Annualized Operating Return on Equity of
8.4% for the Second Quarter 2018 and 8.8% for First Half
2018
Annualized Net Income Return on Equity of
(4.0)% for the Second Quarter 2018 and 0.1% for First Half
2018
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) reported
today a net loss after tax of $(14.7) million, or $(0.38) per
diluted ordinary share, and operating income after tax of $56.3
million, or $0.80 per diluted ordinary share, for the second
quarter of 2018.
Chris O’Kane, Chief Executive Officer, commented: “Aspen’s
second quarter results demonstrate ongoing execution of our plan to
enhance performance. This included the continued successful
repositioning of Aspen Insurance, which had its second consecutive
record quarter in terms of gross written premium, another quarter
of solid results and pricing discipline at Aspen Re and significant
progress in the implementation of our Operational Effectiveness and
Efficiency program. In addition, we reduced debt leverage through
the partial redemption of our senior notes.”(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,
2018
- Gross written premiums of $853.8
million in the second quarter of 2018, an increase of 3.9% compared
with $822.1 million in the second quarter of 2017
- Insurance: Gross written premiums of
$527.8 million, an increase of 8.5% compared with $486.5 million in
the second quarter of 2017 due to growth across all
sub-segments
- Reinsurance: Gross written premiums of
$326.0 million, a decrease of 2.9% compared with $335.6 million in
the second quarter of 2017 due to a decrease in Specialty
sub-segment premiums which was partially offset by growth in all
other sub-segments
- Net written premiums of $486.0
million in the second quarter of 2018, a decrease of 16.0% compared
with $578.7 million in the second quarter of 2017 as Aspen
continues to make increased use of ceded reinsurance. The retention
ratio in the second quarter of 2018 was 56.9% compared with 70.4%
in the second quarter of 2017
- Insurance: Net written premiums of
$219.1 million, a decrease of 25.3% compared with $293.2 million in
the second quarter of 2017, due primarily to the increased use of
quota share reinsurance. The retention ratio in the second quarter
of 2018 was 41.5% compared with 60.3% in the second quarter of
2017
- Reinsurance: Net written premiums of
$266.9 million, a decrease of 6.5% compared with $285.5 million in
the second quarter of 2017. As disclosed previously, Aspen no
longer cedes business via Silverton and accounts for such business
in the same way as other third party reinsurance. This change
reduced net written premiums in the second quarter of 2018 by $13.7
million. The retention ratio in the second quarter of 2018 was
81.9% compared with 85.1% in the second quarter of 2017
- Loss ratio of 59.7% in the
second quarter of 2018 compared with 61.6% in the second quarter of
2017. The loss ratio included pre-tax catastrophe losses of $18.2
million, or 3.5 percentage points, net of reinsurance recoveries,
in the second quarter of 2018 compared with $37.4 million, or 6.7
percentage points, in the second quarter of 2017
- Insurance: Loss ratio of 62.2% compared
with 66.9% in the second quarter of 2017. The loss ratio included
pre-tax catastrophe losses of $8.1 million, or 3.5 percentage
points, net of reinsurance recoveries, in the second quarter of
2018 primarily as a result of weather-related events in the U.S.
