Allied World Assurance Co. beat analysts’ expectations last night when it swung to a third-quarter profit of about $114 million, or $1.89 a share, from a year-earlier loss of $283.4 million, or $5.65 a share.

Operating income, which excludes net realised investment gains and losses, was $122.5 million, or $2.03 a share.

Wall Street analysts, according to Thomson First Call, expected earnings of $1.49 a share, on average.

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, AWAC said.

Chief executive officer Scott Carmilani said: “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 percent.

“In addition to benefiting from benign catastrophe activity during the quarter, the company recognised favourable prior year reserve development and our growing investment portfolio continues to generate a substantial level of investment income.

“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.”

Gross premiums written were $362.5 million in the third quarter 2006, a 9.9 percent increase compared to $329.9 million in the third quarter 2005. For the nine months ended September 30, 2006, gross premiums written totalled $1,378.9 million, an eight percent 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,” the company said.

Net premiums written were $298 million in the third quarter 2006, a 19.3 percent increase compared to $249.7 million in the third quarter 2005. For the nine months ended September 30, 2006, net premiums written totalled $1,095.9 million, an 8.7 percent increase compared to $1,008.4 million in the first nine months of 2005.

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

The combined ratio was 76.9% in the third quarter 2006 compared to 207.5% in the third quarter 2005.

During the third quarter 2006, the company recorded net favourable 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.

Net investment income in the third quarter 2006 was $61.4 million, an increase of 29 percent 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 percent.

The company said the increases primarily reflected 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.