Darwin Professional Underwriters, Inc. Reports Second Quarter Net Income of $13.5 Million

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:

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-- 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. 

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DATASOURCE: Darwin Professional Underwriters, Inc.



CONTACT:  Analyst and investor inquiries, Jack Sennott, [phone],





Web site:  http://www.darwinpro.com/

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