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.