Annualized Operating Return on Equity of
5.2% for the Third Quarter 2018 and 7.6% for First Nine
Months 2018
Annualized Net Income Return on Equity of
(4.0)% for the Third Quarter 2018 and (1.2)% for First Nine
Months 2018
Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
today a net loss after tax of $(15.1) million, or $(0.38) per
diluted ordinary share, and operating income after tax of $36.9
million, or $0.49 per diluted ordinary share, for the third quarter
of 2018.
Chris O’Kane, Chief Executive Officer, commented: “Aspen
delivered solid results in the third quarter. Our priority is to
continue to enhance our financial and operational performance and
maintain our sharp focus on providing our clients and business
partners with outstanding service.
"We are excited about the next chapter in our history with a
partner that understands our strengths, culture and
customer-centric philosophy. The transaction remains on track to
close in the first half of 2019.”(1)
As previously announced on August 28, 2018, Aspen entered into a
definitive agreement to be acquired by certain investment funds
affiliated with Apollo Global Management, LLC (“Apollo”) in an
all-cash transaction valued at approximately $2.6 billion. The
closing of the transaction is subject to closing conditions
including approval by Aspen's shareholders and receipt of certain
insurance and other regulatory approvals, as well as the
maintenance of certain financial strength ratings by Aspen.(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 September 30,
2018
- Gross written premiums of $873.2
million in the third quarter of 2018, an increase of 2.4% compared
with $852.5 million in the third quarter of 2017
- Insurance: Gross written premiums of
$476.8 million, an increase of 13.3% compared with $421.0 million
in the third quarter of 2017 due to growth in Financial and
Professional Lines and Property and Casualty sub-segments,
partially offset by a decrease in the Marine, Aviation and Energy
sub-segment
- Reinsurance: Gross written premiums of
$396.4 million, a decrease of 8.1% compared with $431.5 million in
the third quarter of 2017 due primarily to a decrease in the
Property Catastrophe sub-segment
- Net written premiums of $578.9
million in the third quarter of 2018, a decrease of 4.7% compared
with $607.4 million in the third quarter of 2017 due to the impact
of increased quota share reinsurance attaching during 2018. The
retention ratio in the third quarter of 2018 was 66.3% compared
with 71.2% in the third quarter of 2017
- Insurance: Net written premiums of
$222.5 million, a decrease of 8.7% compared with $243.8 million in
the third quarter of 2017 due primarily to the increased use of
quota share reinsurance. The retention ratio in the third quarter
of 2018 was 46.7% compared with 57.9% in the third quarter of
2017
- Reinsurance: Net written premiums of
$356.4 million, a decrease of 2.0% compared with $363.6 million in
the third quarter of 2017
- Loss ratio of 69.2% in the third
quarter of 2018 compared with 119.0% in the third quarter of 2017.
The loss ratio included pre-tax catastrophe losses of $56.4
million, or 9.4 percentage points, net of reinsurance recoveries
and $4.8 million of reinstatement premiums, in the third quarter of
2018 compared with $360.3 million, or 55.9 percentage points, net
of reinsurance recoveries and $12.5 million of reinstatement
premiums, in the third quarter of 2017
- Insurance: Loss ratio of 63.7% compared
with 101.3% in the third quarter of 2017. The loss ratio included
pre-tax catastrophe losses of $8.0 million, or 3.4 percentage
points, net of reinsurance recoveries, in the third quarter of 2018
primarily as a result of Hurricane Florence in the U.S. In the
third quarter of 2017, pre-tax catastrophe losses totaled $84.0
million, or 30.3 percentage points, net of reinsurance recoveries
and $(7.4) million of reinstatement premiums
- Reinsurance: Loss ratio of 72.5%
compared with 131.5% in the third quarter of 2017. The loss ratio
included pre-tax catastrophe losses of $48.4 million, or 13.0
percentage points, net of reinsurance recoveries and $4.8 million
of reinstatement premiums, in the third quarter of 2018 primarily
as a result of Typhoon Jebi in Japan, Hurricane Florence in the
U.S. and various other weather-related events in the U.S. and Asia.
