PROSPECTUS SUPPLEMENT NO. 6		Filed Pursuant to Rule 424(b)(3)
(To Prospectus dated July 21, 2006)		Registration No. 333-135464

$500,000,000

7.50% Senior Notes due 2016

     This Prospectus Supplement No. 6 supplements the Market-Making Prospectus, dated July 21, 2006, as supplemented, relating to the public offering of the issuer’s 7.50% senior notes due 2016, which closed on July 26, 2006. Goldman, Sachs & Co. is continuing to make a market in the senior notes pursuant to the Market-Making Prospectus.

     This Prospectus Supplement No. 6 includes a Current Report on Form 8-K filed with the SEC on February 13, 2007. The Form 8-K includes an earnings release announcing the issuer’s financial results for the fourth quarter and year-end 2006.

     You should read this Prospectus Supplement No. 6 in conjunction with the Market-Making Prospectus, as supplemented. This Prospectus Supplement No. 6 updates information in the Market-Making Prospectus, as supplemented, and, accordingly, to the extent inconsistent, the information in this Prospectus Supplement No. 6 supersedes the information contained in the Market-Making Prospectus, as supplemented.

     Before you invest in the issuer’s senior notes, you should read the Market-Making Prospectus, as supplemented, and other documents the issuer has filed with the SEC for more complete information about the issuer and an investment in its senior notes. You may get these documents for free by visiting EDGAR on the SEC Website at www.sec.gov. Alternatively, you may obtain a copy of the Market-Making Prospectus by calling Goldman, Sachs & Co. toll-free at 1-866-471-2526.

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement is truthful and complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement No. 6 is February 13, 2007.

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 12, 2007

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

(Exact Name of Registrant as Specified in Charter)

Bermuda		001-32938		98-0481737
(State or Other Jurisdiction		(Commission File Number)		(I.R.S. Employer
of Incorporation)				Identification No.)

27 Richmond Road
Pembroke HM 08, Bermuda
(Address of Principal Executive Offices and Zip Code)

Registrant’s telephone number, including area code: (441) 278-5400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition.

     On February 12, 2007, Allied World Assurance Company Holdings, Ltd issued a press release reporting its fourth quarter and year-end results for 2006 and the availability of its fourth quarter and year-end 2006 financial supplement. The press release and the financial supplement are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively. The information hereunder is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not otherwise subject to the liabilities of that section and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit
Number		Description
99.1		Press release, dated February 12, 2007, reporting fourth quarter and year-end results for 2006.
99.2		Fourth Quarter and Year-End 2006 Financial Supplement.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
Dated: February 12, 2007		By:		/s/ Joan H. Dillard
		Name:		Joan H. Dillard
		Title:		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit
Number		Description
99.1		Press release, dated February 12, 2007, reporting fourth quarter and year-end results for 2006.
99.2		Fourth Quarter and Year-End 2006 Financial Supplement.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD REPORTS RECORD
FOURTH QUARTER AND FULL YEAR
2006 OPERATING RESULTS

PEMBROKE, BERMUDA, February 12, 2007 — Allied World Assurance Company Holdings, Ltd (NYSE: AWH) today reported net income of $128.4 million, or $2.04 per diluted share, for the fourth quarter 2006 compared to a net loss of $12.3 million, or $0.24 per diluted share, for the fourth quarter 2005. Net income for the year ended December 31, 2006 was $442.8 million, or $7.75 per diluted share, compared to a net loss of $159.8 million, or $3.19 per diluted share, for the year ended December 31, 2005. Results in 2005 were adversely impacted by Hurricanes Katrina, Rita and Wilma.

The company reported record operating income of $133.6 million, or $2.12 per diluted share, for the fourth quarter 2006 compared to an operating loss of $5.3 million, or $0.11 per diluted share, for the fourth quarter 2005. Operating income for the year ended December 31, 2006 was $472.1 million, or $8.27 per diluted share, compared to a net loss of $147.4 million, or $2.94 per diluted share, for the year ended December 31, 2005.

President and Chief Executive Officer Scott Carmilani commented, “During the quarter, Allied World marked its fifth anniversary, and we are very proud of what we have accomplished in our first five years. In 2006, we took the company public, consolidated our Bermuda operations into new corporate headquarters and expanded our U.S. operating platform.”

“On top of these successes, each operating segment performed extremely well during 2006, and we can now report record net and operating income for the quarter and for the full year. We have grown our diluted book value per share by 25% during the year and increased our capital base to over $2.7 billion, a 42% increase from the beginning of the year.”

Mr. Carmilani continued, “As a maturing company with a global diversified platform firmly in place, we are working to maintain our underwriting discipline through the current market conditions. We are bolstered by a very strong balance sheet, strong financial ratings, and an invested asset base that is approaching $6 billion. We believe that we are very well positioned as we move forward in 2007.”

