CONDENSED CONSOLIDATED PARENT COMPANY AND GUARANTOR FINANCIAL STATEMENTS

The following tables present condensed consolidating financial information as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 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.

Condensed Consolidating Balance Sheet:



As of December 31, 2014	Allied World Switzerland (Parent Guarantor)		Allied World Bermuda (Subsidiary Issuer)		Other Allied World Subsidiaries		Consolidating Adjustments			Allied World Switzerland Consolidated
ASSETS:
Investments	$	—	$	—	$	7,868,682	$	—		$	7,868,682
Cash and cash equivalents	32,579		1,734		555,026		—			589,339
Insurance balances receivable	—		—		664,815		—			664,815
Funds held	—		—		724,021		—			724,021
Reinsurance recoverable	—		—		1,340,256		—			1,340,256
Reinsurance recoverable on paid losses	—		—		86,075					86,075
Net deferred acquisition costs	—		—		151,546		—			151,546
Goodwill and intangible assets	—		—		324,556		—			324,556
Balances receivable on sale of investments	—		—		47,149		—			47,149
Investments in subsidiaries	3,629,301		4,218,028		—		(7,847,329		)	—
Due from subsidiaries	147,072		19,190		14,396		(180,658		)	—
Other assets	1,470		3,192		620,462		—			625,124
Total assets	$	3,810,422	$	4,242,144	$	12,396,984	$	(8,027,987	)	$	12,421,563
LIABILITIES:
Reserve for losses and loss expenses	$	—	$	—	$	5,881,165	$	—		$	5,881,165
Unearned premiums	—		—		1,555,313		—			1,555,313
Reinsurance balances payable	—		—		180,060		—			180,060
Balances due on purchases of investments	—				5,428		—			5,428
Senior notes	—		798,802		—		—			798,802
Other long-term debt	—		—		19,213		—			19,213
Due to subsidiaries	7,599		6,797		166,262		(180,658		)	—
Other liabilities	24,532		19,618		159,141		—			203,291
Total liabilities	32,131		825,217		7,966,582		(180,658		)	8,643,272
Total shareholders’ equity	3,778,291		3,416,927		4,430,402		(7,847,329		)	3,778,291
Total liabilities and shareholders’ equity	$	3,810,422	$	4,242,144	$	12,396,984	$	(8,027,987	)	$	12,421,563



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	—		—		588,632		—			588,632
Funds held	—		—		632,430		—			632,430
Reinsurance recoverable	—		—		1,234,504		—			1,234,504
Reinsurance recoverable on paid losses	—		—		76,099		—			76,099
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

Condensed Consolidating Income Statement:



Year Ended December 31, 2014	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	2,182,758		$	—		$	2,182,758
Net investment income	50			—			176,824			—			176,874
Net realized investment gains	—			—			88,957			—			88,957
Other income	—			—			2,064			—			2,064
Net losses and loss expenses	—			—			(1,199,190		)	—			(1,199,190		)
Acquisition costs	—			—			(295,122		)	—			(295,122		)
General and administrative expenses	(35,596		)	(3,088		)	(327,052		)	—			(365,736		)
Other expense	—			—			(8,578		)	—			(8,578		)
Amortization of intangible assets	—			—			(2,533		)	—			(2,533		)
Interest expense	—			(55,418		)	(2,337		)	—			(57,755		)
Foreign exchange gain (loss)	20			104			(1,081		)	—			(957		)
Income tax (expense) benefit	(89		)	—			(30,434		)	—			(30,523		)
Equity in earnings of consolidated subsidiaries	525,874			564,648			—			(1,090,522		)	—
NET INCOME (LOSS)	$	490,259		$	506,246		$	584,276		$	(1,090,522	)	$	490,259
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	490,259		$	506,246		$	584,276		$	(1,090,522	)	$	490,259



Year Ended December 31, 2013	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	2,005,833		$	—		$	2,005,833
Net investment income	13			4			157,547			—			157,564
Net realized investment gains	—			—			59,525			—			59,525
Other income	—			—			—			—			—
Net losses and loss expenses	—			—			(1,123,242		)	—			(1,123,242		)
Acquisition costs	—			—			(252,673		)	—			(252,673		)
General and administrative expenses	(42,122		)	(1,320		)	(308,843		)	—			(352,285		)
Other expense	—			—			—			—			—
Amortization of intangible assets	—			—			(2,533		)	—			(2,533		)
Interest expense	—			(55,347		)	(1,163		)	—			(56,510		)
Foreign exchange gain (loss)	263			(1,045		)	(7,237		)	—			(8,019		)
Income tax (expense) benefit	98			—			(9,878		)	—			(9,780		)
Equity in earnings of consolidated subsidiaries	459,628			515,156			—			(974,784		)	—
NET INCOME (LOSS)	$	417,880		$	457,448		$	517,336		$	(974,784	)	$	417,880
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	417,880		$	457,448		$	517,336		$	(974,784	)	$	417,880



