Annualized Net Income Return on Equity of
10.2% for First Half 2017 and 8.8% for the Second Quarter
2017
Annualized Operating Return on Equity of
5.4% for First Half 2017 and 4.0% for the Second
Quarter 2017
Diluted Book Value Per Share of $48.64, up
4.1% from December 31, 2016
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) reported
today net income after tax of $75.8 million, or $1.07 per diluted
ordinary share, and operating income after tax of $39.2 million, or
$0.47 per diluted ordinary share, for the second quarter of
2017.
Chris O’Kane, Chief Executive Officer, commented: “We continue
to make progress in both Reinsurance and Insurance to enhance
further our competitive position and profitability.
“With a strong regional network and deep local relationships,
the Aspen Re team has been able to capture new opportunities and
again deliver strong results in an operating environment that
remains challenging. The Aspen Insurance team remains focused on
lines that provide the best opportunities for long-term profitable
growth such as Professional Liability, with its excellent track
record of growth and strong underwriting performance.
“While our second quarter underwriting results reflected
elevated loss levels in certain areas of the business, our
investment performance contributed positively to diluted book value
per share growth.”(1)
_____________________
Non-GAAP financial measures are used
throughout this release as defined at the end of this press
release.
(1) Refer to "Forward-looking
Statements Safe Harbor" at the end of this press release.
Operating highlights for the quarter ended June 30,
2017
- Gross written premiums of $822.1
million in the second quarter of 2017, an increase of 2.5% compared
with $801.7 million in the second quarter of 2016
- Insurance: Gross written premiums of
$486.5 million, an increase of 3.7% compared with $469.1 million in
the second quarter of 2016, primarily due to growth in the
Financial and Professional lines sub-segment, offset by decreases
in the Property and Casualty and Marine, Aviation and Energy
sub-segments
- Reinsurance: Gross written premiums of
$335.6 million, an increase of 0.9% from $332.6 million in the
second quarter of 2016, primarily due to growth in the Specialty
sub-segment, offset by decreases in the Property Catastrophe, Other
Property, and Casualty sub-segments
- Net written premiums of $578.7
million in the second quarter of 2017, a decrease of 20.2% compared
with $724.8 million in the second quarter of 2016 as Aspen is
making more efficient use of reinsurance to reduce volatility. The
retention ratio in the second quarter of 2017 was 70.4% compared
with 90.4% in the second quarter of 2016
- Insurance: Net written premiums of
$293.2 million, a decrease of 29.9% from $418.0 million in the
second quarter of 2016, primarily due to increased use of quota
share reinsurance to reduce volatility across our businesses. The
retention ratio in the second quarter of 2017 was 60.3% compared
with 89.1% in the second quarter of 2016
- Reinsurance: Net written premiums of
$285.5 million, a decrease of 6.9% from $306.8 million in the
second quarter of 2016, primarily due to increased cessions to
Aspen Capital Markets. The retention ratio in the second quarter of
2017 was 85.1% compared with 92.2% in the second quarter of
2016
- Loss ratio of 61.6% in the
second quarter of 2017 compared with 65.0% in the second quarter of
2016. The loss ratio included pre-tax catastrophe losses, net of
reinsurance recoveries, of $37.4 million, or 6.7 percentage points,
in the second quarter of 2017. Pre-tax catastrophe losses, net of
reinsurance recoveries and reinstatement premiums, totaled $65.1
million, or 10.1 percentage points, in the second quarter of 2016
- Insurance: Loss ratio of 66.9% compared
with 68.5% in the second quarter of 2016. Pre-tax catastrophe
losses, net of reinsurance recoveries, of $27.1 million, totaled
9.4 percentage points in the second quarter of 2017 due to
weather-related events in the U.S. Pre-tax catastrophe losses net
of reinsurance recoveries totaled $16.5 million, or 4.3 percentage
points, in the second quarter of 2016
- Reinsurance: Loss ratio of 56.0%
compared with 60.5% in the second quarter of 2016. The loss ratio
included pre-tax catastrophe losses, net of reinsurance recoveries,
of $10.3 million, or 3.8 percentage points, in the second quarter