and U.K. Pre-tax catastrophe losses, net of reinsurance recoveries,
totaled $27.1 million, or 9.4 percentage points, in the second
quarter of 2017
- Reinsurance: Loss ratio of 57.8%
compared with 56.0% in the second quarter of 2017. The loss ratio
included pre-tax catastrophe losses of $10.1 million, or 3.5
percentage points, net of reinsurance recoveries, in the second
quarter of 2018 primarily as a result of weather-related events in
the U.S. Pre-tax catastrophe losses, net of reinsurance recoveries,
totaled $10.3 million, or 3.8 percentage points, in the second
quarter of 2017
- Net favorable development on
prior year loss reserves of $42.5 million benefited the loss ratio
by 8.2 percentage points in the second quarter of 2018. Prior year
net favorable reserve development of $48.7 million benefited the
loss ratio by 8.7 loss ratio points in the second quarter of 2017
- Insurance: Prior year net favorable
reserve development of $11.0 million benefited the loss ratio by
4.8 percentage points in the second quarter of 2018 and reflected
releases, primarily from short-tail lines, including favorable
development from first half of 2017 natural catastrophes. Prior
year net favorable development of $16.1 million benefited the loss
ratio by 5.6 percentage points in the second quarter of 2017
- Reinsurance: Prior year net favorable
reserve development of $31.5 million benefited the loss ratio by
10.9 percentage points in the second quarter of 2018 and reflected
releases, primarily from short-tail lines, including favorable
development from 2017 natural catastrophes. Prior year net
favorable development of $32.6 million benefited the loss ratio by
12.0 percentage points in the second quarter of 2017
- Accident year net loss ratio
excluding catastrophes was 64.4% in the second quarter of 2018
compared with 63.6% in the second quarter of 2017
- Insurance: Accident year loss ratio
excluding catastrophes was 59.2% on a gross basis and 63.5% on a
net basis in the second quarter of 2018 compared with 63.6% and
63.1%, respectively, in the second quarter of 2017
- Reinsurance: Accident year loss ratio
excluding catastrophes was 58.4% on a gross basis and 65.2% on a
net basis in the second quarter of 2018 compared with 61.6% and
64.2%, respectively in the second quarter of 2017. As a result of
the change in treatment of business ceded via Aspen Capital
Markets, on a like-for-like basis, the net ratio would have been
61.6%. The second quarter of 2018 net ratio also included 4.6
percentage points of large losses from a dam collapse and a
fire-related loss
- Total expense ratio of 37.7% and
total expense ratio (excluding amortization and non-recurring
expenses) of 36.0% in the second quarter of 2018 compared with
38.4% and 38.1%, respectively, in the second quarter of 2017
- The policy acquisition expense ratio
decreased to 16.5% in the second quarter of 2018 from 17.1% in the
second quarter of 2017
- General and administrative expenses
(excluding amortization and non-recurring expenses) decreased to
$101.1 million in the second quarter of 2018 from $117.8 million in
the second quarter of 2017. The general and administrative expense
ratio (excluding amortization and non-recurring expenses) decreased
to 19.5% from 21.0% in the second quarter of 2017
- Aspen recorded $8.6 million of expenses
related to its operational effectiveness and efficiency program in
the second quarter of 2018
- Net (loss) after tax of $(14.7)
million, or $(0.38) per diluted ordinary share, in the second
quarter of 2018 compared with net income of $75.8 million, or $1.07
per diluted ordinary share, in the second quarter of 2017. Net
(loss) income in the second quarter of 2018 included $(20.7)
million of net realized and unrealized investment losses and
$(40.9) million of net realized and unrealized foreign exchange
(losses) compared with $42.0 million of net realized and unrealized
investment gains and $(3.0) million of net realized and unrealized
foreign exchange (losses) in the second quarter of 2017. Net
(loss) income in the second quarter of 2018 also included an $8.6
million make-whole payment associated with the partial redemption
of Aspen's 6.0% Senior Notes due 2020
- Operating income after tax of
$56.3 million, or $0.80 per diluted ordinary share, in the second
quarter of 2018 compared with operating income of $39.2 million, or
$0.47 per diluted ordinary share, in the second quarter of
2017
- Annualized net income return on
average equity of (4.0)% and annualized operating return on
average equity of 8.4% for the quarter ended
June 30, 2018 compared with 8.8% and 4.0%, respectively, for
the second quarter of 2017
Operating highlights for the six months ended June 30,
2018
- Gross written premiums increased
by 8.3% to $1,970.6 million in the first half of 2018 compared with
$1,820.1 million in the first half of 2017
- Net written premiums decreased
by 11.3% to $1,121.5 million in the first half of 2018 compared
with $1,264.9 million in the first half of 2017. The retention
ratio in the first half of 2018 was 56.9% compared with 69.5% in
the first half of 2017
- Loss ratio of 58.9% for the
first half of 2018 compared with 59.0% for the first half of 2017.
