Outstanding Quarter for Reinsurance with a
43.3% Loss Ratio
Continued Progress in U.S. Insurance
Platform with 21% Growth in Gross Written Premium Through the Six
Months
Annualized Net Income Return on Equity of
11.0% and Annualized Operating Return on Equity of 10.6% Through
the Six Months
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) reported
today net income after tax of $49.0 million, or $0.62 per diluted
share, and operating income after tax of $72.2 million, or $0.99
per diluted share, for the second quarter of 2015.
Chris O’Kane, Chief Executive Officer, commented, “Through the
first half of the year we continued to execute on our diversified
Insurance and Reinsurance strategy, achieving a 10.6% annualized
operating return on equity. Our Reinsurance segment once again had
an excellent performance with an impressive accident year ex-cat
loss ratio of 51.4% in the second quarter. In our Insurance segment
our U.S. platform continued to grow into scale with 23.9% premium
growth in the quarter. In our International markets, the rate
environment varied by line and geography. We reduced our exposure
in certain Energy-related Lloyd's lines where rates were under
pressure and competition was intense and as a result our level of
Insurance premiums declined. This, combined with several mid-sized
losses, had a negative effect on this quarter’s Insurance results.
We redeployed capital to those opportunities which were better
rated and will continue to do so. We expect to achieve 11%
operating return on equity for 2015."
Operating highlights for the quarter ended June 30,
2015
- Gross written premiums decreased by
7.3% to $722.8 million in the second quarter of 2015 compared with
the second quarter of 2014
- Combined ratio of 93.6% for the second
quarter of 2015 compared with 90.1% for the second quarter of 2014.
Net favorable development on prior year loss reserves of $31.1
million, or 5.1 combined ratio points, for the second quarter of
2015 compared with $31.8 million, or 5.2 combined ratio points, in
the comparable period a year ago
- Pre-tax catastrophe losses net of
reinsurance recoveries totaled $11.9 million, or 2.0 combined ratio
points, in the second quarter of 2015 compared with $22.1 million,
or 3.6 combined ratio points, of pre-tax catastrophe losses net of
reinsurance recoveries in the second quarter of 2014
Financial highlights for the quarter and six months ended
June 30, 2015
- Annualized net income return on average
equity of 5.6% and annualized operating return on average equity of
8.8% for the quarter ended June 30, 2015 compared with 16.8%
and 12.8%, respectively, for the second quarter of 2014
- Annualized net income return on average
equity of 11.0% and annualized operating return on average equity
of 10.6% for the first half of 2015 compared with 16.2% and 13.8%,
respectively, for the first half of 2014
- Net income per diluted share of $0.62
for the quarter ended June 30, 2015 compared with net income
per diluted share of $1.82 for the quarter ended June 30,
2014, and net income per diluted share of $2.50 for the six months
ended June 30, 2015 compared with net income per diluted share
of $3.48 for the six months ended June 30, 2014
- Operating income per diluted share of
$0.99 for the quarter ended June 30, 2015 compared with
operating income per diluted share of $1.40 for the quarter ended
June 30, 2014, and operating income per diluted share of $2.39
for the six months ended June 30, 2015 compared with operating
income per diluted share of $2.94 for the six months ended
June 30, 2014
- Diluted book value per share of $45.16
at June 30, 2015 up 0.1% from December 31, 2014.
_________________Non-GAAP financial measures are used throughout
this release as defined in footnote(1)
Segment Highlights
Insurance
Operating highlights for Insurance for the quarter ended
June 30, 2015 include:
- Gross written premiums of $462.1
million, a decrease of 3.9% compared with $480.9 million in the
second quarter of 2014
- Combined ratio of 103.6% compared with
95.5% for the second quarter of 2014
- Prior year favorable reserve
development of $7.0 million, or 2.1 combined ratio points, compared
with prior year favorable reserve development of $3.4 million, or
1.0 combined ratio point, for the second quarter of 2014.
Growth in Property and Casualty was more than offset by a
decline in Marine, Energy and Aviation as a result of decisions to
decline business where the pricing levels were not deemed adequate
for the underlying risk. The U.S. platform continued its record of
strong growth with a 23.9% increase in gross written premium in the
quarter.
