CONDENSED CONSOLIDATED GUARANTOR FINANCIAL STATEMENTS

The following tables present unaudited condensed consolidating financial information as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013 for Allied World Switzerland (the “Parent Guarantor”) and Allied World Bermuda (the “Subsidiary Issuer”). The Subsidiary Issuer is a direct, 100%-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 senior notes issued by the Subsidiary Issuer.

Unaudited Condensed Consolidating Balance Sheet:



As of June 30, 2014	Allied World Switzerland (Parent Guarantor)		Allied World Bermuda (Subsidiary Issuer)		Other Allied World Subsidiaries		Consolidating Adjustments			Allied World Switzerland Consolidated
ASSETS:
Investments	$	—	$	—	$	8,027,840	$	—		$	8,027,840
Cash and cash equivalents	40,976		1,286		592,876		—			635,138
Insurance balances receivable	—		—		976,441		—			976,441
Funds held	—		—		414,445		—			414,445
Reinsurance recoverable	—		—		1,301,742		—			1,301,742
Net deferred acquisition costs	—		—		163,259		—			163,259
Goodwill and intangible assets	—		—		325,325		—			325,325
Balances receivable on sale of investments	—		—		164,713		—			164,713
Investments in subsidiaries	3,600,731		4,201,054		—		(7,801,785		)	—
Due from subsidiaries	75,813		18,859		15,536		(110,208		)	—
Other assets	1,090		4,026		655,628		—			660,744
Total assets	$	3,718,610	$	4,225,225	$	12,637,805	$	(7,911,993	)	$	12,669,647
LIABILITIES:
Reserve for losses and loss expenses	$	—	$	—	$	5,935,678	$	—		$	5,935,678
Unearned premiums	—		—		1,703,684		—			1,703,684
Reinsurance balances payable	—		—		224,182		—			224,182
Balances due on purchases of investments	—		—		180,378		—			180,378
Senior notes	—		798,648		—		—			798,648
Due to subsidiaries	8,373		7,163		94,672		(110,208		)	—
Other liabilities	27,475		17,976		98,864		—			144,315
Total liabilities	35,848		823,787		8,237,458		(110,208		)	8,986,885
Total shareholders’ equity	3,682,762		3,401,438		4,400,347		(7,801,785		)	3,682,762
Total liabilities and shareholders’ equity	$	3,718,610	$	4,225,225	$	12,637,805	$	(7,911,993	)	$	12,669,647



As of December 31, 2013	Allied World Switzerland (Parent Guarantor)		Allied World Bermuda (Subsidiary Issuer)		Other Allied World Subsidiaries		Consolidating Adjustments			Allied World Switzerland Consolidated
ASSETS:
Investments	$	—	$	—	$	7,712,036	$	—		$	7,712,036
Cash and cash equivalents	10,790		2,775		518,371		—			531,936
Insurance balances receivable	—		—		664,731		—			664,731
Funds held	—		—		632,430		—			632,430
Reinsurance recoverable	—		—		1,234,504		—			1,234,504
Net deferred acquisition costs	—		—		126,661		—			126,661
Goodwill and intangible assets	—		—		317,207		—			317,207
Balances receivable on sale of investments	—		—		76,544		—			76,544
Investments in subsidiaries	3,413,001		4,018,619		—		(7,431,620		)	—
Due from subsidiaries	111,172		122,846		123,479		(357,497		)	—
Other assets	1,757		4,671		643,353		—			649,781
Total assets	$	3,536,720	$	4,148,911	$	12,049,316	$	(7,789,117	)	$	11,945,830
LIABILITIES:
Reserve for losses and loss expenses	$	—	$	—	$	5,766,529	$	—		$	5,766,529
Unearned premiums	—		—		1,396,256		—			1,396,256
Reinsurance balances payable	—		—		173,023		—			173,023
Balances due on purchases of investments	—		—		104,740		—			104,740
Senior notes	—		798,499		—		—			798,499
Due to subsidiaries	12,945		110,534		234,018		(357,497		)	—
Other liabilities	3,949		17,797		165,211		—			186,957
Total liabilities	16,894		926,830		7,839,777		(357,497		)	8,426,004
Total shareholders’ equity	3,519,826		3,222,081		4,209,539		(7,431,620		)	3,519,826
Total liabilities and shareholders’ equity	$	3,536,720	$	4,148,911	$	12,049,316	$	(7,789,117	)	$	11,945,830

