,731			50,739
Transfers out of Level 3		—			(41,259	)		(98,460	)
Ending balance	$	319,592		$	278,789		$	103,555

     The Company attempts to verify the significant inputs used by broker-dealers in determining the fair value of the securities priced by them. If the Company could not obtain sufficient information to determine if the broker-dealers were using significant observable inputs, such securities have been transferred to Level 3 fair value hierarchy. The Company believes the prices obtained from the broker-dealers are the best estimate of fair value of the securities being priced as the broker-dealers are typically involved in the initial pricing of the security, and the Company has compared the price per the broker-dealer to other pricing sources and noted no material differences.

     During the three and six months ended June 30, 2011, the Company transferred $38,994 and $64,527 of mortgage-backed securities, respectively and $80,867 and $80,976 of asset-backed securities, respectively, from Level 3 to Level 2 in the fair value hierarchy. During the three and six months ended June 30, 2010, the Company transferred $9,843 and $41,259 of mortgage-backed securities, respectively, and $10,237 and $98,460 of asset-backed securities, respectively, from Level 3 to Level 2 in the fair value hierarchy. The Company transferred those securities as they no longer utilized broker-dealer quotes and instead used other pricing sources that have significant observable inputs. The Company recognizes transfers between levels at the end of the reporting period.

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Fair Value of Financial Instruments (Schedule of Fair Value Measurement Using Significant Unobservable Inputs Level Three) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Hedge Funds [Member]
Opening balance	$ 469,999	$ 242,135	$ 347,632	$ 184,725
Total realized and unrealized gains included in net income	5,435	1,742	21,884	6,584
Total realized and unrealized losses included in net income	(4,621)	(2,906)	(9,391)	(3,386)
Purchases	94,290	78,621	245,340	131,669
Sales	(2,836)		(43,198)
Transfers into Level 3
Transfers out of Level 3
Ending balance	562,267	319,592	562,267	319,592
Mortgage-Backed [Member]
Opening balance	234,087	233,667	172,558	253,979
Total realized and unrealized gains included in net income	4,251	9,703	5,495	18,084
Total realized and unrealized losses included in net income	(2,571)	(6,987)	(2,268)	(7,098)
Change in unrealized gains included in OCI		1,639		5,084
Change in unrealized losses included in OCI		(205)		(447)
Purchases	29,827	96,089	62,604	120,943
Sales	(34,329)	(47,560)	(43,287)	(119,228)
Transfers into Level 3	24,389	2,286	86,085	48,731
Transfers out of Level 3	(38,994)	(9,843)	(64,527)	(41,259)
Ending balance	216,660	278,789	216,660	278,789
Asset-Backed [Member]
Opening balance	143,829	36,532	48,707	104,871
Total realized and unrealized gains included in net income	596	79	660	634
Total realized and unrealized losses included in net income	(102)	(279)	(73)	(209)
Change in unrealized gains included in OCI		9		51
Change in unrealized losses included in OCI				(6)
Purchases	32,408	28,868	115,417	51,181
Sales	(2,800)	(2,058)	(3,226)	(5,246)
Transfers into Level 3	20,246	50,641	32,801	50,739
Transfers out of Level 3	(80,867)	(10,237)	(80,976)	(98,460)
Ending balance	$ 113,310	$ 103,555	$ 113,310	$ 103,555

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Condensed Consolidated Statements of Shareholders' Equity In Thousands	Share Capital [Member] USD ($)	Share Capital [Member] CHF	Additional Paid-in Capital [Member] USD ($)	Treasury Shares [Member] USD ($)	Accumulated Other Comprehensive Income [Member] USD ($)	Retained Earnings [Member] USD ($)	Total USD ($)
Balance at Dec. 31, 2009	$ 1,492		$ 1,359,934		$ 149,849	$ 1,702,020	$ 3,213,295
Net income						317,699	317,699
Dividends						(20,109)	(20,109)
Other comprehensive loss					(11,604)		(11,604)
Stock compensation	23		18,328				18,351
Share repurchases				(49,089)			(49,089)
Balance at Jun. 30, 2010	1,515		1,378,262	(49,089)	138,245	1,999,610	3,468,543
Balance at Dec. 31, 2010		600,055	170,239	(112,811)	57,135	2,361,202	3,075,820
Net income						102,420	102,420
Dividends
Other comprehensive loss					(34,040)		(34,040)
Stock compensation			(34,582)	48,419			13,837
Share repurchases				(60,000)			(60,000)
Repurchase of founder warrants			(53,620)				(53,620)
Balance at Jun. 30, 2011		600,055	$ 82,037	$ (124,392)	$ 23,095	$ 2,463,622	$ 3,044,417

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Basis of Preparation and Consolidation

6 Months Ended

Jun. 30, 2011

Basis of Preparation and Consolidation

Basis of Preparation and Consolidation

2. BASIS OF PREPARATION AND CONSOLIDATION

     These unaudited condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. GAAP for interim financial information and with Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments that are normal and recurring in nature and necessary for a fair presentation of financial position and results of operations as of the end of and for the periods presented. The results of operations for any interim period are not necessarily indicative of the results for a full year.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates reflected in the Company's financial statements include, but are not limited to:

• The premium estimates for certain reinsurance agreements,

• Recoverability of deferred acquisition costs,

• The reserve for outstanding losses and loss expenses,

• Valuation of ceded reinsurance recoverables,

• Determination of impairment of goodwill and other intangible assets,

• Valuation of financial instruments, and

• Determination of other-than-temporary impairment of investments.

     Inter-company accounts and transactions have been eliminated on consolidation and all entities meeting consolidation requirements have been included in the consolidation.

     These unaudited condensed consolidated financial statements, including these notes, should be read in conjunction with the Company's audited consolidated financial statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

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Investments (Schedule of Trading Securities) (Details) (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Equity securities trading, at fair value	$ 393,913		$ 174,976
Hedge funds, fair value	562,267		347,632
Trading Securities	7,157,214		6,291,705
U.S. Government and Government Agencies [Member]
Trading Securities, fair value	982,274		1,229,720
Non-U.S. Government and Government Agencies [Member]
Trading Securities, fair value	177,529		120,793
States, Municipalities and Political Subdivisions [Member]
Trading Securities, fair value	108,256		127,436
Corporate Debt, Financial Institutions [Member]
Trading Securities, fair value	1,440,554		1,261,219
Corporate Debt, Industrials [Member]
Trading Securities, fair value	772,829		627,524
Corporate Debt, Utilities [Member]
Trading Securities, fair value	135,492		101,472
Residential Mortgage-Backed, Non-Agency Residential [Member]
Trading Securities, fair value	363,408		371,935
Residential Mortgage-Backed, Agency Residential [Member]
Trading Securities, fair value	1,229,647		1,195,905
Commercial Mortgage-Backed [Member]
Trading Securities, fair value	311,509		184,043
Asset-Backed [Member]
Trading Securities, fair value	679,536		549,050
Total Fixed Maturity Investments, Trading [Member]
Trading Securities, fair value	6,201,034		5,769,097
Equity Securities [Member]
Equity securities trading, at fair value	393,913		174,976
Hedge Funds [Member]
Hedge funds, fair value	$ 562,267	[1]	$ 347,632	[1]

[1] Within the Company's financial statements and footnotes "hedge funds" include the Company's investments in both hedge funds and private equity funds.

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Goodwill and Intangible Assets (Table)

6 Months Ended

Jun. 30, 2011

Goodwill and Intangible Assets

Schedule of Intangible Assets and Goodwill

				Intangible
				assets with		Intangible
				indefinite		assets with
	Goodwill			lives		finite lives			Total
Net balance at December 31, 2009	$	268,376		$	23,920	$	36,439		$	328,735
Additions		—			—		—			—
Amortization		—			—		(3,483	)		(3,483	)
Net balance at December 31, 2010		268,376			23,920		32,956			325,252
Additions		—			—		—			—
Amortization		—			—		(1,533	)		(1,533	)
Net balance at June 30, 2011		268,376			23,920		31,423			323,719
Gross balance		268,532			23,920		48,200			340,652
Accumulated amortization		—			—		(9,911	)		(9,911	)
Accumulated impairments		(156	)		—		(6,866	)		(7,022	)
Net balance	$	268,376		$	23,920	$	31,423		$	323,719

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Income Taxes (Schedule of Tax Years Open to Examination by Jurisdiction) (Details)	6 Months Ended
	Jun. 30, 2011
U.S. IRS [Member]
Open tax years by major tax jurisdiction	2007— 2010
Inland Revenue UK [Member]
Open tax years by major tax jurisdiction	2009 — 2010
Irish Revenue Commissioners [Member]
Open tax years by major tax jurisdiction	2006 — 2010
Swiss Federal Tax Administration [Member]
Open tax years by major tax jurisdiction	2008 — 2010
Inland Revenue Department Hong Kong [Member]
Open tax years by major tax jurisdiction	2009 — 2010
Inland Revenue Department Singapore [Member]
Open tax years by major tax jurisdiction	2010

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Shareholders' Equity (Share Capital Issued) (Details) In Thousands, except Share data	6 Months Ended
	Jun. 30, 2011 USD ($)	Jun. 30, 2011 CHF	Dec. 31, 2010 USD ($)	Dec. 31, 2010 CHF
Earnings Per Share
Share capital at end of period	$ 600,055		$ 600,055
Total shares issued at beginning of period	40,003,642
Total shares issued at end of period	40,003,642
Treasury shares issued, balance at beginning of period	1,914,416
Shares repurchased	969,163
Shares issued out of treasury	(824,980)
Total treasury shares at end of period	2,058,599
Total shares outstanding at end of period	37,945,043		38,089,226	38,089,226
Common shares, par value		15.00		15

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Fair Value of Financial Instruments (Schedule of Fair Value of Financial Instruments) (Details) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Senior notes	$ 797,823	$ 797,700
U.S. Government and Government Agencies [Member] | Carrying Amount [Member]
Available for sale securities	39,016
Trading securities	982,274
U.S. Government and Government Agencies [Member] | Fair Value Fair Value Disclosure [Member]
Available for sale securities	39,016
Trading securities	982,274
U.S. Government and Government Agencies [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Available for sale securities	39,016
Trading securities	835,748
U.S. Government and Government Agencies [Member] | Significant Other Observable Inputs (Level 2) [Member]
Available for sale securities
Trading securities	146,526
U.S. Government and Government Agencies [Member] | Significant Unobservable Inputs (Level 3) [Member]
Available for sale securities
Trading securities
Non-U.S. Government and Government Agencies [Member] | Carrying Amount [Member]
Trading securities	177,529
Non-U.S. Government and Government Agencies [Member] | Fair Value Fair Value Disclosure [Member]
Trading securities	177,529
Non-U.S. Government and Government Agencies [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Trading securities
Non-U.S. Government and Government Agencies [Member] | Significant Other Observable Inputs (Level 2) [Member]
Trading securities	177,529
Non-U.S. Government and Government Agencies [Member] | Significant Unobservable Inputs (Level 3) [Member]
Trading securities
States, Municipalities and Political Subdivisions [Member] | Carrying Amount [Member]
Available for sale securities	48,666
Trading securities	108,256
States, Municipalities and Political Subdivisions [Member] | Fair Value Fair Value Disclosure [Member]
Available for sale securities	48,666
Trading securities	108,256
States, Municipalities and Political Subdivisions [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Available for sale securities
Trading securities
States, Municipalities and Political Subdivisions [Member] | Significant Other Observable Inputs (Level 2) [Member]
Available for sale securities	48,666
Trading securities	108,256
States, Municipalities and Political Subdivisions [Member] | Significant Unobservable Inputs (Level 3) [Member]
Available for sale securities
Trading securities
Corporate Debt [Member] | Carrying Amount [Member]
Available for sale securities	257,869
Trading securities	2,348,875
Corporate Debt [Member] | Fair Value Fair Value Disclosure [Member]
Available for sale securities	257,869
Trading securities	2,348,875
Corporate Debt [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Available for sale securities
Trading securities
Corporate Debt [Member] | Significant Other Observable Inputs (Level 2) [Member]
Available for sale securities	257,869
Trading securities	2,348,875
Corporate Debt [Member] | Significant Unobservable Inputs (Level 3) [Member]
Available for sale securities
Trading securities
Mortgage-Backed [Member] | Carrying Amount [Member]
Trading securities	1,904,564
Mortgage-Backed [Member] | Fair Value Fair Value Disclosure [Member]
Trading securities	1,904,564
Mortgage-Backed [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Trading securities
Mortgage-Backed [Member] | Significant Other Observable Inputs (Level 2) [Member]
Trading securities	1,687,904
Mortgage-Backed [Member] | Significant Unobservable Inputs (Level 3) [Member]
Trading securities	216,660
Asset-Backed [Member] | Carrying Amount [Member]
Trading securities	679,536
Asset-Backed [Member] | Fair Value Fair Value Disclosure [Member]
Trading securities	679,536
Asset-Backed [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Trading securities
Asset-Backed [Member] | Significant Other Observable Inputs (Level 2) [Member]
Trading securities	566,226
Asset-Backed [Member] | Significant Unobservable Inputs (Level 3) [Member]
Trading securities	113,310
Hedge Funds [Member] | Carrying Amount [Member]
Hedge funds	562,267
Hedge Funds [Member] | Fair Value Fair Value Disclosure [Member]
Hedge funds	562,267
Hedge Funds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Hedge funds
Hedge Funds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Hedge funds
Hedge Funds [Member] | Significant Unobservable Inputs (Level 3) [Member]
Hedge funds	562,267
Equity Securities [Member] | Carrying Amount [Member]
Equity securities	393,913
Equity Securities [Member] | Fair Value Fair Value Disclosure [Member]
Equity securities	393,913
Equity Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Equity securities	393,913
Equity Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Equity securities
Equity Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Equity securities
Carrying Amount [Member]
Available for sale securities	345,551
Trading securities	6,201,034
Total fixed maturity investments	6,546,585
Total investments	7,502,765
Senior notes	797,823
Fair Value Fair Value Disclosure [Member]
Available for sale securities	345,551
Trading securities	6,201,034
Total fixed maturity investments	6,546,585
Total investments	7,502,765
Senior notes	878,085
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Available for sale securities
Trading securities
Total fixed maturity investments
Total investments	1,268,677
Senior notes
Significant Other Observable Inputs (Level 2) [Member]
Available for sale securities
Trading securities
Total fixed maturity investments
Total investments	5,341,851
Senior notes	878,085
Significant Unobservable Inputs (Level 3) [Member]
Available for sale securities
Trading securities
Total fixed maturity investments
Total investments	892,237
Senior notes

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Employee Benefit Plans (Schedule of Restricted Stock Units Award Activity) (Details) (RSUs [Member], USD $)	6 Months Ended
	Jun. 30, 2011
RSUs [Member]
Other Than Options, Outstanding at beginning of period	851,078
Weighted Average Grant Date Fair Value, Outstanding at beginning of period	$ 39.88
Other Than Options, granted	45,239
Weighted Average Grant Date Fair Value, granted	$ 61.51
Other Than Options, Performance-based granted	139,210
Weighted Average Grant Date Fair Value, Performance-based granted	$ 61.51
Other Than Options, vested	(130,252)
Weighted Average Grant Date Fair Value, fully vested	$ 42.59
Other Than Options, forfeited	(12,198)
Weighted Average Grant Date Fair Value, forfeited	$ 37.24
Other Than Options, Outstanding at end of period	893,077
Weighted Average Grant Date Fair Value, Outstanding at End of Period	$ 43.99

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2011

New Accounting Pronouncements

New Accounting Pronouncements

3. NEW ACCOUNTING PRONOUNCEMENTS

     In July 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-20, "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses" ("ASU 2010-20"). ASU 2010-20 enhances disclosures about credit quality of financing receivables and the allowance of credit losses by requiring additional information regarding the Company's credit risk exposures and evaluating the adequacy of its allowance for credit losses. The balance sheet related disclosures for ASU 2010-20 were effective for the year ended December 31, 2010 and the income statement related disclosures were effective for the quarter ended March 31, 2011. Refer to Note 15 for the Company's related disclosures.

