Allied World Assurance shares rise on strong 1Q earnings

Shares of Allied World Assurance rose sharply Friday, a day after the insurer said first-quarter earnings rose 15 percent.

Allied World Assurance shares rose $3.07, or 7.5 percent, to $43.78. Shares have traded between $38.29 and $53.48 during the past year.

Allied World Assurance earned $130.9 million, or $2.55 per share, during the quarter ending March 31, compared with earnings of $113.9 million, or $1.83 per share, during the same period the previous year.

Analysts polled by Thomson Financial, on average, forecast earnings of $1.89 per share.

Allied World Assurance's combined ratio improved to 78.2 from 79.7 during the year-ago period. Combined ratio measures the amount of money an insurer pays out in claims and expenses compared with how much it receives from writing premiums. A ratio above 100 means costs outpace revenue from new premiums.

The ratio benefited from a release of $53.1 million in reserves related to windstorms in 2005.

The reserve release was one of the primary drivers of the strong earnings during the quarter, Goldman Sachs Group Inc. analyst Thomas Cholnoky wrote in a research note. The second benefit was growth in investment income, Cholnoky noted.

Allied World Assurance's net investment income rose 6 percent from the year-ago period to $76.9 million during the first quarter.

Wachovia Capital Markets LLC analyst Susan Spivak Bernstein raised her 2008 earnings outlook for the insurer based on the stronger-than-expected first-quarter results. Spivak Bernstein raised her 2008 estimate to $7.65 per share from $7.17 per share.