In the third quarter of 2017, pre-tax catastrophe losses totaled
$276.3 million, or 74.6 percentage points, net of reinsurance
recoveries and $19.9 million of reinstatement premiums
- Net favorable development on
prior year loss reserves of $19.5 million benefited the loss ratio
by 3.2 percentage points in the third quarter of 2018. Prior year
net favorable reserve development of $17.9 million benefited the
loss ratio by 2.8 loss ratio points in the third quarter of 2017
- Insurance: Prior year net favorable
reserve development of $11.9 million benefited the loss ratio by
5.1 percentage points in the third quarter of 2018. Prior year net
favorable development of $0.7 million benefited the loss ratio by
0.3 percentage points in the third quarter of 2017
- Reinsurance: Prior year net favorable
reserve development of $7.6 million benefited the loss ratio by 2.0
percentage points in the third quarter of 2018. Prior year net
favorable development of $17.2 million benefited the loss ratio by
4.8 percentage points in the third quarter of 2017
- Accident year loss ratio excluding
catastrophes was 63.0% in the third quarter of 2018 compared
with 65.9% in the third quarter of 2017. The ratio was impacted by
business mix, particularly crop reinsurance. Excluding the impact
of the crop reinsurance business, the accident year loss ratio
excluding catastrophes in the third quarter of 2018 was 56.7%
- Insurance: Accident year loss ratio
excluding catastrophes was 65.4% in the third quarter of 2018
compared with 71.3% in the third quarter of 2017. The third quarter
of 2018 ratio included $15.1 million of fire-related losses in the
U.K.
- Reinsurance: Accident year loss ratio
excluding catastrophes was 61.5% in the third quarter of 2018
compared with 61.7% in the third quarter of 2017. Excluding the
impact of the crop reinsurance business, the accident year loss
ratio excluding catastrophes in the third quarter of 2018 was
49.0%
- Total expense ratio of 41.9% and
total expense ratio (excluding amortization and non-recurring
expenses) of 33.8% in the third quarter of 2018 compared with
33.2% and 32.4%, respectively, in the third quarter of 2017
- Amortization and non-recurring expenses
in the third quarter of 2018 included $11.1 million of expenses
related to the operational effectiveness and efficiency program and
$38.6 million of advisor fees relating to the transaction with
Apollo
- The policy acquisition expense ratio
was 16.2% in the third quarter of 2018 in line with the third
quarter of 2017
- General and administrative expenses
(excluding amortization and non-recurring expenses) were $109.4
million in the third quarter of 2018 compared with $105.7 million
in the third quarter of 2017 as variable compensation in the third
quarter of 2017 was impacted by losses during that quarter. The
general and administrative expense ratio (excluding amortization
and non-recurring expenses) increased to 17.6% from 16.2% in the
third quarter of 2017
- Net (loss) after tax of $(15.1)
million, or $(0.38) per diluted ordinary share, in the third
quarter of 2018 compared with net (loss) of $(253.8) million, or
$(4.48) per diluted ordinary share, in the third quarter of 2017
- The income tax credit for the three
months ended September 30, 2018 included $12.5 million related
to the successful conclusion of a U.K. tax inquiry.