     In October 2010, the FASB issued ASU 2010-26, "Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts" ("ASU 2010-26"). ASU 2010-26 clarifies what costs associated with acquiring or renewing insurance contracts can be deferred and amortized over the coverage period. Under the revised guidance of ASU 2010-26, incremental direct costs that result directly from and are essential to the insurance contract and would not have been incurred had the insurance contract not been written are costs that may be capitalized, including costs relating to activities specifically performed by the Company such as underwriting, policy issuance and processing. ASU 2010-26 will be effective January 1, 2012 and early adoption is permitted. The Company has not elected early adoption and is currently evaluating the provisions of ASU 2010-26 and its potential impact on future financial statements.

     In January 2011, the FASB issued ASU 2011-01, "Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20". In April 2011, the FASB issued ASU 2011-02 "A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring" ("ASU 2011-02"). ASU 2011-02 provides further guidance on what constitutes a troubled debt restructuring. The guidance is effective for interim and annual periods beginning on or after June 15, 2011 and applies retrospectively to restructurings within the fiscal year of adoption. Refer to Note 15 for the Company's related disclosures.

     In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" ("ASU 2011-04"). ASU 2011-04 provides a consistent meaning for the term "fair value" between the FASB and International Accounting Standards Board and establishes common requirements for measuring and disclosing information related thereto. ASU 2011-04 is effective on a prospective basis for interim and annual periods beginning on or after December 15, 2011 and early adoption is prohibited. The Company is currently assessing the provisions of ASU 2011-04 and its potential impact on future financial statements.

     In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income" ("ASU 2011-05"). ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires the presentation of reclassification adjustments on the face of the financial statements from other comprehensive income to net income. ASU 2011-05 is effective on a retrospective basis for interim and annual periods beginning on or after December 15, 2011. The Company is currently assessing the provisions of ASU 2011-05 and its potential impact on future financial statements.

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Investments (Schedule of Investments and Cash and Cash Equivalents) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011		Dec. 31, 2010
Fair value of other invested assets	$ 562,267		$ 347,632
Unfunded Commitments	332,607
Ratio of the fund's long investments in securities to fund's equity capital	100.00%
Percentage of gross exposure addition of long and short exposure	100.00%
Private Equity Funds [Member]
Fair value of other invested assets	56,707
Unfunded Commitments	182,296
Long Exposure	100.00%	[1]
Short Exposure	0.00%	[2]
Gross Exposure	100.00%	[3]
Net Exposure	100.00%	[4]
Mezzanine Debt [Member]
Fair value of other invested assets	1,978
Unfunded Commitments	113,022
Long Exposure	100.00%	[1]
Short Exposure	0.00%	[2]
Gross Exposure	100.00%	[3]
Net Exposure	100.00%	[4]
Distressed [Member]
Fair value of other invested assets	62,498
Unfunded Commitments	37,289
Long Exposure	73.00%	[1]
Short Exposure	10.00%	[2]
Gross Exposure	83.00%	[3]
Net Exposure	63.00%	[4]
Total Private Equity [Member]
Fair value of other invested assets	121,183
Unfunded Commitments	332,607
Short Exposure	0.00%	[2]
Equity Long/Short [Member]
Fair value of other invested assets	186,142
Unfunded Commitments
Long Exposure	104.00%	[1]
Short Exposure	67.00%	[2]
Gross Exposure	171.00%	[3]
Net Exposure	37.00%	[4]
Multi-Strategy [Member]
Fair value of other invested assets	170,168
Unfunded Commitments
Long Exposure	101.00%	[1]
Short Exposure	60.00%	[2]
Gross Exposure	161.00%	[3]
Net Exposure	41.00%	[4]
Event Driven [Member]
Fair value of other invested assets	84,774
Unfunded Commitments
Long Exposure	115.00%	[1]
Short Exposure	75.00%	[2]
Gross Exposure	190.00%	[3]
Net Exposure	40.00%	[4]

[1] Long exposure represents the ratio of the fund's long investments in securities to the fund's equity capital (over 100% may denote explicit borrowing).

[2] Short exposure represents the ratio of the securities sold short to the fund's equity capital.

[3] Gross exposure is the addition of the long and short exposures (over 100% may denote explicit borrowing).

[4] Net exposure is the subtraction of the short exposure from the long exposure.

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Derivative Instruments

Schedule of Derivative Fair Values on Condensed Consolidated Balance Sheets

			June 30, 2011								December 31, 2010
	Asset				Liability				Asset				Liability
	Derivative		Asset		Derivative		Liability		Derivative		Asset		Derivative		Liability
	Notional		Derivative		Notional		Derivative		Notional		Derivative		Notional		Derivative
	Amount		Fair Value		Amount		Fair Value		Amount		Fair Value		Amount		Fair Value
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts (1)	$	122,311	$	1,487	$	33,873	$	204	$	—	$	—	$	—	$	—
Interest rate futures (1)		1,797,200		4,183		142,300		32		—		—		—		—
	$	1,919,511	$	5,670	$	176,173	$	236	$	—	$	—	$	—	$	—
Relating to operating activities:
Foreign exchange contracts (2)	$	125,528	$	1,378	$	34,830	$	418	$	26,758	$	858	$	51,308	$	1,629
Total derivatives	$	2,045,039	$	7,048	$	211,003	$	654	$	26,758	$	858	$	51,308	$	1,629

(1)	Asset and liability derivatives relating to the investment portfolio are classified within "balances receivable on sale of investments" or "balances due on the purchase of investments" on the consolidated balance sheets.
(2)	Asset and liability derivatives relating to operating activities are classified within "other assets" or "other liabilities" on the consolidated balance sheets.

Schedule of Unrealized and Realized Gains (Losses) on Derivatives Recorded in the Consolidated Income Statement

	Location of Gain (Loss)	Three Months Ended						Six Months Ended
	Recognized in the Consolidated	June 30,						June 30,
	Income Statements	2011			2010			2011			2010
Derivatives not designated as hedging instruments
Relating to investment portfolio:
Foreign exchange contracts	Net realized investment gains	$	723		$	—		$	723		$	—
Interest rate futures	Net realized investment losses		(10,763	)		—			(16,259	)		—
		$	(10,040	)	$	—		$	(15,536	)	$	—
Relating to operating activities:
Foreign exchange contracts	Foreign exchange gains (losses)	$	1,345		$	(1,361	)	$	2,601		$	(1,412	)
Total derivatives		$	(8,695	)	$	(1,361	)	$	(12,935	)	$	(1,412	)
									~~~~~a

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Employee Benefit Plans (Schedule of Stock Related Compensation Expense Relating To the Stock Options, RSUs, LTIP and Cash Equivalent Awards) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Compensation expense	$ 9,668	$ 10,939	$ 20,687	$ 22,775
Stock Options [Member]
Compensation expense	997	758	2,176	1,550
RSUs [Member]
Compensation expense	3,707	3,327	7,529	7,041
LTIP Award [Member]
Compensation expense	1,558	3,842	2,407	8,863
Cash-Equivalent Stock Awards [Member]
Compensation expense	$ 3,406	$ 3,012	$ 8,575	$ 5,321

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Employee Benefit Plans (Schedule of Employee Option Plan) (Details) (USD $)	6 Months Ended
	Jun. 30, 2011
Employee Benefit Plans
Options, Outstanding at beginning of period	1,272,739
Options, Granted	494,885
Options, Exercised	(128,487)
Options, Forfeited	(27,819)
Options, Expired	(170)
Options, Outstanding at end of period	1,611,148
Weighted Average Exercise Price, Begining of the period	$ 38.77
Weighted Average Exercise Price, Granted	$ 61.51
Weighted Average Exercise Price, Exercised	$ (37.55)
Weighted Average Exercise Price, Forfeited	$ (48.54)
Weighted Average Exercise Price, Expired	$ (39.02)
Weighted Average Exercise Price, End of the period	$ 45.68

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Shareholders' Equity (Tables)

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Schedule of capital units

	June 30,		December 31,
	2011		2010
Common shares issued and fully paid, CHF 15.00 per share		40,003,642		40,003,642
Share capital at end of period		600,055		600,055

Schedule of share capital roll forward

	Six Months Ended
	June 30, 2011
Total shares issued at beginning and end of period		40,003,642
Treasury shares issued, balance at beginning of period		1,914,416
Shares repurchased		969,163
Shares issued out of treasury		(824,980	)
Total treasury shares at end of period		2,058,599
Total shares outstanding at end of period		37,945,043

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Investments (Schedule of Contractual Maturity Dates of Available for Sale Fixed Maturity Investments) (Details) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Investments
Available for sale fixed maturity, Due within one year, Amortized Cost	$ 33,343
Available for sale fixed maturity, Due after one year through five years, Amortized Cost	233,119
Available for sale fixed maturity, Due after five years through ten years, Amortized Cost	49,168
Available for sale fixed maturity, Due after ten years, Amortized Cost	3,081
Available for sale fixed maturity, Amortized Cost	318,711	828,544
Available for sale fixed maturity, Due within one year, Fair Value	33,999
Available for sale fixed maturity, Due after one year through five years, Fair Value	252,903
Available for sale fixed maturity, Due after five years through ten years, Fair Value	55,314
Available for sale fixed maturity, Due after ten years, Fair Value	3,335
Available for sale fixed maturity, Fair Value	$ 345,551	$ 891,849

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Reserve for Losses and Loss Expenses (Tables)

6 Months Ended

Jun. 30, 2011

Reserve for Losses and Loss Expenses

Schedule of Reserve for Losses and Loss Expenses

	June 30,		December 31,
	2011		2010
Outstanding loss reserves	$	1,462,144	$	1,166,516
Reserves for losses incurred but not reported		3,789,160		3,712,672
Reserve for losses and loss expenses	$	5,251,304	$	4,879,188

Schedule of Reconciliation of Unpaid Losses and Loss Expenses

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross liability at beginning of period	$	5,100,643		$	4,853,359		$	4,879,188		$	4,761,772
Reinsurance recoverable at beginning of period		(975,523	)		(920,480	)		(927,588	)		(919,991	)
Net liability at beginning of period		4,125,120			3,932,879			3,951,600			3,841,781
Net losses incurred related to:
Commutation of variable-rated reinsurance contracts		11,529			—			11,529			8,864
Current year		279,513			252,816			628,315			550,062
Prior years		(55,229	)		(64,094	)		(99,579	)		(138,050	)
Total incurred		235,813			188,722			540,265			420,876
Net paid losses related to:
Current year		19,579			26,704			21,279			33,410
Prior years		109,238			102,690			243,596			231,990
Total paid		128,817			129,394			264,875			265,400
Foreign exchange revaluation		5,237			(4,207	)		10,363			(9,257	)
Net liability at end of period		4,237,353			3,988,000			4,237,353			3,988,000
Reinsurance recoverable at end of period		1,013,951			932,435			1,013,951			932,435
Gross liability at end of period	$	5,251,304		$	4,920,435		$	5,251,304		$	4,920,435

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Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity

Shareholders' Equity

11. SHAREHOLDERS' EQUITY

a) Authorized shares

     The articles of association authorize the Board of Directors to increase the share capital by a maximum amount of 20% of the share capital registered in the commercial register up to CHF 119,404 or 7,690,260 voting shares, and create conditional capital of 7,200,000 voting shares. The issued share capital consists of the following:

	June 30,		December 31,
	2011		2010
Common shares issued and fully paid, CHF 15.00 per share		40,003,642		40,003,642
Share capital at end of period		600,055		600,055

	Six Months Ended
	June 30, 2011
Total shares issued at beginning and end of period		40,003,642
Treasury shares issued, balance at beginning of period		1,914,416
Shares repurchased		969,163
Shares issued out of treasury		(824,980	)
Total treasury shares at end of period		2,058,599
Total shares outstanding at end of period		37,945,043

     As of June 30, 2011, there were outstanding 37,901,183 voting common shares and 43,860 non-voting common shares.

b) Share Warrants

     In conjunction with the private placement offering at the formation of Allied World Bermuda, Allied World Bermuda granted warrant agreements to certain founding shareholders to acquire up to 5,500,000 common shares at an exercise price of $34.20 per share. These warrants were exercisable in certain limited conditions, including a public offering of common shares, and were due to expire November 21, 2011. All warrants granted have been purchased by the Company as discussed below.

     In August 2010, Allied World Bermuda repurchased a warrant owned by The Chubb Corporation ("Chubb") in a privately negotiated transaction. The warrant entitled Chubb to purchase 2,000,000 of Allied World Bermuda's common shares for $34.20 per share. Allied World Bermuda repurchased the warrant for an aggregate purchase price of $32,819. In November 2010, Allied World Bermuda repurchased warrants owned by GS Capital Partners and other investment funds, which are affiliates of The Goldman Sachs Group, Inc. ("Goldman Sachs") and founding shareholders in a privately negotiated transaction. The warrants entitled Goldman Sachs to purchase 1,500,000 of Allied World Bermuda's common shares for $34.20 per share. Allied World Bermuda repurchased the warrants for an aggregate purchase price of $37,197. In February 2011, the Company repurchased a warrant owned by American International Group, Inc. ("AIG") in a privately negotiated transaction. The warrant entitled AIG to purchase 2,000,000 of the Company's common shares for $34.20 per share. The Company repurchased the warrant for an aggregate purchase price of $53,620. The repurchases of the warrants were recognized as a reduction in "additional paid-in capital" on the consolidated balance sheets. The repurchases were executed separately from the share repurchase program discussed in Note 11(d) below. After these repurchases, Chubb, Goldman Sachs and AIG have no warrants remaining and no other disclosed equity interest in the Company.

c) Dividends

     Under Swiss law, distributions to shareholders may be paid only if the Company has sufficient distributable profits from previous fiscal years, or if the Company has freely distributable reserves, each as presented on the audited stand-alone statutory balance sheet. Distributions to shareholders out of the share and participation capital may be made by way of a capital reduction in the form of a reduction to par value to achieve a similar result as the payment of a dividend.

