Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
today a net loss after tax of $(253.8) million, or $(4.48) per
diluted ordinary share, and an operating loss after tax of $(276.6)
million, or $(4.78) per diluted ordinary share, for the third
quarter of 2017.
Chris O’Kane, Chief Executive Officer, commented: “The third
quarter was characterized by multiple, large-scale natural
catastrophes across our industry. While significant, Aspen's
estimated losses from these events are within our expectations for
catastrophes of this nature. We are encouraged that, following
several years of decline, the industry losses this quarter may be
the catalyst that leads to improved market conditions and
pricing.
"We remain focused on enhancing the long-term positioning of our
insurance and reinsurance businesses and we took another important
step in this direction today with the announcement of a
comprehensive program to drive greater effectiveness and efficiency
across Aspen. The program will deliver substantial benefits,
particularly in our Insurance segment, by providing a more
competitive expense ratio in our chosen lines of business, as well
as an even more scalable operating platform from which to deliver
long-term shareholder value.”(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,
2017
- Gross written premiums of $852.5
million in the third quarter of 2017, an increase of 11.7% compared
with $763.5 million in the third quarter of 2016
- Insurance: Gross written premiums of
$421.0 million, an increase of 5.9% compared with $397.6 million in
the third quarter of 2016, primarily due to growth in the Financial
and Professional lines sub-segment
- Reinsurance: Gross written premiums of
$431.5 million, an increase of 17.9% from $365.9 million in the
third quarter of 2016, primarily due to growth in the Specialty
sub-segment, largely from AgriLogic. The growth in the Property
Catastrophe and Other Property sub-segments was largely from
reinstatement premiums
- Net written premiums of $607.4
million in the third quarter of 2017, a decrease of 4.9% compared
with $638.4 million in the third quarter of 2016 as Aspen continues
to make more efficient use of ceded reinsurance to reduce
volatility. The retention ratio in the third quarter of 2017 was
71.2% compared with 83.6% in the third quarter of 2016
- Insurance: Net written premiums of
$243.8 million, a decrease of 24.7% from $323.9 million in the
third quarter of 2016, primarily due to increased use of quota
share reinsurance to reduce volatility across our longer-tail
businesses. The retention ratio in the third quarter of 2017 was
57.9% compared with 81.5% in the third quarter of 2016
- Reinsurance: Net written premiums of
$363.6 million, an increase of 15.6% from $314.5 million in the
third quarter of 2016
- Loss ratio of 119.0% in the
third quarter of 2017 compared with 57.2% in the third quarter of
2016. The loss ratio included pre-tax catastrophe losses of $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, primarily due to hurricanes Harvey, Irma and Maria, and
other catastrophes, including weather-related events and the
Mexican earthquakes. Pre-tax catastrophe losses, net of reinsurance
recoveries and reinstatement premiums, totaled $24.9 million, or
3.7 percentage points, in the third quarter of 2016
- Insurance: Loss ratio of 101.3%
compared with 57.7% in the third quarter of 2016. Pre-tax
catastrophe losses, of $84.0 million, or 30.3 percentage points,
net of reinsurance recoveries and $(7.4) million of reinstatement
premiums, in the third quarter of 2017 primarily due to hurricanes
Harvey, Irma and Maria and weather-related events. Pre-tax
catastrophe losses net of reinsurance recoveries totaled $10.1
million, or 2.8 percentage points, in the third quarter of
2016
- Reinsurance: Loss ratio of 131.5%
compared with 56.5% in the third quarter of 2016. The loss ratio
included pre-tax catastrophe losses, of $276.3 million, or 74.6
percentage points, net of reinsurance recoveries and $19.9 million
of reinstatement premiums, in the third quarter of 2017 primarily
due to hurricanes Harvey, Irma and Maria, and the Mexican
earthquakes. Pre-tax catastrophe losses, net of reinsurance
recoveries and reinstatement premiums, totaled $14.8 million, or
4.7 percentage points, in the third quarter of 2016
- Net favorable development on
prior year loss reserves of $17.9 million benefited the loss ratio
by 2.8% in the third quarter of 2017. Prior year net favorable
reserve development of $35.4 million benefited the loss ratio by
5.2% in the third quarter of 2016
- Insurance: Prior year net favorable
reserve development of $0.7 million benefited the loss ratio by 0.3
percentage points in the third quarter of 2017. Prior year net
favorable development of $15.3 million benefited the loss ratio by
4.2 percentage points in the third quarter of 2016
- Reinsurance: Prior year net favorable
reserve development of $17.2 million benefited the loss ratio by
4.8 percentage points in the third quarter of 2017. Prior year net
favorable development of $20.1 million benefited the loss ratio by
6.4 percentage points in the third quarter of 2016
- Accident year loss ratio excluding
catastrophes was 65.9% in the third quarter of 2017 compared