The investment in subsidiaries and total shareholders' equity balances reported above in the Unaudited Condensed Consolidating Balance Sheet for Allied World Bermuda (Subsidiary Issuer) as of December 31, 2013 were reduced by $776,000 from the previously reported amounts to properly record intercompany dividends as a reduction in the investment in subsidiaries balance due to a miscalculation. Since the intercompany dividends were eliminated in consolidation there was no impact to consolidated total shareholders' equity.

Unaudited Condensed Consolidating Statement of Operations and Comprehensive Income:



Three Months Ended June 30, 2014	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	537,247		$	—		$	537,247
Net investment income	2			—			36,791			—			36,793
Net realized investment gains (losses)	—			—			85,217			—			85,217
Net losses and loss expenses	—			—			(314,855		)	—			(314,855		)
Acquisition costs	—			—			(74,279		)	—			(74,279		)
General and administrative expenses	(10,813		)	1,654			(87,029		)	—			(96,188		)
Amortization of intangible assets	—			—			(634		)	—			(634		)
Interest expense	—			(13,853		)	(739		)	—			(14,592		)
Foreign exchange gain (loss)	(2		)	(12		)	(637		)	—			(651		)
Income tax (expense) benefit	323			—			(6,518		)	—			(6,195		)
Equity in earnings of consolidated subsidiaries	162,353			170,796			—			(333,149		)	—
NET INCOME (LOSS)	$	151,863		$	158,585		$	174,564		$	(333,149	)	$	151,863
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	151,863		$	158,585		$	174,564		$	(333,149	)	$	151,863



Three Months Ended June 30, 2013	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	507,271		$	—		$	507,271
Net investment income	1			2			37,632			—			37,635
Net realized investment gains (losses)	—			—			(115,198		)	—			(115,198		)
Net losses and loss expenses	—			—			(275,128		)	—			(275,128		)
Acquisition costs	—			—			(64,617		)	—			(64,617		)
General and administrative expenses	(8,566		)	(455		)	(71,564		)	—			(80,585		)
Amortization of intangible assets	—			—			(634		)	—			(634		)
Interest expense	—			(13,835		)	(353		)	—			(14,188		)
Foreign exchange gain (loss)	2			(628		)	136			—			(490		)
Income tax (expense) benefit	—			—			4,072			—			4,072
Equity in earnings of consolidated subsidiaries	6,701			21,147			—			(27,848		)	—
NET INCOME (LOSS)	$	(1,862	)	$	6,231		$	21,617		$	(27,848	)	$	(1,862	)
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	(1,862	)	$	6,231		$	21,617		$	(27,848	)	$	(1,862	)



Six Months Ended June 30, 2014	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	1,067,532		$	—		$	1,067,532
Net investment income	4			—			84,408			—			84,412
Net realized investment gains (losses)	—			—			139,422			—			139,422
Net losses and loss expenses	—			—			(590,141		)	—			(590,141		)
Acquisition costs	—			—			(142,001		)	—			(142,001		)
General and administrative expenses	(19,727		)	(737		)	(156,064		)	—			(176,528		)
Amortization of intangible assets	—			—			(1,267		)	—			(1,267		)
Interest expense	—			(27,700		)	(1,426		)	—			(29,126		)
Foreign exchange gain (loss)	(4		)	21			(717		)	—			(700		)
Income tax (expense) benefit	(86		)	—			(22,682		)	—			(22,768		)
Equity in earnings of consolidated subsidiaries	348,648			369,803			—			(718,451		)	—
NET INCOME (LOSS)	$	328,835		$	341,387		$	377,064		$	(718,451	)	$	328,835
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	328,835		$	341,387		$	377,064		$	(718,451	)	$	328,835