     On May 5, 2011, the shareholders approved the Company's proposal to pay dividends in the form of a distribution by way of par value reductions. The aggregate reduction amount will be paid to shareholders in quarterly installments of $0.375 per share. The Company made the first such quarterly dividend payment on August, 5 2011 to shareholders of record on July 27, 2011. The amount of the first par value reduction was CHF 0.30, based on the exchange rate as of July 18, 2011. The Company expects to distribute the remaining quarterly installments in October 2011, January 2012 and April 2012. Dividend payments are subject to Swiss law and other related factors described in the Company's 2011 Proxy Statement and the Company's other filings with the SEC

     In February 2010, the Company declared a dividend of $0.20 per common share payable on April 1, 2010 to shareholders of record on March 16, 2010. The total dividend payable amounted to $10,092. In May 2010, the Company declared a quarterly dividend of $0.20 per common share, payable on June 10, 2010 to shareholders of record on May 25, 2010. The total dividend paid amounted to $10,017.

d) Share repurchase

     In May 2010, the Company established a share repurchase program in order to repurchase its common shares. Repurchases may be effected from time to time through open market purchases, privately negotiated transactions, tender offers or otherwise. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company's capital position, legal requirements and other factors. During the six months ended June 30, 2011, the Company repurchased through open market purchases 969,163 shares at a total cost of $60,000 for an average price of $61.91 per share. No shares were repurchased during the three months ended June 30, 2011 because of the merger negotiations with Transatlantic Holdings, Inc. These repurchased shares have been classified as "Treasury shares, at cost" on the consolidated balance sheets. The Company will issue shares out of treasury principally related to the Company's employee benefit plans.

     In August 2010, the Company repurchased 5,000,000 of its common shares for $250,000, or $50.00 per share, in a privately negotiated transaction from Goldman Sachs. The shares repurchased were classified as "Treasury shares, at cost" on the consolidated balance sheets. In November 2010, the Company repurchased the remaining 3,159,793 common shares from Goldman Sachs for $185,448, or $58.69 per share. The repurchase price per common share is based on and reflects 0.5% discount from the volume-weighted average trading price of the Company's common shares on November 5, 2010. These repurchases were executed separately from the Company's share repurchase program discussed above.

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Goodwill and Intangible Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2011
Goodwill and Intangible Assets
2011	$ 1,443
2012	2,533
2013	2,533
2014	2,533
2015	2,533
thereafter	$ 19,846
Weighted average useful life	12.3

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Condensed Consolidated Guarantor Financial Statements (Schedule of Condensed Consolidating Cash Flows) (Details) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Net income	$ 102,420	$ 317,699
Equity in earnings of consolidated subsidiaries
Dividends received from subsidiaries
Stock compensation expense	12,112	17,454
Amortization of discount on senior notes	122	65
Other assets	(359,507)	(342,580)
Accounts payable and accrued liabilities	608,889	311,145
Interest payable
Balances due to subsidiaries
Net cash provided by (used in) operating activities	364,036	303,783
Net cash paid for acquisitions
Purchases of fixed maturity investments - available for sale	(352)	(113,118)
Purchases of fixed maturity investments - trading	(3,949,447)	(6,927,637)
Purchases of equity securities and other invested assets	(485,750)	(203,011)
Sales of fixed maturity investments - available for sale	560,794	1,827,800
Sales of fixed maturity investments - trading	3,503,758	5,344,007
Sale of equity securities and other invested assets	72,362	3,155
Other	27,204	(18,856)
Net cash used in investing activities	(271,431)	(87,660)
Dividends paid		(20,109)
Proceeds from the exercise of stock options	4,824	3,576
Share repurchases	(60,000)	(49,089)
Repurchase of founder warrants	(53,620)
Stock compensation funding due from subsidiaries
Capital contribution
Other
Net cash (used in) provided by financing activities	(108,796)	(65,622)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(16,191)	150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	756,995	292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	740,804	442,689
Allied World Switzerland (Parent Guarantor) [Member]
Net income	102,420
Equity in earnings of consolidated subsidiaries	(108,184)
Dividends received from subsidiaries
Stock compensation expense	457
Amortization of discount on senior notes
Other assets	(216)
Accounts payable and accrued liabilities	(2,490)
Interest payable
Balances due to subsidiaries
Net cash provided by (used in) operating activities	(8,013)
Net cash paid for acquisitions
Purchases of fixed maturity investments - available for sale
Purchases of fixed maturity investments - trading
Purchases of equity securities and other invested assets
Sales of fixed maturity investments - available for sale
Sales of fixed maturity investments - trading
Sale of equity securities and other invested assets
Other	(4,496)
Net cash used in investing activities	(4,496)
Dividends paid
Proceeds from the exercise of stock options	4,824
Share repurchases	(60,000)
Repurchase of founder warrants
Stock compensation funding due from subsidiaries
Capital contribution
Other	(216)
Net cash (used in) provided by financing activities	(55,392)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(67,901)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	138,488
CASH AND CASH EQUIVALENTS, END OF PERIOD	70,587
Allied World Bermuda (Subsidiary Issuer) [Member]
Net income	(31,918)	317,699
Equity in earnings of consolidated subsidiaries		(347,346)
Dividends received from subsidiaries		80,000
Stock compensation expense		295
Amortization of discount on senior notes	122	65
Other assets	(928)	847
Accounts payable and accrued liabilities	(36)	5,789
Interest payable
Balances due to subsidiaries
Net cash provided by (used in) operating activities	(32,760)	57,349
Net cash paid for acquisitions
Purchases of fixed maturity investments - available for sale
Purchases of fixed maturity investments - trading
Purchases of equity securities and other invested assets
Sales of fixed maturity investments - available for sale
Sales of fixed maturity investments - trading
Sale of equity securities and other invested assets
Other		(2,097)
Net cash used in investing activities		(2,097)
Dividends paid		(20,109)
Proceeds from the exercise of stock options		3,576
Share repurchases		(49,089)
Repurchase of founder warrants	(53,620)
Stock compensation funding due from subsidiaries
Capital contribution
Other	(881)
Net cash (used in) provided by financing activities	(54,501)	(65,622)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(87,261)	(10,370)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	125,663	53,849
CASH AND CASH EQUIVALENTS, END OF PERIOD	38,402	43,479
Other Allied World Subsidiaries [Member]
Net income	140,102	347,346
Equity in earnings of consolidated subsidiaries
Dividends received from subsidiaries
Stock compensation expense	11,655	17,159
Amortization of discount on senior notes
Other assets	(358,363)	(343,427)
Accounts payable and accrued liabilities	611,415	305,356
Interest payable
Balances due to subsidiaries
Net cash provided by (used in) operating activities	404,809	326,434
Net cash paid for acquisitions
Purchases of fixed maturity investments - available for sale	(352)	(113,118)
Purchases of fixed maturity investments - trading	(3,949,447)	(6,927,637)
Purchases of equity securities and other invested assets	(485,750)	(203,011)
Sales of fixed maturity investments - available for sale	560,794	1,827,800
Sales of fixed maturity investments - trading	3,503,758	5,344,007
Sale of equity securities and other invested assets	72,362	3,155
Other	31,700	(16,759)
Net cash used in investing activities	(266,935)	(85,563)
Dividends paid		(80,000)
Proceeds from the exercise of stock options
Share repurchases
Repurchase of founder warrants
Stock compensation funding due from subsidiaries
Capital contribution
Other	1,097
Net cash (used in) provided by financing activities	1,097	(80,000)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	138,971	160,871
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	492,844	238,339
CASH AND CASH EQUIVALENTS, END OF PERIOD	631,815	399,210
Consolidating Adjustments [Member]
Net income	(108,184)	(347,346)
Equity in earnings of consolidated subsidiaries	108,184	347,346
Dividends received from subsidiaries		(80,000)
Stock compensation expense
Amortization of discount on senior notes
Other assets
Accounts payable and accrued liabilities
Interest payable
Balances due to subsidiaries
Net cash provided by (used in) operating activities		(80,000)
Net cash paid for acquisitions
Purchases of fixed maturity investments - available for sale
Purchases of fixed maturity investments - trading
Purchases of equity securities and other invested assets
Sales of fixed maturity investments - available for sale
Sales of fixed maturity investments - trading
Sale of equity securities and other invested assets
Other
Net cash used in investing activities
Dividends paid		80,000
Proceeds from the exercise of stock options
Share repurchases
Repurchase of founder warrants
Stock compensation funding due from subsidiaries
Capital contribution
Other
Net cash (used in) provided by financing activities		80,000
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD

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Employee Benefit Plans (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended			3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended			6 Months Ended	12 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended				3 Months Ended		6 Months Ended				6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010	Jun. 30, 2011 General and Administrative Expense [Member] Employee Stock Option [Member]	Jun. 30, 2010 General and Administrative Expense [Member] Employee Stock Option [Member]	Jun. 30, 2011 General and Administrative Expense [Member] Employee Stock Option [Member]	Jun. 30, 2010 General and Administrative Expense [Member] Employee Stock Option [Member]	Jun. 30, 2011 RSUs [Member]	Jun. 30, 2010 RSUs [Member]	Jun. 30, 2011 RSUs [Member]	Jun. 30, 2010 RSUs [Member]	Dec. 31, 2010 RSUs [Member]	Jun. 30, 2011 RSUs [Member] Allied World Switzerland (Parent Guarantor) [Member]	Dec. 31, 2010 RSUs [Member] Allied World Switzerland (Parent Guarantor) [Member]	Dec. 31, 2009 RSUs [Member] Allied World Switzerland (Parent Guarantor) [Member]	Jun. 30, 2011 LTIP Award [Member]	Jun. 30, 2010 LTIP Award [Member]	Jun. 30, 2011 LTIP Award [Member]	Jun. 30, 2010 LTIP Award [Member]	Dec. 31, 2008 LTIP Award [Member]	Dec. 31, 2010 LTIP Award [Member]	Jun. 30, 2011 2001 Employee Stock Option Plan [Member]	Jun. 30, 2011 2004 Stock Incentive Plan [Member]	Jun. 30, 2011 Cash-Equivalent Stock Awards [Member]	Jun. 30, 2010 Cash-Equivalent Stock Awards [Member]	Jun. 30, 2011 Cash-Equivalent Stock Awards [Member]	Jun. 30, 2010 Cash-Equivalent Stock Awards [Member]	Jun. 30, 2011 Employee Stock Option [Member]	Dec. 31, 2010 Employee Stock Option [Member]	Jun. 30, 2011 Employee Stock Option [Member] Allied World Switzerland (Parent Guarantor) [Member]
Common shares, issued																		2,000,000		2,000,000				4,000,000	2,000,000
Exercise price of options issued not be less than percentage of fair market value of the common shares granted																																100.00%
Percentage of weighted average annual forfeiture rate used in determining in compensation expense over the service period													2.80%																	6.72%
Amount of compensation expense recorded	$ 9,668	$ 10,939	$ 20,687	$ 22,775		$ 997	$ 758	$ 2,176	$ 1,550	$ 3,707	$ 3,327	$ 7,529	$ 7,041					$ 1,558	$ 3,842	$ 2,407	$ 8,863					$ 3,406	$ 3,012	$ 8,575	$ 5,321
Additional paid-in capital	$ 82,037		$ 82,037		$ 170,239					$ 34,865		$ 34,865		$ 37,991				$ 46,852		$ 46,852			$ 77,728							$ 41,207	$ 41,505
Expense related to unvested awards in percentage of fair value															100.00%	100.00%	150.00%					150.00%

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Investments

6 Months Ended

Jun. 30, 2011

Investments

Investments

4. INVESTMENTS

a) Available for Sale Securities

     The amortized cost, gross unrealized gains, gross unrealized losses and fair value of the Company's available for sale investments by category are as follows:

			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses			Fair Value
June 30, 2011
U.S. Government and Government agencies	$	37,597	$	1,419	$	—		$	39,016
States, municipalities and political subdivisions		43,343		5,323		—			48,666
Corporate debt:
Financial institutions		41,186		2,365		—			43,551
Industrials		95,583		7,656		—			103,239
Utilities		101,002		10,077		—			111,079
Total fixed maturity investments, available for sale	$	318,711	$	26,840	$	—		$	345,551
December 31, 2010
U.S. Government and Government agencies	$	85,030	$	6,923	$	—		$	91,953
Non-U.S. Government and Government agencies		138,386		9,539		(2,541	)		145,384
States, municipalities and political subdivisions		107,289		10,901		(13	)		118,177
Corporate debt:
Financial institutions		66,660		6,776		(38	)		73,398
Industrials		310,664		20,548		(2	)		331,210
Utilities		120,515		11,212		—			131,727
Total fixed maturity investments, available for sale	$	828,544	$	65,899	$	(2,594	)	$	891,849

b) Trading Securities

     Securities accounted for at fair value with changes in fair value recognized in the unaudited condensed consolidated statements of operations ("consolidated income statements") by category are as follows:

	June 30, 2011		December 31, 2010
U.S. Government and Government agencies	$	982,274	$	1,229,720
Non-U.S. Government and Government agencies		177,529		120,793
States, municipalities and political subdivisions		108,256		127,436
Corporate debt:
Financial institutions		1,440,554		1,261,219
Industrials		772,829		627,524
Utilities		135,492		101,472
Residential mortgage-backed:
Non-agency residential		363,408		371,935
Agency residential		1,229,647		1,195,905
Commercial mortgage-backed		311,509		184,043
Asset-backed		679,536		549,050
Total fixed maturity investments, trading		6,201,034		5,769,097
Equity securities		393,913		174,976
Hedge funds (1)		562,267		347,632
Total	$	7,157,214	$	6,291,705

⁽¹⁾ Within the Company's financial statements and footnotes "hedge funds" include the Company's investments in both hedge funds and private equity funds.

c) Contractual Maturity Dates

     The contractual maturity dates of available for sale fixed maturity investments are as follows:

	June 30, 2011
	Amortized Cost		Fair Value
Due within one year	$	33,343	$	33,999
Due after one year through five years		233,119		252,903
Due after five years through ten years		49,168		55,314
Due after ten years		3,081		3,335
	$	318,711	$	345,551

     Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

d) Other Invested Assets

     Included in other invested assets are the Company's hedge fund investments. As of the balance sheet date, the Company held 21 hedge fund investments with a total fair value of $562,267, which comprised 6.8% of the total fair value of its investments and cash and cash equivalents and are summarized as follows by type of investment strategy:

					Long			Short
Hedge Fund	Fair Value as of		Unfunded		Exposure(1)			Exposure(2)			Gross			Net
Type	June 30, 2011		Commitments		(% of funded)			(% of funded)			Exposure(3)			Exposure(4)
Private equity (primary and secondary)	$	56,707	$	182,296		100	%		0	%		100	%		100	%
Mezzanine debt		1,978		113,022		100	%		0	%		100	%		100	%
Distressed		62,498		37,289		73	%		10	%		83	%		63	%
Total private equity		121,183		332,607
Equity long/short		186,142		—		104	%		67	%		171	%		37	%
Multi-strategy		170,168		—		101	%		60	%		161	%		41	%
Event driven		84,774		—		115	%		75	%		190	%		40	%
Total	$	562,267	$	332,607

(1)	Long exposure represents the ratio of the fund's long investments in securities to the fund's equity capital (over 100% may denote explicit borrowing).
(2)	Short exposure represents the ratio of the securities sold short to the fund's equity capital.
(3)	Gross exposure is the addition of the long and short exposures (over 100% may denote explicit borrowing).
(4)	Net exposure is the subtraction of the short exposure from the long exposure.