The combined ratio of 103.6% for the second quarter of 2015
included $9.5 million, or 2.8 percentage points, of pre-tax
catastrophe losses net of reinsurance recoveries. The combined
ratio for the second quarter of 2014 included $10.2 million, or 3.0
percentage points, of pre-tax catastrophe losses net of reinsurance
recoveries. For the quarter ended June 30, 2015, the Insurance
accident year ex-cat loss ratio was 70.9% compared with 60.9% a
year ago. In the quarter there were a number of mid-sized losses
primarily in property and energy, which equated to $40.0 million or
11.7 points on the accident year ex-cat loss ratio.
Mario Vitale, CEO of Insurance, commented, “We maintained our
trajectory of disciplined growth in our U.S. Insurance business
and, on a trailing twelve month basis, we have now reached a level
of $579 million of net earned premium. In our International
platform, we maintained discipline and chose not to renew a
meaningful amount of business in the Energy sector. This market is
experiencing intense competition and in our assessment the rates
offered did not adequately reflect the underlying risks. We are
redeploying that capital into areas where the rates are not as
pressured, such as Financial and Professional lines and our U.K.
Property and Casualty business and are excited about these areas of
growth.”(2)
Reinsurance
Operating highlights for Reinsurance for the quarter ended
June 30, 2015 include:
- Gross written premiums of $260.7
million, a decrease of 12.6% from $298.4 million in the second
quarter of 2014
- Combined ratio of 75.3% compared with
75.5% for the second quarter of 2014
- Prior year favorable reserve
development of $24.1 million, or 9.0 combined ratio points,
compared with $28.4 million prior year favorable loss reserve
development, or 10.2 combined ratio points, for the second quarter
of 2014
The combined ratio of 75.3% for the second quarter of 2015
included $2.4 million, or 0.9% percentage points, of pre-tax
catastrophe losses, net of reinsurance recoveries. The combined
ratio of 75.5% for the second quarter of 2014 included $11.9
million, or 4.3 percentage points, of pre-tax catastrophe losses,
net of reinsurance recoveries. For the quarter ended June 30,
2015, the Reinsurance accident year ex-cat loss ratio was 51.4%
compared with 50.7% a year ago.
Stephen Postlewhite, CEO of Reinsurance, commented on the
quarter, “Aspen Re continues its track record of excellent results,
demonstrating our relevance in the market, close client
relationships, and responsive solutions. Our strategy of pursuing
targeted expansion in areas where rates are under less pressure is
reaping rewards. We achieved growth in Asia, Latin America and MENA
of 25% through the first half of the year and look forward to
continuing to expand in those regions through our established
international office network. While total gross written premium was
down in the quarter on a GAAP basis, it was up 33% on an
underwriting basis, highlighting the underlying strength of the
business. Included in this growth were two large deals in our Other
Property and Specialty sub-segments, with attractive expected
returns, where we will recognize the related gross written premiums
and earned premiums over future quarters. Through the six months we
have seen strong performance in all of our sub-segments and we look
forward to executing our strategy of profitable growth through the
rest of the year and into 2016.”(2)
Investment performance
Aspen’s investment portfolio continues to be comprised primarily
of high quality fixed income securities with an average credit
quality of “AA-”. The average duration of the fixed income
portfolio was 3.53 years at June 30, 2015 excluding the impact
of interest rate swaps, or 3.38 years including the impact of
interest rate swaps. The total return on Aspen’s aggregate
investment portfolio was (0.56)% for the three months ended
June 30, 2015 due primarily to a $90.6 million decrease in
mark to market gains in the fixed income portfolio. In the first
six months of 2015, Aspen’s aggregate investment portfolio had a
positive total return of 0.48% despite a $53.8 million decrease in
mark to market gains in the fixed income portfolio over the
period.
Book yield as at June 30, 2015 on the fixed income
portfolio was 2.57% compared to 2.65% at December 31, 2014.
Capital
Total shareholders’ equity was $3.4 billion at June 30,
2015.
During the second quarter of 2015, there were 1,003,195 ordinary
shares repurchased at an average price of $47.06 per share for a
total cost of $47.2 million. Aspen has $416.4 million remaining
under its current share repurchase authorization as at July 27,
2015.
Outlook
Aspen continues to expect to achieve an operating return on
equity of 11% in 2015.(2)
See “Forward-looking Statements Safe Harbor” below.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
a.m. (EDT) on Tuesday, July 28, 2015.
