PROSPECTUS SUPPLEMENT NO. 4		Filed Pursuant to Rule 424(b)(3)
(To Prospectus dated July 21, 2006)		Registration No. 333-135464

$500,000,000

Allied World Assurance Company Holdings, Ltd

7.50% Senior Notes due 2016

     This Prospectus Supplement No. 4 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. 4 includes a Current Report on Form 8-K filed with the SEC on November 9, 2006. The Form 8-K includes an earnings release announcing the issuer’s financial results for the fiscal quarter ended September 30, 2006.

     You should read this Prospectus Supplement No. 4 in conjunction with the Market-Making Prospectus, as supplemented. This Prospectus Supplement No. 4 updates information in the Market-Making Prospectus, as supplemented, and, accordingly, to the extent inconsistent, the information in this Prospectus Supplement No. 4 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. 4 is November 9, 2006.

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

(Exact Name of Registrant as Specified In Its Charter)

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

43 Victoria Street
Hamilton HM 12, 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 (see General Instruction A.2. below):

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 November 8, 2006, Allied World Assurance Company Holdings, Ltd issued a press release reporting its third quarter 2006 results and the availability of its third quarter 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 November 8, 2006, reporting third quarter results.
99.2		Third Quarter 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: November 8, 2006		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 November 8, 2006, reporting third quarter results.
99.2		Third Quarter 2006 Financial Supplement.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD REPORTS THIRD
QUARTER 2006 OPERATING RESULTS; DECLARES QUARTERLY DIVIDEND
OF $0.15 PER COMMON SHARE

HAMILTON, BERMUDA, November 8, 2006 - Allied World Assurance Company Holdings, Ltd (NYSE: AWH) today reported net income of $114.0 million, or $1.89 per diluted share, for the third quarter 2006 compared to a net loss of $283.4 million, or $5.65 per diluted share, for the third quarter 2005. Net income for the nine months ended September 30, 2006 was $314.5 million, or $5.76 per diluted share, compared to a net loss of $147.5 million, or $2.94 per diluted share, for the first nine months of 2005. Results for the three and nine months ended September 30, 2005 were adversely impacted by Hurricanes Katrina and Rita.

The company reported record operating income of $122.5 million, or $2.03 per diluted share, for the third quarter 2006 compared to an operating loss of $287.6 million, or $5.73 per diluted share, for the third quarter 2005. Operating income for the nine months ended September 30, 2006 was $338.5 million, or $6.20 per diluted share, compared to a net loss of $142.1 million, or $2.83 per diluted share, for the first nine months of 2005.

President and Chief Executive Officer Scott Carmilani commented, “Allied World has had another very strong quarter with each of our operating segments continuing to perform very well. During the quarter, the company achieved record operating income of $122.5 million and grew our book value per share by approximately 11%. In addition to benefiting from benign catastrophe activity during the quarter, the company recognized favorable prior year reserve development and our growing investment portfolio continues to generate a substantial level of investment income.”

“We are energized by the company’s performance and our successful capital raising initiatives in July, including our initial public offering, which now allows us to support our business with almost $2.6 billion in capital and an invested asset base in excess of $5.8 billion. While market conditions are currently mixed depending on the line of business and geography, we believe that the diversity of our portfolio and our established operating platforms in Bermuda, Europe and the United States position us extremely well.”

Underwriting Results

Gross premiums written were $362.5 million in the third quarter 2006, a 9.9% increase compared to $329.9 million in the third quarter 2005. For the nine months ended September 30, 2006, gross premiums written totaled $1,378.9 million, an 8.0% increase compared to $1,276.9 million in the first nine months of 2005. This increase was primarily the result of an increase in general property rates in catastrophe prone areas and increased market opportunities that developed following the 2005 hurricane season. In addition, premiums from the company’s reinsurance segment increased due to upward premium adjustments on prior year business and from new business written.

Net premiums written were $298.0 million in the third quarter 2006, a 19.3% increase compared to $249.7 million in the third quarter 2005. For the nine months ended September 30, 2006, net premiums written totaled $1,095.9 million, an 8.7% increase compared to $1,008.4 million in the first nine months of 2005. This increase primarily reflects increased writings in the company’s reinsurance segment and the increased general property rates in catastrophe prone areas.

