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Allied World Assurance Company Holdings Ltd. (NYSE:AWH)

Q4 FY07 Earnings Call

February 8, 2008, 08:30 AM ET

Executives

Keith Lennox - IR Officer

Scott A. Carmilani - President and CEO

Joan H. Dillard - Sr. VP and CFO

Analysts

Jay Gelb - Lehman Brothers

Matthew Heimermann - JP Morgan

Susan Spivak - Wachovia Capital Markets

Operator

Good day ladies and gentlemen and welcome to the Fourth Quarter and Full Year 2007 Allied World Assurance Company Holdings, Ltd. Earnings Conference Call. My name is Shiquana, and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. [Operator Instructions].

I would now like to turn the presentation over to your host for today's call, Mr. Keith Lennox, Investor Relations Officer. Please proceed sir.

Keith Lennox - Investor Relations Officer

Great, thank you. Good morning everyone and welcome to Allied World's fourth quarter and full year 2007 earnings conference call. Our earnings press release and financial supplement were issued last night after the market closed. If you like copies of either please visit the Investor Relations section of our website at www.awac.com.

Today's call will also be available through February 22 as a webcast on our website, and there is a teleconference replay. The dial-in information for this replay is included in our earnings press release.

Before I turn the call over to Scott Carmilani, Allied World's President and Chief Executive Officer, and Joan Dillard, the company's Chief Financial Officer. I'll remind everyone the statements made during today's call including question-and-answer session, which are non-historical facts, may be forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements include all statements that do not relate solely to historical and current facts and can be identified by use of words such as may, should, estimate, anticipate, intend, believe, predict, potential or words of similar importance generally involve forward-looking statements.

These forward-looking statements are based upon the company's current plans or expectations and are subject to a number of uncertainties and risks that could significantly impact current plans, anticipated actions and the company's future financial condition and results. The uncertainties and risks include but are not limited to, those disclosed in the company's filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by or on behalf of the company today.

Additionally, forward-looking statements speak only as of the date they are made and the company assumes no obligation to update or revise any of them, in light of new information, future events or otherwise.

Finally, during the call, management will discuss information regarding operating income, diluted book value for common share and annualized return on average equity, which are non-GAAP measures within the meaning of the U.S. federal securities laws. For more information and a reconciliation of these measures to the most directly comparable GAAP financial measures, please refer to our earnings press release issued last night.

With that complete, I can now turn the call over to Scott.

Scott A. Carmilani - President and Chief Executive Officer

Good morning. Thanks Keith. And good morning to everybody and thanks for being with us on the call today. I am happy and delighted to report that for the full year 2007 Allied World has posted record results. Our 2000 (sic) [2007] year-end operating income of $476 million and net income of $469 million both exceeded our performances in 2006.

Before I delve into our production and provide some color on the market conditions, I would like to start out this morning's call by emphasizing that while our results are very good and underlie Allied World's success since inception, we are going to spend some articulating what Allied World is doing going forward as well. We are engaged in a number of initiatives to effectively and efficiently manage our business and be able to respond to the changing market conditions.

But first of all, we're pleased with the company's profitability and the resulting capital that we generated over the past couple of years. And in December, as you know, we announced and completed the acquisition of the common shares of one of our founders AIG. This has served to sort of right-size our capital and eliminate some overhang.

Over the past six years, we've built a very successful and pretty unique franchise centered on our Bermuda platform, focusing both on the P&C insurance market and the reinsurance market. This core business remains strong and will continue to be one of the pillars of strength in the market. But we do recognize that we have to make some investments in our future to keep advancing our competitive position. So we're doing a few things.

We'll be using our current product base and distribution to... and further integrate our business units to try to capture synergies through cross-marketing and better brand promotion, AKA [ph] sales and marketing. We are making some investments in our people to strengthen our international market presence. And we'll also... because the U.S. is the largest insurance market in the world, we believe a stronger U.S. presence is essential to our long-term success.

Now is the right time to further invest in our people and our infrastructure, to be in a better position to change... to move with the market conditions and be there when the market conditions improve. You've noted over the last few months that we've announced plans to acquire a shell company, which we expect to close in the first quarter, which gives us the admitted capabilities in 49 states to write both insurance and reinsurance.

Starting with the reinsurance operations, we've hired an executive by the name John Bender, which we have announced previously, to build out our U.S. reinsurance operations. And on the insurance side, the executive by the name of Gordon Knight, who has strong leadership in marketing, product development and distribution. His talents will help us to better the Allied growth brand and increase and build out our U.S. operations. We are very excited to have both John and Gordon on the team and to help us lead us through these initiatives.