The loss ratio included $42.4 million, or 4.0 percentage points, of
pre-tax catastrophe losses, net of reinsurance recoveries, in the
first half of 2018. This compared with $66.5 million, or 5.8
percentage points, of pre-tax catastrophe losses, net of
reinsurance recoveries, in the first half of 2017
- Net favorable development on
prior year loss reserves of $80.2 million benefited the loss ratio
by 7.6 percentage points in the first half of 2018. In the first
half of 2017, net favorable development of $74.9 million benefited
the loss ratio by 6.6 percentage points
- Accident year loss ratio excluding
catastrophes of 62.5% for the first half of 2018 compared with
59.8% for the first half of 2017
- Total expense ratio of 38.8% and
total expense ratio (excluding amortization and non-recurring
expenses) of 36.7% for the first half of 2018 compared with
39.5% and 39.1%, respectively, for the first half of 2017,
reflecting decreases in both the policy acquisition expense ratio
and the general and administrative expense ratio
- Aspen recorded $20.4 million of
expenses related to its operational effectiveness and efficiency
program in the first six months of 2018
- Net income after tax of $16.1
million or $0.01 per diluted ordinary share (adjusted for
preference shares dividends and non-controlling interest) for the
six months ended June 30, 2018 compared with net income of
$172.3 million, or $2.43 per diluted ordinary share, for the six
months ended June 30, 2017. Net income in the first half of
2018 included $(58.4) million of net realized and unrealized
investment (losses) and $(22.1) million of net realized and
unrealized foreign exchange (losses) compared with net realized and
unrealized investment gains of $88.2 million and $(8.8) million of
net realized and unrealized foreign exchange (losses) in the first
half of 2017. Net income in the first half of 2018 also included an
$8.6 million make-whole payment associated with the partial
redemption of Aspen's 6.0% Senior Notes due 2020
- Operating income after tax of
$119.3 million, or $1.71 per diluted ordinary share, for the six
months ended June 30, 2018 compared with operating income of
$99.0 million, or $1.27 per diluted ordinary share, for the six
months ended June 30, 2017
- Annualized net income return on
average equity of 0.1% and annualized operating return on
average equity of 8.8% for the first half of 2018 compared with
10.2% and 5.4%, respectively, for the first half of 2017
Investment performance
- Investment income of $50.4 million in
the second quarter of 2018 compared with $47.4 million in the
second quarter of 2017
- The total return on Aspen’s aggregate
investment portfolio was flat for the three months ended
June 30, 2018 and reflects net realized and unrealized gains
and losses mainly in the fixed income portfolio
- Aspen’s investment portfolio is
comprised primarily of high quality fixed income securities with an
average credit quality of “AA-”. The average duration of the fixed
income portfolio was 3.9 years as at June 30, 2018
- Book yield on the fixed income
portfolio as at June 30, 2018 was 2.63% compared with 2.56% as
at December 31, 2017
Capital and Debt
- Total shareholders’ equity was $2.8
billion as at June 30, 2018
- Diluted book value per share was $38.21
as at June 30, 2018, down 4.7% from December 31, 2017
primarily due to realized and unrealized investment losses in the
first half of 2018
- On June 18, 2018, Aspen partially
redeemed its outstanding 6.0% Senior Notes due 2020. The Company
redeemed $125 million in aggregate principal amount and incurred a
make-whole payment of $8.6 million associated with the partial
redemption
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, August 2, 2018.