• Private equity funds: These funds buy limited partnership interests from existing limited partners of primary private equity funds. As owners of private equity funds seek liquidity, they can sell their existing investments, plus any remaining commitment, to secondary market participants. The Company has invested in four private equity funds to purchase those primary limited partnership interests. The fair values of the investments in this class have been estimated using the net asset value per share of the investments. These funds cannot be redeemed because the investments include restrictions that do not allow for redemption until termination of the fund. The restriction period for these funds from initial investment ranges from eight to ten years.

• Mezzanine debt funds: Mezzanine debt funds invest primarily in privately negotiated mezzanine investments. The funds' strategies will focus primarily on providing capital to upper middle market and middle market companies, and private equity sponsors, in connection with leveraged buyouts, mergers and acquisitions, recapitalizations, growth financings and other corporate transactions. The most common position in the capital structure will be between the senior secured debt holder and the equity, however the funds will utilize a flexible approach when structuring investments, which may include secured debt, subordinated debt, preferred stock and/or private equity. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in one mezzanine debt fund which cannot be redeemed at this time because the investments include restrictions that do not allow for redemption until termination of the fund. The remaining restriction period for this fund is approximately ten years.

• Distressed funds: In distressed debt investing, managers take positions in the debt of companies experiencing significant financial difficulties, including bankruptcy, or in certain positions of the capital structure of structured securities. The manager relies on the fundamental analysis of these securities, including the claims on the assets and the likely return to bondholders. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in five distressed funds, three of which (representing approximately 34% of the value of the funds in this class) are not currently eligible for redemption due to imposed lock-up periods from initial investments ranging from one to eight years. The remaining funds representing approximately 42% and 24% of the value of the funds in this class are currently eligible for quarterly redemption with a 65-day and 45-day notification period, respectively, and are subject to redemption limitations and a redemption fee if redeemed prior to January 2012, respectively.

• Equity long/short funds: In equity long/short funds, managers take long positions in companies they deem to be undervalued and short positions in companies they deem to be overvalued. Long/short managers may invest in countries, regions or sectors and vary by their use of leverage and target net long position. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in five equity long/short funds, one of which (representing approximately 24% of the value of the funds in this class) is not currently eligible for redemption due to an imposed lock-up period of eighteen months from initial investment, at which time the fund will be eligible for quarterly redemption with a 45-day notification period. The remaining four funds, representing approximately 76% of the value of the funds in this class, are currently eligible for quarterly redemption, one with a 30-day notification period or monthly redemption with a 30-day notification period and redemption fee, one with a 45-day notification period and redemption fee if redeemed prior to July 2012 and two with a 60-day notification period.

• Multi-strategy funds: These funds may utilize many strategies employed by specialized funds including distressed investing, equity long/short, merger arbitrage, convertible arbitrage, fixed income arbitrage and macro trading. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in four equity long/short funds, all of which are currently eligible for quarterly redemption. Three of the funds require notification periods before redemption which range from 45 days to 90 days. The remaining fund is currently eligible for redemption of one third of the net asset value with a 65-day notification period.

• Event driven funds: Event driven strategies seek to deploy capital into specific securities whose returns are affected by a specific event that affects the value of one or more securities of a company. Returns for such securities are linked primarily to the specific outcome of the events and not by the overall direction of the bond or stock markets. Examples could include mergers and acquisitions (arbitrage), corporate restructurings and spin-offs and capital structure arbitrage. The fair values of the funds in this class have been estimated using the net asset value per share of the funds. The Company has invested in two event driven funds. Approximately 52% of the value of the funds is not currently eligible for redemption due to an imposed two year lock-up period from initial investment. The remaining 48% of the value of the funds in this class is currently eligible for quarterly redemption, but is subject to redemption fees and limitations.

     Five of the Company's hedge funds, three equity long/short funds, one multi-strategy funds and one event driven fund, had long exposure greater than 100% of the funds' net asset value (indicating explicit leverage) of 120%, 117%, 110%, 133%, and 151%, respectively, as of June 30, 2011.

e) Net Investment Income

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Fixed maturity investments	$	50,648		$	67,552		$	101,594		$	138,650
Equity securities and other invested assets		5,015			940			7,211			1,246
Cash and cash equivalents		127			111			445			163
Expenses		(3,422	)		(3,009	)		(6,674	)		(5,563	)
Net investment income	$	52,368		$	65,594		$	102,576		$	134,496

f) Components of Realized Gains and Losses

     Components of realized gains are summarized in the following table:

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Gross realized gains on sale of securities	$	34,611		$	78,572		$	78,168		$	130,239
Gross realized losses on sale of securities		(3,330	)		(6,724	)		(25,262	)		(13,130	)
Treasury yield hedge		—			(3,958	)		—			(3,958	)
Futures not designated as hedges		(15,755	)		—			(20,410	)		—
Foreign exchange forwards not designated as hedges		(560	)		—			(560	)		—
Mark-to-market changes: debt securities trading		31,872			32,746			45,336			60,477
Mark-to-market changes: foreign exchange forwards and futures not designated as hedges		6,275			—			5,434			—
Mark-to-market changes: hedge funds and equity securities		5,765			(5,703	)		26,548		$	(1,208	)
Net realized investment gains	$	58,878		$	94,933		$	109,254		$	172,420
Proceeds from sale of available for sale securities	$	202,671		$	1,306,625		$	546,191		$	1,846,074
Proceeds from sale of trading securities	$	1,432,148		$	1,215,553		$	3,418,548		$	5,297,353

g) Pledged Assets

     As of June 30, 2011 and December 31, 2010, $286,393 and $280,175, respectively, of cash and cash equivalents and investments were on deposit with various state or government insurance departments or pledged in favor of ceding companies in order to comply with relevant insurance regulations. In addition, the Company has set up trust accounts to meet security requirements for inter-company reinsurance transactions. These trusts contained assets of $1,321,751 and $1,377,266 as of June 30, 2011 and December 31, 2010, respectively, and are included in fixed maturity investments.

     The Company also has facilities available for the issuance of letters of credit collateralized against the Company's investment portfolio. The collateralized portion of these facilities is up to $1,300,000 as of June 30, 2011 and December 31, 2010. See Note 8 "Debt and Financing Arrangements" for details on the facilities.

     The following table shows the Company's trust accounts on deposit, as well as outstanding and remaining letter of credit facilities, and the collateral committed to support the letter of credit facilities:

	As of		As of
	June 30,		December 31,
	2011		2010
Total trust accounts on deposit	$	1,608,143	$	1,657,441
Total letter of credit facilities:
Citibank Europe plc		900,000		900,000
Credit Facility		800,000		800,000
Total letter of credit facilities		1,700,000		1,700,000
Total letter of credit facilities outstanding:
Citibank Europe plc		712,454		689,851
Credit Facility		158,983		158,983
Total letter of credit facilities outstanding		871,437		848,834
Total letter of credit facilities remaining:
Citibank Europe plc		187,546		210,149
Credit Facility (1)		641,017		641,017
Total letter of credit facilities remaining		828,563		851,166
Collateral committed to support the letter of credit facilities	$	1,054,206	$	1,121,345

(1) Net of any borrowing or repayments under the Unsecured Facility (as defined in Note 8). See Note 8 for further details on the Unsecured Facility.

    Total trust accounts on deposit includes available for sale securities, trading securities and cash and cash equivalents. The fair values of the combined total cash and cash equivalents and investments held under trust were $2,662,349 and $2,778,786 as of June 30, 2011 and December 31, 2010, respectively. Of the total letters of credit facilities outstanding as of June 30, 2011 and December 31, 2010, $7,295 was used to meet security requirements for inter-company transactions and the remaining letters of credit facilities outstanding of $864,142 and $841,539 was used for third-party beneficiaries, respectively.

h) Analysis of Unrealized Losses

     As of June 30, 2011 and December 31, 2010, there were approximately nil and nine securities, respectively, in an unrealized loss position. The following table summarizes the market value of those investments in an unrealized loss position for periods less than and greater than 12 months:

	December 31, 2010
	Gross Fair		Unrealized
	Value		Loss
Less than 12 months
U.S. Government and Government agencies	$	—	$	—
Non-U.S. Government and Government agencies		34,204		(1,116	)
States, municipalities and political subdivisions		472		(13	)
Corporate debt:
Financial institutions		2,796		(38	)
Industrials		2,150		(2	)
	$	39,622	$	(1,169	)
More than 12 months
Non-U.S. Government and Government agencies	$	10,998	$	(1,425	)
	$	10,998	$	(1,425	)
	$	50,620	$	(2,594	)

i) Other-than-temporary impairment charges

     Following the Company's review of the securities in the investment portfolio during the three and six months ended June 30, 2011, no securities were considered to be other-than-temporarily impaired.

     Following the Company's review of the securities in the investment portfolio during the three and six months ended June 30, 2010 nil and one mortgage-backed security was considered to be other-than-temporarily impaired due to the present value of the expected cash flows being lower than the amortized cost. The $168 of other than temporary impairment ("OTTI") during the six months ended June 30, 2010 was recognized through earnings due to credit related losses.

     The following table summarizes the amounts related to credit losses on debt securities for which a portion of the OTTI was recognized in other comprehensive income in the consolidated income statements for the three and six months ended June 30, 2010:

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2010		2010
Beginning balance of credit losses	$	1,264	$	1,096
Additions for credit loss for which OTTI was not previously recognized		—		168
Reductions for securities sold during the period (realized)		—		—
Reductions for OTTI previously recognized due to intent to sell		—		—
Additions resulting from the increase in credit losses		—		—
Reductions resulting from the improvement in expected cash flows		—		—
Ending balance of credit losses	$	1,264	$	1,264

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Segment Information

6 Months Ended

Jun. 30, 2011

Segment Information

Segment Information

14. SEGMENT INFORMATION

     The determination of reportable segments is based on how senior management monitors the Company's underwriting operations. Management monitors the performance of its direct underwriting operations based on the geographic location of the Company's offices, the markets and customers served and the type of accounts written. The Company is currently organized into three operating segments: U.S. insurance, international insurance and reinsurance. All product lines fall within these classifications.

     The U.S. insurance segment includes the Company's direct specialty insurance operations in the United States. This segment provides both direct property and specialty casualty insurance primarily to non-Fortune 1000 North American domiciled accounts. The international insurance segment includes the Company's direct insurance operations in Bermuda, Europe, Singapore and Hong Kong. This segment provides both direct property and casualty insurance primarily to Fortune 1000 North American domiciled accounts and mid-sized to large non-North American domiciled accounts. The reinsurance segment includes the reinsurance of property, general casualty, professional liability, specialty lines and property catastrophe coverages written by insurance companies. The Company presently writes reinsurance on both a treaty and a facultative basis, targeting several niche reinsurance markets.

     Responsibility and accountability for the results of underwriting operations are assigned by major line of business within each segment. Because the Company does not manage its assets by segment, investment income, interest expense and total assets are not allocated to individual reportable segments. General and administrative expenses are allocated to segments based on various factors, including staff count and each segment's proportional share of gross premiums written.

     Management measures results for each segment on the basis of the "loss and loss expense ratio," "acquisition cost ratio," "general and administrative expense ratio" and the "combined ratio." The "loss and loss expense ratio" is derived by dividing net losses and loss expenses by net premiums earned. The "acquisition cost ratio" is derived by dividing acquisition costs by net premiums earned. The "general and administrative expense ratio" is derived by dividing general and administrative expenses by net premiums earned. The "combined ratio" is the sum of the "loss and loss expense ratio," the "acquisition cost ratio" and the "general and administrative expense ratio."

     The following tables provide a summary of the segment results:

				International
Three months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	226,738		$	178,593		$	114,267		$	519,598
Net premiums written		172,887			108,985			113,931			395,803
Net premiums earned		145,857			79,956			129,494			355,307
Other income		—			—			—			—
Net losses and loss expenses		(92,595	)		(72,082	)		(71,136	)		(235,813	)
Acquisition costs		(18,876	)		747			(24,842	)		(42,971	)
General and administrative expenses		(31,253	)		(20,653	)		(15,295	)		(67,201	)
Underwriting income (loss)		3,133			(12,032	)		18,221			9,322
Net investment income											52,368
Net realized investment gains											58,878
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(766	)
Interest expense											(13,745	)
Foreign exchange loss											(1,184	)
Income before income taxes										$	104,873
Loss and loss expense ratio		63.5	%		90.2	%		54.9	%		66.4	%
Acquisition cost ratio		12.9	%		(0.9	%)		19.2	%		12.1	%
General and administrative expense ratio		21.4	%		25.8	%		11.8	%		18.9	%
Combined ratio		97.8	%		115.1	%		85.9	%		97.4	%

				International
Three months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	189,663		$	167,601		$	136,583		$	493,847
Net premiums written		135,238			98,509			136,048			369,795
Net premiums earned		125,659			89,427			123,838			338,924
Other income		616			—			—			616
Net losses and loss expenses		(69,198	)		(64,580	)		(54,944	)		(188,722	)
Acquisition costs		(15,854	)		66			(22,150	)		(37,938	)
General and administrative expenses		(30,683	)		(22,657	)		(14,749	)		(68,089	)
Underwriting income		10,540			2,256			31,995			44,791
Net investment income											65,594
Net realized investment gains											94,933
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(891	)
Interest expense											(9,531	)
Foreign exchange loss											(559	)
Income before income taxes										$	194,337
Loss and loss expense ratio		55.1	%		72.2	%		44.4	%		55.7	%
Acquisition cost ratio		12.6	%		(0.1	%)		17.9	%		11.2	%
General and administrative expense ratio		24.4	%		25.3	%		11.9	%		20.1	%
Combined ratio		92.1	%		97.4	%		74.2	%		87.0	%

				International
Six months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	410,040		$	289,918		$	380,328		$	1,080,286
Net premiums written		312,789			183,895			379,990			876,674
Net premiums earned		281,338			156,246			252,599			690,183
Other income		—			—			—			—
Net losses and loss expenses		(208,426	)		(143,266	)		(188,573	)		(540,265	)
Acquisition costs		(36,978	)		2,603			(46,678	)		(81,053	)
General and administrative expenses		(62,052	)		(41,381	)		(31,724	)		(135,157	)
Underwriting loss		(26,118	)		(25,798	)		(14,376	)		(66,292	)
Net investment income											102,576
Net realized investment gains											109,254
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(1,533	)
Interest expense											(27,487	)
Foreign exchange loss											(742	)
Income before income taxes										$	115,776
Loss and loss expense ratio		74.1	%		91.7	%		74.7	%		78.3	%
Acquisition cost ratio		13.1	%		(1.7	%)		18.5	%		11.7	%
General and administrative expense ratio		22.1	%		26.5	%		12.6	%		19.6	%
Combined ratio		109.3	%		116.5	%		105.8	%		109.6	%