- Net (loss) in the third quarter of 2018
included $(0.9) million of net realized and unrealized investment
losses and $(2.3) million of net realized and unrealized foreign
exchange (losses) compared with $17.5 million of net realized and
unrealized investment gains and $12.9 million gain of net realized
and unrealized foreign exchange (losses) in the third quarter of
2017
- Operating income after tax of
$36.9 million, or $0.49 per diluted ordinary share, in the third
quarter of 2018 compared with operating (loss) of $(276.6) million,
or $(4.78) per diluted ordinary share, in the third quarter of
2017
- Annualized net income return on
average equity of (4.0)% and annualized operating return on
average equity of 5.2% for the quarter ended
September 30, 2018 compared with (37.6)% and (40.0)%,
respectively, for the third quarter of 2017
Operating highlights for the nine months ended
September 30, 2018
- Gross written premiums increased
by 6.4% to $2,843.8 million in the first nine months of 2018
compared with $2,672.6 million in the first nine months of
2017
- Net written premiums decreased
by 9.2% to $1,700.4 million in the first nine months of 2018
compared with $1,872.3 million in the first nine months of 2017.
The retention ratio in the first nine months of 2018 was 59.8%
compared with 70.1% in the first nine months of 2017
- Loss ratio of 62.7% for the
first nine months of 2018 compared with 80.8% for the first nine
months of 2017. The loss ratio included $98.8 million, or 6.0
percentage points, of pre-tax catastrophe losses, net of
reinsurance recoveries and $4.8 million of reinstatement premiums,
in the first nine months of 2018. This compared with $424.3
million, or 23.9 percentage points, of pre-tax catastrophe losses,
net of reinsurance recoveries and $12.5 million of reinstatement
premiums, in the first nine months of 2017
- Net favorable development on
prior year loss reserves of $99.7 million benefited the loss ratio
by 6.0 percentage points in the first nine months of 2018. In the
first nine months of 2017, net favorable development of $92.8
million benefited the loss ratio by 5.2 percentage points
- Accident year loss ratio excluding
catastrophes of 62.7% for the first nine months of 2018
compared with 62.1% for the first nine months of 2017
- Total expense ratio of 40.0% and
total expense ratio (excluding amortization and non-recurring
expenses) of 35.7% for the first nine months of 2018 compared
with 37.2% and 36.7%, respectively, for the first nine months of
2017, primarily due to a decrease in the policy acquisition expense
ratio
- Amortization and non-recurring expenses
in the first nine months of 2018 included $31.5 million of expenses
related to the operational effectiveness and efficiency program and
$38.6 million of advisor fees relating to the transaction with
Apollo
- Net income after tax of $1.0
million or $(0.37) per diluted ordinary share (adjusted for
preference shares dividends and non-controlling interest) for the
nine months ended September 30, 2018 compared with net (loss)
of $(81.5) million, or $(1.99) per diluted ordinary share, for the
nine months ended September 30, 2017. Net income in the first
nine months of 2018 included $(59.3) million of net realized and
unrealized investment (losses) and $(24.4) million of net realized
and unrealized foreign exchange (losses) compared with net realized
and unrealized investment gains of $105.7 million and $4.1 million
of net realized and unrealized foreign exchange gains in the first
nine months of 2017. Net income in the first nine months of 2018
also included an $8.6 million make-whole payment associated with
the partial redemption of Aspen’s 6.00% Senior Notes due 2020
- Operating income after tax of
$156.2 million, or $2.20 per diluted ordinary share, for the nine
months ended September 30, 2018 compared with operating (loss)
of $(177.6) million, or $(3.46) per diluted ordinary share, for the
nine months ended September 30, 2017
- Annualized net income return on
average equity of (1.2)% and annualized operating return on
average equity of 7.6% for the first nine months of 2018
compared with (5.5)% and (9.6)%, respectively, for the first nine
months of 2017
Investment performance
- Investment income of $48.0 million in
the third quarter of 2018 compared with $46.4 million in the third
quarter of 2017
- The total return on Aspen’s aggregate
investment portfolio was 0.32% for the three months ended
September 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 3.7 years as at September 30, 2018
- Book yield on the fixed income
portfolio as at September 30, 2018 was 2.67% compared with
2.56% as at December 31, 2017
Capital and Debt
- Total shareholders’ equity was $2.8
billion as at September 30, 2018
- Diluted book value per share was $37.46
as at September 30, 2018, a 6.6% decrease from December 31,
2017 primarily due to retained losses and unrealized investment
losses on the available for sale portfolio in the first nine months
of 2018
Earnings materialsThe earnings press release and a
detailed financial supplement will be published on Aspen’s website
at www.aspen.co.
