Factibilidad Operativa

a) Authorized shares

The issued share capital consists of the following:

As of December 31, 2012, there were issued and outstanding 34,797,781 voting common shares and nil non-voting common shares. Effective July 30, 2012, the Company cancelled 2,326,900 voting shares and 173,100 non-voting shares held in treasury, upon completing a required filing with the Swiss Commercial Register in Zug. During the year ended December 31, 2012, a further 1,133,774 voting shares repurchased and designated for cancellation were constructively retired and cancelled.

Year Ended December 31,

2012 2011 2010

Expected tax rate 7.8% 7.8% 7.8%

Income not subject to income tax (7.3%) (3.4%) (7.8%)

Foreign taxes at local expected tax rates 2.1% 6.0% 3.7%

Loss on sale of subsidiary 0.0% 0.0% (0.3%)

Disallowed expenses and capital allowances 0.7% 0.1% 0.1%

Prior year refunds and adjustments 0.4% (0.6%) 0.6%

Other (0.1%) 0.2% (0.2%)

Effective tax rate 3.6% 10.1% 3.9%

December 31, 2012 2011

Common shares issued and fully paid, 2012: CHF 12.64 per share; 2011: CHF 14.03 per share 36,369,868 40,003,642

Share capital at end of year $ 454,980 $ 557,153

2012

Shares issued at beginning of year 40,003,642

Shares cancelled (3,633,774)

Total shares issued at end of year 36,369,868

Treasury shares issued at beginning of year 2,261,511

Shares repurchased 3,655,959

Shares issued out of treasury (711,609)

Shares cancelled (3,633,774)

Total treasury shares at end of year 1,572,087

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

As of December 31, 2012, Allied World Switzerland’s articles of association authorized its Board of Directors to increase the share capital by a maximum amount of 20% of the share capital registered in the commercial register up to CHF 94,809 or 7,500,728 voting shares, and create

conditional capital of 5,200,000 voting shares. b) Redomestication

On December 1, 2010, Allied World Switzerland and Allied World Bermuda entered into a contribution-in-kind agreement to effect the redomestication to Switzerland. Under the terms of the contribution-in-kind agreement all issued and outstanding voting and non-voting shares of Allied World Bermuda were cancelled and issued to Allied World Switzerland as a contribution-in-kind in exchange for which the holders of such voting and non-voting shares immediately prior to the completion of the redomestication received the same number of voting and non-voting shares of Allied World Switzerland. As a result of the contribution-in-kind and the resulting par value changing from $0.03 to CHF 15.00, the share capital balance was increased to CHF 600,055 with an equal reduction in additional paid-in capital. At the time of contribution-in-kind the exchange rate between the U.S. Dollar and Swiss Franc was one-for-one.

As required under Swiss law, the Company cannot hold more than 10% of its registered capital in treasury shares, unless it receives

shareholder approval to do so. As a result, immediately prior to the redomestication, the Company cancelled 10,879,106 shares held in treasury with a related reduction to additional paid in capital of $561,851.

c) Share Warrants

In conjunction with the private placement offering at the formation of Allied World Bermuda, Allied World Bermuda granted warrant

agreements to certain founding shareholders to acquire up to 5,500,000 common shares at an exercise price of $34.20 per share. These warrants were exercisable in certain limited conditions, including a public offering of common shares. All warrants granted were repurchased by the Company as follows:

d) Dividends

As a holding company, Allied World Switzerland’s principal source of income is dividends or other sources of permitted payments from its subsidiaries. These funds provide the cash flow required for dividend payments to the Company’s shareholders. The ability of our insurance and reinsurance subsidiaries to make dividend payments is limited by the applicable laws and regulations of the various states and countries in which they operate.

The Company’s primary restrictions on net assets of subsidiaries consist of regulatory requirements placed upon the regulated insurance and reinsurance subsidiaries to hold minimum amounts of total statutory capital and surplus and there were no other material restrictions on net assets in place as of December 31, 2012.