with 58.6% in the third quarter of 2016
- Insurance: Accident year loss ratio
excluding catastrophes for the quarter ended September 30,
2017 was 71.3%. This was affected by increased losses in short-tail
insurance lines, primarily property. These losses totaled $32.3
million, or 11.9 percentage points, on the accident year ex-cat
loss ratio. The accident year loss ratio excluding catastrophes in
the third quarter of 2016 was 59.1%
- Reinsurance: Accident year loss ratio
excluding catastrophes for the quarter ended September 30,
2017 was 61.7% compared with 58.2% a year ago. The increase was due
largely to a change in business mix, primarily related to
AgriLogic
- Total expense ratio of 33.2% and
total expense ratio (excluding amortization and non-recurring
expenses) of 32.4% in the third quarter of 2017 compared with
37.6% and 36.6%, respectively, in the third quarter of 2016. The
policy acquisition expense ratio was 16.2% in the third quarter of
2017, compared with 19.2% in the third quarter of 2016. General and
administrative expenses (excluding amortization and non-recurring
expenses) were $105.7 million in the third quarter of 2017,
compared with $118.7 million in the third quarter of 2016. The
general and administrative expense ratio (excluding amortization
and non-recurring expenses) decreased to 16.2% from 17.4% in the
third quarter of 2016
- Net loss after tax of $(253.8)
million, or $(4.48) per diluted ordinary share, in the third
quarter of 2017 compared with net income of $95.6 million, or $1.40
per diluted ordinary share, in the third quarter of 2016. Net
income included $17.5 million of net realized and unrealized
investment gains in the third quarter of 2017 compared with $21.5
million in the third quarter of 2016. Operating loss after
tax of $(276.6) million, or $(4.78) per diluted ordinary share,
in the third quarter of 2017 compared with operating income of
$69.3 million, or $0.97 per diluted ordinary share, in the third
quarter of 2016
- Annualized net income return on
average equity of (37.6)% and annualized operating return on
average equity of (40.0)% for the quarter ended
September 30, 2017 compared with 11.2% and 8.0%, respectively,
for the third quarter of 2016
Operating highlights for the nine months ended
September 30, 2017
- Gross written premiums increased
by 5.2% to $2,672.6 million in the first nine months of 2017
compared with $2,540.9 million in the first nine months of
2016
- Net written premiums decreased
by 13.4% to $1,872.3 million in the first nine months of 2017
compared with $2,162.9 million in the first nine months of 2016.
The retention ratio in the first nine months of 2017 was 70.1%
compared with 85.1% in the first nine months of 2016
- Loss ratio of 80.8% for the
first nine months of 2017 compared with 58.7% for the first nine
months of 2016. The loss ratio included $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. This compared with $108.7
million, or 5.4 percentage points, of pre-tax catastrophe losses,
net of reinsurance recoveries and reinstatement premiums, in the
first nine months of 2016
- Net favorable development on
prior year loss reserves of $92.8 million benefited the loss ratio
by 5.2 percentage points in the first nine months of 2017. In the
first nine months of 2016, net favorable development of $78.2
million benefited the loss ratio by 3.9 percentage points
- Accident year loss ratio excluding
catastrophes of 62.1% for the first nine months of 2017
compared with 57.2% for the first nine months of 2016
- Total expense ratio of 37.2% and
total expense ratio (excluding amortization and non-recurring
expenses) of 36.7% for the first nine months of 2017 compared
with 37.0% and 36.7%, respectively, for the first nine months of
2016, reflecting an increase in the general and administrative
expense ratio and a decrease in the policy acquisition expense
ratio
- Net loss after tax of $(81.5)
million or $(1.99) per diluted ordinary share for the nine months
ended September 30, 2017 compared with net income of $274.9
million, or $3.97 per diluted ordinary share, for the nine months
ended September 30, 2016. Net loss included $105.7 million of
net realized and unrealized investment gains in the first nine
months of 2017 compared with $100.2 million in the first nine
months of 2016. Operating loss after tax of $(177.6)
million, or $(3.46) per diluted ordinary share, for the nine months
ended September 30, 2017 compared with operating income of
$193.3 million, or $2.65 per diluted ordinary share, for the nine
months ended September 30, 2016
- Annualized net income return on
average equity of (5.5)% and annualized operating return on
average equity of (9.6)% for the first nine months of 2017
compared with 10.9% and 7.3%, respectively, for the first nine
months of 2016
Investment performance
- Investment income of $46.4 million in
the third quarter of 2017 was unchanged from the third quarter of
2016
- The total return on Aspen’s aggregate
investment portfolio was 0.8% for the three months ended
September 30, 2017 and reflects net realized and unrealized
gains and losses in both the fixed income and equity portfolios. In
the first nine months of 2017, Aspen's aggregate investment
portfolio had a total return of 3.1%.