Aspen Insurance Holdings
Limited
Summary consolidated balance sheet
(unaudited)
$ in millions, except per share data
As atSeptember 30, 2018 As
atDecember 31, 2017 ASSETS Total
investments
$ 6,913.1 $ 7,633.0 Cash and cash
equivalents
1,026.6 1,054.8 Reinsurance recoverables
2,433.6 2,030.7 Premiums receivable
1,700.1 1,496.5
Other assets
750.8 691.4 Total assets
$
12,824.2 $ 12,906.4 LIABILITIES Losses and
loss adjustment expenses
$ 6,726.2 $ 6,749.5 Unearned
premiums
1,974.4 1,820.8 Other payables
923.1 813.9
Silverton loan notes
— 44.2 Long-term debt
424.7
549.5 Total liabilities
$ 10,048.4 $ 9,977.9
SHAREHOLDERS’ EQUITY Total shareholders’ equity
2,775.8 2,928.5 Total liabilities and shareholders’
equity
$ 12,824.2 $ 12,906.4 Book value
per share
$ 37.87 $ 40.59 Diluted book value per
share (treasury stock method)
$ 37.46 $ 40.10
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended
September 30,2018
September 30,2017
UNDERWRITING REVENUES Gross written premiums
$ 873.2
$ 852.5 Premiums ceded
(294.3 ) (245.1 ) Net written
premiums
578.9 607.4 Change in unearned premiums
44.3
45.1 Net earned premiums
623.2 652.5
UNDERWRITING EXPENSES Losses and loss adjustment expenses
431.1 776.2 Amortization of deferred policy acquisition
costs
101.0 105.4 General, administrative and corporate
expenses
109.4 105.7 Total underwriting
expenses
641.5 987.3
Underwriting (loss) including corporate expenses
(18.3
) (334.8 ) Net investment income
48.0 46.4
Interest expense
(5.4 ) (7.4 ) Other (expenses)
income
(0.7 ) 7.6 Total other revenue
41.9 46.6 Amortization and
non-recurring expenses
(51.0 ) (5.2 ) Net realized
and unrealized exchange (losses) gains
(2.3 ) 12.9
Net realized and unrealized investment (losses) gains (1)
(0.9 ) 17.5 (LOSS) BEFORE TAX
(30.6
) (263.0 ) Income tax credit
15.5 9.2
NET (LOSS) AFTER TAX
(15.1 ) (253.8 ) Dividends paid
on ordinary shares
(14.3 ) (14.4 ) Dividends paid on
preference shares
(7.6 ) (7.7 ) Preference share
redemption costs
— (5.6 ) Proportion due to non-controlling
interest
0.1 (0.6 ) Retained (loss)
$
(36.9 ) $ (282.1 ) Loss ratio
69.2
% 119.0 % Policy acquisition expense ratio
16.2
% 16.2 % General, administrative and corporate expense ratio
25.7 % 17.0 % General, administrative and corporate
expense ratio (excluding amortization and non-recurring expenses)
17.6 % 16.2 % Expense ratio
41.9 % 33.2
% Expense ratio (excluding amortization and non-recurring expenses)
33.8 % 32.4 % Combined ratio
111.1 %
152.2 % Combined ratio (excluding amortization and non-recurring
expenses)
103.0 % 151.4 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Nine Months Ended
September 30,2018
September 30,2017
UNDERWRITING REVENUES Gross written premiums
$
2,843.8 $ 2,672.6 Premiums ceded
(1,143.4 )
(800.3 ) Net written premiums
1,700.4 1,872.3 Change in
unearned premiums
(24.2 ) (76.7 ) Net earned premiums
1,676.2 1,795.6 UNDERWRITING EXPENSES Losses
and loss adjustment expenses
1,051.7 1,450.5 Amortization of
deferred policy acquisition costs
277.7 315.4 General,
administrative and corporate expenses
319.4 342.6
Total underwriting expenses
1,648.8 2,108.5
Underwriting income (loss) including corporate
expenses
27.4 (312.9 ) Net investment income
145.7 141.5 Interest expense
(20.4 ) (22.2 )