of 2017 primarily due to weather-related events in the U.S. and
Australia. Pre-tax catastrophe losses, net of reinsurance
recoveries and reinstatement premiums, totaled $48.6 million, or
17.4% percentage points, in the second quarter of 2016
- Net favorable development on
prior year loss reserves in the second quarter of 2017 benefited
from a $28.5 million reinsurance recovery in respect of an offshore
energy-related loss that occurred in Africa in 2016. The
reinsurance recovery benefited the Insurance and Reinsurance
segments largely evenly. Net favorable development on prior year
loss reserves, excluding this reinsurance recovery, in the second
quarter of 2017 was $20.2 million compared with $21.2 million in
the second quarter of 2016
- Insurance: Prior year net favorable
reserve development of $16.1 million benefited the loss ratio by
5.6 percentage points in the second quarter of 2017. Prior year net
favorable development of $7.4 million benefited the loss ratio by
1.9 percentage points in the second quarter of 2016
- Reinsurance: Prior year net favorable
reserve development of $32.6 million benefited the loss ratio by
12.0 percentage points in the second quarter of 2017. Prior year
net favorable development of $13.8 million benefited the loss ratio
by 4.6 percentage points in the second quarter of 2016
- Accident year loss ratio excluding
catastrophes was 63.6% in the second quarter of 2017 compared
with 58.0% in the second quarter of 2016
- Insurance: Accident year loss ratio
excluding catastrophes for the quarter ended June 30, 2017 was
63.1%. This was affected by a surety loss of $10.7 million, net of
reinstatement premiums, and a fire loss of $9.8 million, which
together equated to 7.1 percentage points on the accident year
ex-cat loss ratio. The accident year loss ratio excluding
catastrophes in the second quarter of 2016 was 66.1%
- Reinsurance: Accident year loss ratio
excluding catastrophes for the quarter ended June 30, 2017 was
64.2% compared with 47.7% a year ago. In the second quarter of
2017, there were $16.5 million of mid-sized losses, the largest of
which was a fire at a chemical plant. These losses equated to 6.1
percentage points on the accident year loss ratio excluding
catastrophes
- Total expense ratio of 38.4% and
total expense ratio (excluding amortization and non-recurring
expenses) of 38.1% in the second quarter of 2017 compared with
35.7% and 35.7%, respectively, in the second quarter of 2016. The
policy acquisition expense ratio was 17.1% in the second quarter of
2017, compared with 18.6% in the second quarter of 2016. General
and administrative expenses (excluding amortization and
non-recurring expenses) were $117.8 million in the second quarter
of 2017, largely in-line with $116.4 million in the second quarter
of 2016. The general and administrative expense ratio (excluding
amortization and non-recurring expenses) increased to 21.0% from
17.1% in the second quarter of 2016 due primarily to lower net
earned premiums
- Net income after tax of $75.8
million, or $1.07 per diluted ordinary share, in the second quarter
of 2017 compared with net income of $64.9 million, or $0.89 per
diluted ordinary share, in the second quarter of 2016. Net
income included $42.0 million of net realized and unrealized
investment gains in the second quarter of 2017 compared with $36.5
million in the second quarter of 2016. Operating income after
tax of $39.2 million, or $0.47 per diluted ordinary share, in
the second quarter of 2017 compared with operating income of $34.1
million, or $0.40 per diluted ordinary share, in the second quarter
of 2016
- Annualized net income return on
average equity of 8.8% and annualized operating return on
average equity of 4.0% for the quarter ended
June 30, 2017 compared with 7.2% and 3.2%, respectively, for
the second quarter of 2016
Operating highlights for the six months ended June 30,
2017
- Gross written premiums increased
by 2.4% to $1,820.1 million in the first half of 2017 compared with
$1,777.4 million in the first half of 2016
- Net written premiums decreased
by 17.0% to $1,264.9 million in the first half of 2017 compared
with $1,524.5 million in the first half of 2016. The retention
ratio in the first half of 2017 was 69.5% compared with 85.8% in
the first half of 2016
- Loss ratio of 59.0% for the
first half of 2017 compared with 59.5% for the first half of 2016.
