Allied World Assurance Co. Holdings Ltd.'s profits plunged by more than a third due to falling insurance prices and the impact of a series of worldwide catastrophes, including a pipeline explosion in Western Australia in June.

Net income fell from $123.3 million or $1.96 per share for the second quarter of 2007 to $79.2 million or $1.56 per share for the same period this year.

Bermuda-based Allied World had previously announced its takeover of Darwin Professional Underwriters Inc. last month for about $550 million, to expand coverage of doctors.

Absent prior year reserve adjustments, the loss and loss expense ratio related to the second quarter of 2008 was 81 percent compared to 68.8 percent for the second quarter of 2007. The increase in this ratio was due mainly to worldwide catastrophe loss activity experienced in Allied World's property and reinsurance segments.

These catastrophe events included the pipeline explosion in Australia where the company provides business interruption protection as part of its property coverage to large industrial businesses that depend on the natural gas produced through the pipeline, and the Midwestern US floods where the company also provides general property and business interruption coverages.

Net income for the six months ended June 30, 2008 was $210.2 million or $4.12 per share, compared to net income of $237.2 million or $3.81 per diluted share for the first six months of last year. The company reported operating income of $83.2 million or $1.64 per share for this year's second quarter compared to operating income of $125.3 million or $1.99 per share for the second quarter of 2007. Operating income for the six months ended June 30, 2008 was $211.2 million or $4.14 per share, compared to operating income of $245.7 million or $3.95 per share for the first six months of 2007.

President and chief executive officer of Allied World, Scott Carmilani, said: "Allied World has reported solid operating results despite the continued downturn in pricing in the insurance marketplace and the negative impact of worldwide catastrophes during the quarter. Our operating cash flows continue to be very strong, and we are reporting a 19 percent annualised operating return on equity for the first half of the year.

"Although our revenue declined in this competitive environment, we continue to seek out strategic opportunities to better position ourselves assuming that the current state of the insurance marketplace will remain in place for the foreseeable future. To that end, we are very excited about our recently announced agreement to acquire Darwin Professional Underwriters. This transaction will significantly accelerate our expansion efforts for our US specialty insurance operations by providing us with a well-regarded and complementary small account platform where we believe rates are less sensitive to swings in the market."

Gross premiums written were $446.8 million in the second quarter of 2008, a 15.8 percent decrease compared to $530.5 million in the second quarter of 2007.

For the six months ended June 30, 2008, gross premiums written totalled $843.7 million, a 12.9 percent decrease compared to $969 million in the first six months of 2007. This decrease in gross premiums written was the result of the non-renewal of business that did not meet the company's underwriting requirements, increased competition and decreasing rates for new and renewal business in each of its operating segments.