To participate in the August 2 conference call by
phonePlease 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 10120903
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. To listen to the replay by phone please dial:
+1 (877) 344 7529 (US toll free) or+1 (412) 317 0088
(international)Replay ID 10120903
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, 2018 As
atDecember 31, 2017 ASSETS Total
investments
$ 6,984.3 $ 7,633.0 Cash and cash
equivalents
1,070.7 1,054.8 Reinsurance recoverables
2,381.2 2,030.7 Premiums receivable
1,725.2 1,496.5
Other assets
713.3 691.4 Total assets
$
12,874.7 $ 12,906.4 LIABILITIES Losses and
loss adjustment expenses
$ 6,532.8 $ 6,749.5 Unearned
premiums
2,087.2 1,820.8 Other payables
981.8 813.9
Silverton loan notes
20.3 44.2 Long-term debt
424.6
549.5 Total liabilities
$ 10,046.7 $ 9,977.9
SHAREHOLDERS’ EQUITY Total shareholders’ equity
2,828.0 2,928.5 Total liabilities and shareholders’
equity
$ 12,874.7 $ 12,906.4 Book value
per share
$ 38.75 $ 40.59 Diluted book value per
share (treasury stock method)
$ 38.21 $ 40.10
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2018
June 30, 2017 UNDERWRITING REVENUES Gross written premiums
$ 853.8 $ 822.1 Premiums ceded
(367.8
) (243.4 ) Net written premiums
486.0 578.7
Change in unearned premiums
33.5 (16.7
) Net earned premiums
519.5 562.0
UNDERWRITING EXPENSES Losses and loss adjustment expenses
310.4 346.1 Amortization of deferred policy acquisition
costs
85.9 96.3 General, administrative and corporate
expenses
101.1 117.8 Total
underwriting expenses
497.4 560.2
Underwriting income including corporate
expenses
22.1 1.8 Net
investment income
50.4 47.4 Interest expense
(7.6
) (7.4 ) Other (expenses)
(1.8 )
(1.7 ) Total other revenue
41.0 38.3
Amortization and non-recurring expenses
(9.1
) (2.1 ) Net realized and unrealized exchange (losses)
(40.9 ) (3.0 ) Net realized and unrealized investment
(losses) gains (1)
(20.7 ) 42.0 Realized (loss) on
debt extinguishment
(8.6 ) —
(LOSS) INCOME BEFORE TAX
(16.2 ) 77.0 Income tax
credit (expense)
1.5 (1.2 ) NET (LOSS)
INCOME AFTER TAX
(14.7 ) 75.8 Dividends paid on
ordinary shares
(14.3 ) (14.4 ) Dividends paid on
preference shares
(7.6 ) (10.5 ) Proportion due to
non-controlling interest
(0.1 ) (0.1 )
Retained (loss) income
$ (36.7 ) $ 50.8
Loss ratio
59.7 % 61.6 % Policy acquisition
expense ratio
16.5 % 17.1 % General, administrative
and corporate expense ratio
21.2 % 21.3 % General,
administrative and corporate expense ratio (excluding amortization
and non-recurring expenses)
19.5 % 21.0 % Expense
ratio
37.7 % 38.4 % Expense ratio (excluding
amortization and non-recurring expenses)
36.0 % 38.1
% Combined ratio
97.4 % 100.0 % Combined ratio
(excluding amortization and non-recurring expenses)
95.7 % 99.7 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2018
June 30, 2017 UNDERWRITING REVENUES Gross written premiums
$ 1,970.6 $ 1,820.1 Premiums ceded
(849.1 ) (555.2 ) Net written premiums
1,121.5 1,264.9 Change in unearned premiums
(68.5 ) (121.8 ) Net earned premiums
1,053.0 1,143.1 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
620.6 674.3 Amortization
of deferred policy acquisition costs
176.7 210.0 General,
administrative and corporate expenses
210.0
236.9 Total underwriting expenses
1,007.3 1,121.2
Underwriting income including corporate expenses
45.7
21.9 Net investment income
97.7
95.1 Interest expense
(15.0 ) (14.8 ) Other income