Underwriting Results

Gross premiums written were $280.1 million in the fourth quarter 2006, a 1.2% decrease compared to $283.4 million in the fourth quarter 2005. For the year ended December 31, 2006, gross premiums written totaled $1,659.0 million, a 6.3% increase compared to $1,560.3 million for the year ended December 31, 2005. This increase was primarily the result of increased premiums from the company’s reinsurance segment due to new business written during the year and from upward premium adjustments on prior year business. In addition, premiums written increased due to continued expansion of the company’s U.S distribution platform and from increases in general property rates in certain North America catastrophe exposed areas and increased market opportunities that developed following the 2005 hurricane season.

Net premiums written were $210.7 million in the fourth quarter 2006, a 1.3% decrease compared to $213.6 million in the fourth quarter 2005. For the year ended December 31, 2006, net premiums written totaled $1,306.6 million, a 6.9% increase compared to $1,222.0 million for the year ended December 31, 2005, which corresponds with the increase in gross premiums written during the same period.

Net premiums earned in the fourth quarter 2006 were $319.8 million, a 5.9% increase compared to $302.0 million in the fourth quarter 2005. For the year ended December 31, 2006, net premiums earned totaled $1,252.0 million, a 1.5% decrease from net premiums earned of $1,271.5 million for the year ended December 31, 2005. This decrease reflects the reduced level of net premiums written during 2005.

The combined ratio was 75.3% in the fourth quarter 2006 compared to 115.8% in the fourth quarter 2005. The loss ratio was 53.9% in the fourth quarter 2006 compared to 95.6% in the fourth quarter 2005. During the fourth quarter 2006, the company recorded net favorable reserve development on prior accident years of $43.1 million, a benefit of 13.5 percentage points to the company’s loss ratio for this quarter. The combined ratio for the year ended December 31, 2006 was 78.8% compared to 124.4% for the year ended December 31, 2005. Results for the quarter ended December 31, 2005 were impacted by Hurricane Wilma while results for the year ended December 31, 2005 were adversely impacted by Hurricanes Katrina, Rita and Wilma.

Investment Results

Net investment income in the fourth quarter 2006 was $66.0 million, an increase of 29.9% over the $50.8 million of net investment income in the fourth quarter 2005. For the year ended December 31, 2006, net investment income was $244.4 million, an increase of 36.9% over $178.6 million for the year ended December 31, 2005. These increases primarily reflect the increase in the company’s invested asset base driven by strong operating cash flows and the receipt of approximately $316 million in net proceeds from the company’s initial public offering completed in July 2006. During the fourth quarter 2006, the company recorded net realized losses of $4.2 million compared to net realized losses of $5.3 million in the fourth quarter 2005. For the year ended December 31, 2006, the company recorded net realized losses of $28.7 million compared to net realized losses of $10.2 million for the year ended December 31, 2005.

Legal Matter

The company has a pending legal matter stemming from a Civil Investigative Demand received from the State of Texas in November 2005. Based on discussions with representatives of the Attorney General of that state, the investigation is currently expected to proceed to a settlement. This is likely to result in certain payments that would be adverse to the company. Based on those discussions, the company has reserved $2.1 million for settlement payments to be made to the State of Texas.

Shareholders’ Equity

Shareholders’ equity exceeded $2.2 billion at December 31, 2006, including net proceeds from the company’s initial public offering, compared to $1.4 billion reported at December 31, 2005. Diluted book value per share was $35.26 at December 31, 2006 compared to $28.20 at December 31, 2005. The company’s annualized return on average equity for the quarter and the year ended December 31, 2006 was 23.9% and 24.2%, respectively. The company’s annualized operating return on average equity for the quarter and the year ended December 31, 2006 was 24.8% and 25.8%, respectively.

Conference Call

Allied World Assurance Company Holdings, Ltd will host a conference call on Tuesday, February 13, 2007 at 8:30 a.m. (Eastern Time) to discuss its fourth quarter financial results. The public may access a live webcast of the conference call at the “Investor Relations” section of the company’s website at www.awac.com. In addition, the conference call can be accessed by dialing (866) 203-3436 (U.S. and Canada callers) or (617) 213-8849 (international callers) and entering the passcode 43663034 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Tuesday, February 27, 2007 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 19573156. In addition, the webcast will remain available online through Tuesday, February 27, 2007 at www.awac.com.

Financial Supplement

A financial supplement relating to the fourth quarter of 2006 will be available at the “Investor Relations” section of the company’s website at www.awac.com.