The loss ratio included pre-tax catastrophe losses, net of
reinsurance recoveries and reinstatement premiums, of $66.5
million, or 5.8 percentage points, in the first half of 2017. This
compared with $83.8 million, or 6.5 percentage points, of pre-tax
catastrophe losses, net of reinsurance recoveries and reinstatement
premiums, in the first half of 2016
- Net favorable development on
prior year loss reserves of $74.9 million benefited the loss ratio
by 6.6 percentage points in the first half of 2017. This included
an additional $28.5 million reinsurance recovery in respect of an
offshore energy-related loss that occurred in Africa in 2016, and
which benefited the Insurance and Reinsurance segments largely
evenly. In the first half of 2016, net favorable development of
$42.8 million benefited the loss ratio by 3.2 percentage
points
- Accident year loss ratio excluding
catastrophes of 59.8% for the first half of 2017 compared with
56.2% for the first half of 2016
- Total expense ratio of 39.5% and
total expense ratio (excluding amortization and non-recurring
expenses) of 39.1% for the first half of 2017 compared with
36.7% and 36.7%, respectively, for the first half of 2016,
reflecting an increase in the general and administrative expense
ratio and a decrease in the policy acquisition expense ratio. The
increase in the general and administrative expense ratio (excluding
amortization and non-recurring expenses) is due primarily to lower
net earned premiums in the first half of 2017 compared with the
first half of 2016
- Net income after tax of $172.3
million or $2.43 per diluted ordinary share for the six months
ended June 30, 2017 compared with $179.3 million or $2.57 per
diluted ordinary share for the six months ended June 30, 2016.
Net income included $88.2 million of net realized and unrealized
investment gains in the first half of 2017 compared with $78.7
million in the first half of 2016. Operating income after
tax of $99.0 million or $1.27 per diluted ordinary share for
the six months ended June 30, 2017 compared with operating
income of $124.0 million, or $1.68 per diluted ordinary share for
the six months ended June 30, 2016
- Annualized net income return on
average equity of 10.2% and annualized operating return on
average equity of 5.4% for the first half of 2017 compared with
10.8% and 7.0%, respectively, for the first half of 2016
Investment performance
- Investment income of $47.4 million in
the second quarter of 2017 decreased by 1.3% compared with $48.0
million in the second quarter of 2016
- The total return on Aspen’s aggregate
investment portfolio was 1.20% for the three months ended
June 30, 2017 and reflects net realized and unrealized gains
and losses in both the fixed income and equity portfolios
- 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 3.89 years as at June 30,
2017
- Book yield on the fixed income
portfolio as at June 30, 2017 was 2.53% compared with 2.49% as
at December 31, 2016
Capital
- Total shareholders’ equity was $3.6
billion as at June 30, 2017
- Diluted book value per share was $48.64
as at June 30, 2017, up 4.1% from December 31, 2016
- During the second quarter of 2017,
Aspen repurchased 197,673 ordinary shares at an average price of
$50.59 per share for a cost of $10.0 million
- On July 3, 2017, Aspen redeemed its
outstanding 7.250% Perpetual Non-Cumulative Preference Shares for
$160.0 million. This redemption was primarily funded by proceeds
from Aspen's 5.625% Perpetual Non-Cumulative Preference Share
issue
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, July 27, 2017.
To participate in the July 27 conference call by
phone
Please call to register at least 10 minutes before the
conference call begins by dialing:
+1 (844) 378 6481 (US toll free) or +1 (412) 542 4176
(international) Conference ID 10109382
To listen live online
Aspen will provide a live webcast on Aspen’s website at
www.aspen.co.
To download the materials
The earnings press release and a detailed financial supplement
will also be published on Aspen’s website at www.aspen.co.