We're making investments in our company and plan on doubling our lease space in both New York and in Chicago. That comes with investing in our people as well, and we expect to significantly increase our staff count in the U.S. in 2008. We'll make a note that we are still one of the more smaller companies in numbers, in terms of relation to our peers.

Clearly, these expansion initiatives will have some impact on our expense ratio and ROE over the near term. And Joan will provide some more color on the specific financial impact of these items later in the call. We believe that we have two options in the current marketplace, and we are choosing to take actions to better our capabilities and expand our product offerings.

Now let me turn back to the quarter. Our operating income for the fourth quarter 2007 was $118 million, our eighth consecutive quarter of operating income in excess of $100 million

As I mentioned earlier, for the year we reported $476 million of operating income which is a record for the company and that being slightly higher than the $472 million of operating income we reported in 2006. More importantly, we've increased our diluted book value per share to $42.53 which is up by over $7 per share from the beginning of the year, on a percentage basis 20.6% increase of... in our diluted book value per share. I'm very pleased with that.

I should underscore that this includes our dilutive impact of the share acquisition from AIG. And in fact, despite in purchasing the shares from AIG which cost us about $563 million, the company ended the year with shareholders' equity greater than it was at the year-end 2006, no small achievement. This is due to strong earnings as well as the impact of the change in interest rates that we had on our investment portfolio at the end of this year.

We ended the year with strong underwriting performance in each of our operating segments, and from... the second consecutive year of light and natural catastrophes. We've also had strong investment returns given the state of the financial markets that you're all very familiar with.

In terms of production, gross written premiums were down about 7% for the quarter and 9.3% for the full year, given the market not much different from what we expected. The decrease is primarily due to progressively declining prices throughout 2007, but accelerated a bit at the second half of the year and we described that in last call.

Rates are down generally between 8% and 15% on business renewed depending on class and segment of the business and by a much greater figures on the business that we've chosen to not renew. And of course additionally, competition on new business continues to be fierce and generally price significantly below expiring rates.

Segment by segment, turning to our property segment, we are not or no longer competing aggressively on large account energy businesses. We've spoken about this in the past. But we are seeing increased commodity pricing, the aging of plants and equipment, and the softening of terms and conditions. All eroding the risk reward equation for us in this line of business or the energy sector, and that equals reducing our writings in this area.

In the casualty business, competition continues to intensify. Capacity has expanded, and has resulted in continued rate declines for the segment in the quarter. As well as terms and conditions have now started to become a little bit less restricted. The average we are seeing on renewal rates in this segment are down by approximately 8% to 10%, again depending on industry class from the 2006 levels.

Lastly, I want to talk a little bit about our reinsurance segment. The underlying rates continue to decline for the casualty reinsurance business. The property business continues to have relatively stable results and continues to offer some opportunities. The property market internationally is experiencing weaker pricing. We hope this begins to stabilize in the wake of some loss activity in 2007.

In the reinsurance segment, loss picks have increased. Cedants are either retaining more net or passing a greater number of... passing on their risk to a greater numbers of participants. So, some of our lines have either reduced or signed out, and that's okay given the loss picks have increased.

Before I turn over the call to Joan, I shouldn't end my prepared remarks without discussing the sub-prime situation. I'm sure it's on everyone's mind. In a few minutes, Joan will address a relatively small impact it's had on our investment portfolio. But from an underwriting perspective, I want you to know that we're reviewing the impact that this issue might have on our insurance policy and our reinsurance contracts.

Based on the claims information we've got to date, a review of the individual exposures and the aggregate exposure for our entire portfolio, and the using the value... and evaluating our own various risk management tools in house we can determine at this time that our established and expected loss ratios and reserves are adequate to meet the potential claims activity. This is an ongoing risk management process and I will let you know that this... we'll be monitoring this closely and it is subject to change. But at the time... at this moment in time everything seems okay, mostly because of our excess position and position of our portfolio. And I am sure we will get into that later as well.

Let me conclude by reiterating that we have built a strong foundation at Allied World, which has generated very strong results since our inception. We are all very excited about the initiatives that I have briefly outlined earlier, and believe they will better position Allied World through the current challenging marketing conditions and allow us to respond more effectively to further prosper when the market conditions improve.