Non-GAAP Financial Measures

In presenting the company’s results, management has included and discussed in this press release certain non-GAAP financial measures within the meaning of Regulation G as promulgated by the U.S. Securities and Exchange Commission. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

“Operating income” is an internal performance measure used by the company in the management of its operations and represents after-tax operational results excluding, as applicable, net realized investment gains or losses and foreign exchange gains or losses. The company excludes net realized investment gains or losses and net foreign exchange gains or losses from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part according to, the availability of market

opportunities. The company believes these amounts are largely independent of its business and underwriting process and including them may distort the analysis of trends in its insurance and reinsurance operations. In addition to presenting net income determined in accordance with GAAP, the company believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the company’s results of operations in a manner similar to how management analyzes the company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income.

The company has included “diluted book value per share” because it takes into account the effect of dilutive securities; therefore, the company believes it is a better measure of calculating shareholder returns than book value per share.

“Annualized return on average equity” (ROAE) is calculated using average equity, excluding the average after tax unrealized gains or losses on investments. Unrealized gains (losses) on investments are primarily the result of interest rate movements and the resultant impact on fixed income securities. Such gains (losses) are not related to management actions or operational performance, nor are they likely to be realized. Therefore, the company believes that excluding these unrealized gains (losses) provides a more consistent and useful measurement of operating performance, which supplements GAAP information. In calculating ROAE, the net income (loss) available to shareholders for the period is multiplied by the number of such periods in a calendar year in order to arrive at annualized net income (loss) available to shareholders. The company presents ROAE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

“Annualized operating return on average equity” is calculated using operating income (as defined above and annualized in the manner described for net income (loss) available to shareholders under ROAE above), and average equity, excluding the average after tax unrealized gains (losses) on investments. Unrealized gains (losses) are excluded from equity for the reasons outlined in the annualized return on average equity explanation above.

Reconciliations of these financial measures to their most directly comparable GAAP measures are included in the attached tables.

About Allied World Assurance Company

Allied World Assurance Company Holdings, Ltd, founded in November 2001, is one of Bermuda’s leading property and casualty insurers. The company, through its operating subsidiaries, offers property and casualty insurance and reinsurance on a worldwide basis. The principal operating subsidiaries of Allied World Assurance Company Holdings, Ltd have A (Excellent) ratings from A.M. Best Company and A- ratings from Standard & Poor’s. The company’s Bermuda and U.S. operating subsidiaries are rated A2 by Moody’s Investors Service.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that involve inherent risks and uncertainties. Statements that are not historical facts, including statements that use terms such as “believes,” “anticipates,” “intends” or “expects” and that relate to our plans and objectives for future operations, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this press release should not be considered as a representation by us or any other person that our objectives or plans will be achieved. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (b) the effects of investigations into market practices, in particular insurance brokerage practices, together with any legal or regulatory proceedings, related settlements and industry reform or other changes arising therefrom; (c) the impact of acts of terrorism and acts of war; (d) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices have anticipated; (e) increased competition due to an increase in capacity of property and casualty insurers or reinsurers; (f) the inability to obtain or maintain financial strength ratings by one or more of the company’s subsidiaries; (g) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (h) the company or one of its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; (i) changes in regulations or tax laws applicable to the company, its subsidiaries, brokers or customers; (j) changes in the availability, cost or quality of reinsurance or retrocessional coverage; (k) loss of key personnel; (l) changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect the company’s investment portfolio; and (m) such other risk factors as may be discussed in our most recent documents on file with the SEC. We are under no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of United States dollars, except share and per share amounts)

		Three Months Ended December 31,								Year Ended December 31,
		2006				2005				2006				2005
Revenues:
Gross premiums written		$	280,111			$	283,393			$	1,659,025			$	1,560,326
Premiums ceded			(69,372	)			(69,822	)			(352,429	)			(338,375	)
Net premiums written			210,739				213,571				1,306,596				1,221,951
Change in unearned premiums			109,052				88,461				(54,586	)			49,560
Net premiums earned			319,791				302,032				1,252,010				1,271,511
Net investment income			66,009				50,823				244,360				178,560
Net realized investment losses			(4,190	)			(5,286	)			(28,678	)			(10,223	)
Total Revenue			381,610				347,569				1,467,692				1,439,848
Expenses:
Net losses and loss expenses			172,395				288,669				739,133				1,344,600
Acquisition costs			34,568				33,604				141,488				143,427
General and administrative expenses			33,856				27,594				106,075				94,270
Interest expense			9,510				5,832				32,566				15,615
Foreign exchange loss			1,092				1,670				601				2,156
Total Expenses			251,421				357,369				1,019,863				1,600,068
Income (loss) before income taxes			130,189				(9,800	)			447,829				(160,220	)
Income tax expense (recovery)			1,827				2,478				4,991				(444	)
NET INCOME (LOSS)		$	128,362			$	(12,278	)		$	442,838			$	(159,776	)
PER SHARE DATA:
Basic earnings (loss) per share		$	2.13			$	(0.24	)		$	8.09			$	(3.19	)
Diluted earnings (loss) per share		$	2.04			$	(0.24	)		$	7.75			$	(3.19	)
Weighted average common shares outstanding			60,284,459				50,162,842				54,746,613				50,162,842
Weighted average common shares and common share equivalents outstanding			62,963,243				50,162,842				57,115,171				50,162,842