				International
Six months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	351,748		$	289,023		$	357,239		$	998,010
Net premiums written		266,793			179,590			356,704			803,087
Net premiums earned		254,864			176,470			245,914			677,248
Other income		913			—			—			913
Net losses and loss expenses		(167,623	)		(122,029	)		(131,224	)		(420,876	)
Acquisition costs		(32,814	)		—			(45,908	)		(78,722	)
General and administrative expenses		(57,797	)		(44,502	)		(29,253	)		(131,552	)
Underwriting (loss) income		(2,457	)		9,939			39,529			47,011
Net investment income											134,496
Net realized investment gains											172,420
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(1,783	)
Interest expense											(19,059	)
Foreign exchange loss											(1,635	)
Income before income taxes										$	331,282
Loss and loss expense ratio		65.8	%		69.1	%		53.4	%		62.1	%
Acquisition cost ratio		12.9	%		0.0	%		18.7	%		11.6	%
General and administrative expense ratio		22.7	%		25.2	%		11.9	%		19.4	%
Combined ratio		101.4	%		94.3	%		84.0	%		93.1	%

     The following table shows an analysis of the Company's net premiums written by geographic location of the Company's subsidiaries. All inter-company premiums have been eliminated.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
United States	$	215,343	$	192,980	$	478,574	$	438,260
Bermuda		125,452		131,119		271,783		258,901
Europe		40,663		38,550		92,539		90,710
Singapore		10,331		5,912		25,567		9,603
Hong Kong		4,014		1,234		8,211		5,613
Total net premiums written	$	395,803	$	369,795	$	876,674	$	803,087

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Employee Benefit Plans (Schedule of Long-Term Incentive Plan Awards) (Details) (LTIP Award [Member], Performance Based Units [Member], USD $)	6 Months Ended
	Jun. 30, 2011
LTIP Award [Member] | Performance Based Units [Member]
Other Than Options, Outstanding at beginning of period	773,411
Weighted Average Grant Date Fair Value, Outstanding at beginning of period	$ 41.74
Other Than Options, Additional granted due to the achievement of 2008 - 2010 performance criteria	212,938
Weighted Average Grant Date Fair Value, Additional granted due to the achievement of 2008 - 2010 performance criteria	$ 43.27
Other Than Options, forfeited	(13,500)
Weighted Average Grant Date Fair Value, forfeited	$ 42.48
Other Than Options, vested	(638,813)
Weighted Average Grant Date Fair Value, vested	$ 43.27
Other Than Options, Outstanding at end of period	334,036
Weighted Average Grant Date Fair Value, Outstanding at End of Period	$ 39.76

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Employee Benefit Plans (Schedule of Assumptions Used In the Option-Pricing Model) (Details) (USD $)	6 Months Ended
	Jun. 30, 2011
Employee Benefit Plans
Expected term of option, in years	5.48
Weighted average risk-free interest rate	2.33%
Weighted average expected volatility	31.51%
Dividend yield	1.00%
Weighted average fair value on grant date	$ 18.27

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Investments (Schedule of Available for Sale Securities) (Details) (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Amortized Cost	$ 318,711	$ 828,544
Gross Unrealized Gains	26,840	65,899
Gross Unrealized Losses		(2,594)
Available for sale fixed maturity, Fair Value	345,551	891,849
U.S. Government and Government Agencies [Member]
Amortized Cost	37,597	85,030
Gross Unrealized Gains	1,419	6,923
Gross Unrealized Losses
Available for sale fixed maturity, Fair Value	39,016	91,953
Non-U.S. Government and Government Agencies [Member]
Amortized Cost		138,386
Gross Unrealized Gains		9,539
Gross Unrealized Losses		(2,541)
Available for sale fixed maturity, Fair Value		145,384
States, Municipalities and Political Subdivisions [Member]
Amortized Cost	43,343	107,289
Gross Unrealized Gains	5,323	10,901
Gross Unrealized Losses		(13)
Available for sale fixed maturity, Fair Value	48,666	118,177
Corporate Debt, Financial Institutions [Member]
Amortized Cost	41,186	66,660
Gross Unrealized Gains	2,365	6,776
Gross Unrealized Losses		(38)
Available for sale fixed maturity, Fair Value	43,551	73,398
Corporate Debt, Industrials [Member]
Amortized Cost	95,583	310,664
Gross Unrealized Gains	7,656	20,548
Gross Unrealized Losses		(2)
Available for sale fixed maturity, Fair Value	103,239	331,210
Corporate Debt, Utilities [Member]
Amortized Cost	101,002	120,515
Gross Unrealized Gains	10,077	11,212
Gross Unrealized Losses
Available for sale fixed maturity, Fair Value	$ 111,079	$ 131,727

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Segment Information (Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Total net premiums written	$ 395,803	$ 369,795	$ 876,674	$ 803,087
United States [Member]
Total net premiums written	215,343	192,980	478,574	438,260
Bermuda [Member]
Total net premiums written	125,452	131,119	271,783	258,901
Europe [Member]
Total net premiums written	40,663	38,550	92,539	90,710
Singapore [Member]
Total net premiums written	10,331	5,912	25,567	9,603
HongKong [Member]
Total net premiums written	$ 4,014	$ 1,234	$ 8,211	$ 5,613

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value of Financial Instruments

Schedule of Fair Value of Financial Instruments

					Fair value measurement using:
					Quoted prices in				Significant
					active markets for		Significant other		unobservable
	Carrying				identical assets		observable inputs		inputs
	amount		Total fair value		(Level 1)		(Level 2)		(Level 3)
Available for sale securities:
U.S. Government and Government agencies	$	39,016	$	39,016	$	39,016	$	—	$	—
States, municipalities and political subdivisions		48,666		48,666		—		48,666		—
Corporate debt		257,869		257,869		—		257,869		—
Total available for sale fixed maturity investments		345,551		345,551
Trading securities:
U.S. Government and Government agencies	$	982,274	$	982,274	$	835,748	$	146,526	$	—
Non-U.S. Government and Government agencies		177,529		177,529		—		177,529		—
States, municipalities and political subdivisions		108,256		108,256		—		108,256		—
Corporate debt		2,348,875		2,348,875		—		2,348,875		—
Mortgage-backed		1,904,564		1,904,564		—		1,687,904		216,660
Asset-backed		679,536		679,536		—		566,226		113,310
Total trading fixed maturity investments		6,201,034		6,201,034
Total fixed maturity investments		6,546,585		6,546,585
Hedge funds		562,267		562,267		—		—		562,267
Equity securities		393,913		393,913		393,913		—		—
Total investments	$	7,502,765	$	7,502,765	$	1,268,677	$	5,341,851	$	892,237
Senior notes	$	797,823	$	878,085	$	—	$	878,085	$	—

Schedule of Fair Value Measurement Using Significant Unobservable Inputs Level Three

	Fair value measurement using significant
	unobservable inputs (Level 3):
	Hedge funds			Mortgage-backed			Asset-backed
Three Months Ended June 30, 2011
Opening balance	$	469,999		$	234,087		$	143,829
Total realized and unrealized gains included in net income		5,435			4,251			596
Total realized and unrealized losses included in net income		(4,621	)		(2,571	)		(102	)
Purchases		94,290			29,827			32,408
Sales		(2,836	)		(34,329	)		(2,800	)
Transfers into Level 3		—			24,389			20,246
Transfers out of Level 3		—			(38,994	)		(80,867	)
Ending balance	$	562,267		$	216,660		$	113,310
Three Months Ended June 30, 2010
Opening balance	$	242,135		$	233,667		$	36,532
Total realized and unrealized gains included in net income		1,742			9,703			79
Total realized and unrealized losses included in net income		(2,906	)		(6,987	)		(279	)
Change in unrealized gains included in Other
Comprehensive Income ("OCI")		—			1,639			9
Change in unrealized losses included in OCI		—			(205	)		—
Purchases		78,621			96,089			28,868
Sales		—			(47,560	)		(2,058	)
Transfers into Level 3		—			2,286			50,641
Transfers out of Level 3		—			(9,843	)		(10,237	)
Ending balance	$	319,592		$	278,789		$	103,555
Six Months Ended June 30, 2011
Opening balance	$	347,632		$	172,558		$	48,707
Total realized and unrealized gains included in net income		21,884			5,495			660
Total realized and unrealized losses included in net income		(9,391	)		(2,268	)		(73	)
Purchases		245,340			62,604			115,417
Sales		(43,198	)		(43,287	)		(3,226	)
Transfers into Level 3		—			86,085			32,801
Transfers out of Level 3		—			(64,527	)		(80,976	)
Ending balance	$	562,267		$	216,660		$	113,310
Six Months Ended June 30, 2010
Opening balance	$	184,725		$	253,979		$	104,871
Total realized and unrealized gains included in net income		6,584			18,084			634
Total realized and unrealized losses included in net income		(3,386	)		(7,098	)		(209	)
Change in unrealized gains included in OCI		—			5,084			51
Change in unrealized losses included in OCI		—			(447	)		(6	)
Purchases		131,669			120,943			51,181
Sales		—			(119,228	)		(5,246	)
Transfers into Level 3		—			48,731			50,739
Transfers out of Level 3		—			(41,259	)		(98,460	)
Ending balance	$	319,592		$	278,789		$	103,555

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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Parenthetical) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income Parenthetical
Deferred income tax expense for unrealzed gains on investments arising during period	$ 1,461	$ 471	$ 2,425	$ 690

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2011

Commitments and Contingencies

Commitments and Contingencies

15. COMMITMENTS AND CONTINGENCIES

     Insurance balances receivable primarily consist of net premiums due from insureds and reinsureds. The Company believes that the counterparties to these receivables are able to meet, and will meet, all of their obligations. Consequently, the Company has not included any allowance for doubtful accounts against the receivable balance. Of the $653,002 in insurance balances receivable as of June 30, 2011, $5,698 was past due over 90 days, which represented 0.9% of the total balance. Of the $529,927 in insurance balances receivable as of December 31, 2010, $2,658 was past due over 90 days, which represented 0.5% of the total balance.

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Investments (Schedule of Realized Gains and Losses) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Investments
Gross realized gains on sale of securities	$ 34,611	$ 78,572	$ 78,168	$ 130,239
Gross realized losses on sale of securities	(3,330)	(6,724)	(25,262)	(13,130)
Treasury yield hedge		(3,958)		(3,958)
Futures not designated as hedges	(15,755)		(20,410)
Foreign exchange forwards not designated as hedges	(560)		(560)
Mark-to-market changes: debt securities trading	31,872	32,746	45,336	60,477
Mark-to-market changes: foreign exchange forwards and futures not designated as hedges	6,275		5,434
Mark-to-market changes: hedge funds and equity securities	5,765	(5,703)	26,548	(1,208)
Net realized investment gains	58,878	94,933	109,254	172,420
Proceeds from sale of available for sale securities	202,671	1,306,625	546,191	1,846,074
Proceeds from sale of trading securities	$ 1,432,148	$ 1,215,553	$ 3,418,548	$ 5,297,353

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

17. SUBSEQUENT EVENTS

     Allied World Switzerland entered into a definitive agreement and plan of merger (the "Merger Agreement") on June 12, 2011 with GO Sub, LLC, a newly formed Delaware limited liability company and a wholly-owned subsidiary of Allied World Switzerland ("Merger Sub"), and Transatlantic Holdings, Inc. ("Transatlantic"), a Delaware corporation. The Merger Agreement provides for the merger of Merger Sub with and into Transatlantic, with Transatlantic continuing as the surviving corporation and a wholly-owned subsidiary of Allied World Switzerland. Transatlantic offers reinsurance capacity for a full range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets on both a treaty and facultative basis. Upon completion of the merger, Allied World Switzerland will be the parent company of Transatlantic and Allied World Switzerland's name will be changed to "TransAllied Group Holdings, AG."

     Pursuant to the terms of the Merger Agreement, stockholders of Transatlantic will be entitled to receive 0.88 shares of Allied World Switzerland for each share of Transatlantic together with cash in lieu of any fractional shares, as applicable. The transaction is expected to be completed during the fourth quarter of 2011 subject to the satisfaction of customary closing conditions, including regulatory approvals. The transaction will be accounted for using the acquisition method of accounting with Transatlantic being considered the acquirer for accounting purposes. Accordingly, the assets, liabilities and commitments of Allied World Switzerland will be recorded at their fair values on the acquisition date.

     On May 5, 2011, the shareholders approved the Company's proposal to pay dividends in the form of a distribution by way of par value reduction. The aggregate reduction amount will be paid to shareholders in quarterly installments of $0.375 per share. The Company made the first such quarterly dividend payment on August 5, 2011 to shareholders of record on July 27, 2011. The amount of the par value reduction was CHF 0.30, based on the exchange rate as of July 18, 2011.