Other income
(0.6 ) 6.6 Total other revenue
124.7 125.9 Amortization and
non-recurring expenses
(72.2 ) (9.5 ) Net realized
and unrealized exchange (losses) gains
(24.4 ) 4.1
Net realized and unrealized investment (losses) gains (1)
(59.3 ) 105.7 Realized (loss) on debt extinguishment
(8.6 ) — (LOSS) BEFORE TAX
(12.4
) (86.7 ) Income tax credit
13.4 5.2
NET INCOME (LOSS) AFTER TAX
1.0 (81.5 ) Dividends paid on
ordinary shares
(42.9 ) (42.0 ) Dividends paid on
preference shares
(22.8 ) (28.7 ) Preference share
redemption costs
— (8.0 ) Proportion due to non-controlling
interest
(0.2 ) (0.8 ) Retained (loss)
$
(64.9 ) $ (161.0 ) Loss ratio
62.7
% 80.8 % Policy acquisition expense ratio
16.6
% 17.6 % General, administrative and corporate expense ratio
23.4 % 19.6 % General, administrative and corporate
expense ratio (excluding amortization and non-recurring expenses)
19.1 % 19.1 % Expense ratio
40.0 % 37.2
% Expense ratio (excluding amortization and non-recurring expenses)
35.7 % 36.7 % Combined ratio
102.7 %
118.0 % Combined ratio (excluding amortization and non-recurring
expenses)
98.4 % 117.5 %
Aspen Insurance Holdings
Limited
Operating income reconciliation
(unaudited)
$ in millions, except per share
amounts
Three Months Ended Nine Months
Ended (in US$ millions except where stated)
September30, 2018
September30, 2017
September30, 2018
September30, 2017
Net (loss) income as reported
$ (15.1 )
$ (253.8 )
$ 1.0 $ (81.5 ) Change in redemption value
of preference shares
— (5.6 )
— (8.0 ) Net change
attributable to non-controlling interest
0.1 (0.6 )
(0.2 ) (0.8 ) Preference share dividends
(7.6
) (7.7 )
(22.8 ) (28.7 ) Net (loss) income
available to ordinary shareholders
(22.6 ) (267.7 )
(22.0 ) (119.0 ) Add (deduct) after tax income: Net
foreign exchange losses (gains)
1.6 (10.6 )
18.8 (2.5
)
Net realized losses (gains) on
investments
0.6 (16.6 )
58.7 (101.8 ) Net realized loss on debt
extinguishment
— —
8.6 — Change in redemption value
of preference shares
— 5.6
— 8.0 Amortization and
non-recurring expenses
49.8 4.4
69.1
8.2 Operating income (loss) after tax available to
ordinary shareholders
29.4 (284.9 )
133.2 (207.1 )
Tax (credit) on operating income
(13.3 ) (11.6 )
(4.1 ) (9.4 ) Operating income (loss) before tax
available to ordinary shareholders
$ 16.1 $
(296.5 )
$ 129.1 $ (216.5 )
Basic
earnings (loss) per ordinary share Net (loss) income adjusted
for preference share dividends and non-controlling interest
$ (0.38 ) $ (4.48 )
$ (0.37
) $ (1.99 ) Add (deduct) after tax income: Net foreign
exchange losses (gains)
0.03 (0.18 )
0.32 (0.04 ) Net
realized losses (gains) on investments
0.01 (0.28 )
0.98 (1.70 ) Net realized loss on debt extinguishment
— —
0.14 — Change in redemption value of preference
shares
— 0.09
— 0.13 Amortization and non-recurring
expenses
0.83 0.07
1.16 0.14
Operating income (loss) adjusted for preference shares
dividends and non-controlling interest
$ 0.49
$ (4.78 )
$ 2.23 $ (3.46 )
Diluted
earnings (loss) per ordinary share Net (loss) income adjusted
for preference share dividends and non-controlling interest
$ (0.38 ) $ (4.48 )
$ (0.37
) $ (1.99 ) Add (deduct) after tax income: Net foreign
exchange losses (gains)
0.03 (0.18 )
0.31 (0.04 ) Net
realized losses (gains) on investments