Net premiums earned in the third quarter were $317.8 million, a 1.4% increase compared to $313.3 million for the third quarter 2005. For the nine months ended September 30, 2006, net premiums earned totaled $932.2 million, a 3.8% decrease from net premiums earned of $969.5 million in the first nine months of 2005. This decrease reflects the reduction in net premiums written during 2005.

The combined ratio was 76.9% in the third quarter 2006 compared to 207.5% in the third quarter 2005. The loss ratio was 56.9% in the third quarter 2006 compared to 189.4% in the third quarter 2005. During the third quarter 2006, the company recorded net favorable reserve development on prior accident years of $38.7 million, a benefit of 12.2 percentage points to the company’s loss ratio for this quarter. The combined ratio for the nine months ended September 30, 2006 was 80.0% compared to 127.1% for the first nine months of 2005. Results for the three and nine months ended September 30, 2005 were adversely impacted by Hurricanes Katrina and Rita.

Investment Results

Net investment income in the third quarter 2006 was $61.4 million, an increase of 29.0% over the $47.6 million of net investment income in the third quarter 2005. For the nine months ended September 30, 2006, net investment income was $178.4 million, an increase of 39.6% over the first nine months of 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. During the third quarter 2006, the company recorded net realized losses of $9.1 million compared to net realized gains of $4.2 million in the third quarter 2005. For the nine months ended September 30, 2006, the company recorded net realized losses of $24.5 million compared to net realized losses of $4.9 million over the first nine months of 2005.

Shareholders’ Equity

At September 30, 2006, shareholders’ equity was $2.1 billion compared to $1.4 billion reported at December 31, 2005. Diluted book value per share was $33.54 at September 30, 2006 compared to $28.20 at December 31, 2005. The company’s annualized return on average equity for the three and nine months ended September 30, 2006 was 24.4% and 23.7%, respectively. The company’s annualized operating return on average equity for the three and nine months ended September 30, 2006 was 26.2% and 25.5%, respectively.

Quarterly Dividend

The Board of Directors of Allied World Assurance Company Holdings, Ltd has declared a quarterly dividend of $0.15 per common share payable on December 21, 2006 to the shareholders of record on December 5, 2006.

Conference Call

Allied World Assurance Company Holdings, Ltd will host a conference call on Thursday, November 9, 2006 at 10:00 a.m. (Eastern Time) to discuss its third 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) 761-0748 (U.S. and Canada callers) or (617) 614-2706 (international callers) and entering the passcode 79639647 approximately ten minutes prior to the call.

Following the conclusion of the presentation, a replay of the call will be available through Thursday, November 30, 2006 by dialing (888) 286-8010 (U.S. and Canada callers) or (617) 801-6888 (international callers) and entering the passcode 99687854. In addition, the webcast will remain available online through Thursday, November 30, 2006 at www.awac.com.

Financial Supplement

A financial supplement relating to the third 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.