To listen later
A replay of the call will be available approximately two hours
after the end of the live call for 14 days via phone. To listen to
the replay by phone please dial:
+1 (877) 344 7529 (US toll free) or +1 (412) 317 0088
(international) Replay ID 10109382
The webcast 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, 2017 As
atDecember 31, 2016 ASSETS Total
investments
$ 7,661.3 $ 7,900.3 Cash and cash
equivalents
1,228.4 1,273.8 Reinsurance recoverables
1,243.5 815.9 Premiums receivable
1,614.1 1,399.4
Other assets
769.2 700.7 Total assets
$
12,516.5 $ 12,090.1 LIABILITIES Losses and
loss adjustment expenses
$ 5,571.4 $ 5,319.9 Unearned
premiums
1,981.5 1,618.6 Other payables
682.5 839.0
Silverton loan notes
110.8 115.0 Long-term debt
549.4
549.3 Total liabilities
$ 8,895.6 $ 8,441.8
SHAREHOLDERS’ EQUITY Total shareholders’ equity
3,620.9 3,648.3 Total liabilities and shareholders’
equity
$ 12,516.5 $ 12,090.1 Book value
per share
$ 49.34 $ 47.68 Diluted book value per
share (treasury stock method)
$ 48.64 $ 46.72
Aspen Insurance Holdings Limited
Summary consolidated statement of income (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2017
June 30, 2016 UNDERWRITING REVENUES Gross written premiums
$ 822.1 $ 801.7 Premiums ceded
(243.4 )
(76.9 ) Net written premiums
578.7 724.8 Change in unearned
premiums
(16.7 ) (44.0 ) Net earned premiums
562.0 680.8 UNDERWRITING EXPENSES Losses and
loss adjustment expenses
346.1 442.2 Amortization of
deferred policy acquisition costs
96.3 126.7 General,
administrative and corporate expenses
117.8 116.4
Total underwriting expenses
560.2 685.3
Underwriting income (loss) including corporate
expenses
1.8 (4.5 ) Net investment income
47.4 48.0 Interest expense
(7.4 ) (7.4 ) Other
expenses
(1.7 ) (1.0 ) Total other revenue
38.3 39.6 Amortization and
non-recurring expenses
(2.1 ) — Net realized and
unrealized exchange (losses)
(3.0 ) (5.4 ) Net
realized and unrealized investment gains
42.0 36.5
INCOME BEFORE TAX
77.0 66.2 Income tax expense
(1.2 ) (1.3 ) NET INCOME AFTER TAX
75.8 64.9
Dividends paid on ordinary shares
(14.4 ) (13.4 )
Dividends paid on preference shares
(10.5 ) (9.4 )
Preference share redemption costs
— — Proportion due to
non-controlling interest
(0.1 ) (0.4 ) Retained
income
$ 50.8 $ 41.7 Loss ratio
61.6 % 65.0 % Policy acquisition expense ratio
17.1 % 18.6 % General, administrative and corporate
expense ratio
21.3 % 17.1 % General, administrative
and corporate expense ratio (excluding amortization and
non-recurring expenses)
21.0 % 17.1 % Expense ratio
38.4 % 35.7 % Expense ratio (excluding amortization
and non-recurring expenses)
38.1 % 35.7 % Combined
ratio
100.0 % 100.7 % Combined ratio (excluding
amortization and non-recurring expenses)
99.7 % 100.7
%
Aspen Insurance Holdings
Limited Summary consolidated statement of income
(unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2017 June
30, 2016 UNDERWRITING REVENUES Gross written premiums
$
1,820.1 $ 1,777.4 Premiums ceded
(555.2 )
(252.9 ) Net written premiums
1,264.9 1,524.5 Change in
unearned premiums
(121.8 ) (180.6 ) Net earned
premiums
1,143.1 1,343.9 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
674.3 799.6 Amortization
of deferred policy acquisition costs
210.0 256.9 General,
administrative and corporate expenses
236.9 236.2
Total underwriting expenses
1,121.2 1,292.7
Underwriting income including corporate
expenses
21.9 51.2 Net investment
income
95.1 97.5 Interest expense
