Allied World Assurance Company Holdings Ltd. has agreed to pay more than $220 million to buy out some of its founding shareholders.

Saturday's announcement from the nine-year-old Bermuda-based re/insurer came after the company announced net income for the third quarter rose by more than 20 percent to a record $254 million.

Allied, which plans to move its holding company to Switzerland before the end of this year, said it had agreed to pay $222.6 million to buy securities held by affiliates of the Goldman Sachs Group.

These securities consist of 3.16 million common shares and warrants to purchase an additional 1.5 million shares. The company said it would pay $185.4 million for the shares and $37.2 million for the warrants.

The shares represent a stake of around 7.5 percent of Allied's common equity.

The announcement follows after Allied paid the Goldman Sachs affiliates $250 million on August 6 this year to buy back five million of its shares. The repurchase is expected to close on November 16 and is separate from the company's $500 million share repurchase programme, authorised by its board in May this year.

Accelerated share repurchase helped the company achieve an 11 percent increase in book value during the third quarter to $72.40 per share. Allied reported net income for the third quarter of $254.5 million, or $5.21 per share, for the third compared to $200.6 million, or $3.83 per share, for the same period of 2009. Operating earnings per share of $2.94 far exceeded the estimate of analysts polled by Bloomberg of $1.86.

Combined ratio — the percentage of premium dollars spent on claims and expenses — was 70.3 percent, compared to 70.1 percent last year. This included $101.4 million of favourable reserve development on prior loss years, which benefited the loss and loss expense ratio by 29.9 points.

"Through good returns on our investment portfolio, recognising redundancies in our underwriting portfolio from prior underwriting efforts, and solid operating results for this quarter and year, we are reporting a very strong annualised operating return on shareholders' equity of 17.5 percent for the quarter," Allied's chief executive officer Scott Carmilani said.

"We have achieved these impressive results while continuing to broaden the spectrum of our product offerings and expanding our international platform.

"Our strategy to combat the difficult market environment has been to take steps to manage our business closer to its sources of distribution in areas where we see attractive opportunities. Our recently announced redomestication to Switzerland is another important step consistent with this strategy."

Allied wrote less business, year on year, in the third quarter, as gross premiums written fell 5.8 percent to $378.4 million. The company said the decrease was primarily due to the renewal timing of several large reinsurance treaties.

The total return on the company's investment portfolio for the quarter and the first nine months of this year was approximately 2.4 percent and 6.3 percent, respectively. Third-quarter net investment income was $59.5 million, a decrease of 18.6 percent from last year.

As of September 30, 2010, Allied's total shareholders' equity was $3.3 billion, a four percent increase compared to $3.2 billion as of the end of last year, primarily driven by strong investment returns, offset by the company's share repurchase initiatives through September 2010.