Year Ended December 31, 2012	Allied World Switzerland (Parent Guarantor)			Allied World Bermuda (Subsidiary Issuer)			Other Allied World Subsidiaries			Consolidating Adjustments			Allied World Switzerland Consolidated
Net premiums earned	$	—		$	—		$	1,748,898		$	—		$	1,748,898
Net investment income	26			20			167,095			—			167,141
Net realized investment gains (loss)	—			—			306,436			—			306,436
Other income	—			—			—			—			—
Net losses and loss expenses	—			—			(1,139,264		)	—			(1,139,264		)
Acquisition costs	—			—			(205,722		)	—			(205,722		)
General and administrative expenses	(35,258		)	(2,973		)	(269,090		)	—			(307,321		)
Other expense	—			—			—			—			—
Amortization of intangible assets	—			—			(2,533		)	—			(2,533		)
Interest expense	—			(55,405		)	—			—			(55,405		)
Foreign exchange gain (loss)	159			(319		)	(623		)	—			(783		)
Income tax (expense) benefit	358			—			(18,798		)	—			(18,440		)
Equity in earnings of consolidated subsidiaries	527,722			573,256			—			(1,100,978		)	—
NET INCOME (LOSS)	$	493,007		$	514,579		$	586,399		$	(1,100,978	)	$	493,007
Unrealized gains on investments arising during the year net of applicable deferred income tax benefit of $265	(493		)	—			(493		)	493			(493		)
Reclassification adjustment for net realized investment gains included in net income, net of applicable income tax	(13,991		)	—			(13,991		)	13,991			(13,991		)
Other comprehensive loss	(14,484		)	—			(14,484		)	14,484			(14,484		)
COMPREHENSIVE INCOME (LOSS)	$	478,523		$	514,579		$	571,915		$	(1,086,494	)	$	478,523

Condensed Consolidating Statement of Cash Flows:



Year Ended December 31, 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	$	264,422		$	292,959		$	493,659		$	(643,250	)	$	407,790
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases trading securities	—			—			(7,630,034		)	—			(7,630,034		)
Purchases of other invested assets	—			—			(307,955		)	—			(307,955		)
Sales of trading securities	—			—			7,536,936			—			7,536,936
Sales of other invested assets	—			—			267,885			—			267,885
Other	—			—			6,201			—			6,201
Net cash provided by (used in) investing activities	—			—			(126,967		)	—			(126,967		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Dividends paid	(76,750		)	—			—			—			(76,750		)
Intercompany dividends paid	—			(294,000		)	(349,250		)	643,250			—
Proceeds from the exercise of stock options	10,027			—			—			—			10,027
Proceeds from other long-term debt	—			—			19,213			—			19,213
Share repurchases	(175,910		)	—			—			—			(175,910		)
Net cash provided by (used in) financing activities	(242,633		)	(294,000		)	(330,037		)	643,250			(223,420		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	21,789			(1,041		)	36,655			—			57,403
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	10,790			2,775			518,371			—			531,936
CASH AND CASH EQUIVALENTS, END OF YEAR	$	32,579		$	1,734		$	555,026		$	—		$	589,339



Year Ended December 31, 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	$	198,702		$	265,951		$	237,956		$	(596,500	)	$	106,109
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of trading securities	—			—			(7,527,670		)	—			(7,527,670		)
Purchases of other invested assets	—			—			(276,926		)	—			(276,926		)
Sales of trading securities	—			—			7,540,194			—			7,540,194
Sales of other invested assets	—			—			187,477			—			187,477
Other	—			—			28,782			—			28,782
Net cash provided by (used in) investing activities	—			—			(48,143		)	—			(48,143		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Partial par value reduction	(12,981		)	—			—			—			(12,981		)
Dividends paid	(34,059		)	—			—			—			(34,059		)
Intercompany dividends paid	—			(274,500		)	(322,000		)	596,500			—
Proceeds from the exercise of stock options	12,137			—			—			—			12,137
Share repurchases	(173,006		)	—			—			—			(173,006		)
Net cash provided by (used in) financing activities	(207,909		)	(274,500		)	(322,000		)	596,500			(207,909		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(9,207		)	(8,549		)	(132,187		)	—			(149,943		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	19,997			11,324			650,558			—			681,879
CASH AND CASH EQUIVALENTS, END OF YEAR	$	10,790		$	2,775		$	518,371		$	—		$	531,936



Year Ended December 31, 2012	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:	$	338,565		$	357,438		$	702,853		$	(770,000	)	$	628,856
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of trading securities	—			—			(8,006,237		)	—			(8,006,237		)
Purchases of other invested assets	—			—			(333,031		)	—			(333,031		)
Sales of available for sale securities	—			—			236,978			—			236,978
Sales of trading securities	—			—			7,892,907			—			7,892,907
Sales of other invested assets	—			—			53,741			—			53,741
Capital contribution to subsidiary	(110,000		)	—			—			110,000			—
Other	—			—			(104,091		)	—			(104,091		)
Net cash provided by (used in) investing activities	(110,000		)	—			(259,733		)	110,000			(259,733		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Partial par value reduction	(67,825		)	—			—			—			(67,825		)
Intercompany dividends paid	—			(355,000		)	(415,000		)	770,000			—
Proceeds from the exercise of stock options	10,527			—			—			—			10,527
Share repurchases	(263,942		)	—			—			—			(263,942		)
Capital contribution from parent	—			—			110,000			(110,000		)	—
Net cash provided by (used in) financing activities	(321,240		)	(355,000		)	(305,000		)	660,000			(321,240		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(92,675		)	2,438			138,120			—			47,883
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	112,672			8,886			512,438			—			633,996
CASH AND CASH EQUIVALENTS, END OF YEAR	$	19,997		$	11,324		$	650,558		$	—		$	681,879

Notes to Parent Company Condensed Financial Information

a) Dividends

Allied World Switzerland received cash dividends from its subsidiaries of $294,000, $274,500 and $355,000 for the years ended December 31, 2014, 2013 and 2012, respectively. Such dividends are included in “cash flows provided by (used in) operating activities” in the condensed consolidating statement of cash flows.