Now I'm going to turn it over to Joan for some financial results highlights.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

Thanks Scott. Good morning everyone and welcome to the call. The fourth quarter of 2007 was another very strong quarter for the company, which as Scott mentioned, helped to elevate the full year net and operating income to another record for Allied World. On a per diluted share basis that equates to $7.64 operating and $7.53 on a net income basis.

Let's turn to the segments where we generated $217 million of underwriting income for the year, and that included $53 million from the fourth quarter. The property segment generated $40.7 million of underwriting income for the full year, including a loss in the fourth quarter of $2 million.

While during the year, we recognized over $45 million in favorable prior development in this segment the current accident year results suffered from higher than expected loss activity. And that came from both our general property line in Europe as well as increased loss activity in our energy line of business.

I should also highlight that the $45 million of favorable development, two thirds of that was associated with the 2005 windstorms. On a quarter and full year basis, gross premiums in our property segment were down by 18.6% and 15.7% respectively, including our non-renewing many accounts in our energy book of business.

Net premiums written in the property segment were down for the year also, but to a lesser degree than the gross premiums. This is a result of our ceding less business overall in the segment. While we did increase the premium ceded percentage to 55% on our general property treaty this was more than offset by lower premium ceded or the lower costs if you will, on our property catastrophe treaty and our energy treaty which expired and was not renewed last June.

In the casualty segment, we're reporting underwriting income of $114.1 million for the full year, including $37.5 million of underwriting income in the fourth quarter. Included in these results were $70.6 million and $28.5 million the favorable prior year development for the year and the fourth quarter.

For the full year the favorable development reflects low loss emergence and that's primarily in the professional liability and healthcare books of business for several prior loss years. However, somewhat offset by higher loss emergence in the general casualty line of business for 2003 and the 2005 loss years.

For the quarter and on a full year basis, gross premiums written in the casualty segment were down 3% and 7%, which again is due to increased competition and the decreased renewal rates as Scott mentioned earlier. Our net premiums return have declined more, because we are ceding more casualty business through new outward treaties for our professional lines and healthcare books of business. These new treaties by the way did help to improve our acquisition ratios by about 2% compared to the fourth quarter and the full year of 2006.

In the reinsurance segment, we are reporting underwriting income of $17.6 million for the quarter and $62.2 million for the full year. Gross premiums written were basically flat for the quarter and were down by $36.7 million or 6.4% for the full year.

In 2007, we had fewer upward adjustments to our estimated reinsurance premium by about $69 million compared to 2006. And as we go forward, naturally we would expect to have fewer of these adjustments. However, after these premium adjustments, the premiums in the reinsurance segment were actually up for the year, and that resulted from some new business and from increasing our participation on treaties where we believe the pricing and terms are attractive.

For the full year, underwriting results for the company were very strong with an overall combined ratio of 81.3% with good results in each segment. We reported a combined ratio of 77.4% for property, 76% for casualty, and 87.7% for reinsurance. Our overall loss ratio for the year was 58.8 and benefited from $123.1 million of positive reserve development from prior loss years, which reduced our year-to-date reported loss ratio by 10.6%.

For the quarter, the overall combined was 81.4% which included 104.8% for property, 66.6% for casualty, and 86.5% for reinsurance. As I mentioned little earlier, our current accident year results in property were impacted by overall increased loss activity.

For the quarter, our overall loss ratio was 58.2%, which benefited from $36 million of positive reserve development and improved our reported our loss ratio by 12.6 points. I should add that the positive reserve development for the year included $35 million in favorable development from KRW. We have seen a deceleration in the claim activity for these events, but still maintain about $47 million of related IBNR.

As Scott mentioned earlier, we are currently reviewing the impact of the sub-prime mortgage market on both our insurance policies and reinsurance contracts. And while we recognize that we will have some insurance losses related to the sub-prime exposure, we also believe that the claims verifications received to date and the potential related losses are within the current range of our established IBNR. We based this on a number of factors including the number and potential severity of the claim notices that we have received, our excess attachment points for our direct business, as well as the limits of coverage that we offer.

In total, almost $2.6 billion of total reserves are carried as IBNR, and of that amount, over $1 billion of IBNR is being carried for our professional lines. At year-end, our carried reserve position was about 4% over the midpoint of our range of estimates.

The expense ratio increased for the quarter at 23.2% with 22.5% for the full year. The increase in these ratios versus the prior period is being driven primarily by increased personnel expenses, including additional incentive compensation, stock-based compensation, and the amortization of the buildout and systems enhancements in the U.S. and Bermuda. And as Scott alluded to earlier, we do anticipate this ratio going up in 2008, and I will discuss that in a few minutes.