Six Months Ended June 30, 2013	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	970,499		$	—		$	970,499
Net investment income	8			4			71,011			—			71,023
Net realized investment gains (losses)	—			—			(35,561		)	—			(35,561		)
Net losses and loss expenses	—			—			(530,306		)	—			(530,306		)
Acquisition costs	—			—			(121,302		)	—			(121,302		)
General and administrative expenses	(19,552		)	(912		)	(142,801		)	—			(163,265		)
Amortization of intangible assets	—			—			(1,267		)	—			(1,267		)
Interest expense	—			(27,665		)	(657		)	—			(28,322		)
Foreign exchange gain (loss)	274			(723		)	(2,559		)	—			(3,008		)
Income tax (expense) benefit	—			—			(1,361		)	—			(1,361		)
Equity in earnings of consolidated subsidiaries	176,400			202,627			—			(379,027		)	—
NET INCOME (LOSS)	$	157,130		$	173,331		$	205,696		$	(379,027	)	$	157,130
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	157,130		$	173,331		$	205,696		$	(379,027	)	$	157,130

Unaudited Condensed Consolidating Statement of Cash Flows:



Six Months Ended June 30, 2014	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments		Allied World Switzerland Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES	$	194,890		$	(1,489	)	$	258,707		$	—	$	452,108
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases trading securities	—			—			(3,905,650		)	—		(3,905,650		)
Purchases of other invested assets	—			—			(181,419		)	—		(181,419		)
Sales of trading securities	—			—			3,705,229			—		3,705,229
Sales of other invested assets	—			—			184,166			—		184,166
Other	—			—			13,472			—		13,472
Net cash provided by (used in) investing activities	—			—			(184,202		)	—		(184,202		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Dividends paid	(33,207		)	—			—			—		(33,207		)
Proceeds from the exercise of stock options	6,313			—			—			—		6,313
Share repurchases	(137,810		)	—			—			—		(137,810		)
Net cash provided by (used in) financing activities	(164,704		)	—			—			—		(164,704		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	30,186			(1,489		)	74,505			—		103,202
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,790			2,775			518,371			—		531,936
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	40,976		$	1,286		$	592,876		$	—	$	635,138



Six Months Ended June 30, 2013	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments		Allied World Switzerland Consolidated
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:	$	73,938		$	(3,025	)	$	54,993		$	—	$	125,906
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of trading securities	—			—			(3,186,162		)	—		(3,186,162		)
Purchases of other invested assets	—			—			(141,805		)	—		(141,805		)
Sales of trading securities	—			—			3,171,977			—		3,171,977
Sales of other invested assets	—			—			126,491			—		126,491
Other	—			—			(13,924		)	—		(13,924		)
Net cash provided by (used in) investing activities	—			—			(43,423		)	—		(43,423		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Partial par value reduction	(12,981		)	—			—			—		(12,981		)
Proceeds from the exercise of stock options	5,293			—			—			—		5,293
Share repurchases	(82,571		)	—			—			—		(82,571		)
Net cash provided by (used in) financing activities	(90,259		)	—			—			—		(90,259		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(16,321		)	(3,025		)	11,570			—		(7,776		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	19,997			11,324			650,558			—		681,879
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,676		$	8,299		$	662,128		$	—	$	674,103

Notes to Parent Company Condensed Financial Information

a) Dividends

Allied World Switzerland received cash dividends from its subsidiaries of $205,000 and $155,000 for the six months ended June 30, 2014 and 2013, respectively. Such dividends are included in “cash flows provided by (used in) operating activities” in the unaudited condensed consolidating cash flows.