(expenses)
0.1 (1.0 ) Total other
revenue
82.8 79.3
Amortization and non-recurring expenses
(21.2 ) (4.3
) Net realized and unrealized exchange (losses)
(22.1
) (8.8 ) Net realized and unrealized investment (losses)
gains (1)
(58.4 ) 88.2 Realized (loss) on debt
extinguishment
(8.6 ) — INCOME
BEFORE TAX
18.2 176.3 Income tax expense
(2.1
) (4.0 ) NET INCOME AFTER TAX
16.1 172.3
Dividends paid on ordinary shares
(28.6 ) (27.6 )
Dividends paid on preference shares
(15.2 ) (21.0 )
Preference share redemption costs
— (2.4 ) Proportion due to
non-controlling interest
(0.3 ) (0.2 )
Retained (loss) income
$ (28.0 ) $ 121.1
Loss ratio
58.9 % 59.0 % Policy
acquisition expense ratio
16.8 % 18.4 % General,
administrative and corporate expense ratio
22.0 %
21.1 % General, administrative and corporate expense ratio
(excluding amortization and non-recurring expenses)
19.9
% 20.7 % Expense ratio
38.8 % 39.5 % Expense
ratio (excluding amortization and non-recurring expenses)
36.7 % 39.1 % Combined ratio
97.7 %
98.5 % Combined ratio (excluding amortization and non-recurring
expenses)
95.6 % 98.1 %
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, 2018
June 30, 2017 June 30, 2018
June 30, 2017 Net (loss) income as reported
$
(14.7 ) $ 75.8
$ 16.1 $ 172.3 Change in
redemption value of preference shares
— —
— (2.4 )
Net change attributable to non-controlling interest
(0.1
) (0.1 )
(0.3 ) (0.2 ) Preference share
dividends
(7.6 ) (10.5 )
(15.2 ) (21.0 ) Net (loss) income available to
ordinary shareholders
(22.4 ) 65.2
0.6 148.7
Add (deduct) after tax income: Net foreign exchange losses
32.6 3.0
17.2 8.1 Net realized losses (gains) on
investments
20.3 (41.4 )
58.1 (85.2 ) Net realized
loss on debt extinguishment
8.6 —
8.6 — Change in
redemption value of preference shares
— —
— 2.4
Amortization and non-recurring expenses
9.5
1.8
19.3 3.8
Operating income after tax available to ordinary shareholders
48.6 28.6
103.8 77.8 Tax expense on operating income
6.8 0.9
9.2
2.2 Operating income before tax available to ordinary
shareholders
$ 55.4 $ 29.5
$
113.0 $ 80.0
Basic earnings per
ordinary share Net (loss) income adjusted for preference share
dividends and non-controlling interest
$ (0.38
) $ 1.09
$ 0.01 $ 2.48 Add (deduct) after tax
income: Net foreign exchange losses
0.55 0.05
0.29
0.13 Net realized losses (gains) on investments
0.34 (0.69 )
0.97 (1.42 ) Net realized loss on debt extinguishment
0.14 —
0.14 — Change in redemption value of
preference shares
— —
— 0.04 Amortization and
non-recurring expenses
0.16 0.03
0.32 0.06 Operating income
adjusted for preference shares dividends and non-controlling
interest
$ 0.81 $ 0.48
$
1.73 $ 1.29
Diluted earnings per
ordinary share Net (loss) income adjusted for preference share
dividends and non-controlling interest
$ (0.38
) $ 1.07
$ 0.01 $ 2.43 Add (deduct) after tax
income: Net foreign exchange losses
0.54 0.05
0.28
0.13 Net realized losses (gains) on investments
0.34 (0.68 )
0.96 (1.39 ) Net realized loss on debt extinguishment
0.14 —
0.14 — Change in redemption value of
preference shares
— —
— 0.04 Amortization and
non-recurring expenses
0.16 0.03
0.32 0.06 Operating income
adjusted for preference shares dividends and non-controlling
interest
$ 0.80 $ 0.47
$
1.71 $ 1.27
The basic and diluted number of ordinary
shares for the three months ended June 30, 2018 is the same, as the
inclusion of dilutive securities in a loss-making period would be
anti-dilutive.
