Condensed Consolidated Guarantor Financial Statements

6 Months Ended

Jun. 30, 2013

Condensed Consolidated Guarantor Financial Statements [Abstract]

Condensed consolidated guarantor financial statements

13. CONDENSED CONSOLIDATED GUARANTOR FINANCIAL STATEMENTS

The following tables present unaudited condensed consolidating financial information as of June 30, 2013 and December 31, 2012 and for the three and six months ended June 30, 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.

Unaudited Condensed Consolidating Balance Sheet:

	Allied World		Allied World
	Switzerland		Bermuda		Other Allied				Allied World
	(Parent		(Subsidiary		World		Consolidating		Switzerland
As of June 30, 2013	Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
ASSETS:
Investments	$	0	$	0	$	7,775,803	$	0	$	7,775,803
Cash and cash equivalents		3,676		8,299		662,128		0		674,103
Insurance balances receivable		0		0		814,620		0		814,620
Funds held		0		0		387,599		0		387,599
Reinsurance recoverable		0		0		1,179,525		0		1,179,525
Net deferred acquisition costs		0		0		153,812		0		153,812
Goodwill and intangible assets		0		0		318,474		0		318,474
Balances receivable on sale of investments		0		0		277,025		0		277,025
Investments in subsidiaries		3,357,144		4,480,926		0		(7,838,070)		0
Due (to) from subsidiaries		29,968		(2,234)		(27,734)		0		0
Other assets		1,144		5,410		677,362		0		683,916
Total assets	$	3,391,932	$	4,492,401	$	12,218,614	$	(7,838,070)	$	12,264,877
LIABILITIES:
Reserve for losses and loss expenses	$	0	$	0	$	5,696,865	$	0	$	5,696,865
Unearned premiums		0		0		1,586,327		0		1,586,327
Reinsurance balances payable		0		0		205,884		0		205,884
Balances due on purchases of investments		0		0		487,063		0		487,063
Senior notes		0		798,355		0		0		798,355
Other liabilities		18,703		18,246		80,205		0		117,154
Total liabilities		18,703		816,601		8,056,344		0		8,891,648
Total shareholders’ equity		3,373,229		3,675,800		4,162,270		(7,838,070)		3,373,229
Total liabilities and shareholders’ equity	$	3,391,932	$	4,492,401	$	12,218,614	$	(7,838,070)	$	12,264,877


	Allied World		Allied World
	Switzerland		Bermuda		Other Allied				Allied World
	(Parent		(Subsidiary		World		Consolidating		Switzerland
As of December 31, 2012	Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
ASSETS:
Investments	$	0	$	0	$	7,933,937	$	0	$	7,933,937
Cash and cash equivalents		19,997		11,324		650,558		0		681,879
Insurance balances receivable		0		0		510,532		0		510,532
Funds held		0		0		336,368		0		336,368
Reinsurance recoverable		0		0		1,141,110		0		1,141,110
Net deferred acquisition costs		0		0		108,010		0		108,010
Goodwill and intangible assets		0		0		319,741		0		319,741
Balances receivable on sale of investments		0		0		418,879		0		418,879
Investments in subsidiaries		3,337,446		4,768,769		0		(8,106,215)		0
Due (to) from subsidiaries		(23,864)		(7,173)		31,037		0		0
Other assets		1,499		6,081		571,910		0		579,490
Total assets	$	3,335,078	$	4,779,001	$	12,022,082	$	(8,106,215)	$	12,029,946
LIABILITIES:
Reserve for losses and loss expenses	$	0	$	0	$	5,645,549	$	0	$	5,645,549
Unearned premiums		0		0		1,218,021		0		1,218,021
Reinsurance balances payable		0		0		136,264		0		136,264
Balances due on purchases of investments		0		0		759,934		0		759,934
Senior notes		0		798,215		0		0		798,215
Other liabilities		8,743		17,727		119,158		0		145,628
Total liabilities		8,743		815,942		7,878,926		0		8,703,611
Total shareholders’ equity		3,326,335		3,963,059		4,143,156		(8,106,215)		3,326,335
Total liabilities and shareholders’ equity	$	3,335,078	$	4,779,001	$	12,022,082	$	(8,106,215)	$	12,029,946

Unaudited Condensed Consolidating Income Statement:

	Allied World		Allied World
	Switzerland		Bermuda		Other Allied				Allied World
	(Parent		(Subsidiary		World		Consolidating		Switzerland
Three Months Ended June 30, 2013	Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
Net premiums earned	$	0	$	0	$	507,271	$	0	$	507,271
Net investment income		1		2		37,632		0		37,635
Net realized investment losses		0		0		(115,198)		0		(115,198)
Net losses and loss expenses		0		0		(275,128)		0		(275,128)
Acquisition costs		0		0		(64,617)		0		(64,617)
General and administrative expenses		(8,566)		(455)		(71,564)		0		(80,585)
Amortization of intangible assets		0		0		(634)		0		(634)
Interest expense		0		(13,835)		(353)		0		(14,188)
Foreign exchange gain (loss)		2		(628)		136		0		(490)
Income tax (expense) benefit		0		0		4,072		0		4,072
Equity in earnings of consolidated subsidiaries		6,701		21,147		0		(27,848)		0
NET INCOME (LOSS)	$	(1,862)	$	6,231	$	21,617	$	(27,848)	$	(1,862)
Other comprehensive income		0		0		0		0		0
COMPREHENSIVE INCOME (LOSS)	$	(1,862)	$	6,231	$	21,617	$	(27,848)	$	(1,862)


		Allied World		Allied World
		Switzerland		Bermuda		Other Allied				Allied World
		(Parent		(Subsidiary		World		Consolidating		Switzerland
Three Months Ended June 30, 2012		Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
Net premiums earned		$	0	$	0	$	429,747	$	0	$	429,747
Net investment income			5		8		42,438		0		42,451
Net realized investment gains			0		0		8,663		0		8,663
Net losses and loss expenses			0		0		(240,380)		0		(240,380)
Acquisition costs			0		0		(51,588)		0		(51,588)
General and administrative expenses			(4,278)		(1,302)		(68,399)		0		(73,979)
Amortization of intangible assets			0		0		(634)		0		(634)
Interest expense			0		(14,001)		0		0		(14,001)
Foreign exchange gain (loss)			460		(42)		601		0		1,019
Income tax (expense) benefit			(373)		0		(4,574)		0		(4,947)
Equity in earnings of consolidated subsidiaries			100,537		115,102		0		(215,639)		0
NET INCOME (LOSS)		$	96,351	$	99,765	$	115,874	$	(215,639)	$	96,351
Unrealized gains on investments arising during the period
	net of applicable deferred income tax benefit of $68		231		0		231		(231)		231
Reclassification adjustment for net realized investment
	gains included in net income, net of applicable income tax		(1,142)		0		(1,142)		1,142		(1,142)
Other comprehensive loss			(911)		0		(911)		911		(911)
COMPREHENSIVE INCOME (LOSS)		$	95,440	$	99,765	$	114,963	$	(214,728)	$	95,440

	Allied World		Allied World
	Switzerland		Bermuda		Other Allied				Allied World
	(Parent		(Subsidiary		World		Consolidating		Switzerland
Six Months Ended June 30, 2013	Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
Net premiums earned	$	0	$	0	$	970,499	$	0	$	970,499
Net investment income		8		4		71,011		0		71,023
Net realized investment losses		0		0		(35,561)		0		(35,561)
Net losses and loss expenses		0		0		(530,306)		0		(530,306)
Acquisition costs		0		0		(121,302)		0		(121,302)
General and administrative expenses		(19,552)		(912)		(142,801)		0		(163,265)
Amortization of intangible assets		0		0		(1,267)		0		(1,267)
Interest expense		0		(27,665)		(657)		0		(28,322)
Foreign exchange loss (gain)		274		(723)		(2,559)		0		(3,008)
Income tax (expense) benefit		0		0		(1,361)		0		(1,361)
Equity in earnings of consolidated subsidiaries		176,400		202,627		0		(379,027)		0
NET INCOME (LOSS)	$	157,130	$	173,331	$	205,696	$	(379,027)	$	157,130
Other comprehensive income		0		0		0		0		0
COMPREHENSIVE INCOME (LOSS)	$	157,130	$	173,331	$	205,696	$	(379,027)	$	157,130

		Allied World		Allied World
		Switzerland		Bermuda		Other Allied				Allied World
		(Parent		(Subsidiary		World		Consolidating		Switzerland
Six Months Ended June 30, 2012		Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
Net premiums earned		$	0	$	0	$	831,637	$	0	$	831,637
Net investment income			14		11		89,635		0		89,660
Net realized investment gains			0		0		142,244		0		142,244
Net losses and loss expenses			0		0		(465,582)		0		(465,582)
Acquisition costs			0		0		(98,726)		0		(98,726)
General and administrative expenses			(8,234)		(2,454)		(133,657)		0		(144,345)
Amortization of intangible assets			0		0		(1,267)		0		(1,267)
Interest expense			0		(27,757)		0		0		(27,757)
Foreign exchange gain (loss)			549		(67)		618		0		1,100
Income tax (expense) benefit			71		0		(12,528)		0		(12,457)
Equity in earnings of consolidated subsidiaries			322,107		349,409		0		(671,516)		0
NET INCOME (LOSS)		$	314,507	$	319,142	$	352,374	$	(671,516)	$	314,507
Unrealized gains on investments arising during the period
	net of applicable deferred income tax expense of $3,051		179		0		179		(179)		179
Reclassification adjustment for net realized investment
	gains included in net income, net of applicable income tax		(13,249)		0		(13,249)		13,249		(13,249)
Other comprehensive loss			(13,070)		0		(13,070)		13,070		(13,070)
COMPREHENSIVE INCOME (LOSS)		$	301,437	$	319,142	$	339,304	$	(658,446)	$	301,437