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 U.S. Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of United States dollars, except share and per share amounts)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2006				2005				2006				2005
Revenues:
Gross premiums written		$	362,478			$	329,930			$	1,378,914			$	1,276,933
Premiums ceded			(64,462	)			(80,210	)			(283,057	)			(268,553	)
Net premiums written			298,016				249,720				1,095,857				1,008,380
Change in unearned premiums			19,743				63,556				(163,638	)			(38,901	)
Net premiums earned			317,759				313,276				932,219				969,479
Net investment income			61,407				47,592				178,351				127,737
Net realized investment (losses) gains			(9,080	)			4,152				(24,488	)			(4,937	)
Total Revenue			370,086				365,020				1,086,082				1,092,279
Expenses:
Net losses and loss expenses			180,934				593,276				566,738				1,055,931
Acquisition costs			37,785				35,871				106,920				109,823
General and administrative expenses			25,640				20,795				72,218				66,676
Interest expense			9,529				5,146				23,056				9,783
Foreign exchange (gain) loss			(561	)			(46	)			(491	)			486
Total Expenses			253,327				655,042				768,441				1,242,699
Income (loss) before income taxes			116,759				(290,022	)			317,641				(150,420	)
Income tax expense (recovery)			2,774				(6,617	)			3,164				(2,922	)
NET INCOME (LOSS)		$	113,985			$	(283,405	)		$	314,477			$	(147,498	)
PER SHARE DATA:
Basic earnings (loss) per share		$	1.95			$	(5.65	)		$	5.94			$	(2.94	)
Diluted earnings (loss) per share		$	1.89			$	(5.65	)		$	5.76			$	(2.94	)
Weighted average common shares outstanding			58,376,307				50,162,842				52,900,664				50,162,842
Weighted average common shares and common share equivalents outstanding			60,451,643				50,162,842				54,577,445				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 September				As of December
		30, 2006				31, 2005
						(Audited)
ASSETS:
Fixed maturity investments available for sale at fair value (amortized cost: 2006: $5,289,411; 2005:$4,442,040)		$	5,283,799			$	4,390,457
Other invested assets available for sale, at fair value (cost: 2006: $246,854; 2005: $270,138)			256,997				296,990
Cash and cash equivalents			270,848				172,379
Restricted cash			50,871				41,788
Securities lending collateral			700,804				456,792
Insurance balances receivable			306,084				218,044
Prepaid reinsurance			176,355				140,599
Reinsurance recoverable			688,066				716,333
Accrued investment income			43,498				48,983
Deferred acquisition costs			119,845				94,557
Intangible assets			3,920				3,920
Balances receivable on sale of investments			70,174				3,633
Income tax assets			5,540				8,516
Other assets			36,092				17,501
Total assets		$	8,012,893			$	6,610,492
LIABILITIES:
Reserve for losses and loss expenses		$	3,586,964			$	3,405,353
Unearned premiums			939,485				740,091
Unearned ceding commissions			25,537				27,465
Reinsurance balances payable			68,446				28,567
Securities lending payable			700,804				456,792
Balances due on purchase of investments			66,874				—
Senior notes			498,543				—
Long term debt			—				500,000
Accounts payable and accrued liabilities			31,368				31,958
Total liabilities		$	5,918,021			$	5,190,226
SHAREHOLDERS’ EQUITY:
Common stock, par value $0.03 per share, issued and outstanding 2006: 60,283,040 shares; 2005: 50,162,842 shares			1,809				1,505
Additional paid-in capital			1,819,730				1,488,860
Retained earnings (accumulated deficit)			269,886				(44,591	)
Accumulated other comprehensive income (loss): net unrealized gains (losses) on investments, net of tax			3,447				(25,508	)
Total shareholders’ equity			2,094,872				1,420,266
Total liabilities and shareholders’ equity		$	8,012,893			$	6,610,492

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars)

Three Months Ended September 30, 2006		Property				Casualty				Reinsurance				Total
Gross premiums written		$	88,150			$	144,576			$	129,752			$	362,478
Net premiums written			40,855				127,893				129,268				298,016
Net premiums earned			46,576				135,186				135,997				317,759
Net losses and loss expenses			(28,917	)			(78,979	)			(73,038	)			(180,934	)
Acquisition costs			373				(7,301	)			(30,857	)			(37,785	)
General and administrative expenses			(6,273	)			(12,894	)			(6,473	)			(25,640	)
Underwriting income			11,759				36,012				25,629				73,400
Net investment income			—				—				—				61,407
Net realized investment losses			—				—				—				(9,080	)
Interest expense			—				—				—				(9,529	)
Foreign exchange gain			—				—				—				561
Income before income taxes			—				—				—			$	116,759
GAAP Ratios:
Loss and loss expense ratio			62.1	%			58.4	%			53.7	%			56.9	%
Acquisition cost ratio			(0.8	%)			5.4	%			22.7	%			11.9	%
General and administrative expense ratio			13.5	%			9.6	%			4.8	%			8.1	%
Combined ratio			74.8	%			73.4	%			81.2	%			76.9	%

Three Months Ended September 30, 2005		Property				Casualty				Reinsurance				Total
Gross premiums written		$	85,048			$	153,267			$	91,615			$	329,930
Net premiums written			25,304				138,589				85,827				249,720
Net premiums earned			40,047				146,556				126,673				313,276
Net losses and loss expenses			(252,679	)			(101,928	)			(238,669	)			(593,276	)
Acquisition costs			1,771				(7,950	)			(29,692	)			(35,871	)
General and administrative expenses			(4,871	)			(10,314	)			(5,610	)			(20,795	)
Underwriting (loss) income			(215,732	)			26,364				(147,298	)			(336,666	)
Net investment income			—				—				—				47,592
Net realized investment gains			—				—				—				4,152
Interest expense			—				—				—				(5,146	)
Foreign exchange gain			—				—				—				46
Loss before income taxes			—				—				—			$	(290,022	)
GAAP Ratios:
Loss and loss expense ratio			630.9	%			69.6	%			188.4	%			189.4	%
Acquisition cost ratio			(4.4	%)			5.4	%			23.5	%			11.5	%
General and administrative expense ratio			12.2	%			7.0	%			4.4	%			6.6	%
Combined ratio			638.7	%			82.0	%			216.3	%			207.5	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED CONSOLIDATED SEGMENT DATA
(Expressed in thousands of United States dollars)