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ except share amounts
Three Months Ended
Six Months Ended June 30, 2018
June 30, 2017 June 30, 2018
June 30, 2017 Basic earnings per
ordinary share Net (loss) income adjusted for preference
share dividend and non-controlling interest
($0.38 )
$ 1.09
$ 0.01 $ 2.48 Operating income adjusted for
preference share dividend and non-controlling interest
$
0.81 $ 0.48
$ 1.73 $ 1.29 Diluted earnings per
ordinary share Net (loss) income adjusted for preference share
dividend and non-controlling interest
($0.38 ) $ 1.07
$ 0.01 $ 2.43 Operating income adjusted for
preference share dividend and non-controlling interest
$
0.80 $ 0.47
$ 1.71 $ 1.27 Weighted
average number of ordinary shares outstanding
(in millions) (1)
59.672 59.966
59.609 59.915 Weighted average
number of ordinary shares outstanding and dilutive potential
ordinary shares (in millions)
59.672 61.023
60.528
61.096 Book value per ordinary share
$ 38.75 $
49.34
$ 38.75 $ 49.34 Diluted book value per ordinary
share (treasury stock method)
$ 38.21 $ 48.64
$ 38.21 $ 48.64 Ordinary shares outstanding at
end of the period (in millions)
59.688 59.844
59.688
59.844 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method)
(in millions)
60.534 60.712
60.534 60.712
(1) The basic and diluted number of
ordinary shares for the three months ended June 30, 2018 is the
same, as the inclusion of dilutive securities in a loss-making
period would be anti-dilutive.
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended June 30, 2018
Three Months Ended June 30, 2017 Reinsurance
Insurance Total
Reinsurance Insurance
Total Gross written premiums
$ 326.0
$ 527.8 $ 853.8 $ 335.6 $ 486.5 $ 822.1
Net written premiums
266.9 219.1 486.0 285.5
293.2 578.7 Gross earned premiums
366.2 479.3
845.5 320.6 429.1 749.7 Net earned premiums
289.0
230.5 519.5 272.7 289.3 562.0 Losses and loss
adjustment expenses
167.0 143.4 310.4 152.6
193.5 346.1 Amortization of deferred policy acquisition expenses
62.8 23.1 85.9 53.4 42.9 96.3 General and
administrative expenses
27.9 57.2
85.1 40.7 65.7 106.4
Underwriting income
$ 31.3 $ 6.8
$ 38.1 $ 26.0 $ (12.8 ) $ 13.2
Net investment income
50.4 47.4 Net realized and unrealized
investment (losses) gains
(20.7 ) 42.0 Realized
(loss) on debt extinguishment
(8.6 ) — Corporate
expenses
(16.0 ) (11.4 ) Amortization and
non-recurring expenses (1)
(9.1 ) (2.1 ) Other
(expenses) (2)
(1.8 ) (1.7 ) Interest expense
(7.6 ) (7.4 ) Net realized and unrealized foreign
exchange (losses)(3)
(40.9 ) (3.0 ) Income before tax
$ (16.2 ) $ 77.0 Income tax credit (expense)
1.5 (1.2 )
Net (loss) income $
(14.7 ) $ 75.8
Ratios Loss ratio
57.8 % 62.2 % 59.7 % 56.0
% 66.9 % 61.6 % Policy acquisition expense ratio
21.7
% 10.0 % 16.5 % 19.6 % 14.8 %
17.1 % General and administrative expense ratio (4)
9.7
% 24.8 % 21.2 % 14.9 % 22.7 %
21.3 %
General and administrative expense ratio
(excluding amortization and non-recurring expenses) (4)
9.7 % 24.8 % 19.5 % 14.9
% 22.7 % 21.0 % Expense ratio
31.4 % 34.8
% 37.7 % 34.5 % 37.5 % 38.4 % Expense ratio
(excluding amortization and non-recurring expenses)
31.4
% 34.8 % 36.0 % 34.5 % 37.5 %
38.1 % Combined ratio
89.2 % 97.0 %
97.4 % 90.5 % 104.4 % 100.0 % Combined ratio
(excluding amortization and non-recurring expenses)
89.2
% 97.0 % 95.7 % 90.5 % 104.4 %
99.7 %
Accident Year Ex-cat Loss Ratio Loss ratio
57.8 % 62.2 % 59.7 % 56.0
% 66.9 % 61.6 % Prior year loss development
10.9 %
4.8 % 8.2 % 12.0 % 5.6 % 8.7 %
Catastrophe losses
(3.5 )% (3.5 )%
(3.5 )% (3.8 )% (9.4 )% (6.7 )% Accident year ex-cat
loss ratio
65.2 % 63.5 % 64.4
% 64.2 % 63.1 % 63.6 %
(1) Amortization and non-recurring
expenses in the second quarter of 2018 included $8.6 million of