(14.8 )
(14.8 ) Other expenses
(1.0 ) (4.0 ) Total other
revenue
79.3 78.7 Amortization and
non-recurring expenses
(4.3 ) — Net realized and
unrealized exchange (losses)
(8.8 ) (25.5 ) Net
realized and unrealized investment gains
88.2 78.7
INCOME BEFORE TAX
176.3 183.1 Income tax expense
(4.0 ) (3.8 ) NET INCOME AFTER TAX
172.3 179.3
Dividends paid on ordinary shares
(27.6 ) (26.2 )
Dividends paid on preference shares
(21.0 ) (18.9 )
Preference share redemption costs
(2.4 ) — Proportion
due to non-controlling interest
(0.2 ) (0.2 )
Retained income
$ 121.1 $ 134.0
Loss ratio
59.0 % 59.5 % Policy acquisition expense
ratio
18.4 % 19.1 % General, administrative and
corporate expense ratio
21.1 % 17.6 % General,
administrative and corporate expense ratio (excluding amortization
and non-recurring expenses)
20.7 % 17.6 % Expense
ratio
39.5 % 36.7 % Expense ratio (excluding
amortization and non-recurring expenses)
39.1 % 36.7
% Combined ratio
98.5 % 96.2 % Combined ratio
(excluding amortization and non-recurring expenses)
98.1
% 96.2 %
Aspen
Insurance Holdings Limited Operating income reconciliation
(unaudited)
$ in millions, except per share
amounts
Three Months Ended Six Months Ended (in US$
millions except where stated)
June 30, 2017
June 30, 2016
June 30, 2017
June 30, 2016
Net income as reported
$ 75.8 $ 64.9
$
172.3 $ 179.3 Change in redemption value of preference
shares
— —
(2.4 ) — Net change attributable to
non-controlling interest
(0.1 ) (0.4 )
(0.2
) (0.2 ) Preference share dividends
(10.5 )
(9.4 )
(21.0 ) (18.9 ) Net income available to
ordinary shareholders
65.2 55.1
148.7 160.2 Add
(deduct) after tax income: Net foreign exchange losses
3.0
4.9
8.1 21.8 Net realized (gains) on investments
(41.4 ) (35.7 )
(85.2 ) (77.1 ) Change
in redemption value of preference shares
— —
2.4 —
Amortization and non-recurring expenses
1.8 —
3.8 — Operating income after tax available to
ordinary shareholders
28.6 24.3
77.8 104.9 Tax
expense on operating income
0.9 1.0
2.2
5.9 Operating income before tax available to ordinary
shareholders
$ 29.5 $ 25.3
$
80.0 $ 110.8
Basic earnings per
ordinary share Net income adjusted for preference share
dividends and non-controlling interest
$ 1.09 $ 0.91
$ 2.48 $ 2.64 Add (deduct) after tax income: Net
foreign exchange losses
0.05 0.08
0.13 0.36 Net
realized (gains) on investments
(0.69 ) (0.59 )
(1.42 ) (1.27 ) Change in redemption value of
preference shares
— —
0.04 — Amortization and
non-recurring expenses
0.03 —
0.06
— Operating income adjusted for preference shares
dividends and non-controlling interest
$ 0.48
$ 0.40
$ 1.29 $ 1.73
Diluted earnings per ordinary share Net income adjusted for
preference share dividends and non-controlling interest
$
1.07 $ 0.89
$ 2.43 $ 2.57 Add (deduct) after
tax income: Net foreign exchange losses
0.05 0.08
0.13 0.35 Net realized (gains) on investments
(0.68
) (0.57 )
(1.39 ) (1.24 ) Change in redemption
value of preference shares
— —
0.04 — Amortization
and non-recurring expenses
0.03 —
0.06
— Operating income adjusted for preference shares
dividends and non-controlling interest
$ 0.47
$ 0.40
$ 1.27 $ 1.68
Aspen Insurance Holdings Limited
Summary consolidated financial data (unaudited)
$ in millions, except number of shares
Three Months Ended Six Months Ended June
30, 2017 June 30, 2016 June
30, 2017 June 30, 2016 Basic
earnings per ordinary share Net income adjusted for preference
share dividend and non-controlling interest
$1.09 $0.91
