CONDENSED CONSOLIDATED GUARANTOR FINANCIAL STATEMENTS

The following tables present unaudited condensed consolidating financial information as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 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 March 31, 2014	Allied World Switzerland (Parent Guarantor)		Allied World Bermuda (Subsidiary Issuer)		Other Allied World Subsidiaries		Consolidating Adjustments			Allied World Switzerland Consolidated
ASSETS:
Investments	$	—	$	—	$	7,893,350	$	—		$	7,893,350
Cash and cash equivalents	22,557		1,047		542,198		—			565,802
Insurance balances receivable	—		—		839,630		—			839,630
Funds held	—		—		447,801		—			447,801
Reinsurance recoverable	—		—		1,280,525		—			1,280,525
Net deferred acquisition costs	—		—		167,104		—			167,104
Goodwill and intangible assets	—		—		316,574		—			316,574
Balances receivable on sale of investments	—		—		198,640		—			198,640
Investments in subsidiaries	3,434,192		4,026,535		—		(7,460,727		)	—
Due from subsidiaries	187,571		30,569		20,751		(238,891		)	—
Other assets	2,079		4,321		618,339		—			624,739
Total assets	$	3,646,399	$	4,062,472	$	12,324,912	$	(7,699,618	)	$	12,334,165
LIABILITIES:
Reserve for losses and loss expenses	$	—	$	—	$	5,856,798	$	—		$	5,856,798
Unearned premiums	—		—		1,627,658		—			1,627,658
Reinsurance balances payable	—		—		160,041		—			160,041
Balances due on purchases of investments	—		—		171,442		—			171,442
Senior notes	—		798,573		—		—			798,573
Due to subsidiaries	10,565		10,186		218,140		(238,891		)	—
Other liabilities	19,156		14,583		69,236		—			102,975
Total liabilities	29,721		823,342		8,103,315		(238,891		)	8,717,487
Total shareholders’ equity	3,616,678		3,239,130		4,221,597		(7,460,727		)	3,616,678
Total liabilities and shareholders’ equity	$	3,646,399	$	4,062,472	$	12,324,912	$	(7,699,618	)	$	12,334,165



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 March 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	$	—		$	—		$	530,285		$	—		$	530,285
Net investment income	2			—			47,617			—			47,619
Net realized investment losses	—			—			54,205			—			54,205
Net losses and loss expenses	—			—			(275,286		)	—			(275,286		)
Acquisition costs	—			—			(67,722		)	—			(67,722		)
General and administrative expenses	(8,914		)	(2,391		)	(69,035		)	—			(80,340		)
Amortization of intangible assets	—			—			(633		)	—			(633		)
Interest expense	—			(13,848		)	(686		)	—			(14,534		)
Foreign exchange gain (loss)	(2		)	33			(80		)	—			(49		)
Income tax (expense) benefit	(409		)	—			(16,164		)	—			(16,573		)
Equity in earnings of consolidated subsidiaries	186,295			199,007			—			(385,302		)	—
NET INCOME (LOSS)	$	176,972		$	182,801		$	202,501		$	(385,302	)	$	176,972
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	176,972		$	182,801		$	202,501		$	(385,302	)	$	176,972



Three Months Ended March 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	$	—		$	—		$	463,228		$	—		$	463,228
Net investment income	7			2			33,379			—			33,388
Net realized investment gains	—			—			79,637			—			79,637
Net losses and loss expenses	—			—			(255,178		)	—			(255,178		)
Acquisition costs	—			—			(56,685		)	—			(56,685		)
General and administrative expenses	(10,986		)	(457		)	(71,237		)	—			(82,680		)
Amortization of intangible assets	—			—			(633		)	—			(633		)
Interest expense	—			(13,830		)	(304		)	—			(14,134		)
Foreign exchange gain (loss)	272			(95		)	(2,695		)	—			(2,518		)
Income tax (expense) benefit	—			—			(5,433		)	—			(5,433		)
Equity in earnings of consolidated subsidiaries	169,699			181,480			—			(351,179		)	—
NET INCOME (LOSS)	$	158,992		$	167,100		$	184,079		$	(351,179	)	$	158,992
Other comprehensive income	—			—			—			—			—
COMPREHENSIVE INCOME (LOSS)	$	158,992		$	167,100		$	184,079		$	(351,179	)	$	158,992

Unaudited Condensed Consolidating Statement of Cash Flows:



Three Months Ended March 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	$	94,128		$	(1,728	)	$	212,382		$	—	$	304,782
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases trading securities	—			—			(1,568,993		)	—		(1,568,993		)
Purchases of other invested assets	—			—			(779,934		)	—		(779,934		)
Sales of trading securities	—			—			1,494,648			—		1,494,648
Sales of other invested assets	—			—			663,237			—		663,237
Other	—			—			2,487			—		2,487
Net cash provided by (used in) investing activities	—			—			(188,555		)	—		(188,555		)
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Dividends paid	(16,732		)	—			—			—		(16,732		)
Proceeds from the exercise of stock options	3,030			—			—			—		3,030
Share repurchases	(68,659		)	—			—			—		(68,659		)
Net cash provided by (used in) financing activities	(82,361		)	—			—			—		(82,361		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	11,767			(1,728		)	23,827			—		33,866
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	10,790			2,775			518,371			—		531,936
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	22,557		$	1,047		$	542,198		$	—	$	565,802



Three Months Ended March 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:	$	59,772		$	5,859	$	(54,117	)	$	—	$	11,514
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of trading securities	—			—		(1,330,735		)	—		(1,330,735		)
Purchases of other invested assets	—			—		(54,026		)	—		(54,026		)
Sales of trading securities	—			—		1,188,307			—		1,188,307
Sales of other invested assets	—			—		97,989			—		97,989
Other	—			—		114,407			—		114,407
Net cash provided by (used in) investing activities	—			—		15,942			—		15,942
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Partial par value reduction	(12,981		)	—		—			—		(12,981		)
Proceeds from the exercise of stock options	2,472			—		—			—		2,472
Share repurchases	(36,245		)	—		—			—		(36,245		)
Net cash provided by (used in) financing activities	(46,754		)	—		—			—		(46,754		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	13,018			5,859		(38,175		)	—		(19,298		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	19,997			11,324		650,558			—		681,879
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	33,015		$	17,183	$	612,383		$	—	$	662,581

Notes to Parent Company Condensed Financial Information

a) Dividends

Allied World Switzerland received cash dividends from its subsidiaries of $94,000 and $90,000 for the three months ended March 31, 2014 and 2013, respectively. Such dividends are included in “cash flows provided by (used in) operating activities” in the unaudited condensed consolidating cash flows.