To participate in the July 28 conference call by
phonePlease call to register at least 10 minutes before the
conference call begins by dialing:
+1 (888) 317 6016 (US toll free) or+1 (412) 317 6016
(international)Conference ID 10068333
To listen live onlineAspen will provide a live webcast on
Aspen’s website at www.aspen.co.
To download the materialsThe earnings press release and a
detailed financial supplement will also be published on Aspen’s
website at www.aspen.co.
To listen laterA replay of the call will be available
approximately two hours after the end of the live call for 14 days
via phone and internet. To listen to the replay by phone please
dial:
+1 (888) 317 6016 (US toll free) or+1 (412) 537 6016
(international)Replay ID 10068333
The recording will be also available at www.aspen.co on the Event Calendar page within the
Investor Relations section.
Aspen Insurance Holdings
Limited
Summary consolidated balance sheet
(unaudited)
$ in millions, except per share data
As atJune 30, 2015 As
atDecember 31, 2014 ASSETS Total
investments
$ 7,363.7 $ 7,428.9 Cash and cash
equivalents
1,148.4 1,178.5 Reinsurance recoverables
594.4 556.8 Premiums receivable
1,249.9 1,011.7 Other
assets
597.8 540.4 Total assets
$
10,954.2 $ 10,716.3 LIABILITIES Losses and
loss adjustment expenses
$ 4,815.9 $ 4,750.8 Unearned
premiums
1,702.8 1,441.8 Other payables
446.5 484.6
Silverton loan notes
76.2 70.7 Long-term debt
549.2
549.1 Total liabilities
$ 7,590.6 $ 7,297.0
SHAREHOLDERS’ EQUITY Total shareholders’ equity
3,363.6 3,419.3 Total liabilities and shareholders’
equity
$ 10,954.2 $ 10,716.3 Book value
per share
$ 46.18 $ 46.16 Diluted book value per
share (treasury stock method)
$ 45.16 $ 45.13
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2015
June 30, 2014 UNDERWRITING REVENUES Gross written premiums
$ 722.8 $ 779.3 Premiums ceded
(78.4 )
(92.9 ) Net written premiums
644.4 686.4 Change in unearned
premiums
(35.0 ) (70.2 ) Net earned premiums
609.4 616.2 UNDERWRITING EXPENSES Losses and
loss adjustment expenses
360.5 337.1 Amortization of
deferred policy acquisition costs
114.1 108.9 General,
administrative and corporate expenses (excluding non-recurring
corporate expenses)
95.4 103.5 Total
underwriting expenses
570.0 549.5 Underwriting
income including corporate expenses
39.4 66.7
OTHER OPERATING REVENUE Net investment income
46.7 46.1
Interest expense
(7.3 ) (7.3 ) Other (expense) income
(2.7 ) 2.0 Total other operating revenue
36.7 40.8 OPERATING INCOME
BEFORE TAX
76.1 107.5 Non-recurring
corporate expenses (bid defense costs) — (5.3 ) Net realized and
unrealized exchange (losses) gains
(9.4 ) 7.7 Net
realized and unrealized investment (losses) gains
(15.5
) 27.1 INCOME BEFORE TAX
51.2 137.0 Income tax
expense
(2.2 ) (6.2 ) NET INCOME AFTER TAX
49.0 130.8 Dividends paid on ordinary shares
(13.0
) (13.1 ) Dividends paid on preference shares
(9.4
) (9.4 ) Proportion due to non-controlling interest
(0.5 ) — Retained income
$ 26.1
$ 108.3 Components of net income (after tax)
Operating income
$ 72.2 $ 102.8 Non-recurring
corporate expenses — (5.3 ) Net realized and unrealized exchange
(losses) gains after tax
(7.5 ) 6.3 Net realized
investment (losses) gains after tax
(15.7 ) 27.0
NET INCOME AFTER TAX
$ 49.0 $ 130.8
Loss ratio
59.2 % 54.7 % Policy
acquisition expense ratio
18.7 % 17.7 % General,
administrative and corporate expense ratio
15.7 %
17.7 % General, administrative and corporate expense ratio
(excluding non-recurring corporate expenses)
15.7 %
16.8 % Expense ratio
34.4 % 35.4 % Expense ratio
(excluding non-recurring corporate expenses)
34.4 %
34.5 % Combined ratio
93.6 % 90.1 % Combined ratio
(excluding non-recurring corporate expenses)
93.6 %
89.2 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2015 June
