Allied World Assurance Company Holdings yesterday reported net income of $151.9 million for the second quarter of 2014 compared to a net loss of $1.9 million for the second quarter of 2013. Operating income was $76.1 million, down from $103.5 million for the corresponding quarter last year.

President and chief executive officer Scott Carmilani said: “Allied World delivered another solid result for the first half of 2014. As evidenced by an 85 percent combined ratio, our disciplined underwriting philosophy, combined with improved investment performance, drove the year to date 8.1 percent growth in diluted book value per share.”

The report stated that gross premiums written were $760.4 million, a 0.6 percent decrease compared to the second quarter of 2013. The growth in the US and international insurance segments was offset by a decrease in the reinsurance segment.

The US insurance business grew by 11.1 percent led by growth in general casualty, inland marine and representations and warranties insurance, offset by a continued decrease in healthcare insurance.

The international insurance segment grew by 6.2 percent driven by more recently added lines of insurance business in Europe including aviation and marine cargo as well as growth across existing lines.

Offsetting the growth in the two insurance segments was a 19.1 percent decrease in the reinsurance segment driven by lower premiums across most lines of business.

Net premiums written were $553.9 million, a 4.7 percent decrease compared to $581.2 million in the second quarter of 2013.

Net premiums earned were $537.2 million, a 5.9 percent increase compared to $507.3 million in the second quarter of 2013.

Underwriting income was $51.9 million, compared to underwriting income of $86.9 million in the second quarter of 2013.

The combined ratio was 90.3 percent compared to 82.8 percent in the second quarter of 2013.

The loss and loss expense ratio was 58.6 percent in the second quarter of 2014 compared to 54.2 percent in the prior year quarter. During the second quarter of 2014, the company recorded net favourable reserve development on prior loss years of $45.1 million, a benefit of 8.4 percentage points to the loss and loss expense ratio, compared to $48.4 million a year ago, a benefit of 9.5 percentage points.

The company did not experience any reportable catastrophe losses for the second quarter of 2014 or the comparable quarter last year.

The company’s expense ratio was 31.7 percent for the second quarter of 2014 compared to 28.6 percent for the second quarter of 2013. The increase was driven by various profit commissions as well as the impact of new hires and higher stock price on compensation expense.

During the quarter, the company purchased new global property catastrophe protection which helped lower our probable maximum losses from a single catastrophic event across all major zones and perils.

The total financial statement return on the company’s investment portfolio for the three months ended June 30, 2014 was 1.4 percent compared to a loss of 0.9 percent for the three months ended June 30, 2013.

The increase in total return was driven by realised and unrealised gains across the portfolio.

Net investment income decreased compared to the prior year quarter as a result of a net loss recorded for an equity method investment owned in our other private securities portfolio.