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Condensed Consolidated Guarantor Financial Statements (Schedule of Condensed Consolidating Balance Sheet) (Details) (USD $) In Thousands	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2009
Investments	$ 7,502,765		$ 7,183,554
Cash and cash equivalents	740,804		756,995	442,689		292,188
Insurance balances receivable	653,002		529,927
Prepaid reinsurance	223,269		187,287
Reinsurance recoverable	1,013,951	975,523	927,588	932,435	920,480	919,991
Net deferred acquisition costs	112,083		96,803
Goodwill	268,376		268,376
Intangible assets	55,342		56,876
Balances receivable on sale of investments	106,486		188,408
Investments in subsidiaries
Due (to) from subsidiaries
Other assets	181,021		231,817
Total assets	10,857,099		10,427,631
Reserve for losses and loss expenses	5,251,304	5,100,643	4,879,188	4,920,435	4,853,359	4,761,772
Unearned premiums	1,184,676		962,203
Reinsurance balances payable	132,661		99,732
Balances due on purchases of investments	358,837		506,978
Senior notes	797,823		797,700
Accounts payable and accrued liabilities	87,381		106,010
Total liabilities	7,812,682		7,351,811
Total shareholders' equity	3,044,417		3,075,820
Total liabilities and shareholders' equity	10,857,099		10,427,631
Allied World Switzerland (Parent Guarantor) [Member]
Investments
Cash and cash equivalents	70,587		138,488
Insurance balances receivable
Prepaid reinsurance
Reinsurance recoverable
Net deferred acquisition costs
Goodwill
Intangible assets
Balances receivable on sale of investments
Investments in subsidiaries	2,978,767		2,944,975
Due (to) from subsidiaries	(1,771)		(7,143)
Other assets	216
Total assets	3,047,799		3,076,320
Reserve for losses and loss expenses
Unearned premiums
Reinsurance balances payable
Balances due on purchases of investments
Senior notes
Accounts payable and accrued liabilities	3,382		500
Total liabilities	3,382		500
Total shareholders' equity	3,044,417		3,075,820
Total liabilities and shareholders' equity	3,047,799		3,076,320
Allied World Bermuda (Subsidiary Issuer) [Member]
Investments
Cash and cash equivalents	38,402		125,663	43,479		53,849
Insurance balances receivable
Prepaid reinsurance
Reinsurance recoverable
Net deferred acquisition costs
Goodwill
Intangible assets
Balances receivable on sale of investments
Investments in subsidiaries	1,990,580		1,981,158
Due (to) from subsidiaries	(7,421)		(9,419)
Other assets	61,229		8,801
Total assets	2,082,790		2,106,203
Reserve for losses and loss expenses
Unearned premiums
Reinsurance balances payable
Balances due on purchases of investments
Senior notes	797,823		797,700
Accounts payable and accrued liabilities	18,074		18,111
Total liabilities	815,897		815,811
Total shareholders' equity	1,266,893		1,290,392
Total liabilities and shareholders' equity	2,082,790		2,106,203
Other Allied World Subsidiaries [Member]
Investments	7,502,765		7,183,554
Cash and cash equivalents	631,815		492,844	399,210		238,339
Insurance balances receivable	653,002		529,927
Prepaid reinsurance	223,269		187,287
Reinsurance recoverable	1,013,951		927,588
Net deferred acquisition costs	112,083		96,803
Goodwill	268,376		268,376
Intangible assets	55,342		56,876
Balances receivable on sale of investments	106,486		188,408
Investments in subsidiaries
Due (to) from subsidiaries	9,192		16,562
Other assets	173,196		223,016
Total assets	10,749,477		10,171,241
Reserve for losses and loss expenses	5,251,304		4,879,188
Unearned premiums	1,184,676		962,203
Reinsurance balances payable	132,661		99,732
Balances due on purchases of investments	358,837		506,978
Senior notes
Accounts payable and accrued liabilities	65,925		87,399
Total liabilities	6,993,403		6,535,500
Total shareholders' equity	3,756,074		3,635,741
Total liabilities and shareholders' equity	10,749,477		10,171,241
Consolidating Adjustments [Member]
Investments
Cash and cash equivalents
Insurance balances receivable
Prepaid reinsurance
Reinsurance recoverable
Net deferred acquisition costs
Goodwill
Intangible assets
Balances receivable on sale of investments
Investments in subsidiaries	(4,969,347)		(4,926,133)
Due (to) from subsidiaries
Other assets	(53,620)
Total assets	(5,022,967)		(4,926,133)
Reserve for losses and loss expenses
Unearned premiums
Reinsurance balances payable
Balances due on purchases of investments
Senior notes
Accounts payable and accrued liabilities
Total liabilities
Total shareholders' equity	(5,022,967)		(4,926,133)
Total liabilities and shareholders' equity	$ (5,022,967)		$ (4,926,133)

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Earnings Per Share (Comparison of Basic and Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Earnings Per Share
Basic earnings per share	$ 2.45	$ 3.66	$ 2.69	$ 6.34
Net income	$ 93,800	$ 183,959	$ 102,420	$ 317,699
Weighted average common shares outstanding	38,346,489	50,222,974	38,061,724	50,123,945
Warrants and options	333,837	1,486,465	503,529	1,534,861
Restricted stock units	507,969	456,946	503,954	469,301
LTIP awards	612,458	808,025	804,211	958,601
Weighted average common shares and common share equivalents outstanding - diluted	39,800,753	52,974,410	39,873,418	53,086,708
Diluted earnings per share	$ 2.36	$ 3.47	$ 2.57	$ 5.98

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income	$ 102,420	$ 317,699
Adjustments to reconcile net income to cash provided by operating activities:
Net realized gains on sales of investments	(52,906)	(113,151)
Mark to market adjustments	(77,318)	(59,269)
Net impairment charges recognized in earnings		168
Stock based compensation	12,112	17,454
Insurance balances receivable	(123,075)	(156,709)
Prepaid reinsurance	(35,982)	(15,497)
Reinsurance recoverable	(86,363)	(12,444)
Accrued investment income	938	6,941
Net deferred acquisition costs	(15,280)	(15,465)
Net deferred tax assets	2,339	8,415
Other assets	15,686	22,318
Reserve for losses and loss expenses	372,116	158,663
Unearned premiums	222,473	141,337
Reinsurance balances payable	32,929	34,953
Accounts payable and accrued liabilities	(18,629)	(23,806)
Other items, net	10,386	(6,005)
Net cash provided by operating activities	361,846	305,602
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of fixed maturity investments - available for sale	(352)	(113,118)
Purchases of fixed maturity investments	352	113,118
Purchases of fixed maturity investments - trading	(3,949,447)	(6,927,637)
Purchases of equity securities	(245,340)	(75,473)
Purchases of other invested assets	(240,410)	(127,538)
Sales of fixed maturity investments - available for sale	560,794	1,827,800
Sales of fixed maturity investments - trading	3,503,758	5,344,007
Sales of equity securities	36,295	2,019
Sales of other invested assets	36,067	1,136
Purchases of fixed assets	(2,316)	(5,213)
Change in restricted cash	29,520	(13,643)
Net cash used in investing activities	(271,431)	(87,660)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid		(20,109)
Proceeds from the exercise of stock options	4,824	3,576
Share repurchases	(60,000)	(49,089)
Repurchase of founder warrants	(53,620)
Net cash used in financing activities	(108,796)	(65,622)
Effect of exchange rate changes on foreign currency cash	2,190	(1,819)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(16,191)	150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	756,995	292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	740,804	442,689
Supplemental disclosure of cash flow information:
Cash paid for income taxes	433	4,386
Cash paid for interest expense	$ 27,000	$ 18,750

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2011

Goodwill and Intangible Assets

Goodwill and Intangible Assets

9. GOODWILL AND INTANGIBLE ASSETS

     The following table shows an analysis of goodwill and intangible assets:

				Intangible
				assets with		Intangible
				indefinite		assets with
	Goodwill			lives		finite lives			Total
Net balance at December 31, 2009	$	268,376		$	23,920	$	36,439		$	328,735
Additions		—			—		—			—
Amortization		—			—		(3,483	)		(3,483	)
Net balance at December 31, 2010		268,376			23,920		32,956			325,252
Additions		—			—		—			—
Amortization		—			—		(1,533	)		(1,533	)
Net balance at June 30, 2011		268,376			23,920		31,423			323,719
Gross balance		268,532			23,920		48,200			340,652
Accumulated amortization		—			—		(9,911	)		(9,911	)
Accumulated impairments		(156	)		—		(6,866	)		(7,022	)
Net balance	$	268,376		$	23,920	$	31,423		$	323,719

     The amortization of the intangible assets with definite lives for the remainder of 2011 and for the years ended December 31, 2012, 2013, 2014, 2015 and thereafter will be $1,443, $2,533, $2,533, $2,533, $2,533 and $19,846, respectively. The intangible assets will be amortized over a weighted average useful life of 12.3 years.

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Debt and Financing Arrangements (Details) In Thousands, unless otherwise specified	6 Months Ended																	6 Months Ended
	Jun. 30, 2011 USD ($)	Jun. 30, 2011 GBP (£)	Dec. 31, 2010 USD ($)	Dec. 31, 2010 GBP (£)	Jun. 30, 2011 Maximum [Member]	Jun. 30, 2011 Maximum [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Minimum [Member]	Jun. 30, 2011 Minimum [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Lenders One Thru Four [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Lenders Five Thru Eight [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Lenders Nine Thru Twelve [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Thirteenth Lender [Member] Commitments to Extend Credit [Member] USD ($)	Jun. 30, 2011 Secured Debt [Member] USD ($)	Jun. 30, 2011 Unsecured Debt [Member] USD ($)	Jun. 30, 2011 Five Year Senior Credit Facility [Member] USD ($)	Jun. 30, 2011 Senior Notes [Member] 5.50% Senior Notes [Member]	Jun. 30, 2011 Senior Notes [Member] 7.50% Senior Notes [Member]	Jun. 30, 2011 5.50% Senior Notes [Member] USD ($)	Jun. 30, 2011 7.50% Senior Notes [Member] USD ($)	Jun. 30, 2011 Citibank Europe Plc [Member] USD ($)
Senior notes																		$ 300,000	$ 500,000
Senior notes, interest rate																5.50%	7.50%	5.50%	7.50%
Underwriters price as a percentage of principal amount																		98.89%	99.71%
Effective yield to investors																		5.56%	7.54%
Letter of Credit	871,437		848,834			87,500		20,000	87,500	62,500	45,000	20,000	400,000	400,000	800,000					900,000
Credit facility has options to increase the aggregate commitments	200,000
Ratio of indebtedness to net capital					1.0		0.35
Line of credit facility having varying commitments	$ 108,258	£ 67,400	$ 82,838	£ 53,700
Senior notes due																		Nov. 10, 2020	Aug. 01, 2016

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Shareholders' Equity (Narrative) (Details) In Thousands, except Share data, unless otherwise specified	1 Months Ended		6 Months Ended												6 Months Ended	1 Months Ended				1 Months Ended
	May 31, 2010 USD ($)	Feb. 28, 2010 USD ($)	Jun. 30, 2011 USD ($)	Jun. 30, 2010 USD ($)	Apr. 30, 2012 USD ($)	Jan. 31, 2012 USD ($)	Oct. 31, 2011 USD ($)	Aug. 31, 2011 USD ($)	Jul. 31, 2011 CHF	Jun. 30, 2011 CHF	May 31, 2011 USD ($)	Dec. 31, 2010	Jun. 30, 2011 Voting Common Stock [Member]	Jun. 30, 2011 Nonvoting Common Stock [Member]	Jun. 30, 2011 Allied World Bermuda [Member] USD ($)	Aug. 31, 2010 The Chubb Corporation ("Chubb") [Member] USD ($)	Nov. 30, 2010 The Goldman Sachs Group, Inc ("Goldman Sachs") [Member] USD ($)	Aug. 31, 2010 The Goldman Sachs Group, Inc ("Goldman Sachs") [Member] USD ($)	Nov. 05, 2010 The Goldman Sachs Group, Inc ("Goldman Sachs") [Member]	Feb. 28, 2011 American International Group, Inc. ("AIG") [Member] USD ($)
Common shares related to warrants granted															5,500,000	2,000,000	1,500,000			2,000,000
Percent increase in share capital			20.00%
Voting common shares			37,945,043									38,089,226	37,901,183	43,860
Number of voting shares in commercial register			7,690,260
Share capital registered in commercial register										119,404
Number of conditional capital voting shares			7,200,000
Common shares, outstanding			37,945,043									38,089,226	37,901,183	43,860
Common shares exercise price per share															$ 34.20	$ 34.20	$ 34.20			$ 34.20
Repurchase of warrant			53,620													32,819	37,197			53,620
Dividends payable per share					$ 0.375	$ 0.375	$ 0.375	$ 0.375			$ 0.375
Par value reduction based on the CHF exchange rate									0.30
Dividends declared per share	$ 0.20	$ 0.20
Dividends payable	10,017	10,092
Shares repurchased			969,163														3,159,793	5,000,000
Common shares value			$ 60,000	$ 49,089													$ 185,448	$ 250,000
Common share per share			$ 61.91														$ 58.69	$ 50.00
Percentage discount of weighted average trading price of common share																			0.50%

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Segment Information (Schedule of Segment Reporting Information, by Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Gross premiums written	$ 519,598	$ 493,847	$ 1,080,286	$ 998,010
Net premiums written	395,803	369,795	876,674	803,087
Net premiums earned	355,307	338,924	690,183	677,248
Other income		616		913
Net losses and loss expenses	(235,813)	(188,722)	(540,265)	(420,876)
Acquisition costs	(42,971)	(37,938)	(81,053)	(78,722)
General and administrative expenses	(67,201)	(68,089)	(135,157)	(131,552)
Underwriting loss	9,322	44,791	(66,292)	47,011
Net investment income	52,368	65,594	102,576	134,496
Net realized investment gains	58,878	94,933	109,254	172,420
Net impairment charges recognized in earnings				(168)
Amortization and impairment of intangible assets	(766)	(891)	(1,533)	(1,783)
Interest expense	(13,745)	(9,531)	(27,487)	(19,059)
Foreign Currency Transaction Gain Loss Before Tax	(1,184)	(559)	(742)	(1,635)
Income before income taxes	104,873	194,337	115,776	331,282
Loss and loss expense ratio	66.40%	55.70%	78.30%	62.10%
Acquisition cost ratio	12.10%	11.20%	11.70%	11.60%
General and administrative expense ratio	18.90%	20.10%	19.60%	19.40%
Combined ratio	97.40%	87.00%	109.60%	93.10%
U.S.Insurance [Member]
Gross premiums written	226,738	189,663	410,040	351,748
Net premiums written	172,887	135,238	312,789	266,793
Net premiums earned	145,857	125,659	281,338	254,864
Other income		616		913
Net losses and loss expenses	(92,595)	(69,198)	(208,426)	(167,623)
Acquisition costs	(18,876)	(15,854)	(36,978)	(32,814)
General and administrative expenses	(31,253)	(30,683)	(62,052)	(57,797)
Underwriting loss	3,133	10,540	(26,118)	(2,457)
Net impairment charges recognized in earnings
Loss and loss expense ratio	63.50%	55.10%	74.10%	65.80%
Acquisition cost ratio	12.90%	12.60%	13.10%	12.90%
General and administrative expense ratio	21.40%	24.40%	22.10%	22.70%
Combined ratio	97.80%	92.10%	109.30%	101.40%
International Insurance [Member]
Gross premiums written	178,593	167,601	289,918	289,023
Net premiums written	108,985	98,509	183,895	179,590
Net premiums earned	79,956	89,427	156,246	176,470
Other income
Net losses and loss expenses	(72,082)	(64,580)	(143,266)	(122,029)
Acquisition costs	747	66	2,603
General and administrative expenses	(20,653)	(22,657)	(41,381)	(44,502)
Underwriting loss	(12,032)	2,256	(25,798)	9,939
Net impairment charges recognized in earnings
Loss and loss expense ratio	90.20%	72.20%	91.70%	69.10%
Acquisition cost ratio	(0.90%)	(0.10%)	(1.70%)	0.00%
General and administrative expense ratio	25.80%	25.30%	26.50%	25.20%
Combined ratio	115.10%	97.40%	116.50%	94.30%
Reinsurance [Member]
Gross premiums written	114,267	136,583	380,328	357,239
Net premiums written	113,931	136,048	379,990	356,704
Net premiums earned	129,494	123,838	252,599	245,914
Other income
Net losses and loss expenses	(71,136)	(54,944)	(188,573)	(131,224)
Acquisition costs	(24,842)	(22,150)	(46,678)	(45,908)
General and administrative expenses	(15,295)	(14,749)	(31,724)	(29,253)
Underwriting loss	18,221	31,995	(14,376)	39,529
Net impairment charges recognized in earnings
Loss and loss expense ratio	54.90%	44.40%	74.70%	53.40%
Acquisition cost ratio	19.20%	17.90%	18.50%	18.70%
General and administrative expense ratio	11.80%	11.90%	12.60%	11.90%
Combined ratio	85.90%	74.20%	105.80%	84.00%

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Employee Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2011