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of United States dollars, except share and per share amounts)

		As of December				As of December
		31, 2006				31, 2005
ASSETS:
Fixed maturity investments available for sale at fair value (amortized cost: 2006: $5,188,379; 2005: $4,442,040)		$	5,177,812			$	4,390,457
Other invested assets available for sale, at fair value (cost: 2006: $245,657; 2005: $270,138)			262,557				296,990
Cash and cash equivalents			366,817				172,379
Restricted cash			138,223				41,788
Securities lending collateral			304,742				456,792
Insurance balances receivable			304,261				218,044
Prepaid reinsurance			159,719				140,599
Reinsurance recoverable			689,105				716,333
Accrued investment income			51,112				48,983
Deferred acquisition costs			100,326				94,557
Intangible assets			3,920				3,920
Balances receivable on sale of investments			16,545				3,633
Income tax assets			5,140				8,516
Other assets			40,301				17,501
Total assets		$	7,620,580			$	6,610,492
LIABILITIES:
Reserve for losses and loss expenses		$	3,636,997			$	3,405,353
Unearned premiums			813,797				740,091
Unearned ceding commissions			23,914				27,465
Reinsurance balances payable			82,212				28,567
Securities lending payable			304,742				456,792
Senior notes			498,577				—
Long term debt			—				500,000
Accounts payable and accrued liabilities			40,257				31,958
Total liabilities		$	5,400,496			$	5,190,226
SHAREHOLDERS’ EQUITY:
Common stock, par value $0.03 per share, issued and outstanding 2006: 60,287,696 shares; 2005: 50,162,842 shares			1,809				1,505
Additional paid-in capital			1,822,607				1,488,860
Retained earnings (accumulated deficit)			389,204				(44,591	)
Accumulated other comprehensive income (loss): net unrealized gains (losses) on investments, net of tax			6,464				(25,508	)
Total shareholders’ equity			2,220,084				1,420,266
Total liabilities and shareholders’ equity		$	7,620,580			$	6,610,492

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONSOLIDATED SEGMENT DATA

(Expressed in thousands of United States dollars, except for ratio information)

Three Months Ended December 31, 2006		Property				Casualty				Reinsurance				Total
Gross premiums written		$	89,072			$	147,314			$	43,725			$	280,111
Net premiums written			40,846				126,169				43,724				210,739
Net premiums earned			49,151				133,805				136,835				319,791
Net losses and loss expenses			(28,029	)			(72,766	)			(71,600	)			(172,395	)
Acquisition costs			(384	)			(6,821	)			(27,363	)			(34,568	)
General and administrative expenses			(8,061	)			(16,935	)			(8,860	)			(33,856	)
Underwriting income			12,677				37,283				29,012				78,972
Net investment income															66,009
Net realized investment losses															(4,190	)
Interest expense															(9,510	)
Foreign exchange loss															(1,092	)
Income before income taxes														$	130,189
GAAP Ratios:
Loss and loss expense ratio			57.0	%			54.4	%			52.3	%			53.9	%
Acquisition cost ratio			0.8	%			5.1	%			20.0	%			10.8	%
General and administrative expense ratio			16.4	%			12.6	%			6.5	%			10.6	%
Combined ratio			74.2	%			72.1	%			78.8	%			75.3	%

Three Months Ended December 31, 2005		Property				Casualty				Reinsurance				Total
Gross premiums written		$	96,420			$	154,563			$	32,410			$	283,393
Net premiums written			47,505				133,770				32,296				213,571
Net premiums earned			48,276				133,481				120,275				302,032
Net losses and loss expenses			(64,926	)			(108,385	)			(115,358	)			(288,669	)
Acquisition costs			2,035				(8,668	)			(26,971	)			(33,604	)
General and administrative expenses			(6,067	)			(13,598	)			(7,929	)			(27,594	)
Underwriting (loss) income			(20,682	)			2,830				(29,983	)			(47,835	)
Net investment income															50,823
Net realized investment losses															(5,286	)
Interest expense															(5,832	)
Foreign exchange loss															(1,670	)
Loss before income taxes														$	(9,800	)
GAAP Ratios:
Loss and loss expense ratio			134.5	%			81.2	%			95.9	%			95.6	%
Acquisition cost ratio			(4.2	%)			6.5	%			22.4	%			11.1	%
General and administrative expense ratio			12.6	%			10.2	%			6.6	%			9.1	%
Combined ratio			142.8	%			97.9	%			124.9	%			115.8	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED CONSOLIDATED SEGMENT DATA