$2.48 $2.64 Operating income adjusted for preference share
dividend and non-controlling interest
$0.48 $0.40
$1.29 $1.73 Diluted earnings per ordinary share Net income
adjusted for preference share dividend and non-controlling interest
$1.07 $0.89
$2.43 $2.57 Operating income adjusted for
preference share dividend and non-controlling interest
$0.47
$0.40
$1.27 $1.68 Weighted average number of ordinary
shares outstanding (in millions)
59.966 60.705
59.915
60.772 Weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares (in millions)
61.023 62.192
61.096 62.263 Book value per
ordinary share
$49.34 $50.71
$49.34 $50.71 Diluted
book value per ordinary share (treasury stock method)
$48.64
$49.53
$48.64 $49.53 Ordinary shares outstanding at
end of the period (in millions)
59.844 60.329
59.844
60.329 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method) (in
millions)
60.712 61.767
60.712 61.767
Aspen Insurance Holdings Limited
Summary consolidated segment information (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2017 Three Months
Ended June 30, 2016 Reinsurance Insurance
Total Reinsurance Insurance
Total Gross written premiums
$
335.6 $ 486.5 $ 822.1 $ 332.6 $
469.1 $ 801.7 Net written premiums
285.5 293.2
578.7 306.8 418.0 724.8 Gross earned premiums
320.6
429.1 749.7 329.8 454.7 784.5 Net earned premiums
272.7 289.3 562.0 299.4 381.4 680.8 Losses and
loss adjustment expenses
152.6 193.5 346.1
181.1 261.1 442.2 Amortization of deferred policy acquisition
expenses
53.4 42.9 96.3 50.7 76.0 126.7
General and administrative expenses
40.7 65.7
106.4 39.1 57.2 96.3
Underwriting income (loss)
$ 26.0 $
(12.8 ) $ 13.2 $ 28.5 $ (12.9 )
$ 15.6 Net investment income
47.4 48.0 Net realized
and unrealized investment gains (1)
42.0 36.5 Corporate
expenses
(11.4 ) (20.1 ) Amortization and
non-recurring expenses
(2.1 ) — Other expenses (2)
(1.7 ) (1.0 ) Interest expense
(7.4 )
(7.4 ) Net realized and unrealized foreign exchange (losses) (3)
(3.0 ) (5.4 ) Income before tax
$ 77.0
$ 66.2 Income tax expense
(1.2 ) (1.3 )
Net
income $ 75.8 $ 64.9
Ratios Loss ratio
56.0 % 66.9 %
61.6 % 60.5 % 68.5 % 65.0 % Policy acquisition
expense ratio
19.6 % 14.8 % 17.1
% 16.9 % 19.9 % 18.6 % General and administrative expense
ratio (4)
14.9 % 22.7 % 21.3
% 13.1 % 15.0 % 17.1 % General and administrative expense
ratio (excluding amortization and non-recurring expenses) (4)
14.9 % 22.7 % 21.0 % 13.1
% 15.0 % 17.1 % Expense ratio
34.5 % 37.5
% 38.4 % 30.0 % 34.9 % 35.7 % Expense ratio
(excluding amortization and non-recurring expenses)
34.5
% 37.5 % 38.1 % 30.0 % 34.9 %
35.7 % Combined ratio
90.5 % 104.4 %
100.0 % 90.5 % 103.4 % 100.7 % Combined ratio
(excluding amortization and non-recurring expenses)
90.5
% 104.4 % 99.7 % 90.5 % 103.4 %
100.7 %
Accident Year Ex-cat Loss Ratio Loss ratio
56.0 % 66.9 % 61.6 % 60.5
% 68.5 % 65.0 % Prior year loss development
12.0 %
5.6 % 8.7 % 4.6 % 1.9 % 3.1 %
Catastrophe losses
(3.8 )% (9.4 )%
(6.7 )% (17.4 )% (4.3 )% (10.1 )% Accident year
ex-cat loss ratio
64.2 % 63.1 %
63.6 % 47.7 % 66.1 % 58.0 %
(1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Other expenses in the second quarter of
2017 and second quarter of 2016 included $3.3 million of expense
and $0.5 million of income, respectively, related to a change in
the fair value of loan notes issued by Silverton Re
(3)
Includes realized and unrealized foreign
exchange gains and losses and realized and unrealized gains and