expenses related to the operational effectiveness and efficiency
program
(2) Other (expenses) income in the second
quarter of 2018 and second quarter of 2017 included expenses of
$3.4 million and $3.3 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) Total group general and administrative
expense ratio includes the impact from corporate and amortization
and non-recurring expenses
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Six Months Ended June 30, 2018 Six Months Ended
June 30, 2017 Reinsurance Insurance
Total Reinsurance
Insurance Total Gross written
premiums
$ 949.5 $ 1,021.1 $
1,970.6 $ 900.9 $ 919.2 $ 1,820.1 Net written premiums
691.9 429.6 1,121.5 733.7 531.2 1,264.9 Gross
earned premiums
741.2 946.9 1,688.1 648.2
852.8 1,501.0 Net earned premiums
571.5 481.5
1,053.0 550.2 592.9 1,143.1 Losses and loss adjustment
expenses
333.9 286.7 620.6 295.7 378.6 674.3
Amortization of deferred policy acquisition expenses
118.7
58.0 176.7 112.9 97.1 210.0 General and
administrative expenses
59.5 120.8
180.3 84.6 127.5 212.1
Underwriting income (loss)
$ 59.4 $
16.0 $ 75.4 $ 57.0 $ (10.3 ) $
46.7 Net investment income
97.7 95.1 Net realized and
unrealized investment (losses) gains
(58.4 ) 88.2
Realized (loss) on debt extinguishment
(8.6 ) —
Corporate expenses
(29.7 ) (24.8 ) Amortization and
non-recurring expenses (1)
(21.2 ) (4.3 ) Other
income (expenses) (2)
0.1 (1.0 ) Interest expense
(15.0 ) (14.8 ) Net realized and unrealized foreign
exchange (losses) (3)
(22.1 ) (8.8 ) Income before
tax
$ 18.2 $ 176.3 Income tax expense
(2.1
) (4.0 )
Net income $ 16.1 $
172.3
Ratios Loss ratio
58.4 %
59.5 % 58.9 % 53.7 % 63.9 % 59.0 %
Policy acquisition expense ratio
20.8 %
12.0 % 16.8 % 20.5 % 16.4 % 18.4 %
General and administrative expense ratio (4)
10.4 %
25.1 % 22.0 % 15.4 % 21.5 % 21.1 %
General and administrative expense ratio (excluding amortization
and non-recurring expenses) (4)
10.4 % 25.1
% 19.9 % 15.4 % 21.5 % 20.7 % Expense ratio
31.2 % 37.1 % 38.8 % 35.9
% 37.9 % 39.5 % Expense ratio (excluding amortization and
non-recurring expenses)
31.2 % 37.1 %
36.7 % 35.9 % 37.9 % 39.1 % Combined ratio
89.6 % 96.6 % 97.7 % 89.6
% 101.8 % 98.5 % Combined ratio (excluding amortization and
non-recurring expenses)
89.6 % 96.6 %
95.6 % 89.6 % 101.8 % 98.1 %
Accident Year Ex-cat
Loss Ratio Loss ratio
58.4 % 59.5 %
58.9 % 53.7 % 63.9 % 59.0 % Prior year loss
development
6.8 % 8.6 % 7.6
% 9.8 % 3.6 % 6.6 % Catastrophe losses
(4.4 )%
(3.6 )% (4.0 )% (6.3 )% (5.3 )% (5.8 )%
Accident year ex-cat loss ratio
60.8 % 64.5
% 62.5 % 57.2 % 62.2 % 59.8 %
(1) Amortization and non-recurring
expenses in the first half of 2018 included $20.4 million of
expenses related to the operational effectiveness and efficiency
program
(2) Other income (expenses) in the first
half of 2018 and first half of 2017 included expenses of $2.4
million and $6.2 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) Total group general and administrative
expense ratio includes the impact from corporate and amortization
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, Ireland,
Singapore, Switzerland, the United Arab Emirates, the United
Kingdom and the United States. For the year ended December 31,
2017, Aspen reported $12.9 billion in total assets, $6.7 billion in
gross reserves, $2.9 billion in total shareholders’ equity and $3.4
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 written, and Aspen’s earnings
conference call will contain 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. Aspen believes these
factors include, but are not limited to: the actual development of
losses and expenses impacting estimates for the Northern and
Southern California wildfires that occurred in the fourth quarter