(Expressed in thousands of United States dollars, except for ratio information)

Year Ended December 31, 2006		Property				Casualty				Reinsurance				Total
Gross premiums written		$	463,903			$	622,387			$	572,735			$	1,659,025
Net premiums written			193,655				540,980				571,961				1,306,596
Net premiums earned			190,784				534,294				526,932				1,252,010
Net losses and loss expenses			(114,994	)			(331,759	)			(292,380	)			(739,133	)
Acquisition costs			2,247				(30,396	)			(113,339	)			(141,488	)
General and administrative expenses			(26,294	)			(52,809	)			(26,972	)			(106,075	)
Underwriting income			51,743				119,330				94,241				265,314
Net investment income															244,360
Net realized investment losses															(28,678	)
Interest expense															(32,566	)
Foreign exchange loss															(601	)
Income before income taxes														$	447,829
GAAP Ratios:
Loss and loss expense ratio			60.3	%			62.1	%			55.5	%			59.0	%
Acquisition cost ratio			(1.2	%)			5.7	%			21.5	%			11.3	%
General and administrative expense ratio			13.8	%			9.9	%			5.1	%			8.5	%
Combined ratio			72.9	%			77.7	%			82.1	%			78.8	%

Year Ended December 31, 2005		Property				Casualty				Reinsurance				Total
Gross premiums written		$	412,879			$	633,075			$	514,372			$	1,560,326
Net premiums written			170,781				557,622				493,548				1,221,951
Net premiums earned			226,828				581,330				463,353				1,271,511
Net losses and loss expenses			(410,265	)			(430,993	)			(503,342	)			(1,344,600	)
Acquisition costs			(5,685	)			(33,544	)			(104,198	)			(143,427	)
General and administrative expenses			(20,261	)			(44,273	)			(29,736	)			(94,270	)
Underwriting (loss) income			(209,383	)			72,520				(173,923	)			(310,786	)
Net investment income															178,560
Net realized investment losses															(10,223	)
Interest expense															(15,615	)
Foreign exchange loss															(2,156	)
Loss before income taxes														$	(160,220	)
GAAP Ratios:
Loss and loss expense ratio			180.9	%			74.1	%			108.6	%			105.7	%
Acquisition cost ratio			2.5	%			5.8	%			22.5	%			11.3	%
General and administrative expense ratio			8.9	%			7.6	%			6.4	%			7.4	%
Combined ratio			192.3	%			87.5	%			137.5	%			124.4	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED OPERATING INCOME RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

		Three Months Ended December 31,								Year Ended December 31,
		2006				2005				2006				2005
Net income (loss)		$	128,362			$	(12,278	)		$	442,838			$	(159,776	)
Net realized investment losses			4,190				5,286				28,678				10,223
Foreign exchange loss			1,092				1,670				601				2,156
Operating income (loss)		$	133,644			$	(5,322	)		$	472,117			$	(147,397	)
Weighted average common shares outstanding:
Basic			60,284,459				50,162,842				54,746,613				50,162,842
Diluted			62,963,243				50,162,842				57,115,171				50,162,842
Basic per share data:
Net income (loss)		$	2.13			$	(0.24	)		$	8.09			$	(3.19	)
Net realized investment losses			0.07				0.11				0.52				0.21
Foreign exchange loss			0.02				0.02				0.01				0.04
Operating income (loss)		$	2.22			$	(0.11	)		$	8.62			$	(2.94	)
Diluted per share data
Net income (loss)		$	2.04			$	(0.24	)			7.75			$	(3.19	)
Net realized investment losses			0.06				0.11				0.51				0.21
Foreign exchange loss			0.02				0.02				0.01				0.04
Operating income (loss)		$	2.12			$	(0.11	)			8.27			$	(2.94	)

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED DILUTED BOOK VALUE PER SHARE RECONCILIATION

(Expressed in thousands of United States dollars, except share and per share amounts)

		As of December				As of December
		31, 2006				31, 2005
Price per share at period end		$	43.63				N/A
Total shareholders’ equity			2,220,084				1,420,266
Basic common shares outstanding			60,287,696				50,162,842
Add: unvested restricted share units			704,372				127,163
Add: long-term incentive plan share units			342,501				—
Add: dilutive options/warrants outstanding			6,695,990				662,833
Weighted average exercise price per share		$	33.02			$	24.88
Less: treasury stock method adjustment			(5,067,534	)			(582,486	)
Common shares and common share equivalents outstanding			62,963,025				50,370,352
Basic book value per common share		$	36.82			$	28.31
Diluted book value per common share		$	35.26			$	28.20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY RECONCILIATION