30, 2014 UNDERWRITING REVENUES Gross written premiums
$
1,642.0 $ 1,634.8 Premiums ceded
(234.4 )
(250.9 ) Net written premiums
1,407.6 1,383.9 Change in
unearned premiums
(204.6 ) (201.2 ) Net earned
premiums
1,203.0 1,182.7 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
666.6 625.2 Amortization
of deferred policy acquisition costs
233.4 220.9 General,
administrative and corporate expenses (excluding non-recurring
corporate expenses)
197.6 196.1 Total
underwriting expenses
1,097.6 1,042.2
Underwriting income including corporate expenses
105.4
140.5 OTHER OPERATING REVENUE Net investment income
94.1 95.6 Interest expense
(14.7 ) (14.7 )
Other (expense) income
(4.3 ) 1.9 Total other
operating revenue
75.1 82.8
OPERATING INCOME BEFORE TAX
180.5 223.3
Non-recurring corporate expenses (bid defense costs) — (8.3 ) Net
realized and unrealized exchange (losses) gains
(20.4
) 10.3 Net realized and unrealized investment gains
24.2 35.9 INCOME BEFORE TAX
184.3 261.2
Income tax expense
(7.3 ) (10.0 ) NET INCOME AFTER
TAX
177.0 251.2 Dividends paid on ordinary shares
(25.4 ) (24.8 ) Dividends paid on preference shares
(18.9 ) (18.9 ) Proportion due to non-controlling
interest
(0.5 ) (0.1 ) Retained income
$
132.2 $ 207.4 Components of net income (after
tax) Operating income
$ 170.2 $ 215.5
Non-recurring corporate expenses — (8.3 ) Net realized and
unrealized exchange (losses) gains after tax
(17.3 )
8.4 Net realized investment gains after tax
24.1 35.6
NET INCOME AFTER TAX
$ 177.0 $ 251.2
Loss ratio
55.4 % 52.9 % Policy
acquisition expense ratio
19.4 % 18.7 % General,
administrative and corporate expense ratio
16.4 %
17.3 % General, administrative and corporate expense ratio
(excluding non-recurring corporate expenses)
16.4 %
16.6 % Expense ratio
35.8 % 36.0 % Expense ratio
(excluding non-recurring corporate expenses)
35.8 %
35.3 % Combined ratio
91.2 % 88.9 % Combined ratio
(excluding non-recurring corporate expenses)
91.2 %
88.2 %
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended Six Months Ended
June 30, 2015 June 30, 2014 June 30,
2015 June 30, 2014 Basic earnings
per ordinary share Net income adjusted for preference share
dividend
$0.64 $1.85
$2.55 $3.55 Operating income
adjusted for preference share dividend
$1.02 $1.42
$2.44 $3.01 Diluted earnings per ordinary share Net income
adjusted for preference share dividend
$0.62 $1.82
$2.50 $3.48 Operating income adjusted for preference share
dividend
$0.99 $1.40
$2.39 $2.94 Weighted
average number of ordinary shares outstanding (in millions)
61.409 65.447
61.776 65.369 Weighted average
number of ordinary shares outstanding and dilutive potential
ordinary shares (in millions)
62.897 66.700
63.165
66.646 Book value per ordinary share
$46.18 $45.81
$46.18 $45.81 Diluted book value per ordinary share
(treasury stock method)
$45.16 $44.84
$45.16 $44.84
Ordinary shares outstanding at end of the period (in
millions)
60.778 65.463
60.778 65.463 Ordinary
shares outstanding and dilutive potential ordinary shares at end of
the period (treasury stock method) (in millions)
62.149
66.871
62.149 66.871
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2015 Three Months
Ended June 30, 2014 Reinsurance Insurance
Total Reinsurance Insurance Total
Gross written premiums
$ 260.7 $
462.1 $ 722.8 $ 298.4 $ 480.9 $ 779.3 Net
written premiums
238.2 406.2 644.4 286.9 399.5
686.4 Gross earned premiums
287.2 423.2 710.4
289.7 404.5 694.2 Net earned premiums
268.3 341.1
609.4 278.8 337.4 616.2 Losses and loss adjustment expenses
116.3 244.2 360.5 125.0 212.1 337.1 Policy
acquisition expenses
50.4 63.7 114.1 49.8 59.1
108.9 General and administrative expenses
35.4
45.2 80.6 35.8 51.1 86.9
Underwriting income (loss)
$ 66.2
$ (12.0 ) $ 54.2 $ 68.2 $
15.1 $ 83.3 Net investment income
46.7 46.1
Net realized and unrealized investment (losses) gains (1)