Unaudited Condensed Consolidating Cash Flows:

		Allied World		Allied World
		Switzerland		Bermuda		Other Allied				Allied World
		(Parent		(Subsidiary		World		Consolidating		Switzerland
Six Months Ended June 30, 2013		Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated
CASH FLOWS PROVIDED BY (USED IN)
	OPERATING ACTIVITIES	$	73,938	$	(3,025)	$	54,993	$	0	$	125,906
CASH FLOWS PROVIDED BY (USED IN)
	INVESTING ACTIVITIES:
Purchases trading securities			0		0		(3,186,162)		0		(3,186,162)
Purchases of other invested assets			0		0		(141,805)		0		(141,805)
Sales of available for sale securities			0		0		0		0		0
Sales of trading securities			0		0		3,171,977		0		3,171,977
Sales of other invested assets			0		0		126,491		0		126,491
Other			0		0		(13,924)		0		(13,924)
	Net cash provided by (used in) investing activities		0		0		(43,423)		0		(43,423)
CASH FLOWS PROVIDED BY (USED IN)
	FINANCING ACTIVITIES:
Partial par value reduction			(12,981)		0		0		0		(12,981)
Proceeds from the exercise of stock options			5,293		0		0		0		5,293
Share repurchases			(82,571)		0		0		0		(82,571)
	Net cash provided by (used in) financing activities		(90,259)		0		0		0		(90,259)
NET INCREASE (DECREASE) IN CASH AND
	CASH EQUIVALENTS		(16,321)		(3,025)		11,570		0		(7,776)
CASH AND CASH EQUIVALENTS, BEGINNING
	OF PERIOD		19,997		11,324		650,558		0		681,879
CASH AND CASH EQUIVALENTS, END OF
	PERIOD	$	3,676	$	8,299	$	662,128	$	0	$	674,103

		Allied World		Allied World
		Switzerland		Bermuda		Other Allied				Allied World
		(Parent		(Subsidiary		World		Consolidating		Switzerland
Six Months Ended June 30, 2012		Guarantor)		Issuer)		Subsidiaries		Adjustments		Consolidated

CASH FLOWS PROVIDED BY (USED IN)
	OPERATING ACTIVITIES:	$	81,902	$	10,326	$	207,280	$	0	$	299,508
CASH FLOWS PROVIDED BY (USED IN)
	INVESTING ACTIVITIES:
Purchases of available for sale securities			0		0		0		0		0
Purchases of trading securities			0		0		(4,005,352)		0		(4,005,352)
Purchases of other invested assets			0		0		(17,778)		0		(17,778)
Sales of available for sale securities			0		0		214,015		0		214,015
Sales of trading securities			0		0		3,959,204		0		3,959,204
Sales of other invested assets			0		0		108,759		0		108,759
Other			0		0		(157,647)		0		(157,647)
	Net cash provided by (used in) investing activities		0		0		101,201		0		101,201
CASH FLOWS PROVIDED BY (USED IN)
	FINANCING ACTIVITIES:
Partial par value reduction			(28,003)		0		0		0		(28,003)
Proceeds from the exercise of stock options			6,697		0		0		0		6,697
Share repurchases			(148,949)		0		0		0		(148,949)
Repurchase of founder warrants			0		0		0		0		0
Other			0		0		0		0		0
	Net cash provided by (used in) financing activities		(170,255)		0		0		0		(170,255)
NET INCREASE (DECREASE) IN CASH AND
	CASH EQUIVALENTS		(88,353)		10,326		308,481		0		230,454
CASH AND CASH EQUIVALENTS, BEGINNING
	OF PERIOD		112,672		8,886		512,438		0		633,996
CASH AND CASH EQUIVALENTS, END OF
	PERIOD	$	24,319	$	19,212	$	820,919	$	0	$	864,450

Notes to Parent Company Condensed Financial Information

a) Dividends

Allied World Switzerland received cash dividends from its subsidiaries of $155,000 and $200,000 for the six months ended June 30, 2013 and 2012, respectively.