(Expressed in thousands of United States dollars, except for percentage information)

		Three Months Ended December 31,								Year Ended December 31,
		2006				2005				2006				2005
Opening shareholders’ equity		$	2,094,872			$	1,441,956			$	1,420,266			$	2,138,521
(Deduct)/add: net unrealized (gains) losses on investments, net of tax			(3,447	)			16,095				25,508				(33,171	)
Adjusted opening shareholders’ equity			2,091,425				1,458,051				1,445,774				2,105,350
Closing shareholders’ equity			2,220,084				1,420,266				2,220,084				1,420,266
(Deduct)/add: net unrealized (gains) losses on investments, net of tax			(6,464	)			25,508				(6,464	)			25,508
Adjusted closing shareholders’ equity			2,213,620				1,445,774				2,213,620				1,445,774
Average shareholders’ equity		$	2,152,523			$	1,451,913			$	1,829,697			$	1,775,562
Net income (loss) available to shareholders		$	128,362			$	(12,278	)		$	442,838			$	(159,776	)
Annualized net income (loss) available to shareholders			513,448				(49,112	)			442,838				(159,776	)
Annualized return on average shareholders’ equity — net income (loss) available to shareholders			23.9	%			(3.4	%)			24.2	%			(9.0	%)
Operating income (loss) available to shareholders		$	133,644			$	(5,322	)		$	472,117			$	(147,397	)
Annualized operating income (loss) available to shareholders			534,576				(21,288	)			472,117				(147,397	)
Annualized return on average shareholders’ equity — operating income (loss) available to shareholders			24.8	%			(1.5	%)			25.8	%			(8.3	%)

For further information, please contact:

Investor Contact:		Media Contact:
Keith Lennox		Jamie Tully/Susan Burns
Allied World Assurance Company		Sard Verbinnen & Co
212-635-5319		212-687-8080
keith.lennox@awac.com		jtully@sardverb.com
		sburns@sardverb.com

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

Investor Contact:		This report is for informational purposes only. It should be read in conjunction with documents filed by Allied World Assurance Company Holdings, Ltd with the U.S. Securities and Exchange Commission.
Keith Lennox

Phone: (212) 635-5319
Fax: (212) 635-5532
email: keith.lennox@awac.com

NOTE ON FORWARD-LOOKING STATEMENTS

This report may contain forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 that involve inherent risks and uncertainties. Statements that are not historical facts, including statements that use terms such as “believes”, “anticipates”, “intends” or “expects” and that relate to our plans and objectives for future operations, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this report should not be considered as a representation by us or any other person that our objectives or plans will be achieved. These statements are based on current plans, estimates and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore you should not place undue reliance on them. A non-exclusive list of the important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products; (b) the effects of investigations into market practices, in particular insurance brokerage practices, together with any legal or regulatory proceedings, related settlements and industry reform or other changes arising therefrom; (c) the impact of acts of terrorism and acts of war; (d) greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices have anticipated; (e) increased competition due to an increase in capacity of property and casualty insurers or reinsurers; (f) the inability to obtain or maintain financial strength ratings by one or more of the company’s subsidiaries; (g) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (h) the company or one of its subsidiaries becoming subject to significant income taxes in the United States or elsewhere; (i) changes in regulations or tax laws applicable to the company, its subsidiaries, brokers or customers; (j) changes in the availability, cost or quality of reinsurance or retrocessional coverage; (k) loss of key personnel; (l) changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect the company’s investment portfolio; and (m) such other risk factors as may be discussed in our most recent documents on file with the U.S. Securities and Exchange Commission (“SEC”). We undertake no obligation (and expressly disclaim any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
FINANCIAL SUPPLEMENT TABLE OF CONTENTS

						Page
				Basis of Presentation			4
	I.			Financial Highlights
				- Consolidated Financial Highlights			5
II.				Consolidated Results
				- Consolidated Statements of Operations — Consecutive Quarters			6
				- Consolidated Statements of Operations — Year to Date			7
				- Consolidated Premium Distribution Analysis — Current Quarter			8
				- Consolidated Premium Distribution Analysis — Year to Date			9
III.				Segment Results
				- Consolidated Segment Results — Current Quarter			10
				- Consolidated Segment Results — Year to Date			11
IV.				Balance Sheet Details
				- Consolidated Balance Sheets			12
				- Investment Portfolio			13
				- Reserve for Losses and Loss Expenses			14
				- Capital Structure			15
	V.			Other
				- Basic and Diluted Earnings per Share			16
				- Return on Average Shareholders’ Equity — Consecutive Quarters			17
				- Return on Average Shareholders’ Equity — Year to Date			18
				- Diluted Book Value per Share			19
				- Annualized Investment Book Yield			20
				- Regulation G			22

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

- All financial information contained herein is unaudited.