(15.5 ) 27.1 Corporate expenses
(14.8 )
(16.6 ) Non-recurring corporate expenses — (5.3 ) Other (expense)
income
(2.7 ) 2.0 Interest expense
(7.3
) (7.3 ) Net realized and unrealized foreign exchange
(losses) gains (2)
(9.4 ) 7.7 Income before
tax
$ 51.2 $ 137.0 Income tax expense
(2.2
) (6.2 )
Net income $ 49.0 $
130.8
Ratios Loss ratio
43.3 %
71.6 % 59.2 % 44.8 % 62.9 % 54.7 %
Policy acquisition expense ratio
18.8 %
18.7 % 18.7 % 17.9 % 17.5 % 17.7 %
General and administrative expense ratio (3)
13.2 %
13.3 % 15.7 % 12.8 % 15.1 % 17.7 %
General and administrative expense ratio (excluding non-recurring
corporate expenses) (3)
13.2 % 13.3 %
15.7 % 12.8 % 15.1 % 16.8 % Expense ratio
32.0
% 32.0 % 34.4 % 30.7 % 32.6 %
35.4 % Expense ratio (excluding non-recurring corporate expenses)
32.0 % 32.0 % 34.4 % 30.7
% 32.6 % 34.5 % Combined ratio
75.3 % 103.6
% 93.6 % 75.5 % 95.5 % 90.1 % Combined ratio
(excluding non-recurring corporate expenses)
75.3 %
103.6 % 93.6 % 75.5 % 95.5 % 89.2 % (1)
Includes realized and unrealized capital gains and losses
and realized and unrealized gains and losses on interest rate swaps
(2) Includes realized and unrealized foreign exchange gains and
losses and realized and unrealized gains and losses on foreign
exchange contracts (3) The total group general and administrative
expense ratio includes the impact from corporate expenses
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2015 Six Months Ended
June 30, 2014 Reinsurance Insurance Total
Reinsurance Insurance Total Gross
written premiums
$ 745.5 $ 896.5
$ 1,642.0 $ 770.6 $ 864.2 $ 1,634.8 Net written
premiums
680.3 727.3 1,407.6 729.5 654.4
1,383.9 Gross earned premiums
553.0 838.3
1,391.3 568.2 778.1 1,346.3 Net earned premiums
517.7
685.3 1,203.0 545.5 637.2 1,182.7 Losses and loss
adjustment expenses
221.8 444.8 666.6 235.4
389.8 625.2 Policy acquisition expenses
103.8 129.6
233.4 100.2 120.7 220.9 General and administrative expenses
67.8 100.5 168.3 68.6
97.0 165.6 Underwriting income
$
124.3 $ 10.4 $
134.7 $ 141.3 $ 29.7 $ 171.0 Net
investment income
94.1 95.6 Net realized and unrealized
investment gains (1)
24.2 35.9 Corporate expenses
(29.3 ) (30.5 ) Non-recurring corporate expenses
— (8.3 ) Other (expense) income
(4.3 ) 1.9
Interest expense
(14.7 ) (14.7 ) Net realized and
unrealized foreign exchange (losses) gains (2)
(20.4
) 10.3 Income before tax
$ 184.3 $
261.2 Income tax expense
(7.3 ) (10.0 )
Net
income $ 177.0 $ 251.2
Ratios Loss ratio
42.8 % 64.9 %
55.4 % 43.2 % 61.2 % 52.9 % Policy acquisition
expense ratio
20.1 % 18.9 % 19.4
% 18.4 % 18.9 % 18.7 % General and administrative expense
ratio (3)
13.1 % 14.7 % 16.4
% 12.6 % 15.2 % 17.3 % General and administrative expense
ratio (excluding non-recurring corporate expenses) (3)
13.1
% 14.7 % 16.4 % 12.6 % 15.2 %
16.6 % Expense ratio
33.2 % 33.6 %
35.8 % 31.0 % 34.1 % 36.0 % Expense ratio (excluding
non-recurring corporate expenses)
33.2 % 33.6
% 35.8 % 31.0 % 34.1 % 35.3 % Combined ratio
76.0 % 98.5 % 91.2 % 74.2
% 95.3 % 88.9 % Combined ratio (excluding non-recurring corporate
expenses)
76.0 % 98.5 % 91.2
% 74.2 % 95.3 % 88.2 % (1) Includes realized
and unrealized capital gains and losses and realized and unrealized
gains and losses on interest rate swaps (2) Includes realized and
unrealized foreign exchange gains and losses and realized and
unrealized gains and losses on foreign exchange contracts (3) The
total group general and administrative expense ratio includes the
impact from corporate expenses
About Aspen Insurance Holdings Limited
Aspen provides reinsurance and insurance coverage to clients in
various domestic and global markets through wholly-owned
subsidiaries and offices in Bermuda, France, Germany, Ireland,
Singapore, Switzerland, the United Kingdom and the United States.
