Allied World Assurance Company Holdings Ltd. saw its profits rise by more than $2 million during the first quarter of 2010 despite continued competition on pricing and significant global catastrophic loss activity, including the Chile earthquake.

The insurer's net income climbed to $133.7 million, or $2.52 per share, for the first quarter from $131.4 million or $2.57 per share for the same period in 2009.

The company reported operating income of $61.3 million or $1.16 per share compared to $137.6 million or $2.69 per share over the respective periods.

Allied World's president and CEO Scott Carmilani said, "I am pleased to report that Allied World continued to grow book value in the first quarter of 2010 despite continued competitive pricing pressures and some significant catastrophic loss activity that occurred throughout the world.

"Thanks to our underwriting discipline, strong and stable investment portfolio and our historically prudent reserving philosophy we were able to grow book value by 3.9 percent during the quarter and now have a total capital base in excess of $3.8 billion.

"Since our company went public in 2006, we have more than doubled our total book value and outperformed our peer group over that period. Given the continued soft market conditions, we are finding it increasingly difficult to find attractive opportunities to deploy excess capital.

"Accordingly, our board of directors has authorised us to initiate a share repurchase programme of up to $500 million over the next two years. Based upon the average closing price of our shares over the past 30 days, this plan would equate to a repurchase of over 20 percent of our common shares outstanding."

Gross premiums written were $504.2 million in the first quarter of 2010, a 5.1 percent increase versus $479.6 million in the first quarter of 2009, primarily due to increased new business in the company's reinsurance and US insurance segments, offset by the non-renewal of business in all three of its operating segments which did not meet its underwriting requirements.

The combined ratio was 99.5 percent in the first quarter, compared to 75 percent in the first quarter of 2009.

During the first quarter of 2010, Allied World recorded net favourable reserve development on prior loss years of $73.9 million, a benefit of 21.8 percentage points to the company's loss and loss expense ratio for the quarter.

The increase in the loss and loss expense ratio for the first quarter was mainly down to losses of $65 million from the earthquake in Chile as well as losses of $21.5 million from other major loss events in the quarter.

The total return on its investment portfolio for the first quarter 2010 was approximately 1.8 percent or, annually, 7.3 percent.

Net investment income in the first quarter of 2010 was $68.9 million, a decrease of 11.5 percent from $77.9 million last year.

As of March 31, 2010, shareholders' equity was $3.3 billion, a 3.9 percent increase versus $3.2 billion as of December 31, 2009, primarily driven by strong investment returns.

Allied also announced yesterday that its board of directors has declared a quarterly dividend of 20 cents per share, payable on June 10, 2010 to shareholders of record on May 25, 2010.