Employee Benefit Plans

Schedule of Employee Option Plan

	Six Months Ended June 30, 2011
				Weighted Average
	Options			Exercise Price
Outstanding at beginning of period		1,272,739		$	38.77
Granted		494,885			61.51
Exercised		(128,487	)		37.55
Forfeited		(27,819	)		48.54
Expired		(170	)		39.02
Outstanding at end of period		1,611,148		$	45.68

Schedule of Assumptions Used In the Option-Pricing Model

	Options Granted During
	the Six Months Ended
	June 30, 2011
Expected term of option	5.48 years
Weighted average risk-free interest rate		2.33	%
Weighted average expected volatility		31.51	%
Dividend yield		1.00	%
Weighted average fair value on grant date	$	18.27

Schedule of Restricted Stock Units Award Activity

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	RSUs			Value
Outstanding RSUs at beginning of period		851,078		$	39.88
RSUs granted		45,239			61.51
Performance-based RSUs granted		139,210			61.51
RSUs fully vested		(130,252	)		42.59
RSUs forfeited		(12,198	)		37.24
Outstanding RSUs at end of period		893,077		$	43.99

Schedule of Long-Term Incentive Plan Awards

	Six Months Ended June 30, 2011
				Weighted Average
				Grant Date Fair
	LTIP			Value
Outstanding LTIP awards at beginning of period		773,411		$	41.74
Additional LTIP awards granted due to the achievement of 2008 — 2010 performance criteria		212,938			43.27
LTIP forfeited		(13,500	)		42.48
LTIP awards vested		(638,813	)		43.27
Outstanding LTIP awards at end of period		334,036		$	39.76

Schedule of Stock Related Compensation Expense Relating To the Stock Options, RSUs, LTIP and Cash Equivalent Awards

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Stock Options	$	997	$	758	$	2,176	$	1,550
RSUs		3,707		3,327		7,529		7,041
LTIP		1,558		3,842		2,407		8,863
Cash-equivalent stock awards		3,406		3,012		8,575		5,321
Total	$	9,668	$	10,939	$	20,687	$	22,775

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Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share

Earnings Per Share

13. EARNINGS PER SHARE

     The following table sets forth the comparison of basic and diluted earnings per share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Basic earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Basic earnings per share	$	2.45	$	3.66	$	2.69	$	6.34

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Diluted earnings per share
Net income	$	93,800	$	183,959	$	102,420	$	317,699
Weighted average common shares outstanding		38,346,489		50,222,974		38,061,724		50,123,945
Share equivalents:
Warrants and options		333,837		1,486,465		503,529		1,534,861
Restricted stock units		507,969		456,946		503,954		469,301
LTIP awards		612,458		808,025		804,211		958,601
Weighted average common shares and common share equivalents outstanding — diluted		39,800,753		52,974,410		39,873,418		53,086,708
Diluted earnings per share	$	2.36	$	3.47	$	2.57	$	5.98

     For the three months ended June 30, 2011, a weighted average of 634,579 employee stock options and 28,256 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share. For the six months ended June 30, 2011, a weighted average of 568,359 employee stock options and 119,354 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share.

     For the three months ended June 30, 2010, a weighted average of 686,938 employee stock options and 24,833 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share. For the six months ended June 30, 2010, a weighted average of 600,567 employee stock options and 15,988 RSUs were considered anti-dilutive and were therefore excluded from the calculation of the diluted earnings per share.

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Condensed Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
ASSETS
Fixed maturity investments available for sale, at fair value (amortized cost: 2011: $318,711; 2010: $828,544)	$ 345,551	$ 891,849
Fixed maturity investments trading, at fair value	6,201,034	5,769,097
Equity securities trading, at fair value	393,913	174,976
Other invested assets trading, at fair value	562,267	347,632
Total investments	7,502,765	7,183,554
Cash and cash equivalents	740,804	756,995
Restricted cash	66,853	96,373
Insurance balances receivable	653,002	529,927
Prepaid reinsurance	223,269	187,287
Reinsurance recoverable	1,013,951	927,588
Accrued investment income	39,582	40,520
Net deferred acquisition costs	112,083	96,803
Goodwill	268,376	268,376
Intangible assets	55,342	56,876
Balances receivable on sale of investments	106,486	188,408
Net deferred tax assets	19,826	19,740
Other assets	54,760	75,184
Total assets	10,857,099	10,427,631
LIABILITIES:
Reserve for losses and loss expenses	5,251,304	4,879,188
Unearned premiums	1,184,676	962,203
Reinsurance balances payable	132,661	99,732
Balances due on purchases of investments	358,837	506,978
Senior notes	797,823	797,700
Accounts payable and accrued liabilities	87,381	106,010
Total liabilities	7,812,682	7,351,811
SHAREHOLDERS' EQUITY:
Common shares: par value CHF 15.00 per share (2011: 40,003,642; 2010: 40,003,642 shares issued and 2011: 37,945,043; 2010: 38,089,226 shares outstanding)	600,055	600,055
Additional paid-in capital	82,037	170,239
Treasury shares, at cost (2011: 2,058,599; 2010: 1,914,416)	(124,392)	(112,811)
Retained earnings	2,463,622	2,361,202
Accumulated other comprehensive income: net unrealized gains on investments, net of tax	23,095	57,135
Total shareholders' equity	3,044,417	3,075,820
Total liabilities and shareholders' equity	$ 10,857,099	$ 10,427,631

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2011

Segment Information

Schedule of Segment Reporting Information, by Segment

				International
Three months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	226,738		$	178,593		$	114,267		$	519,598
Net premiums written		172,887			108,985			113,931			395,803
Net premiums earned		145,857			79,956			129,494			355,307
Other income		—			—			—			—
Net losses and loss expenses		(92,595	)		(72,082	)		(71,136	)		(235,813	)
Acquisition costs		(18,876	)		747			(24,842	)		(42,971	)
General and administrative expenses		(31,253	)		(20,653	)		(15,295	)		(67,201	)
Underwriting income (loss)		3,133			(12,032	)		18,221			9,322
Net investment income											52,368
Net realized investment gains											58,878
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(766	)
Interest expense											(13,745	)
Foreign exchange loss											(1,184	)
Income before income taxes										$	104,873
Loss and loss expense ratio		63.5	%		90.2	%		54.9	%		66.4	%
Acquisition cost ratio		12.9	%		(0.9	%)		19.2	%		12.1	%
General and administrative expense ratio		21.4	%		25.8	%		11.8	%		18.9	%
Combined ratio		97.8	%		115.1	%		85.9	%		97.4	%

				International
Three months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	189,663		$	167,601		$	136,583		$	493,847
Net premiums written		135,238			98,509			136,048			369,795
Net premiums earned		125,659			89,427			123,838			338,924
Other income		616			—			—			616
Net losses and loss expenses		(69,198	)		(64,580	)		(54,944	)		(188,722	)
Acquisition costs		(15,854	)		66			(22,150	)		(37,938	)
General and administrative expenses		(30,683	)		(22,657	)		(14,749	)		(68,089	)
Underwriting income		10,540			2,256			31,995			44,791
Net investment income											65,594
Net realized investment gains											94,933
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(891	)
Interest expense											(9,531	)
Foreign exchange loss											(559	)
Income before income taxes										$	194,337
Loss and loss expense ratio		55.1	%		72.2	%		44.4	%		55.7	%
Acquisition cost ratio		12.6	%		(0.1	%)		17.9	%		11.2	%
General and administrative expense ratio		24.4	%		25.3	%		11.9	%		20.1	%
Combined ratio		92.1	%		97.4	%		74.2	%		87.0	%

				International
Six months ended June 30, 2011	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	410,040		$	289,918		$	380,328		$	1,080,286
Net premiums written		312,789			183,895			379,990			876,674
Net premiums earned		281,338			156,246			252,599			690,183
Other income		—			—			—			—
Net losses and loss expenses		(208,426	)		(143,266	)		(188,573	)		(540,265	)
Acquisition costs		(36,978	)		2,603			(46,678	)		(81,053	)
General and administrative expenses		(62,052	)		(41,381	)		(31,724	)		(135,157	)
Underwriting loss		(26,118	)		(25,798	)		(14,376	)		(66,292	)
Net investment income											102,576
Net realized investment gains											109,254
Net impairment charges recognized in earnings											—
Amortization and impairment of intangible assets											(1,533	)
Interest expense											(27,487	)
Foreign exchange loss											(742	)
Income before income taxes										$	115,776
Loss and loss expense ratio		74.1	%		91.7	%		74.7	%		78.3	%
Acquisition cost ratio		13.1	%		(1.7	%)		18.5	%		11.7	%
General and administrative expense ratio		22.1	%		26.5	%		12.6	%		19.6	%
Combined ratio		109.3	%		116.5	%		105.8	%		109.6	%

				International
Six months ended June 30, 2010	U.S. Insurance			Insurance			Reinsurance			Total
Gross premiums written	$	351,748		$	289,023		$	357,239		$	998,010
Net premiums written		266,793			179,590			356,704			803,087
Net premiums earned		254,864			176,470			245,914			677,248
Other income		913			—			—			913
Net losses and loss expenses		(167,623	)		(122,029	)		(131,224	)		(420,876	)
Acquisition costs		(32,814	)		—			(45,908	)		(78,722	)
General and administrative expenses		(57,797	)		(44,502	)		(29,253	)		(131,552	)
Underwriting (loss) income		(2,457	)		9,939			39,529			47,011
Net investment income											134,496
Net realized investment gains											172,420
Net impairment charges recognized in earnings											(168	)
Amortization and impairment of intangible assets											(1,783	)
Interest expense											(19,059	)
Foreign exchange loss											(1,635	)
Income before income taxes										$	331,282
Loss and loss expense ratio		65.8	%		69.1	%		53.4	%		62.1	%
Acquisition cost ratio		12.9	%		0.0	%		18.7	%		11.6	%
General and administrative expense ratio		22.7	%		25.2	%		11.9	%		19.4	%
Combined ratio		101.4	%		94.3	%		84.0	%		93.1	%

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
United States	$	215,343	$	192,980	$	478,574	$	438,260
Bermuda		125,452		131,119		271,783		258,901
Europe		40,663		38,550		92,539		90,710
Singapore		10,331		5,912		25,567		9,603
Hong Kong		4,014		1,234		8,211		5,613
Total net premiums written	$	395,803	$	369,795	$	876,674	$	803,087

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Subsequent Events (Details)	1 Months Ended
	Jun. 30, 2011	Apr. 30, 2012 USD ($)	Jan. 31, 2012 USD ($)	Oct. 31, 2011 USD ($)	Aug. 31, 2011 USD ($)	Jul. 31, 2011 CHF	May 31, 2011 USD ($)
Subsequent Events
Transatlantic shares received of Allied World Switzerland	0.88
Dividends payable per share		$ 0.375	$ 0.375	$ 0.375	$ 0.375		$ 0.375
Par value reduction based on the CHF exchange rate						0.30

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Derivative Instruments (Total Unrealized and Realized Gains (Losses) recorded in the Consolidated Income Statement) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ (15,755)		$ (20,410)
Investment Portfolio [Member] | Net Realized Investment Gains [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Foreign Exchange Contracts [Member]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	723		723
Investment Portfolio [Member] | Net Realized Investment Losses [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Interest Rate Futures [Member]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	(10,763)		(16,259)
Investment Portfolio [Member] | Derivatives Not Designated as Hedging Instruments [Member]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	(10,040)		(15,536)
Operating Activities [Member] | Foreign Exchange Gains (Losses) [Member] | Derivatives Not Designated as Hedging Instruments [Member] | Foreign Exchange Contracts [Member]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	1,345	(1,361)	2,601	(1,412)
Derivatives Not Designated as Hedging Instruments [Member]
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net	$ (8,695)	$ (1,361)	$ (12,935)	$ (1,412)

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Goodwill and Intangible Assets (Schedule of Intangible Assets and Goodwill) (Details) (USD $) In Thousands	6 Months Ended	12 Months Ended							6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2011 Goodwill [Member]	Dec. 31, 2010 Goodwill [Member]	Dec. 31, 2009 Goodwill [Member]	Jun. 30, 2011 Intangible Asstes With Indefinite Lives [Member]	Dec. 31, 2010 Intangible Asstes With Indefinite Lives [Member]	Dec. 31, 2009 Intangible Asstes With Indefinite Lives [Member]	Jun. 30, 2011 Intangible Asstes With Finite Lives [Member]	Dec. 31, 2010 Intangible Asstes With Finite Lives [Member]
Goodwill and Intangible Assets, Net	$ 325,252	$ 328,735	$ 268,376	$ 268,376	$ 268,376	$ 23,920	$ 23,920	$ 23,920	$ 32,956	$ 36,439
Amortization	(1,533)	(3,483)							(1,533)	(3,483)
Goodwill and Intangible Assets, Net	323,719	325,252	268,376	268,376	268,376	23,920	23,920	23,920	31,423	32,956
Goodwill and Intangible Assets, Gross	340,652		268,532			23,920			48,200
Accumulated amortization	(9,911)								(9,911)
Accumulated impairments	$ (7,022)		$ (156)						$ (6,866)

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Earnings Per Share (Narrative) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Stock Options [Member]
Antidilutive securities excluded from computation of earnings per share	634,579	686,938	568,359	600,567
RSUs [Member]
Antidilutive securities excluded from computation of earnings per share	28,256	24,833	119,354	15,988

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Investments (Schedule of Company's Trust Accounts on Deposits, Outstanding and Remaining Letter of Credit Facilities, Collateral Committed to Support the Letter of Credit Facilities) (Details) (USD $) In Thousands	Jun. 30, 2011		Dec. 31, 2010
Total trust accounts on deposit	$ 1,608,143		$ 1,657,441
Total letter of credit facilities	1,700,000		1,700,000
Total letter of credit facilities outstanding	871,437		848,834
Total letter of credit facilities remaining	828,563		851,166
Collateral committed to support the letter of credit facilities	1,054,206		1,121,345
Citibank Europe Plc [Member]
Total letter of credit facilities	900,000		900,000
Total letter of credit facilities outstanding	712,454		689,851
Total letter of credit facilities remaining	187,546		210,149
Credit Facility [Member]
Total letter of credit facilities	800,000		800,000
Total letter of credit facilities outstanding	158,983		158,983
Total letter of credit facilities remaining	$ 641,017	[1]	$ 641,017	[1]

[1] Net of any borrowing or repayments under the Unsecured Facility (as defined in Note 8). See Note 8 for further details on the Unsecured Facility.