0.01 (0.28 )
0.97 (1.70 ) Net realized loss on debt extinguishment
— —
0.14 — Change in redemption value of preference
shares
— 0.09
— 0.13 Amortization and non-recurring
expenses
0.83 0.07
1.15 0.14
Operating income (loss) adjusted for preference shares
dividends and non-controlling interest
$ 0.49
$ (4.78 )
$ 2.20 $ (3.46 )
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ except share amounts
Three Months Ended Nine Months Ended
September 30, 2018
September 30, 2017 September 30,
2018 September 30, 2017
Basic earnings per ordinary share Net
(loss) income adjusted for preference share dividend and
non-controlling interest
($0.38 ) ($4.48 )
($0.37 ) ($1.99 ) Operating income (loss) adjusted
for preference share dividend and non-controlling interest
$
0.49 ($4.78 )
$ 2.23 ($3.46 ) Diluted earnings
per ordinary share Net (loss) income adjusted for preference share
dividend and non-controlling interest
($0.38 ) ($4.48
)
($0.37 ) ($1.99 ) Operating income (loss) adjusted
for preference share dividend and non-controlling interest
$
0.49 ($4.78 )
$ 2.20 ($3.46 ) Weighted
average number of ordinary shares outstanding
(in millions) (1)
59.693 59.760
59.637 59.863 Weighted average
number of ordinary shares outstanding and dilutive potential
ordinary shares (in millions)
60.412 59.760
60.543
59.863 Book value per ordinary share
$ 37.87 $
44.59
$ 37.87 $ 44.59 Diluted book value per ordinary
share (treasury stock method)
$ 37.46 $ 44.00
$ 37.46 $ 44.00 Ordinary shares outstanding at
end of the period (in millions)
59.698 59.407
59.698
59.407 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method)
(in millions)
60.356 60.200
60.356 60.200 (1) The basic and
diluted number of ordinary shares is the same because 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 September 30, 2018 Three Months
Ended September 30, 2017 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 396.4 $ 476.8
$ 873.2 $ 431.5 $ 421.0 $ 852.5 Net written premiums
356.4 222.5 578.9 363.6 243.8 607.4 Gross
earned premiums
475.3 498.3 973.6 464.0 449.3
913.3 Net earned premiums
388.5 234.7 623.2
382.0 270.5 652.5 Losses and loss adjustment expenses
281.5
149.6 431.1 502.2 274.0 776.2 Amortization of
deferred policy acquisition expenses
75.7 25.3
101.0 61.5 43.9 105.4 General and administrative expenses
34.7 58.7
93.4 32.8 59.4
92.2 Underwriting (loss) income
$ (3.4
) $ 1.1 $
(2.3 ) $ (214.5 ) $ (106.8 ) $ (321.3 )
Net investment income
48.0 46.4 Net realized and
unrealized investment (losses) gains
(0.9 ) 17.5
Corporate expenses
(16.0 ) (13.5 ) Amortization and
non-recurring expenses (1)
(51.0 ) (5.2 ) Other
(expenses) income (2)
(0.7 ) 7.6 Interest expense
(5.4 ) (7.4 ) Net realized and unrealized foreign
exchange (losses) gains(3)
(2.3 ) 12.9 (Loss)
before tax
$ (30.6 ) $ (263.0 ) Income tax
credit
15.5 9.2
Net (loss) $
(15.1 ) $ (253.8 )
Ratios Loss ratio
72.5 % 63.7 % 69.2 %
131.5 % 101.3 % 119.0 % Policy acquisition expense ratio
19.5 % 10.8 % 16.2 % 16.1
% 16.2 % 16.2 % General and administrative expense ratio (4)
8.9 % 25.0 % 25.7 % 8.6 %
22.0 % 17.0 % General and administrative expense ratio (excluding
amortization and non-recurring expenses) (4)
8.9 %
25.0 % 17.6 % 8.6 % 22.0 % 16.2 %
Expense ratio
28.4 % 35.8 % 41.9
