DR Darwin Professional Underwriters

Net income increases 74% and net premiums written increase 4.2% over the comparable year-earlier results FARMINGTON, Conn., Aug. 8 /PRNewswire-FirstCall/ -- Darwin Professional Underwriters, Inc. ("Darwin," the "Company," or "Our") (NYSE:DR) today announced its financial results for the second quarter ended June 30, 2008. Highlights include: (Logo: http://www.newscom.com/cgi-bin/prnh/20060829/NETU014LOGO ) -- Gross premiums written for the second quarter are $64.0 million. Second quarter gross premiums written are 2.9% below our gross premiums for the same period a year ago. Net premiums written for the quarter of $51.1 million are up 4.2% over the second quarter of 2007. -- Net income of $13.5 million for the quarter ended June 30, 2008 represents a 73.7% increase over the $7.8 million for the quarter ended June 30, 2007. -- Overall, the combined ratio is 67.9% for the second quarter 2008, which compares favorably to the second quarter 2007 combined ratio of 82.7%. The combined ratio excludes certain aspects of the Company's long-term incentive plan which is included in other expenses. The improvement in the Company's results is primarily driven by a decrease in the loss ratio (16.9% improvement to 37.6%). The second quarter results include approximately $13.2 million ($8.6 million, net of tax) in favorable loss reserve development and the corresponding ceded premiums, net of incentive compensation and profit sharing expenses stemming from the favorable development of the 2003 through 2007 accident years. -- Earnings per diluted share for the three months ended June 30, 2008 are $0.79 compared to $0.45 per share for the same period in 2007. -- Annualized return on average equity is 21.3% for the quarter ended June 30, 2008, while shareholders' equity grew $23.8 million, or 9.4% for the six months ended June 30, 2008, from $254.2 million at December 31, 2007 to $278.0 million at June 30, 2008. Book value per share grew 9.4% to $16.33 at June 30, 2008 from $14.93 at December 31, 2007. Stephen Sills, Darwin's Chief Executive Officer commented, "Darwin recorded a significant increase in net income in the current quarter as compared to the second quarter of 2007, and we demonstrated our commitment to underwriting profitability with a second-quarter combined ratio of 67.9 percent. We are gratified that we have built an organization that has delivered strong earnings and solid returns for our shareholders. We are pleased that this quarter, perhaps one of our last as a stand-alone public company, continues this trend. As Darwin becomes part of the Allied World family, I believe that the franchise we have built, the people who have helped us build it, and the business relationships we have forged will enable continued success as part of the new combined organization." Jack Sennott, Darwin's Executive Vice President, added, "We are focused on completing the remaining items needed to close the merger with Allied World, and we look forward to a successful integration in what we see as a very complementary merger of capabilities. With significant expertise across all of our lines, we believe we're well positioned to take advantage of the continued opportunities we see in specialty insurance. We have cleared one regulatory hurdle related to the merger already. On July 21st, the Federal Trade Commission granted early termination of the Hart-Scott-Rodino Act's pre-merger waiting period." Important Information Certain matters discussed in this release are forward-looking statements. Such statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Potential risks and uncertainties include the accuracy of assumptions underlying the Company's outlook and other risks described in the Company's filings with the Securities and Exchange Commission ("SEC"), including the Company's Annual Report on Form 10-K for 2007 and Form 10-Q for second quarter 2008. These forward-looking statements represent the Company's judgment as of the date of this release. The Company disclaims any intent or obligation to update these forward-looking statements. Additional Information In connection with the proposed merger with Allied World Assurance Company Holdings, Ltd, Darwin will file a proxy statement with the SEC. Investors are urged to read the proxy statement when it becomes available because it will contain important information. Darwin's stockholders and other interested parties will be able to obtain the proxy statement, as well as other filings containing information about Darwin (when they become available), free of charge, at the website maintained by the SEC at http://www.sec.gov/. Copies of the proxy statement and other filings made by Darwin with the SEC can also be obtained, free of charge, by visiting Darwin's website at http://www.darwinpro.com/. Participants in the Solicitation The directors and executive officers of Darwin may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information regarding Darwin's directors and executive officers is available in Darwin's proxy statement for its 2008 Annual Meeting filed with the SEC on April 7, 2008. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC regarding the merger when they become available. Investors should read the proxy statement carefully when it becomes available before making any voting or investment decisions. About Darwin Professional Underwriters, Inc. Darwin is a specialty insurance group based in Farmington, Connecticut. The Company is focused on the specialty liability insurance market and underwrites D&O liability insurance for public and private companies, E&O liability insurance, medical malpractice liability insurance, and other specialty coverages. Darwin member companies include Darwin Professional Underwriters, Inc., Darwin National Assurance Company ("DNA"), and Darwin Select Insurance Company ("Darwin Select"). DNA and Darwin Select have earned a financial strength rating of "A- (Excellent)" from A.M. Best Company. Darwin is traded on the New York Stock Exchange under the ticker symbol, "DR." For more information about Darwin, visit http://www.darwinpro.com/. Additional information concerning Darwin, its finances, and business operations can be found in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 which will be filed with the SEC. Darwin Professional Underwriters, Inc. and Subsidiaries Selected Consolidated Statements of Operations Data Three and Six Months Ended June 30, 2008 and June 30, 2007 (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2008 2007 2008 2007 Gross premiums written $63,994 $65,882 $144,037 $140,160 Net premiums written $51,113 $49,032 $109,127 $97,974 Revenues: Net premiums earned $54,928 $46,378 $106,911 $86,375 Net investment income 5,930 5,441 11,999 10,680 Other income 1,294 - 2,889 17 Net realized investment losses (614) 17 (614) - Total revenues 61,538 51,836 121,185 97,072 Costs and expenses: Losses and loss adjustment expenses 20,653 25,253 40,617 50,723 Commissions and brokerage expenses 5,992 6,329 12,438 11,509 Other underwriting, acquisition and operating expenses 10,638 6,760 17,838 13,245 Other expenses 4,817 2,237 9,816 2,814 Interest expense 69 - 138 - Total costs and expenses 42,169 40,579 80,847 78,291 Earnings before income taxes 19,369 11,257 40,338 18,781 Income tax expense 5,906 3,505 12,015 5,809 Net earnings $13,463 $7,752 $28,323 $12,972 Basic earnings per share: Net earnings per share $0.80 $0.48 $1.68 $0.80 Weighted average shares outstanding 16,892,327 16,133,472 16,892,092 16,130,177 Diluted earnings per share: Net earnings per share $0.79 $0.45 $1.66 $0.76 Weighted average shares outstanding 17,070,697 17,064,606 17,078,570 17,076,716 Combined ratio: Loss ratio 37.6% 54.5% 38.0% 58.7% Expense ratio 30.3% 28.2% 28.3% 28.7% Combined ratio(1) 67.9% 82.7% 66.3% 87.4% See accompanying notes to Condensed Consolidated Financial Statements. Darwin Professional Underwriters, Inc. and Subsidiaries Selected Consolidated Balance Sheets Data June 30, 2008 and December 31, 2007 (Unaudited) (Dollars in thousands, except per share amounts) June 30, December 31, 2008 2007 ASSETS: Available-for-sale securities, at fair value: Equity securities (cost: 2008, $7,413; 2007, $4,000) $7,067 $3,680 Fixed maturity securities (amortized cost: 2008, $566,811; 2007, $439,748) 565,429 445,661 Short-term investments, at cost which approximates fair value 47,784 107,597 Total investments 620,280 556,938 Cash 6,440 7,469 Premiums receivable (net of allowance for doubtful accounts of $75 as of June 30, 2008 and December 31, 2007) 27,169 30,986 Reinsurance recoverable on paid and unpaid losses 148,635 136,370 Ceded unearned reinsurance premiums 44,174 43,244 Deferred insurance acquisition costs 13,949 13,814 Property and equipment at cost, less accumulated depreciation 1,981 1,783 Goodwill and intangible assets 12,448 7,455 Net deferred income tax asset 18,844 13,546 Current income taxes receivable 1,808 - Other assets 16,493 15,530 Total assets $912,221 $827,135 LIABILITIES AND STOCKHOLDERS' EQUITY: Loss and loss adjustment expense reserves $426,136 $387,865 Unearned premium reserves 144,270 141,126 Reinsurance payable 24,320 20,999 Due to brokers for unsettled trades 8,771 - Debt 5,000 5,000 Income taxes payable - 1,155 Accrued expenses and other liabilities 25,763 16,817 al liabilities 634,260 572,962 Stockholders' equity: Common stock; $0.01 par value; authorized 50,000,000 shares; issued and outstanding 17,017,881 shares at June 30, 2008 and 17,025,501 shares at December 31, 2007 170 170 Additional paid-in capital 204,802 204,583 Retained earnings 74,112 45,790 Accumulated other comprehensive income (loss) (1,123) 3,630 Total stockholders' equity 277,961 254,173 Total liabilities and stockholders' equity $912,221 $827,135 Book value per common share: Book value per common share $16.33 $14.93 Tangible book value per common share $15.60 $14.49 Net income return on average equity(2) 21.3% 13.7% (1) Excludes other expenses which primarily consist of the company's long-term incentive plan. (2) Return on average equity for first six months is annualized. http://www.newscom.com/cgi-bin/prnh/20060829/NETU014LOGO http://photoarchive.ap.org/ DATASOURCE: Darwin Professional Underwriters, Inc. CONTACT: Analyst and investor inquiries, Jack Sennott, +1-860-284-1918, Web site: http://www.darwinpro.com/

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