- Unless otherwise noted, all data is in thousands of U.S. dollars, except for share, per share, percentage and ratio information.

- Allied World Assurance Company Holdings, Ltd, along with others in the industry, uses underwriting ratios as measures of performance. The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned. The acquisition cost ratio is calculated by dividing acquisition costs by net premiums earned. The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned. The expense ratio is calculated by combining the acquisition cost ratio and the general and administrative expense ratio. The combined ratio is calculated by combining the loss ratio, the acquisition cost ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned or written, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned or written premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.

- In presenting the company’s results, management has included and discussed certain “non-GAAP” financial measures, as such term is defined in Regulation G promulgated by the SEC. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in this financial supplement. See page 22 for further details.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED FINANCIAL HIGHLIGHTS

						THREE MONTHS ENDED										YEAR ENDED									Previous				Previous
						DECEMBER 31,										DECEMBER 31,									Quarter				Year to Date
						2006					2005					2006					2005				Change				Change
HIGHLIGHTS				Gross premiums written		$	280,111				$	283,393				$	1,659,025				$	1,560,326				(1.2	%)			6.3	%
				Net premiums written			210,739					213,571					1,306,596					1,221,951				(1.3	%)			6.9	%
				Net premiums earned			319,791					302,032					1,252,010					1,271,511				5.9	%			(1.5	%)
				Net investment income			66,009					50,823					244,360					178,560				29.9	%			36.9	%
				Net income (loss)			128,362					(12,278	)				442,838					(159,776	)			(1145.5	%)			(377.2	%)
				Operating income (loss)			133,644					(5,322	)				472,117					(147,397	)			(2611.2	%)			(420.3	%)
				Total assets			7,620,580					6,610,492					7,620,580					6,610,492				15.3	%			15.3	%
				Total shareholders’ equity			2,220,084					1,420,266					2,220,084					1,420,266				56.3	%			56.3	%
				Cash flows from operating activities			111,141					140,206					762,146					730,111				(20.7	%)			4.4	%
PER SHARE				Basic earnings per share
AND SHARE DATA				Net income (loss)		$	2.13				$	(0.24	)			$	8.09				$	(3.19	)			(987.5	%)			(353.6	%)
				Operating income (loss)		$	2.22				$	(0.11	)			$	8.62				$	(2.94	)			(2118.2	%)			(393.2	%)
				Diluted earnings per share
				Net income (loss)		$	2.04				$	(0.24	)			$	7.75				$	(3.19	)			(950.0	%)			(342.9	%)
				Operating income (loss)		$	2.12				$	(0.11	)			$	8.27				$	(2.94	)			(2027.3	%)			(381.3	%)
				Weighted average common shares outstanding
				Basic			60,284,459					50,162,842					54,746,613					50,162,842
				Diluted			62,963,243					50,162,842					57,115,171					50,162,842
				Book value		$	36.82				$	28.31				$	36.82				$	28.31				30.1	%			30.1	%
				Diluted book value (treasury stock method)		$	35.26				$	28.20				$	35.26				$	28.20				25.0	%			25.0	%
FINANCIAL RATIOS				Return on average equity (ROAE), net income (loss)			23.9	%				(3.4	%)				24.2	%				(9.0	%)		27.3		pts		33.2		pts
				ROAE, operating income (loss)			24.8	%				(1.5	%)				25.8	%				(8.3	%)		26.3		pts		34.1		pts
				Annualized investment book yield			4.4	%				3.7	%				4.5	%				3.9	%		0.7		pts		0.6		pts
				Loss and loss expense ratio			53.9	%				95.6	%				59.0	%				105.7	%		(41.7		) pts		(46.7		) pts
				Acquisition cost ratio			10.8	%				11.1	%				11.3	%				11.3	%		(0.3		) pts		—		pts
				General and administrative expense ratio			10.6	%				9.1	%				8.5	%				7.4	%		1.5		pts		1.1		pts
				Expense ratio			21.4	%				20.2	%				19.8	%				18.7	%		1.2		pts		1.1		pts
				Combined ratio			75.3	%				115.8	%				78.8	%				124.4	%		(40.5		) pts		(45.6		) pts