% 24.7 % 38.2 % 33.2 % Expense ratio (excluding amortization
and non-recurring expenses)
28.4 % 35.8
% 33.8 % 24.7 % 38.2 % 32.4 % Combined ratio
100.9 % 99.5 % 111.1 %
156.2 % 139.5 % 152.2 % Combined ratio (excluding amortization and
non-recurring expenses)
100.9 % 99.5 %
103.0 % 156.2 % 139.5 % 151.4 %
Accident Year
Ex-cat Loss Ratio Loss ratio
72.5 % 63.7
% 69.2 % 131.5 % 101.3 % 119.0 % Prior year
loss development
2.0 % 5.1 % 3.2
% 4.8 % 0.3 % 2.8 % Catastrophe losses
(13.0
)% (3.4 )% (9.4 )% (74.6 )%
(30.3 )% (55.9 )% Accident year ex-cat loss ratio
61.5
% 65.4 % 63.0 % 61.7 % 71.3 %
65.9 % (1) Amortization and non-recurring expenses in
the third quarter of 2018 included $11.1 million of expenses
related to the operational effectiveness and efficiency program and
$38.6 million of advisor fees related to the Apollo transaction (2)
Other (expenses) income in the third quarter of 2018 and third
quarter of 2017 included expenses of $1.7 million and income of
$9.8 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
Nine Months Ended September 30, 2018 Nine Months
Ended September 30, 2017 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 1,345.9 $
1,497.9 $ 2,843.8 $ 1,332.4 $ 1,340.2 $
2,672.6 Net written premiums
1,048.3 652.1
1,700.4 1,097.3 775.0 1,872.3 Gross earned premiums
1,216.5 1,445.2 2,661.7 1,112.2 1,302.1
2,414.3 Net earned premiums
960.0 716.2
1,676.2 932.2 863.4 1,795.6 Losses and loss adjustment
expenses
615.4 436.3 1,051.7 797.9 652.6
1,450.5 Amortization of deferred policy acquisition expenses
194.4 83.3 277.7 174.4 141.0 315.4 General and
administrative expenses
94.2
179.5 273.7 117.4
186.9 304.3 Underwriting
income (loss)
$ 56.0 $
17.1 $ 73.1 $ (157.5 ) $
(117.1 ) $ (274.6 ) Net investment income
145.7 141.5
Net realized and unrealized investment (losses) gains
(59.3
) 105.7 Realized (loss) on debt extinguishment
(8.6
) — Corporate expenses
(45.7 ) (38.3 )
Amortization and non-recurring expenses (1)
(72.2 )
(9.5 ) Other (expense) income (2)
(0.6 ) 6.6 Interest
expense
(20.4 ) (22.2 ) Net realized and unrealized
foreign exchange (losses) gains(3)
(24.4 ) 4.1
(Loss) before tax
$ (12.4 ) $ (86.7 ) Income
tax credit
13.4 5.2
Net income (loss)
$ 1.0 $ (81.5 )
Ratios Loss
ratio
64.1 % 60.9 % 62.7
% 85.6 % 75.6 % 80.8 % Policy acquisition expense
ratio
20.3 % 11.6 % 16.6
% 18.7 % 16.3 % 17.6 % General and administrative expense
ratio (4)
9.8 % 25.1 % 23.4
% 12.6 % 21.6 % 19.6 % General and administrative expense
ratio (excluding amortization and non-recurring expenses) (4)
9.8 % 25.1 % 19.1 % 12.6
% 21.6 % 19.1 % Expense ratio
30.1 % 36.7
% 40.0 % 31.3 % 37.9 % 37.2 % Expense ratio
(excluding amortization and non-recurring expenses)
30.1
% 36.7 % 35.7 % 31.3 % 37.9 %
36.7 % Combined ratio
94.2 % 97.6 %
102.7 % 116.9 % 113.5 % 118.0 % Combined ratio
(excluding amortization and non-recurring expenses)
94.2
% 97.6 % 98.4 % 116.9 % 113.5 %
117.5 %
Accident Year Ex-cat Loss Ratio Loss ratio
64.1 % 60.9 % 62.7 % 85.6
% 75.6 % 80.8 % Prior year loss development
4.9 %
7.4 % 6.0 % 7.8 % 2.5 % 5.2 %
Catastrophe losses
(7.9 )% (3.6 )%
(6.0 )% (34.3 )% (12.9 )% (23.9 )% Accident year
ex-cat loss ratio
61.1 % 64.7 %
62.7 % 59.1 % 65.2 % 62.1 % (1)
Amortization and non-recurring expenses in the first nine months of