losses on foreign exchange contracts
(4)
The total group general and administrative
expense ratio includes the impact from corporate and non-recurring
expenses
Aspen Insurance Holdings
Limited Summary consolidated segment information
(unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2017 Six Months Ended
June 30, 2016 Reinsurance Insurance
Total Reinsurance Insurance
Total Gross written premiums
$ 900.9
$ 919.2 $ 1,820.1 $ 850.2 $ 927.2 $
1,777.4 Net written premiums
733.7 531.2
1,264.9 756.3 768.2 1,524.5 Gross earned premiums
648.2 852.8 1,501.0 636.6 900.3 1,536.9 Net
earned premiums
550.2 592.9 1,143.1 579.7
764.2 1,343.9 Losses and loss adjustment expenses
295.7
378.6 674.3 315.6 484.0 799.6 Amortization of
deferred policy acquisition expenses
112.9 97.1
210.0 110.1 146.8 256.9 General and administrative expenses
84.6 127.5 212.1 83.2
115.8 199.0 Underwriting income (loss)
$ 57.0 $ (10.3 ) $
46.7 $ 70.8 $ 17.6 $ 88.4 Net
investment income
95.1 97.5 Net realized and unrealized
investment gains (1)
88.2 78.7 Corporate expenses
(24.8 ) (37.2 ) Amortization and non-recurring
expenses
(4.3 ) — Other expenses (2)
(1.0
) (4.0 ) Interest expense
(14.8 ) (14.8 ) Net
realized and unrealized foreign exchange (losses) (3)
(8.8
) (25.5 ) Income before tax
$ 176.3 $ 183.1
Income tax expense
(4.0 ) (3.8 )
Net income
$ 172.3 $ 179.3
Ratios
Loss ratio
53.7 % 63.9 % 59.0
% 54.4 % 63.3 % 59.5 % Policy acquisition expense ratio
20.5 % 16.4 % 18.4 % 19.0
% 19.2 % 19.1 % General and administrative expense ratio (4)
15.4 % 21.5 % 21.1 % 14.4
% 15.2 % 17.6 % General and administrative expense ratio (excluding
amortization and non-recurring expenses) (4)
15.4 %
21.5 % 20.7 % 14.4 % 15.2 % 17.6 %
Expense ratio
35.9 % 37.9 % 39.5
% 33.4 % 34.4 % 36.7 % Expense ratio (excluding amortization
and non-recurring expenses)
35.9 % 37.9
% 39.1 % 33.4 % 34.4 % 36.7 % Combined ratio
89.6 % 101.8 % 98.5 %
87.8 % 97.7 % 96.2 % Combined ratio (excluding amortization and
non-recurring expenses)
89.6 % 101.8 %
98.1 % 87.8 % 97.7 % 96.2 %
Accident Year Ex-cat
Loss Ratio Loss ratio
53.7 % 63.9 %
59.0 % 54.4 % 63.3 % 59.5 % Prior year loss
development
9.8 % 3.6 % 6.6
% 5.5 % 1.4 % 3.2 % Catastrophe losses
(6.3 )%
(5.3 )% (5.8 )% (10.8 )% (3.2 )% (6.5
)% Accident year ex-cat loss ratio
57.2 % 62.2
% 59.8 % 49.1 % 61.5 % 56.2 % (1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Other expenses in the first half of 2017
and first half of 2016 included $6.2 million and $3.9 million,
respectively, related to a change in the fair value of loan notes
issued by Silverton Re
(3)
Includes realized and unrealized foreign
exchange gains and losses and realized and unrealized gains and
losses on foreign exchange contracts
(4)
The total group general and administrative
expense ratio includes the impact from corporate and non-recurring
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 Australia, Bermuda, Canada, France,
Germany, Ireland, Singapore, Switzerland, the United Arab Emirates,
the United Kingdom and the United States. For the year ended
December 31, 2016, Aspen reported $12.1 billion in total assets,
$5.3 billion in gross reserves, $3.6 billion in total shareholders’
equity and $3.1 billion in gross written premiums. Its operating
subsidiaries have been assigned a rating of “A” by Standard &
Poor’s Financial Services LLC (“S&P”), an “A” (“Excellent”) by
A.M. Best Company Inc. (“A.M. Best”) and an “A2” by Moody’s
Investors Service, Inc. (“Moody’s”).