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS

		THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED				THREE MONTHS ENDED
		DECEMBER 31, 2006				SEPTEMBER 30, 2006				JUNE 30, 2006				MARCH 31, 2006				DECEMBER 31, 2005				SEPTEMBER 30, 2005
Revenues
Gross premiums written		$	280,111			$	362,478			$	518,316			$	498,120			$	283,393			$	329,930
Net premiums written		$	210,739			$	298,016			$	370,338			$	427,503			$	213,571			$	249,720
Net premiums earned		$	319,791			$	317,759			$	305,517			$	308,943			$	302,032			$	313,276
Net investment income			66,009				61,407				54,943				62,001				50,823				47,592
Net realized investment (losses) gains			(4,190	)			(9,080	)			(10,172	)			(5,236	)			(5,286	)			4,152
Total revenues		$	381,610			$	370,086			$	350,288			$	365,708			$	347,569			$	365,020
Expenses
Net losses and loss expenses		$	172,395			$	180,934			$	179,844			$	205,960			$	288,669			$	593,276
Acquisition costs			34,568				37,785				32,663				36,472				33,604				35,871
General and administrative expenses			33,856				25,640				26,257				20,322				27,594				20,795
Foreign exchange loss (gain)			1,092				(561	)			(475	)			545				1,670				(46	)
Interest expense			9,510				9,529				7,076				6,451				5,832				5,146
Total expenses		$	251,421			$	253,327			$	245,365			$	269,750			$	357,369			$	655,042
Income (loss) before income taxes		$	130,189			$	116,759			$	104,923			$	95,958			$	(9,800	)		$	(290,022	)
Income tax expense (recovery)			1,827				2,774				2,553				(2,163	)			2,478				(6,617	)
Net income (loss)		$	128,362			$	113,985			$	102,370			$	98,121			$	(12,278	)		$	(283,405	)
GAAP Ratios
Loss and loss expense ratio			53.9	%			56.9	%			58.9	%			66.7	%			95.6	%			189.4	%
Acquisition cost ratio			10.8	%			11.9	%			10.7	%			11.8	%			11.1	%			11.5	%
General and administrative expense ratio			10.6	%			8.1	%			8.6	%			6.6	%			9.1	%			6.6	%
Expense ratio			21.4	%			20.0	%			19.3	%			18.4	%			20.2	%			18.1	%
Combined ratio			75.3	%			76.9	%			78.2	%			85.1	%			115.8	%			207.5	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS

		YEAR ENDED				YEAR ENDED
		DECEMBER 31, 2006				DECEMBER 31, 2005
Revenues
Gross premiums written		$	1,659,025			$	1,560,326
Net premiums written			1,306,596				1,221,951
Net premiums earned		$	1,252,010			$	1,271,511
Net investment income			244,360				178,560
Net realized investment losses			(28,678	)			(10,223	)
Total revenues		$	1,467,692			$	1,439,848
Expenses
Net losses and loss expenses		$	739,133			$	1,344,600
Acquisition costs			141,488				143,427
General and administrative expenses			106,075				94,270
Foreign exchange loss			601				2,156
Interest expense			32,566				15,615
Total expenses		$	1,019,863			$	1,600,068
Income (loss) before income taxes		$	447,829			$	(160,220	)
Income tax expense (recovery)			4,991				(444	)
Net income (loss)		$	442,838			$	(159,776	)
GAAP Ratios
Loss and loss expense ratio			59.0	%			105.7	%
Acquisition cost ratio			11.3	%			11.3	%
General and administrative expense ratio			8.5	%			7.4	%
Expense ratio			19.8	%			18.7	%
Combined ratio			78.8	%			124.4	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006

Gross Premiums Written = $280,111

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED PREMIUM DISTRIBUTION
FOR THE YEAR ENDED DECEMBER 31, 2006

Gross Premiums Written = $1,659,025

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT RESULTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006

														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTALS
Revenues
Gross premiums written		$	89,072			$	147,314			$	43,725			$	280,111
Net premiums written		$	40,846			$	126,169			$	43,724			$	210,739
Net premiums earned		$	49,151			$	133,805			$	136,835			$	319,791
Total revenues		$	49,151			$	133,805			$	136,835			$	319,791
Expenses
Net losses and loss expenses		$	28,029			$	72,766			$	71,600			$	172,395
Acquisition costs			384				6,821				27,363				34,568
General and administrative expenses			8,061				16,935				8,860				33,856
Total expenses		$	36,474			$	96,522			$	107,823			$	240,819
Underwriting Income		$	12,677			$	37,283			$	29,012			$	78,972
GAAP Ratios
Loss and loss expense ratio			57.0	%			54.4	%			52.3	%			53.9	%
Acquisition cost ratio			0.8	%			5.1	%			20.0	%			10.8	%
General and administrative expense ratio			16.4	%			12.6	%			6.5	%			10.6	%
Expense ratio			17.2	%			17.7	%			26.5	%			21.4	%
Combined ratio			74.2	%			72.1	%			78.8	%			75.3	%