2018 included $31.5 million of expenses related to the operational
effectiveness and efficiency program and $38.6 million of advisor
fees related to the Apollo transaction (2) Other income (expenses)
in the first nine months of 2018 and first nine months of 2017
included expenses of $4.1 million and income of $3.6 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: Aspen's and Apollo's
ability to consummate the proposed transaction; the occurrence of
any event, change or other circumstance that could give rise to the
termination of the proposed transaction; required governmental
approvals for the proposed transaction may not be obtained or may
not be obtained on terms expected or on the anticipated schedule,
and adverse regulatory conditions may be imposed in connection with
any such governmental approvals; Aspen's shareholders may fail to
approve the proposed transaction; Apollo or Aspen may fail to
satisfy other conditions required for the completion of the
proposed transaction; operating costs, customer loss and business
disruption (including, without limitation, difficulties in
maintaining relationships with employees, customers, reinsurers or
suppliers) may be greater than expected following the announcement
of the proposed transaction; the amount of the costs, fees,
expenses and other charges related to the proposed transaction may
be greater than expected; the outcome of any legal proceedings, to
the extent initiated against Aspen or others following the
announcement of the proposed transaction; the actual development of
losses and expenses impacting estimates for Typhoon Jebi and
Hurricane Florence that occurred in the third quarter of 2018, 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 October 24, 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 Aspen's operational effectiveness and
efficiency program.
Operating income in the third quarter of 2018 also excluded
advisor fees relating to the transaction with Apollo. Operating
income in the first nine months of 2018 also excluded advisor fees
relating to the transaction with Apollo and expenses related to the
make-whole payment associated with the partial redemption of
Aspen’s 6.00% Senior Notes due 2020. Operating income in the third
quarter of 2017 also excluded the issue costs associated with the
redemption of Aspen’s 7.250% Perpetual Non-Cumulative Preference
Shares. Operating income in the first nine months of 2017 also
excluded the issue costs associated with the redemption of Aspen’s
7.250% Perpetual Non-Cumulative Preference Share and 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 nine
months ended September 30, 2018 as losses associated with
Hurricane Florence in the U.S., Typhoon Jebi in Japan, Winter Storm
Friederike in Europe, U.K. winter storms and other U.S. and Asian
weather-related events. Catastrophe losses in the nine months ended
September 30, 2017 were defined as losses associated
predominantly with Hurricanes Harvey, Irma and Maria, the
earthquakes in Mexico, a tornado in Mississippi, Cyclone Debbie in
Australia and other 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/20181024005902/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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