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Investments (Summarizes the Market Value of those Investments in an Unrealized Loss Position for Periods Less Than and Greater Than 12 Months) (Details) (USD $) In Thousands	Dec. 31, 2010
Gross Fair Value	$ 50,620
Unrealized Loss	(2,594)
Less Than 12 Months [Member]
Gross Fair Value	39,622
Unrealized Loss	(1,169)
Non-U.S. Government and Government Agencies [Member] | Less Than 12 Months [Member]
Gross Fair Value	34,204
Unrealized Loss	(1,116)
States, Municipalities and Political Subdivisions [Member] | Less Than 12 Months [Member]
Gross Fair Value	472
Unrealized Loss	(13)
Corporate Debt, Financial Institutions [Member] | Less Than 12 Months [Member]
Gross Fair Value	2,796
Unrealized Loss	(38)
Corporate Debt, Industrials [Member] | Less Than 12 Months [Member]
Gross Fair Value	2,150
Unrealized Loss	(2)
More Than 12 Months [Member]
Gross Fair Value	10,998
Unrealized Loss	(1,425)
Non-U.S. Government and Government Agencies [Member] | More Than 12 Months [Member]
Gross Fair Value	10,998
Unrealized Loss	$ (1,425)

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Reserve for Losses and Loss Expenses (Schedule of Reconciliation of Unpaid Losses and Loss Expenses) (Details) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Reserve for Losses and Loss Expenses
Gross liability at beginning of period	$ 5,100,643	$ 4,853,359	$ 4,879,188	$ 4,761,772
Reinsurance recoverable at beginning of period	(975,523)	(920,480)	(927,588)	(919,991)
Net liability at beginning of period	4,125,120	3,932,879	3,951,600	3,841,781
Commutation of variable-rated reinsurance contracts	11,529		11,529	8,864
Current year	279,513	252,816	628,315	550,062
Prior years	(55,229)	(64,094)	(99,579)	(138,050)
Total incurred	235,813	188,722	540,265	420,876
Current year	19,579	26,704	21,279	33,410
Prior years	109,238	102,690	243,596	231,990
Total paid	128,817	129,394	264,875	265,400
Foreign exchange revaluation	5,237	(4,207)	10,363	(9,257)
Net liability at end of period	4,237,353	3,988,000	4,237,353	3,988,000
Reinsurance recoverable at end of period	1,013,951	932,435	1,013,951	932,435
Gross liability at end of period	5,251,304	4,920,435	5,251,304	4,920,435
Net Gains Incurred Related To Commutation Of Variable Rated Reinsurance Contracts	$ 865		$ 865

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Condensed Consolidated Guarantor Financial Statements (Tables)

6 Months Ended

Jun. 30, 2011

Condensed Consolidated Guarantor Financial Statements

Schedule of Condensed Consolidating Balance Sheet

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of June 30, 2011	Guarantor)			Issuer)			Subsidiaries		Adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,502,765	$	—		$	7,502,765
Cash and cash equivalents		70,587			38,402			631,815		—			740,804
Insurance balances receivable		—			—			653,002		—			653,002
Prepaid reinsurance		—			—			223,269		—			223,269
Reinsurance recoverable		—			—			1,013,951		—			1,013,951
Net deferred acquisition costs		—			—			112,083		—			112,083
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			55,342		—			55,342
Balances receivable on sale of investments		—			—			106,486		—			106,486
Investments in subsidiaries		2,978,767			1,990,580			—		(4,969,347	)		—
Due (to) from subsidiaries		(1,771	)		(7,421	)		9,192		—			—
Other assets		216			61,229			173,196		(53,620	)		181,021
Total assets	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	5,251,304	$	—		$	5,251,304
Unearned premiums		—			—			1,184,676		—			1,184,676
Reinsurance balances payable		—			—			132,661		—			132,661
Balances due on purchases of investments		—			—			358,837		—			358,837
Senior notes		—			797,823			—		—			797,823
Accounts payable and accrued liabilities		3,382			18,074			65,925		—			87,381
Total liabilities		3,382			815,897			6,993,403		—			7,812,682
Total shareholders' equity		3,044,417			1,266,893			3,756,074		(5,022,967	)		3,044,417
Total liabilities and shareholders' equity	$	3,047,799		$	2,082,790		$	10,749,477	$	(5,022,967	)	$	10,857,099

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied					Allied World
	(Parent			(Subsidiary			World		Consolidating			Switzerland
As of December 31, 2010	Guarantor)			Issuer)			Subsidiaries		adjustments			Consolidated
ASSETS:
Investments	$	—		$	—		$	7,183,554	$	—		$	7,183,554
Cash and cash equivalents		138,488			125,663			492,844		—			756,995
Insurance balances receivable		—			—			529,927		—			529,927
Prepaid reinsurance		—			—			187,287		—			187,287
Reinsurance recoverable		—			—			927,588		—			927,588
Net deferred acquisition costs		—			—			96,803		—			96,803
Goodwill		—			—			268,376		—			268,376
Intangible assets		—			—			56,876		—			56,876
Balances receivable on sale of investments		—			—			188,408		—			188,408
Investments in subsidiaries		2,944,975			1,981,158			—		(4,926,133	)		—
Due (to) from subsidiaries		(7,143	)		(9,419	)		16,562		—			—
Other assets		—			8,801			223,016		—			231,817
Total assets	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631
LIABILITIES:
Reserve for losses and loss expenses	$	—		$	—		$	4,879,188	$	—		$	4,879,188
Unearned premiums		—			—			962,203		—			962,203
Reinsurance balances payable		—			—			99,732		—			99,732
Balances due on purchases of investments		—			—			506,978		—			506,978
Senior notes		—			797,700			—		—			797,700
Accounts payable and accrued liabilities		500			18,111			87,399		—			106,010
Total liabilities		500			815,811			6,535,500		—			7,351,811
Total shareholders' equity		3,075,820			1,290,392			3,635,741		(4,926,133	)		3,075,820
Total liabilities and shareholders' equity	$	3,076,320		$	2,106,203		$	10,171,241	$	(4,926,133	)	$	10,427,631

Schedule of Condensed Consolidating Income Statement

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	519,598		$	—		$	519,598
Premiums ceded		—			—			(123,795	)		—			(123,795	)
Net premiums written		—			—			395,803			—			395,803
Change in unearned premiums		—			—			(40,496	)		—			(40,496	)
Net premiums earned		—			—			355,307			—			355,307
Net investment income		15			8			52,345			—			52,368
Net realized investment gains		—			—			58,878			—			58,878
		15			8			466,530			—			466,553
EXPENSES:
Net losses and loss expenses		—			—			235,813			—			235,813
Acquisition costs		—			—			42,971			—			42,971
General and administrative expenses		4,746			1,483			60,972			—			67,201
Amortization and impairment of intangible assets		—			—			766			—			766
Interest expense		—			13,745			—			—			13,745
Foreign exchange loss (gain)		3			(17	)		1,198			—			1,184
Income tax expense		—			—			11,073			—			11,073
		4,749			15,211			352,793			—			372,753
Income (loss) before equity in earnings of consolidated
subsidiaries		(4,734	)		(15,203	)		113,737			—			93,800
Equity in earnings of consolidated subsidiaries		98,534			—			—			(98,534	)		—
NET INCOME (LOSS)	$	93,800		$	(15,203	)	$	113,737		$	(98,534	)	$	93,800

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the three months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	493,847		$	—		$	493,847
Premiums ceded		—		—			(124,052	)		—			(124,052	)
Net premiums written		—		—			369,795			—			369,795
Change in unearned premiums		—		—			(30,871	)		—			(30,871	)
Net premiums earned		—		—			338,924			—			338,924
Net investment income		—		20			65,574			—			65,594
Net realized investment gains (losses)		—		(3,958	)		98,891			—			94,933
Net impairment charges recognized in earnings		—		—			—			—			—
Other income		—		—			616			—			616
		—		(3,938	)		504,005			—			500,067
EXPENSES:
Net losses and loss expenses		—		—			188,722			—			188,722
Acquisition costs		—		—			37,938			—			37,938
General and administrative expenses		—		3,168			64,921			—			68,089
Amortization and impairment of intangible assets		—		—			891			—			891
Interest expense		—		9,531			—			—			9,531
Foreign exchange loss		—		—			559			—			559
Income tax expense		—		—			10,378			—			10,378
		—		12,699			303,409			—			316,108
Income (loss) before equity in earnings of consolidated subsidiaries		—		(16,637	)		200,596			—			183,959
Equity in earnings of consolidated subsidiaries		—		200,596			—			(200,596	)		—
NET INCOME (LOSS)	$	—	$	183,959		$	200,596		$	(200,596	)	$	183,959

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—		$	—		$	1,080,286		$	—		$	1,080,286
Premiums ceded		—			—			(203,612	)		—			(203,612	)
Net premiums written		—			—			876,674			—			876,674
Change in unearned premiums		—			—			(186,491	)		—			(186,491	)
Net premiums earned		—			—			690,183			—			690,183
Net investment income		45			22			102,509			—			102,576
Net realized investment gains		—			—			109,254			—			109,254
Net impairment charges recognized in earnings		—			—			—			—			—
Other income		—			—			—			—			—
		45			22			901,946			—			902,013
EXPENSES:
Net losses and loss expenses		—			—			540,265			—			540,265
Acquisition costs		—			—			81,053			—			81,053
General and administrative expenses		5,810			4,229			125,118			—			135,157
Amortization and impairment of intangible assets		—			—			1,533			—			1,533
Interest expense		—			27,487			—			—			27,487
Foreign exchange loss (gain)		(1	)		224			519			—			742
Income tax expense		—			—			13,356			—			13,356
		5,809			31,940			761,844			—			799,593
Income (loss) before equity in earnings of consolidated subsidiaries		(5,764	)		(31,918	)		140,102			—			102,420
Equity in earnings of consolidated subsidiaries		108,184			—			—			(108,184	)		—
NET INCOME (LOSS)	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
REVENUES:
Gross premiums written	$	—	$	—		$	998,010		$	—		$	998,010
Premiums ceded		—		—			(194,923	)		—			(194,923	)
Net premiums written		—		—			803,087			—			803,087
Change in unearned premiums		—		—			(125,839	)		—			(125,839	)
Net premiums earned		—		—			677,248			—			677,248
Net investment income		—		21			134,475			—			134,496
Net realized investment gains		—		(3,958	)		176,378			—			172,420
Net impairment charges recognized in earnings		—		—			(168	)		—			(168	)
Other income		—		—			913			—			913
		—		(3,937	)		988,846			—			984,909
EXPENSES:
Net losses and loss expenses		—		—			420,876			—			420,876
Acquisition costs		—		—			78,722			—			78,722
General and administrative expenses		—		6,651			124,901			—			131,552
Amortization and impairment of intangible assets		—		—			1,783			—			1,783
Interest expense		—		19,059			—			—			19,059
Foreign exchange loss		—		—			1,635			—			1,635
Income tax expense		—		—			13,583			—			13,583
		—		25,710			641,500			—			667,210
Income (loss) before equity in earnings of consolidated subsidiaries		—		(29,647	)		347,346			—			317,699
Equity in earnings of consolidated subsidiaries		—		347,346			—			(347,346	)		—
NET INCOME (LOSS)	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699

Schedule of Condensed Consolidating Cash Flows

	Allied World			Allied World
	Switzerland			Bermuda			Other Allied						Allied World
	(Parent			(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2011	Guarantor)			Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	102,420		$	(31,918	)	$	140,102		$	(108,184	)	$	102,420
Adjustments to reconcile net income to cash Provided by operating activities:
Equity in earnings of consolidated subsidiaries		(108,184	)		—			—			108,184			—
Dividends received from subsidiaries		—			—			—			—			—
Stock compensation expense		457			—			11,655			—			12,112
Amortization of discount on senior notes		—			122			—			—			122
Other assets		(216	)		(928	)		(358,363	)		—			(359,507	)
Accounts payable and accrued liabilities		(2,490	)		(36	)		611,415			—			608,889
Interest payable		—			—			—			—			—
Balances due to subsidiaries		—			—			—			—			—
Net cash provided by (used in) operating activities		(8,013	)		(32,760	)		404,809			—			364,036
CASH FLOWS USED IN INVESTING ACTIVITIES:
Net cash paid for acquisition		—			—			—			—			—
Purchase of fixed maturity investments — available for sale		—			—			(352	)		—			(352	)
Purchase of fixed maturity investments — trading		—			—			(3,949,447	)		—			(3,949,447	)
Purchases of equity securities and other invested assets		—			—			(485,750	)		—			(485,750	)
Sales of fixed maturity investments — available for sale		—			—			560,794			—			560,794
Sales of fixed maturity investments — trading		—			—			3,503,758			—			3,503,758
Sale of equity securities and other invested assets		—			—			72,362			—			72,362
Other		(4,496	)		—			31,700			—			27,204
Net cash used in investing activities		(4,496	)		—			(266,935	)		—			(271,431	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—			—			—			—			—
Proceeds from the exercise of stock options		4,824			—			—			—			4,824
Share repurchase		(60,000	)		—			—			—			(60,000	)
Repurchase of founder warrants		—			(53,620	)		—			—			(53,620	)
Stock compensation funding due from subsidiaries		—			—			—			—			—
Capital contribution		—			—			—			—			—
Other		(216	)		(881	)		1,097			—			—
Net cash (used in) provided by financing activities		(55,392	)		(54,501	)		1,097			—			(108,796	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(67,901	)		(87,261	)		138,971			—			(16,191	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		138,488			125,663			492,844			—			756,995
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	70,587		$	38,402		$	631,815		$	—		$	740,804

	Allied World		Allied World
	Switzerland		Bermuda			Other Allied						Allied World
	(Parent		(Subsidiary			World			Consolidating			Switzerland
For the six months ended June 30, 2010	Guarantor)		Issuer)			Subsidiaries			Adjustments			Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income	$	—	$	317,699		$	347,346		$	(347,346	)	$	317,699
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of consolidated subsidiaries		—		(347,346	)		—			347,346			—
Dividends received from subsidiaries		—		80,000			—			(80,000	)		—
Stock compensation expense		—		295			17,159			—			17,454
Amortization of discount on senior notes		—		65			—			—			65
Other assets		—		847			(343,427	)		—			(342,580	)
Accounts payable and accrued liabilities		—		5,789			305,356			—			311,145
Interest payable		—		—			—			—			—
Net cash provided by (used in) operating activities		—		57,349			326,434			(80,000	)		303,783
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed maturity investments — available for sale		—		—			(113,118	)		—			(113,118	)
Purchase of fixed maturity investments — trading		—		—			(6,927,637	)		—			(6,927,637	)
Purchases of equity securities and other invested assets		—		—			(203,011	)		—			(203,011	)
Sales of fixed maturity investments — available for sale		—		—			1,827,800			—			1,827,800
Sales of fixed maturity investments — trading		—		—			5,344,007			—			5,344,007
Sale of equity securities and other invested assets		—		—			3,155			—			3,155
Other		—		(2,097	)		(16,759	)		—			(18,856	)
Net cash used in investing activities		—		(2,097	)		(85,563	)		—			(87,660	)
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Dividends paid		—		(20,109	)		(80,000	)		80,000			(20,109	)
Proceeds from the exercise of stock options		—		3,576			—			—			3,576
Stock repurchase		—		(49,089	)		—			—			(49,089	)
Net cash (used in) provided by financing activities		—		(65,622	)		(80,000	)		80,000			(65,622	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—		(10,370	)		160,871			—			150,501
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		—		53,849			238,339			—			292,188
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—	$	43,479		$	399,210		$	—		$	442,689