Turing to the investment portfolio, our net investment income was up by 21.9% for the full year to $298 million. Realized losses of $7.6 million for the year included the $23.9 million write-down of our investment in the Global Alpha Fund. The portfolio overall remains at high quality with approximately 99% of our fixed income portfolio in investment grade securities, and that still includes our investment in a high yield bond fund.

Our mortgage backed securities with sub-prime exposure remains negligible and unchanged at $2.8 million. The portfolio yield for the year was 4.9% and the duration was 3.1%.

Investment income for the quarter was $75.2 million, and I'll remind everyone that the impact on our investment portfolio and net investment income of that $563 million acquisition of our stock from AIG will not be full felt until the first quarter of 2008. That being said, I'd like to point out that despite the purchase of these shares, our $6.2 billion of aggregate invested assets at year-end is still $281 million greater than it was at the beginning of the year, thanks to $763 million of positive cash flow from operations.

Our operating results produced net income and operating income ROE for the quarter of 21.1% and 20.3% respectively. The annual numbers were 21.7% net and 22.1% operating. These results are largely exclusive of the impact from the acquisition of AIG stock only to place in mid December.

Focusing now on the future, we're very excited about the initiatives that Scott has outlined. We are expecting our expense ratio to increase at least in the short term as we make an investment in the additional manpower and infrastructure that will carry us into the next stage of our development. We expect to further invest in our U.S. expansion adding additional people in our New York office. This will afford us new opportunities that we don't see today by accessing new customers and market.

Now depending on the pace of these initiatives, we could see our expense ratio for 2008 increase by 2 to 4 points. The reason for the increase is partially as you know the current soft pricing conditions and lower premium, but primarily the impact of the initiatives that we have outlined in the call. As we have always said, our target of mid to high teens ROE is throughout the cycle. And our ROE expectation for 2008 would be more towards the mid teens than the high teens. We believe that we can leverage our invested asset base and our underwriting discipline to continue to generate these good results in current market conditions, while we are looking for opportunities to expand that business profitably.

With that, I'll open it up for questions. Operator?

Question And Answer

Operator

Thank you. [Operator Instructions]. Your first question comes from the line of Jay Gelb with Lehman Brothers. Please proceed.

Jay Gelb - Lehman Brothers

Thanks and good morning. A couple of questions on the build-out for the investments for next year. First, Scott, maybe you can talk about the strategic rationale for expanding and what you characterize as a broadly softening market.

Scott A. Carmilani - President and Chief Executive Officer

Sure Jay. Couple of things. As I mentioned what we do on the Bermuda platform is and will remain a color of the business. But that focuses on Fortune 500 or Fortune 1000 size accounts and our expansion in the U.S. is really to help complement and spread the risk of the portfolio and to broaden the product base. It is a softer market than it's been in the last two years, but it's still in better shape than it was in the late 90s and it's a big world out there. So, we've had a fairly limited product line focus. We haven't gone very aggressively into the U.S. market. I believe we've quoted those numbers before to the size of the operation we have in the U.S. So it's not a strategy in 2008 to aggressively grow the book of business and put on lots of top line premium. But it's more of an investment in capability and blocking and tackling, so that where we do find opportunities we can execute on them.

Jay Gelb - Lehman Brothers

Okay, and then that's probably a good segue into the next set of questions. In turn... you outlined the expense ratio impact. Joan what does that translate to in terms of an incremental increase in the general and admin, fixed dollar amount of expenses in 08?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

Wellvirtually the 2% to 4% would be in the G&A. We don't expect any major differential in the acquisition costs. So, that's largely related to G&A. And if you look at our overall our earned premium you can just take a look at say where we were and apply that to an estimated earned premium, and I think you'd come out to a good range of increases and expenses. And again, it's a little bit difficult, because one thing is we don't have complete visibility on when throughout the year, we'd like to push forth these initiatives. So again, it depends a bit on the timing and that's why we're expressing that as a range.

Jay Gelb - Lehman Brothers

Right, and do you expect earned premiums to be flat to down slightly in 2008?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

I think you'd probably expect that, because the top line in 07 was down a bit. The new initiatives will be coming online, clearly not in the first quarter, because part of that is dependent on the acquisition of the shell company which will happen during the first quarter. So, as the premium picks up through the year, you wouldn't expect to see any dramatic increases in the earned premium, because that's such a lag factor.