For the year ended December 31, 2014, Aspen reported $10.7 billion
in total assets, $4.8 billion in gross reserves, $3.4 billion in
total shareholders’ equity and $2.9 billion in gross written
premiums. Its operating subsidiaries have been assigned a rating of
“A” (“Strong”) by Standard & Poor’s Financial Services LLC
(“S&P”), an “A” (“Excellent”) by A.M. Best Company Inc. (“A.M.
Best”) and an “A2” (“Good”) by Moody’s Investor Service, Inc.
(“Moody’s”).
For more information about Aspen, please visit www.aspen.co.
Forward-looking Statements Safe Harbor
This press release contains, and Aspen’s earnings conference
call will contain, written or oral “forward-looking statements”
within the meaning of the US federal securities laws. These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of
words such as “expect,” “intend,” “plan,” “believe,” “do not
believe,” “aim,” “project,” “anticipate,” “seek,” “will,” “likely,”
“assume,” “estimate,” “may,” “continue,” “guidance,” “objective,”
“outlook,” “trends,” “future,” “could,” “would,” “should,”
“target,” "on track" and similar expressions of a future or
forward-looking nature.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and are
subject to a number of uncertainties and other factors, many of
which are outside Aspen’s control that could cause actual results
to differ materially from such statements.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. Aspen believes
these factors include, but are not limited to: our ability to
successfully implement steps to further optimize the business
portfolio, ensure capital efficiency and enhance investment
returns; the possibility of greater frequency or severity of claims
and loss activity, including as a result of natural or man-made
(including economic and political risks) catastrophic or material
loss events, than our underwriting, reserving, reinsurance
purchasing or investment practices have anticipated; the
assumptions and uncertainties underlying reserve levels that may be
impacted by future payments for settlements of claims and expenses
or by other factors causing adverse or favorable development,
including our assumptions on inflation costs associated with
long-tail casualty business which could differ materially from
actual experience; the reliability of, and changes in assumptions
to, natural and man-made catastrophe pricing, accumulation and
estimated loss models; decreased demand for our insurance or
reinsurance products and cyclical changes in the insurance and
reinsurance industry; the models we use to assess our exposure to
losses from future natural catastrophes contain inherent
uncertainties and our actual losses may differ significantly from
expectations; our capital models may provide materially different
indications than actual results; increased competition from
existing insurers and reinsurers and from alternative capital
providers and insurance-linked funds and collateralized special
purpose insurers on the basis of pricing, capacity, coverage terms,
new capital, binding authorities to brokers or other factors and
the related demand and supply dynamics as contracts come up for
renewal; our ability to execute our business plan to enter new
markets, introduce new products and develop new distribution
channels, including their integration into our existing operations;
our acquisition strategy; the recent consolidation in the
(re)insurance industry; loss of one or more of our senior
underwriters or key personnel; changes in our ability to exercise
capital management initiatives (including our share repurchase
program) or to arrange banking facilities as a result of prevailing
market conditions or changes in our financial position; changes in
the availability, cost or quality of reinsurance or retrocessional
coverage; changes in general economic conditions, including
inflation, deflation, foreign currency exchange rates, interest
rates and other factors that could affect our financial results;
the risk of a material decline in the value or liquidity of all or
parts of our investment portfolio; the risks associated with the
management of capital on behalf of investors; evolving issues with
respect to interpretation of coverage after major loss events; our
ability to adequately model and price the effects of climate cycles
and climate change; any intervening legislative or governmental
action and changing judicial interpretation and judgments on
insurers’ liability to various risks; the risks related to
litigation; the effectiveness of our risk management loss
limitation methods, including our reinsurance purchasing; changes
in the total industry losses, or our share of total industry
losses, resulting from past events and, with respect to such
events, our reliance on loss reports received from cedants and loss
adjustors, our reliance on industry loss estimates and those
generated by modeling techniques, changes in rulings on flood
damage or other exclusions as a result of prevailing lawsuits and
case law; the impact of one or more large losses from events other
than natural catastrophes or by an unexpected accumulation of
