UPDATE 2-Allied World buys back stock from Goldman funds

Sun Aug 8, 2010 7:51pm EDT

* Buys back $250 mln in shares from GS Capital, other funds

* Buyback at a 0.5 pct discount to Friday's close

* Goldman affiliates still hold 7.2 pct of Allied World (Updates with Allied comment)

NEW YORK, Aug 8 (Reuters) - Allied World Assurance Holdings Ltd (AWH.N) said it bought back $250 million worth of stock from funds affiliated to Goldman Sachs Group Inc (GS.N) that are its founding shareholders.

Allied World, which provides property, casualty and specialty insurance and reinsurance, bought back 5 million shares at $50 per share from GS Capital Partners and other investment funds affiliated to the Wall Street bank. The repurchase is at a 0.5 percent discount to the closing price on Friday.

An Allied World spokeswoman said the repurchase was not related to new financial regulatory reform legislation.

Speculation continues to grow as to which Wall Street banks will be looking to get out of proprietary trading or the private equity business to comply with new legislation, which restricts banks from proprietary trading and sets new limits on the size of private equity or hedge fund investments.

A source familiar with the situation told Reuters previously that Goldman is likely to reduce its own position in private equity over time rather than spinning out GS Capital Partners and other units. (Click on [ID:nN08195624] for Analysis)

Allied World said the repurchase represents about 9.4 percent of shares outstanding, and leaves the Goldman-affiliated funds with about 3.2 million non-voting shares, or 7.2 percent of the shares outstanding.

The buyback was separate from a $500 million share repurchase program that was authorized by the board in May. (Reporting by Paritosh Bansal; Editing by Diane Craft)