Nine Months Ended September 30, 2006		Property				Casualty				Reinsurance				Total
Gross premiums written		$	374,830			$	475,074			$	529,010			$	1,378,914
Net premiums written			152,808				414,812				528,237				1,095,857
Net premiums earned			141,633				400,488				390,098				932,219
Net losses and loss expenses			(86,965	)			(258,993	)			(220,780	)			(566,738	)
Acquisition costs			2,631				(23,575	)			(85,976	)			(106,920	)
General and administrative expenses			(18,233	)			(35,873	)			(18,112	)			(72,218	)
Underwriting income			39,066				82,047				65,230				186,343
Net investment income			—				—				—				178,351
Net realized investment losses			—				—				—				(24,488	)
Interest expense			—				—				—				(23,056	)
Foreign exchange gain			—				—				—				491
Income before income taxes			—				—				—			$	317,641
GAAP Ratios:
Loss and loss expense ratio			61.4	%			64.7	%			56.6	%			60.8	%
Acquisition cost ratio			(1.9	%)			5.9	%			22.0	%			11.5	%
General and administrative expense ratio			12.9	%			8.9	%			4.7	%			7.7	%
Combined ratio			72.4	%			79.5	%			83.3	%			80.0	%

Nine Months Ended September 30, 2005		Property				Casualty				Reinsurance				Total
Gross premiums written		$	316,459			$	478,511			$	481,963			$	1,276,933
Net premiums written			123,276				423,852				461,252				1,008,380
Net premiums earned			178,552				447,849				343,078				969,479
Net losses and loss expenses			(345,339	)			(322,608	)			(387,984	)			(1,055,931	)
Acquisition costs			(7,720	)			(24,876	)			(77,227	)			(109,823	)
General and administrative expenses			(14,194	)			(30,675	)			(21,807	)			(66,676	)
Underwriting (loss) income			(188,701	)			69,690				(143,940	)			(262,951	)
Net investment income			—				—				—				127,737
Net realized investment losses			—				—				—				(4,937	)
Interest expense			—				—				—				(9,783	)
Foreign exchange loss			—				—				—				(486	)
Loss before income taxes			—				—				—			$	(150,420	)
GAAP Ratios:
Loss and loss expense ratio			193.4	%			72.0	%			113.1	%			108.9	%
Acquisition cost ratio			4.3	%			5.6	%			22.5	%			11.3	%
General and administrative expense ratio			8.0	%			6.8	%			6.4	%			6.9	%
Combined ratio			205.7	%			84.4	%			142.0	%			127.1	%

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 Sept 30,								Nine Months Ended Sept 30,
		2006				2005				2006				2005
Net income (loss)		$	113,985			$	(283,405	)		$	314,477			$	(147,498	)
Net realized investment losses (gains)			9,080				(4,152	)			24,488				4,937
Foreign exchange (gain) loss			(561	)			(46	)			(491	)			486
Operating income (loss)		$	122,504			$	(287,603	)		$	338,474			$	(142,075	)
Weighted average common shares outstanding:
Basic			58,376,307				50,162,842				52,900,664				50,162,842
Diluted			60,451,643				50,162,842				54,577,445				50,162,842
Basic per share data:
Net income (loss)		$	1.95			$	(5.65	)		$	5.94			$	(2.94	)
Net realized investment losses (gains)			0.16				(0.08	)			0.47				0.10
Foreign exchange (gain) loss			(0.01	)			—				(0.01	)			0.01
Operating income (loss)		$	2.10			$	(5.73	)		$	6.40			$	(2.83	)
Diluted per share data
Net income (loss)		$	1.89			$	(5.65	)		$	5.76			$	(2.94	)
Net realized investment losses (gains)			0.15				(0.08	)			0.45				0.10
Foreign exchange (gain) loss			(0.01	)			—				(0.01	)			0.01
Operating income (loss)		$	2.03			$	(5.73	)		$	6.20			$	(2.83	)