attritional losses and deterioration with loss estimates; the
impact of acts of terrorism, acts of war and related legislation;
any changes in our reinsurers’ credit quality and the amount and
timing of reinsurance recoverables; the continuing and uncertain
impact of the current depressed lower growth economic environment
in many of the countries in which we operate; our reliance on
information and technology and third-party service providers for
our operations and systems; the level of inflation in repair costs
due to limited availability of labor and materials after
catastrophes; a decline in our operating subsidiaries’ ratings with
S&P, A.M. Best or Moody’s; the failure of our reinsurers,
policyholders, brokers or other intermediaries to honor their
payment obligations; our reliance on the assessment and pricing of
individual risks by third parties; our dependence on a few brokers
for a large portion of our revenues; the persistence of heightened
financial risks, including excess sovereign debt, the banking
system and the Eurozone crisis; changes in government regulations
or tax laws in jurisdictions where we conduct business; changes in
accounting principles or policies or in the application of such
accounting principles or policies; increased counterparty risk due
to the credit impairment of financial institutions; and Aspen or
Aspen Bermuda Limited becoming subject to income taxes in the
United States or the United Kingdom. For a more detailed
description of these uncertainties and other factors, please see
the “Risk Factors” section in Aspen’s Annual Report on Form 10-K as
filed with the U.S. Securities and Exchange Commission on February
23, 2015. Aspen undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the dates on which they are made.
In addition, any estimates relating to loss events involve the
exercise of considerable judgment and reflect a combination of
ground-up evaluations, information available to date from brokers
and cedants, market intelligence, initial tentative loss reports
and other sources. The actuarial range of reserves and management’s
best estimate represents a distribution from our internal capital
model for reserving risk based on our then current state of
knowledge and explicit and implicit assumptions relating to the
incurred pattern of claims, the expected ultimate settlement
amount, inflation and dependencies between lines of business. Due
to the complexity of factors contributing to the losses and the
preliminary nature of the information used to prepare these
estimates, there can be no assurance that Aspen’s ultimate losses
will remain within the stated amount.
(1) Non-GAAP Financial Measures
In presenting Aspen’s results, management has included and
discussed certain “non-GAAP financial measures” as such term is
defined in Regulation G. Management believes that these non-GAAP
financial measures, which may be defined differently by other
companies, better explain Aspen’s results of operations in a manner
that allows for a more complete understanding of the underlying
trends in Aspen’s business. However, these measures should not be
viewed as a substitute for those determined in accordance with
GAAP. The reconciliation of such non-GAAP financial measures to
their respective most directly comparable GAAP financial measures
in accordance with Regulation G is included in the financial
supplement, which can be obtained from the Investor Relations
section of Aspen’s website at www.aspen.co.
Annualized Operating Return on Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Operating ROE is
calculated using operating income, as defined below, and average
equity is calculated as the arithmetic average on a monthly basis
for the stated periods of shareholders’ equity excluding the
aggregate value of the liquidation preferences of our preference
shares net of issuance costs and the total amount of
non-controlling interest. Aspen presents Operating ROE as a measure
that is commonly recognized as a standard of performance by
investors, analysts, rating agencies and other users of its
financial information.
See page 22 of Aspen’s financial supplement for a reconciliation
of operating income to net income and page 7 for a reconciliation
of average ordinary shareholders’ equity to average shareholders’
equity. Aspen’s financial supplement can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
Operating Income is a non-GAAP financial measure.
Operating income is an internal performance measure used by Aspen
in the management of its operations and represents after-tax
operational results excluding, as applicable, after-tax net
realized and unrealized gains or losses, including net realized and
unrealized gains and losses on interest rate swaps, after-tax net
foreign exchange gains or losses, including net realized and
unrealized gains and losses from foreign exchange contracts and
certain non-recurring items. In 2014, non-recurring items included
costs associated with defending the unsolicited approach from
Endurance Specialty Holdings Ltd. in the amount of $5.3 million and
$8.3 million for the three and six months ended June 30,
2014.
