If reading your car or homeowners insurance policy is a sleep-inducing chore, Allied World Assurance Holdings' planned initial public offering isn't for you.

It's a solid company in what many investors will see as a boring sector--casualty insurance, property insurance and reinsurance. But you don't have to be a believer in Al Gore's much-hyped "global warming" to know that betting against hurricanes may not be the wisest use of your chips. Despite the company's strengths and an underwriting team led by Goldman Sachs, don't expect much from this IPO. But keep an eye on the stock because it may be worth returning to after it has aged a few quarters.

Allied World Assurance Holdings writes direct property and casualty insurance and reinsurance for major companies through its operations in Bermuda, the United States, United Kingdom and Ireland. Direct insurance is sold by an issuer who contracts directly with the insured party. Reinsurance is sold by an insurer who contracts with another insurer.

In its registration statement filed with the U.S. Securities and Exchange Commission, Allied World Assurance Holdings says it suffered about $456 million in property losses related to Hurricanes Katrina, Rita and Wilma last year. Individual investors may not want to buy into that risk as a new hurricane season cranks up.

In the property sector, the company insures only commercial sites. The segment totaled about $413 million of 2005's gross premiums, or about a quarter of the company's total premiums written.

The company's casualty segment specializes in general- and product-liability and health care risks. The company focuses on what it calls "excess layers" or the second or subsequent layers of coverage above the primary coverage. This segment generated about $633 million of gross premiums in 2005, just over 40% of the company's gross premiums last year.

The company's reinsurance includes property, general casualty, professional lines, specialty and catastrophic coverage written by other insurance companies. This segment generated about $514 million or about a third of total gross premiums written in 2005.

The insurance sector is extremely competitive and includes many larger companies with deeper financing and more extensive marketing resources. Competitors include American International Group, Axis Capital Holdings (nyse: AXS - news - people ), Endurance Specialty Holdings (nyse: ENH - news - people ), Lloyd's of London and Platinum Underwriters Holdings (nyse: PTP - news - people ).

Allied World Assurance Holdings was organized in November 2001 by a group of investors, including AIG, The Chubb Corp. (nyse: CB - news - people ) and affiliates of Goldman Sachs Group (nyse: GS - news - people ). For the three months ended March 31, 2006, Allied World Assurance Holdings reported net income of $98.1 million on revenue of $498.1 million compared with net income of $64.4 million on revenue of $505.3 million for the like period in 2005. The company lost $159.8 million in 2005.

The Texas attorney general is investigating the company for alleged restraint of trade and alleged use of false quotes as part of an industrywide inquiry. The company says it can't estimate how the legal action might affect future earnings.

Don't overlook the terrorist threat. In its registration statement, Allied World Assurance Holdings says it generally excludes terrorist acts, but notes "we provide coverage in circumstances where we believe we are adequately compensated for assuming those risks. Moreover, even in cases where we seek to exclude coverage, we may not be able to completely eliminate our exposure to terrorist acts. It is impossible to predict the timing or severity of these acts with statistical certainty or to estimate the amount of loss that any given occurrence will generate. To the extent we suffer losses from these risks, such losses could be significant."

Allied World Assurance Holdings Ltd. of Hamilton, Bermuda, plans to offer 8.8 million shares at $34 to $37 each through underwriters led by Goldman Sachs. The proposed New York Stock Exchange symbol is AWH. The deal is expected to be priced the week of July 10. The company plans to pay a quarterly cash dividend of about 13 cents per share beginning the first full quarter following completion of the IPO.

The company expects to raise about $287.1 million in the deal if the shares are priced at the midpoint. It plans to use half the proceeds to repay part of a bank loan and the remainder for general corporate purposes. Upon completion of the IPO, the company plans a $500 million debt offering and will use money raised from the sale of senior notes to repay the balance of the bank loan.

A.M. Best has downgraded the company to "A" (excellent) from A (superior). Allied World Assurance Holdings warns that further downgrades would reduce earnings. In January, A.M. Best said the company's ratings were under review with "negative implications" pending successful completion of the IPO and the issuance of the senior notes.

In its registration statement, Allied World Assurance Holdings says it's not "currently encumbered by asbestos, environmental or any similar exposures." That's good news for investors, but it doesn't necessarily outweigh the hurricane risk. In August 2005, Hurricane Katrina slammed Louisiana and the South, causing industrywide insurance losses of as much as $60 billion.

As an IPO, Allied World Assurance Holdings' planned IPO will show a heartbeat, but little else. It's a well-run, diversified company, but offers none of the tantalizing future growth that makes many IPOs so enticing. The company's sector is well known, and investors will value the stock quickly and accurately in early trading.

In short, the company's IPO will be a yawner.

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Scott Reeves

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