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 September				As of December
		30, 2006				31, 2005
Price per share at period end		$	40.40				N/A
Total shareholders’ equity			2,094,872				1,420,266
Basic common shares outstanding			60,283,040				50,162,842
Add: unvested restricted share units			711,038				127,163
Add: long term incentive plan share units			228,334				—
Add: dilutive options/warrants outstanding			6,704,402				662,833
Weighted average exercise price per share		$	33.00			$	24.88
Less: treasury stock method adjustment			(5,476,585	)			(582,486	)
Common shares and common share equivalents outstanding			62,450,229				50,370,352
Basic book value per common share		$	34.75			$	28.31
Diluted book value per common share		$	33.54			$	28.20

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
UNAUDITED ANNUALIZED RETURN ON SHAREHOLDERS’ EQUITY
(Expressed in thousands of United States dollars)

		Three Months Ended Sept 30,								Nine Months Ended Sept 30,
		2006				2005				2006				2005
Opening shareholders’ equity		$	1,565,062			$	1,756,810			$	1,420,266			$	2,138,521
Add/(deduct): net unrealized losses (gains) on investments, net of tax			83,144				(15,353	)			25,508				(33,171	)
Adjusted opening shareholders’ equity			1,648,206				1,741,457				1,445,774				2,105,350
Closing shareholders’ equity			2,094,872				1,441,956				2,094,872				1,441,956
(Deduct)/add: net unrealized (gains) losses on investments, net of tax			(3,447	)			16,095				(3,447	)			16,095
Adjusted closing shareholders’ equity			2,091,425				1,458,051				2,091,425				1,458,051
Average shareholders’ equity		$	1,869,816			$	1,599,754			$	1,768,600			$	1,781,701
Net income (loss) available to shareholders		$	113,985			$	(283,405	)		$	314,477			$	(147,498	)
Annualized net income (loss) available to shareholders			455,940				(1,133,620	)			419,303				(196,664	)
Annualized return on average shareholders’ equity — net income (loss) available to shareholders			24.4	%			(70.9	%)			23.7	%			(11.0	%)
Operating income (loss) available to shareholders		$	122,504			$	(287,603	)		$	338,474			$	(142,075	)
Annualized operating income (loss) available to shareholders			490,016				(1,150,412	)			451,299				(189,433	)
Annualized return on average shareholders’ equity — operating income (loss) available to shareholders			26.2	%			(71.9	%)			25.5	%			(10.6	%)

     For further information, please contact:

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

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD

FINANCIAL SUPPLEMENT

September 30, 2006

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

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; if (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 to publicly update or revise any forward-looking statement, 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 Preparation			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
		- Segment Results — Current Quarter			10
		- 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 PREPARATION

DEFINITIONS AND PRESENTATION

- All financial information contained herein is unaudited, except the balance sheet and income statement data for the years ended December 31, 2005 and December 31, 2004, which was derived from the company’s audited financial statements.