For more information about Aspen, please visit www.aspen.co.
(1) 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 U.S. 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 political, regulatory and economic effects
arising from the vote by the U.K. electorate in favor of a U.K.
exit from the European Union in the referendum held in June 2016
and resulting negotiations; 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; cyclical changes in the
insurance and reinsurance industry; the models we use to assess our
exposure to losses from future natural catastrophes
("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 (re)insurers 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
teams and develop new distribution channels, including their
integration into our existing operations; our acquisition strategy;
changes in market conditions in the agriculture industry, which may
vary depending upon demand for agricultural products, weather,
commodity prices, natural disasters, and changes in legislation and
policies related to agricultural products and producers;
termination of, or changes in, the terms of the U.S. Federal
Multiple Peril Crop Insurance Program or the U.S. Farm Bill,
including modifications to the Standard Reinsurance Agreement put
in place by the Risk Management Agency of the U.S. Department of
Agriculture; the recent consolidation in the (re)insurance
industry; loss of one or more of our senior underwriters or key
personnel; our ability to exercise capital management initiatives,
including capital available to pursue our share repurchase program
at various levels or to declare dividends, or to arrange banking
facilities as a result of prevailing market conditions, the level
of catastrophes or other losses or changes in our financial
results; 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; a failure in our
operational systems or infrastructure or those of third parties,
including those caused by security breaches or cyber attacks;
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 availability, cost or quality of
reinsurance or retrocessional coverage; changes in the total
industry losses or our share of total industry losses resulting
from events, such as catastrophes, that have occurred in prior
years or may occur 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 catastrophes or by an
unexpected accumulation of attritional losses and deterioration in
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 (the "SEC") on February 22, 2017. 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 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 losses and the preliminary
nature of the information used to prepare estimates, there can be
no assurance that Aspen’s ultimate losses will remain within the
stated amounts.
Non-GAAP Financial Measures
In presenting Aspen’s results, management has included and
discussed certain “non-GAAP financial measures.” Management
believes 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 measure is included in the financial
supplement or this release. Aspen’s financial supplement and second
quarter 2017 earnings press release, which were filed with the SEC
on Form 8-K on July 26, 2017, 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. Please see page 22 of Aspen’s financial
supplement for a reconciliation of net income to operating income
and page 7 for a reconciliation of average shareholders’ equity to
average ordinary shareholders’ equity.
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, net
realized gains or losses on investments, amortization of intangible
assets and certain non-recurring income and expenses. Operating
income in the first half of 2017 also included the issue cost
associated with the redemption of the 7.401% Perpetual
Non-Cumulative Preference Shares.
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
net income to operating income.
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.
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. Please see page 22 of Aspen’s financial
supplement for a reconciliation of basic earnings per share to
diluted and basic operating earnings per share.
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 2017 as losses associated
with a tornado in Mississippi, Cyclone Debbie in Australia and
other U.S. weather-related events. Catastrophe losses in the first
half of 2016 were defined as losses associated with wildfires in
Canada, weather-related events in the U.S. and several earthquakes.
Please see pages 11 and 12 of this release for a reconciliation of
loss ratios to accident year loss ratios excluding
catastrophes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170726006321/en/
InvestorsAspenMark Jones, +1 (646) 289-4945Senior Vice
President, Investor Relationsmark.p.jones@aspen.coorMediaAspenSteve
Colton, +44 20 7184 8337Group Head of Communicationssteve.colton@aspen.co
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