Under Swiss law, distributions to shareholders may be paid only if the Company has sufficient distributable profits from previous fiscal years, or if the Company has freely distributable reserves, each as presented on the

The Chubb Corporation GS Capital Partners and Other Investment Funds(1) American International Group, Inc.

Date of repurchase August 2010 November 2010 February 2011

Number of warrants repurchased 2,000,000 1,500,000 2,000,000

Total cost of warrants repurchased $ 32,819 $ 37,197 $ 53,620

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information)

audited stand-alone statutory balance sheet. Distributions to shareholders out of the share and participation capital may be made by way of a capital reduction in the form of a reduction to par value to achieve a similar result as the payment of a dividend. Under Swiss law, if the Company’s general capital reserves amount to less than 20% of the share and participation capital recorded in the Swiss Commercial Register, then at least 5% of the Company’s annual profit must be retained as general reserves.

The Company paid the following dividends during the years ended December 31, 2012, 2011 and 2010:

e) Share Repurchases

In May 2012, the Company established a new share repurchase program in order to repurchase up to $500,000 of its common shares. Repurchases may be effected from time to time through open market purchases, privately negotiated transactions, tender offers or otherwise. The timing, form and amount of the share repurchases under the program will depend on a variety of factors, including market conditions, the Company’s capital position, legal requirements and other factors. Under the terms of this new share repurchase program, common shares repurchased shall be designated for cancellation at acquisition and shall be cancelled upon shareholder approval.

Shares repurchased by the Company and not designated for cancellation are classified as “Treasury shares, at cost” on the consolidated balance sheets. The Company will issue shares out of treasury principally related to the Company’s employee benefit plans. Shares repurchased and designated for cancellation are constructively retired and recorded as a share cancellation.

F-36

Partial

Par Value Dividend Total Reduction Per Amount

Dividend Paid Per Share Share Paid

December 18, 2012(1) CHF 0.34 $ 0.375 $ 13,010 September 25, 2012(1) CHF 0.35 $ 0.375 $ 13,324 August 6, 2012(1) CHF 0.36 $ 0.375 $ 13,394 April 6, 2012(2) CHF 0.34 $ 0.375 $ 13,795 January 6, 2012(2) CHF 0.35 $ 0.375 $ 14,302 October 7, 2011(2) CHF 0.32 $ 0.375 $ 14,305 August 5, 2011(2) CHF 0.30 $ 0.375 $ 14,295 November 26, 2010(3) N/A $ 0.450 $ 18,938 September 9, 2010 N/A $ 0.200 $ 8,665 June 10, 2010 N/A $ 0.200 $ 10,017 April 1, 2010 N/A $ 0.200 $ 10,092

(1) On May 3, 2012, the shareholders approved the Company’s proposal to pay cash dividends in the form of a distribution by way of par value reductions. The aggregate reduction amount is expected to be paid to shareholders in four installments of $0.375 per share, with the final installment to be paid in March 2013.

(2) On May 5, 2011, the shareholders approved the Company’s proposal to pay cash dividends in the form of a distribution by way of par value reductions. The aggregate reduction amount was paid to shareholders in quarterly installments of $0.375 per share, with the last of such quarterly dividend payments being made on April 6, 2012.

ALLIED WORLD ASSURANCE COMPANY HOLDINGS, AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of United States dollars, except share, per share, percentage and ratio information) The Company’s share repurchases were as follows:

In August 2010, the Company repurchased 5,000,000 of its common shares from Goldman Sachs for $250,000, or $50.00 per share, in a privately negotiated transaction. In November 2010, the Company repurchased the remaining 3,159,793 common shares from Goldman Sachs for $185,448, or $58.69 per share. The repurchase price per common share is based on and reflects a 0.5% discount from the volume-weighted average trading price of the Company’s common shares on November 5, 2010. These repurchases were executed separately from the Company’s share repurchase program discussed above. The shares repurchased were classified as “Treasury shares, at cost” on the consolidated balance sheets.