- 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								NINE MONTHS ENDED								Previous				Previous
				SEPTEMBER 30,								SEPTEMBER 30,								Quarter				Year to Date
				2006				2005				2006				2005				Change				Change
HIGHLIGHTS		Gross premiums written		$	362,478			$	329,930			$	1,378,914			$	1,276,933				9.9	%			8.0	%
		Net premiums written			298,016				249,720				1,095,857				1,008,380				19.3	%			8.7	%
		Net premiums earned			317,759				313,276				932,219				969,479				1.4	%			(3.8	%)
		Net investment income			61,407				47,592				178,351				127,737				29.0	%			39.6	%
		Net income (loss)			113,985				(283,405	)			314,477				(147,498	)			(140.2	%)			(313.2	%)
		Operating income (loss)			122,504				(287,603	)			338,474				(142,075	)			(142.6	%)			(338.2	%)
		Total assets			8,012,893				7,182,918				8,012,893				7,182,918				11.6	%			11.6	%
		Total shareholders’ equity			2,094,872				1,441,956				2,094,872				1,441,956				45.3	%			45.3	%
		Cash flows from operating activities			239,740				211,649				651,005				589,905				13.3	%			10.4	%
PER SHARE AND SHARES DATA		Basic earnings per share
		Net income (loss)		$	1.95			$	(5.65	)		$	5.94			$	(2.94	)			(134.5	%)			(302.0	%)
		Operating income (loss)		$	2.10			$	(5.73	)		$	6.40			$	(2.83	)			(136.6	%)			(326.1	%)
		Diluted earnings per share
		Net income (loss)		$	1.89			$	(5.65	)		$	5.76			$	(2.94	)			(133.5	%)			(295.9	%)
		Operating income (loss)		$	2.03			$	(5.73	)		$	6.20			$	(2.83	)			(135.4	%)			(319.1	%)
		Weighted average common shares outstanding
		Basic			58,376,307				50,162,842				52,900,664				50,162,842
		Diluted			60,451,643				50,162,842				54,577,445				50,162,842
		Book value		$	34.75			$	28.75			$	34.75			$	28.75				20.9	%			20.9	%
		Diluted book value (treasury stock method)		$	33.54			$	28.62			$	33.54			$	28.62				17.2	%			17.2	%
FINANCIAL RATIOS		Return on average equity (ROAE), net income (loss)			24.4	%			(70.9	%)			23.7	%			(11.0	%)		95.3		pts		34.7		pts
		ROAE, operating income (loss)			26.2	%			(71.9	%)			25.5	%			(10.6	%)		98.1		pts		36.1		pts
		Annualized investment book yield			4.4	%			3.7	%			4.3	%			3.7	%		0.7		pts		0.6		pts
		Loss and loss expense ratio			56.9	%			189.4	%			60.8	%			108.9	%		(132.5)		pts		(48.1)		pts
		Acquisition cost ratio			11.9	%			11.5	%			11.5	%			11.3	%		0.4		pts		0.2		pts
		General and administrative expense ratio			8.1	%			6.6	%			7.7	%			6.9	%		1.5		pts		0.8		pts
		Expense ratio			20.0	%			18.1	%			19.2	%			18.2	%		1.9		pts		1.0		pts
		Combined ratio			76.9	%			207.5	%			80.0	%			127.1	%		(130.6)		pts		(47.1)		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
		SEPTEMBER 30, 2006				JUNE 30, 2006				MARCH 31, 2006				DECEMBER 31, 2005				SEPTEMBER 30, 2005				JUNE 30, 2005
Revenues
Gross premiums written		$	362,478			$	518,316			$	498,120			$	283,393			$	329,930			$	441,675
Net premiums written		$	298,016			$	370,338			$	427,503			$	213,571			$	249,720			$	320,006
Net premiums earned		$	317,759			$	305,517			$	308,943			$	302,032			$	313,276			$	332,097
Net investment income			61,407				54,943				62,001				50,823				47,592				39,820
Net realized investment (losses) gains			(9,080	)			(10,172	)			(5,236	)			(5,286	)			4,152				(6,632	)
Total revenues		$	370,086			$	350,288			$	365,708			$	347,569			$	365,020			$	365,285
Expenses
Net losses and loss expenses		$	180,934			$	179,844			$	205,960			$	288,669			$	593,276			$	224,253
Acquisition costs			37,785				32,663				36,472				33,604				35,871				37,502
General and administrative expenses			25,640				26,257				20,322				27,594				20,795				24,972
Foreign exchange (gain) loss			(561	)			(475	)			545				1,670				(46	)			397
Interest expense			9,529				7,076				6,451				5,832				5,146				4,587
Total expenses		$	253,327			$	245,365			$	269,750			$	357,369			$	655,042			$	291,711
Income (loss) before income taxes		$	116,759			$	104,923			$	95,958			$	(9,800	)		$	(290,022	)		$	73,574
Income tax expense (recovery)			2,774				2,553				(2,163	)			2,478				(6,617	)			2,027
Net income (loss)		$	113,985			$	102,370			$	98,121			$	(12,278	)		$	(283,405	)		$	71,547
GAAP Ratios
Loss and loss expense ratio			56.9	%			58.9	%			66.7	%			95.6	%			189.4	%			67.5	%
Acquisition cost ratio			11.9	%			10.7	%			11.8	%			11.1	%			11.5	%			11.3	%
General and administrative expense ratio			8.1	%			8.6	%			6.6	%			9.1	%			6.6	%			7.5	%
Expense ratio			20.0	%			19.3	%			18.4	%			20.2	%			18.1	%			18.8	%
Combined ratio			76.9	%			78.2	%			85.1	%			115.8	%			207.5	%			86.3	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS

		NINE MONTHS ENDED				NINE MONTHS ENDED
		SEPTEMBER 30, 2006				SEPTEMBER 30, 2005
Revenues
Gross premiums written		$	1,378,914			$	1,276,933
Net premiums written			1,095,857				1,008,380
Net premiums earned		$	932,219			$	969,479
Net investment income			178,351				127,737
Net realized investment losses			(24,488	)			(4,937	)
Total revenues		$	1,086,082			$	1,092,279
Expenses
Net losses and loss expenses		$	566,738			$	1,055,931
Acquisition costs			106,920				109,823
General and administrative expenses			72,218				66,676
Foreign exchange (gain) loss			(491	)			486
Interest expense			23,056				9,783
Total expenses		$	768,441			$	1,242,699
Income (loss) before income taxes		$	317,641			$	(150,420	)
Income tax expense (recovery)			3,164				(2,922	)
Net income (loss)		$	314,477			$	(147,498	)
GAAP Ratios
Loss and loss expense ratio			60.8	%			108.9	%
Acquisition cost ratio			11.5	%			11.3	%
General and administrative expense ratio			7.7	%			6.9	%
Expense ratio			19.2	%			18.2	%
Combined ratio			80.0	%			127.1	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
PREMIUM DISTRIBUTION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006

Gross Premiums Written = $362,478

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
PREMIUM DISTRIBUTION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

Gross Premiums Written = $1,378,914

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT DATA
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006

														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTALS
Revenues
Gross premiums written		$	88,150			$	144,576			$	129,752			$	362,478
Net premiums written		$	40,855			$	127,893			$	129,268			$	298,016
Net premiums earned		$	46,576			$	135,186			$	135,997			$	317,759
Total revenues		$	46,576			$	135,186			$	135,997			$	317,759
Expenses
Net losses and loss expenses		$	28,917			$	78,979			$	73,038			$	180,934
Acquisition costs			(373	)			7,301				30,857				37,785
General and administrative expenses			6,273				12,894				6,473				25,640
Total expenses		$	34,817			$	99,174			$	110,368			$	244,359
Underwriting Income		$	11,759			$	36,012			$	25,629			$	73,400
GAAP Ratios
Loss and loss expense ratio			62.1	%			58.4	%			53.7	%			56.9	%
Acquisition cost ratio			(0.8	%)			5.4	%			22.7	%			11.9	%
General and administrative expense ratio			13.5	%			9.6	%			4.8	%			8.1	%
Expense ratio			12.7	%			15.0	%			27.5	%			20.0	%
Combined ratio			74.8	%			73.4	%			81.2	%			76.9	%

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, LTD
CONSOLIDATED SEGMENT DATA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

														CONSOLIDATED
		PROPERTY				CASUALTY				REINSURANCE				TOTALS
Revenues
Gross premiums written		$	374,830			$	475,074			$	529,010			$	1,378,914
Net premiums written		$	152,808			$	414,812			$	528,237			$	1,095,857
Net premiums earned		$	141,633			$	400,488			$	390,098			$	932,219
Total revenues		$	141,633			$	400,488			$	390,098			$	932,219
Expenses
Net losses and loss expenses		$	86,965			$	258,993			$	220,780			$	566,738
Acquisition costs			(2,631	)			23,575				85,976				106,920
General and administrative expenses			18,233				35,873				18,112				72,218
Total expenses		$	102,567			$	318,441			$	324,868			$	745,876
Underwriting Income		$	39,066			$	82,047			$	65,230			$	186,343
GAAP Ratios
Loss and loss expense ratio			61.4	%			64.7	%			56.6	%			60.8	%
Acquisition cost ratio			(1.9	%)			5.9	%			22.0	%			11.5	%
General and administrative expense ratio			12.9	%			8.9	%			4.7	%			7.7	%
Expense ratio			11.0	%			14.8	%			26.7	%			19.2	%
Combined ratio			72.4	%			79.5	%			83.3	%			80.0	%