Jay Gelb - Lehman Brothers

And in terms of when and how these investments are going to pay off, how should we think about that?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

Again, I think Scott can chime in, but because we're putting the shell in place, we expect first quarter then new accounts which start to come on board perhaps second and third quarter and ramping up through the third and fourth quarter of this year. Do you think that's fair Scott?

Scott A. Carmilani - President and Chief Executive Officer

I think that's a fair statement. And again Jay this is really to broaden our risk profile and spread our risk better. So, hopefully that further decreases volatility in our portfolio and helps to enable us to be a more commercial market and round out some of the accounts. It's too early to say whether or not that will have any meaningful premium impact in 2008. As Joan said, these things are just starting to take shape now.

Jay Gelb - Lehman Brothers

Okay. And then just a couple of quick ones on the financial side as well. Do you have an estimate for fully diluted share count 2008, given the significant share buyback? I just want to make sure my model's right.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

Yes. We would end the year and you can pick this up from the supplement and from the balance sheet. We are now on a primary basis at 48.7 million shares. And then if you go to the financial supplement you will see the calculation for the dilution which now is virtually solely impacted by the employee stock compensation.

Jay Gelb - Lehman Brothers

So, it will be about another 2.5 million shares, 2.5 million to 3 million?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

What you see is, let me get the page number for you. Yes, on our EPS basis, we do give you a reconciliation... on page 22, there is actually a better breakout because you can see the basic shares outstanding at December 31 at 48, 741, 927, and then you can see the impact of the dilution from the stock-based compensation. And at year end 07, for example gives us a fully diluted share outstanding of 52.7. So, that should give you some estimate and some guidance for 08.

Jay Gelb - Lehman Brothers

Okay, that's helpful. Thanks. And then on the D&O side, you mentioned the sub-prime, you feel better because you are in access position. What's the average attachment point in your D&O look, and maybe you have that specifically for financial institutions?

Scott A. Carmilani - President and Chief Executive Officer

Sure, I do. It's about $120 million on financial institutions, and a little bit lesser now overall on the whole portfolio. So it's a fairly high excess position.

Jay Gelb - Lehman Brothers

Yes, sure it is. Okay. And then on the ceded premium, it's around $350 million in 2007, would you expect that to change much in 08?

Scott A. Carmilani - President and Chief Executive Officer

Not really, no. On a percentage basis, it shouldn't.

Jay Gelb - Lehman Brothers

Okay. Thanks very much.

Scott A. Carmilani - President and Chief Executive Officer

Okay.

Operator

Your next question comes from the line of Matthew Heimermann with JP Morgan. Please proceed.

Matthew Heimermann - JP Morgan

Hi, good morning everyone.

Scott A. Carmilani - President and Chief Executive Officer

Good morning.

Matthew Heimermann - JP Morgan

Just a question. Can you just help give us the sense of how much the energy... the increased losses in energy impacted property in the quarter, and whether or not there were any other unusual items in there?

Scott A. Carmilani - President and Chief Executive Officer

Well, if you are asking whether or not there were specific storm-related or sort of one-time anomalies, trying to what the trend is, it's more on the one-time anomalies rather than a trend. There was a couple of decent size explosions and specific weather-related losses in the industry that weren't specific to a storm, but were specifically shutdowns of big facilities. And I can tell you, loss activity in the quarter was about double what the quarterly average is in any of the other quarters that we've had this year or in the last two years.

Matthew Heimermann - JP Morgan

Okay, that's helpful. The other question was, can you break out in total how much of your writings come from Bermuda, and I think on a gross basis it was 61% for the full year. Can you give us a sense of relative to that 61% by property, casualty in the reinsurance segment, just which are above that average and which are below?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

I believe you are referring, Matt, on the full year. I think it was a bit more than...

Matthew Heimermann - JP Morgan

It'd be lighter on the quarter.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

Yes, let's see. On the year, that's right [multiple speakers] on the year.

Matthew Heimermann - JP Morgan

71.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

And it would be... yes, it's lighter on the quarter because reinsurance right now is all written out of Bermuda. So on the quarter, the fourth quarter for reinsurance is really pretty light. On a segment basis as I said right now virtually 100% of our reinsurance business is written out of Bermuda. And let's go to the year-to-date obviously on casualty we are roughly probably about a two-thirds in Bermuda, property maybe a half to two-thirds from Bermuda.