Aspen excludes the items above from its calculation of operating
income because they are either not expected to recur and therefore
are not reflective of underlying performance or the amount of these
gains or losses is heavily influenced by, and fluctuates in part,
according to the availability of market opportunities. Aspen
believes these amounts are largely independent of its business and
underwriting process and including them would distort the analysis
of trends in its operations. In addition to presenting net income
determined in accordance with GAAP, Aspen believes that showing
operating income enables investors, analysts, rating agencies and
other users of its financial information to more easily analyze
Aspen’s results of operations in a manner similar to how management
analyzes Aspen’s underlying business performance. Operating income
should not be viewed as a substitute for GAAP net income. Please
see page 22 of Aspen’s financial supplement for a reconciliation of
operating income to net income. Aspen’s financial supplement can be
obtained from the Investor Relations section of Aspen’s website at
www.aspen.co.
Diluted Book Value per Ordinary Share is not a non-GAAP
financial measure. Aspen has included diluted book value per
ordinary share as it illustrates the effect on basic book value per
share of dilutive securities thereby providing a better benchmark
for comparison with other companies. Diluted book value per share
is calculated using the treasury stock method, defined on page 21
of Aspen’s financial supplement, which can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
Diluted Operating Earnings per Share and Basic Operating
Earnings per Share are non-GAAP financial measures. Aspen
believes that the presentation of diluted operating earnings per
share and basic operating earnings per share supports meaningful
comparison from period to period and the analysis of normal
business operations. Diluted operating earnings per share and basic
operating earnings per share are calculated by dividing operating
income by the diluted or basic weighted average number of shares
outstanding for the period. See page 22 of Aspen’s financial
supplement for a reconciliation of diluted and basic operating
earnings per share to basic earnings per share. Aspen’s financial
supplement can be obtained from the Investor Relations section of
Aspen’s website at www.aspen.co.
Accident Year Loss Ratio Excluding Catastrophes is a
non-GAAP financial measure. Aspen believes that the presentation of
loss ratios excluding catastrophes and prior year reserve movements
supports meaningful comparison from period to period of the
underlying performance of the business. Accident year loss ratios
excluding catastrophes are calculated by dividing net losses
excluding catastrophe losses, net expenses and prior year reserve
movements by net earned premiums excluding catastrophe-related
reinstatement premiums. Aspen has defined catastrophe losses in the
first half of 2015 as losses associated with storms in Europe,
Australia and North America and in 2014 as losses associated with
winter storms in the U.S. and Japan and flood losses in the U.K.
See pages 10 and 11 of Aspen’s financial supplement for a
reconciliation of loss ratios to accident year loss ratios
excluding catastrophes.
(2) The outlook for 2015
The outlook for 2015 assumes our expectations of normal loss
experience, our current view of interest rates and our prospective
view of the insurance rate environment. Our outlook in 2015 is
necessarily subject to heightened sensitivity in relation to these
assumptions which are likely to be the subject of future change,
amendment, update and review, as necessary. For example, our
assumptions for rising interest rates in 2015 are subject to and
dependent upon the anticipated and actual monetary policy decisions
taken by the central banks in the jurisdictions in which we
operate. Our assumptions are also based on the retention of our
senior underwriters and client relationships. In addition, the
models underlying our normal loss experience assumptions will
produce different illustrative loss patterns if the modeling
assumptions are changed. Greater decreases in pricing in certain
business lines, if sustained, are also expected to have an adverse
effect on operating return on equity. This outlook is subject to
change for many reasons, including unusual or unpredictable items,
such as catastrophe losses, loss reserve development, investment
results and other items.
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version on businesswire.com: http://www.businesswire.com/news/home/20150727006284/en/
Investors:AspenKathleen de Guzman, Senior Vice President,
Investor Relations+1-646-289-4912Kathleen.deGuzman@aspen.coorMark Jones, Vice
President, Investor Relations+1-646-289-4945Mark.P.Jones@aspen.coorMedia:AspenSteve
Colton, Head of Communications+44 20 7184 8337Steve.Colton@aspen.coorInternational - Citigate
Dewe RogersonCaroline Merrell or Jos Bieneman+44 20 7638
9571Caroline.Merrell@citigatedr.co.ukJos.Bieneman@citigatedr.co.ukorNorth America -
Sard Verbinnen & CoPaul Scarpetta or Jamie
Tully+1-212-687-8080
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