of 2017 and Hurricanes Harvey, Irma and Maria and the earthquakes
in Mexico that occurred in the third quarter of 2017; the impact of
complex and unique causation and coverage issues associated with
the attribution of losses to wind or flood damage or other perils
such as fire or business interruption relating to such events;
potential uncertainties relating to reinsurance recoveries,
reinstatement premiums and other factors inherent in loss
estimation; our ability to successfully develop and execute our
operating effectiveness and efficiency program; 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 United Kingdom’s decision to withdraw from
the European Union; a decline in our operating subsidiaries’
ratings with S&P, A.M. Best or Moody’s; 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 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; 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; 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; changes in the U.S. federal
income tax laws or regulations applicable to insurance companies
and the manner in which such laws and regulations are
interpreted; the impact of U.S. tax reform on Aspen’s
business, investments, results and assets, including (i) changes to
the valuation of deferred tax assets and liabilities, (ii) the
impact on intra-group reinsurance transactions, (iii) that the
costs associated with U.S. tax reform may be greater than initially
expected, and (iv) the risk that technical corrections, regulations
and supplemental legislation and future interpretations or
applications thereof or other changes may be issued in the future,
including the rules affecting the valuation of deferred tax assets;
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 for the year ended December 31, 2017 as
filed with the U.S. Securities and Exchange Commission (the “SEC”).
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, which was
furnished with the SEC on Form 8-K on August 1, 2018, 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, 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, including
expenses associated with the Company's operational effectiveness
and efficiency program. Operating income in the second quarter of
2018 excluded the make-whole payment associated with the partial
redemption of Aspen's 6.0% Senior Notes due 2020. Operating income
in the first half of 2017 excluded the issue costs associated with
the redemption of Aspen’s 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
gross loss ratios excluding catastrophes are calculated by dividing
gross losses excluding catastrophe losses and prior year reserve
movements by gross earned premiums excluding catastrophe-related
reinstatement premiums. Accident year net loss ratios excluding
catastrophes are calculated by dividing net losses excluding
catastrophe losses and prior year reserve movements by net earned
premiums excluding catastrophe-related reinstatement
premiums. Aspen has defined catastrophe losses in the six
months ended June 30, 2018 as losses associated with Winter
Storm Friederike in Europe, and U.K. and U.S. weather-related
events. Catastrophe losses in the six months ended June 30,
2017 were defined as losses associated predominantly with a tornado
in Mississippi, Cyclone Debbie in Australia and other U.S.
weather-related events. Please see pages 11-12 of this release for
a reconciliation of loss ratios to accident year loss ratios
excluding catastrophes.
Retention Ratio is a non-GAAP financial measure and is
calculated by dividing net written premium by gross written
premium.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180801006001/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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