Allied World's U.S. Play

The Bermuda-based insurer looks to expand its footprint in the U.S. with the acquisition of Connecticut-based Darwin.

By JACK ROBERTS, editor in chief

Allied World Assurance Company's acquisition ofConnecticut-based Darwin Professional Underwriters will more than double the Bermuda-based insurer's U.S.-based revenues as the company builds upon its strategy to increase its middle market business here.

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Darwin, over the last five years, has built a growing and profitable insurance business focused on the professional liability markets, particularly the medical liability and health care liability markets. Allied World wrote $193 million in premiums in the United States in 2007 while Darwin posted $280 million in premiums during the same period.

In the United States, Allied World President and CEO Scott Carmilani said the objective here is to focus on segments of the specialty insurance marketplace, particularly smaller accounts which are not as subject to the pricing pressures more common among larger accounts.

Carmilani explained to Risk & Insurance® that the company's strategy is to assume that the "normal state of the market is soft, that the soft market will last and we're not going to see any dramatic increases in pricing."

Carmilani and Gordon Knight, president of insurance operations in the United States for Allied World, said that Darwin's book of business, particularly its healthcare business, complemented Allied World's current North American portfolio. Darwin also brought to the table a strong brand which Allied World is now considering preserving after the acquisition.

Although some parts of the professional liability marketplace have had longer tail exposures, Carmilani said in the professional liability area, the average liability for Allied World and Darwin risks are about three to five years, which will limit long-term exposures."The U.S. and this market in particular is a good market to be a value investor," Carmilani explained. "We're looking to expand our investment in our specialty niches," he added.

The acquisition was expected to close by January 1, although it will probably close in October, Carmilani anticipated. Darwin's current president and CEO, Stephen J. Sills, will retire after the transaction is completed. Jack Sennott, Darwin's Chief Financial Officer, will become Darwin's Chief Operating Officer after the transation closes.

In the second quarter, Allied World's operating income dropped to $83.2 million from the $125.3 million it posted in the second quarter of 2007. Earnings performance was affected by continued pricing pressure and an increase in worldwide catastrophe losses. Allied World is a global provider of primary property and casualty insurance and reinsurance.

October 1, 2008

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