Matthew Heimermann - JP Morgan

Okay.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

So we have been picking up, the U.S. has been growing throughout 2007. So the U.S. then takes on a point or two in the ratios as we've gone forward.

Matthew Heimermann - JP Morgan

And most of the new initiatives just to remind me; are those more casualty than property at the moment?

Scott A. Carmilani - President and Chief Executive Officer

Excuse me, Matt; that was me, Scott, yes, I would say they are.

Matthew Heimermann - JP Morgan

Okay. And then the last question I had was just there has been a lot of M&A speculation on the Ireland, should we view the buy back that you just did in December as kind of a sign of your conviction and just going it alone?

Scott A. Carmilani - President and Chief Executive Officer

I wouldn't say that. I think we are always open to the bright opportunities.

Matthew Heimermann - JP Morgan

Okay, fair enough. Thank you very much.

Scott A. Carmilani - President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Tom Cholnoky with Goldman Sachs, please proceed.

Unidentified Analyst

Yeah, I just have one quick numbers question and I am not sure if you quite answered it; maybe you are getting there with Matt's question, but just as you continued expand in the U.S. what kind of tax rate should we be assuming for you in 08 relative to what you had been accruing over the last couple of years?

Joan H. Dillard - Senior Vice President and Chief Financial Officer

I will just give you one caution on 07, our taxes in 07 were relatively light and that's primarily because as I mentioned we had this increased loss activity in our property book and it was largely focused in Europe, so that lessened profitability in Europe would have translated to a bottom-line lower tax in 2007.

Unidentified Analyst

Right, no I am then aware of...but I think in 06 you had roughly 1% tax rate. I assume that that should start moving up, I mean I realize 07 was obviously low.

Joan H. Dillard - Senior Vice President and Chief Financial Officer

It should move up. And I would expect it to move up by 1% or 2%, because we will also because of our focus in the U.S. and the acquisition of the Shell we'll be further capitalizing that Shell, which would put more capital into the U.S. and read more investment income in the U.S. at a 35% tax rate.

Unidentified Analyst

Okay, all right. Okay, great. Thank you.

Operator

Your next question comes from the line of Susan Spivak with Wachovia. Please proceed. Ms. Spivak your line is open.

Susan Spivak - Wachovia Capital Markets

Sorry about that. Good morning. Scott, I was hoping if you could give us some details on potential international expansion plans. I think last time we met you were headed overseas specifically into the Asian territory?

Scott A. Carmilani - President and Chief Executive Officer

Good memory, Susan. Yes, I did spent some time in Hong Kong, in the late fall and yes we are working to be licensed there and hiring a small staff there. And working on some potential joint ventures, but it's too early to say exactly what that is, because we haven't...we are not able to announce anything yet.

Susan Spivak - Wachovia Capital Markets

So would you be part...

Scott A. Carmilani - President and Chief Executive Officer

License by the summer.

Susan Spivak - Wachovia Capital Markets

You think you will be...would you be partnering up with another U.S. based firm over there?

Scott A. Carmilani - President and Chief Executive Officer

Potentially, and potentially a local operation as well, we are evaluating both, we are working on both.

Susan Spivak - Wachovia Capital Markets

All right, great. Well, good luck. Thank you.

Scott A. Carmilani - President and Chief Executive Officer

Thank you.

Operator

You have a follow-up question from the line of Jay Gelb with Lehman Brothers. Please proceed.

Jay Gelb - Lehman Brothers

Thanks, I want to follow-up on the other founding shareholders Chubb and Goldman that collectively own about 30% of Allied World; are there any plans for them to have some of the stakes in the over market to increase the float in Allied World?

Scott A. Carmilani - President and Chief Executive Officer

Yes, two comments to that. First, the Goldman ownership was a combination of the fund and the number of individuals, who that lock-up expired quite sometime ago. I don't know of which individuals have already traded some of that stock. I would suspect they have, so I am not sure that 30% exactly 30% anymore or their percentage I should say, which is around 13% to 15%, somewhere in that range. We are aware that Chubb has had a registration 144 on their stock, but not aware that they have done any trading or are planned to.

Jay Gelb - Lehman Brothers

Okay. Thanks.

Operator

[Operator Instructions]. At this time, there are no further questions. I would now like to turn the call over to Mr. Scott Carmilani for closing remarks.

Scott A. Carmilani - President and Chief Executive Officer

Okay. Thank you everyone for your time this morning, and your participation on the call. We look forward to talking to you next quarter after we report our first quarter results. Have a very good day.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.

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