- Aspen’s investment portfolio continues
to be comprised primarily of high quality fixed income securities
with an average credit quality of “AA-”. The average duration of
the fixed income portfolio was 3.91 years as at September 30,
2017
- Book yield on the fixed income
portfolio as at September 30, 2017 was 2.54% compared with
2.49% as at December 31, 2016
Capital
- Total shareholders’ equity was $3.2
billion as at September 30, 2017
- Diluted book value per share was $44.00
as at September 30, 2017, down 5.8% from December 31,
2016
- During the third quarter of 2017, Aspen
repurchased 451,268 ordinary shares at an average price of $44.32
per share for a cost of $20 million. Since the beginning of 2017,
Aspen has repurchased 648,941 ordinary shares at an average price
of $46.23 per share for a total cost of $30 million
- On July 3, 2017, Aspen redeemed its
outstanding 7.250% Perpetual Non-Cumulative Preference Shares for
$160.0 million. Since the beginning of 2017, Aspen has redeemed
Perpetual Non-Cumulative Preference Shares in the aggregate amount
of $293.2 million
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, October 26, 2017.
To participate in the October 26 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 10112269
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 10112269
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 atSeptember
30,2017
As atDecember
31,2016
ASSETS Total investments
$ 7,658.0 $ 7,900.3
Cash and cash equivalents
1,209.3 1,273.8 Reinsurance
recoverables
1,815.9 815.9 Premiums receivable
1,529.0 1,399.4 Other assets
839.4 700.7 Total
assets
$ 13,051.6 $ 12,090.1
LIABILITIES Losses and loss adjustment expenses
$
6,490.6 $ 5,319.9 Unearned premiums
1,926.5 1,618.6
Other payables
820.7 839.0 Silverton loan notes
101.5
115.0 Long-term debt
549.4 549.3 Total liabilities
$ 9,888.7 $ 8,441.8 SHAREHOLDERS’ EQUITY Total
shareholders’ equity
3,162.9 3,648.3 Total
liabilities and shareholders’ equity
$ 13,051.6
$ 12,090.1 Book value per share
$ 44.59
$ 47.68 Diluted book value per share (treasury stock method)
$ 44.00 $ 46.72
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended
September 30,2017
September 30,2016
UNDERWRITING REVENUES Gross written premiums
$ 852.5
$ 763.5 Premiums ceded
(245.1 ) (125.1 ) Net written
premiums
607.4 638.4 Change in unearned premiums
45.1
42.6 Net earned premiums
652.5 681.0
UNDERWRITING EXPENSES Losses and loss adjustment expenses
776.2 389.2 Amortization of deferred policy acquisition
costs
105.4 130.9 General, administrative and corporate
expenses
105.7 118.7 Total underwriting
expenses
987.3 638.8
Underwriting (loss) income including corporate expenses
(334.8 ) 42.2 Net investment income
46.4 46.4 Interest expense
(7.4 ) (7.3 ) Other
income (expenses)
7.6 (7.4 ) Total other revenue
46.6 31.7 Amortization and
non-recurring expenses
(5.2 ) (6.3 ) Net realized and
unrealized exchange gains
12.9 11.4 Net realized and
unrealized investment gains
17.5 21.5 (LOSS)
INCOME BEFORE TAX
(263.0 ) 100.5 Income tax (credit)
expense
9.2 (4.9 ) NET (LOSS) INCOME AFTER TAX
(253.8 ) 95.6 Dividends paid on ordinary shares
(14.4 ) (13.3 ) Dividends paid on preference shares
(7.7 ) (9.5 ) Preference share redemption costs
(5.6 ) — Proportion due to non-controlling interest
(0.6 ) 0.2 Retained (loss) income
$
(282.1 ) $ 73.0 Loss ratio
119.0
% 57.2 % Policy acquisition expense ratio
16.2
% 19.2 % General, administrative and corporate expense ratio
17.0 % 18.4 %
General, administrative and corporate
expense ratio (excluding amortizationand non-recurring
expenses)
16.2 % 17.4 % Expense ratio
33.2 % 37.6
% Expense ratio (excluding amortization and non-recurring expenses)
32.4 % 36.6 % Combined ratio
152.2 %
94.8 % Combined ratio (excluding amortization and non-recurring
expenses)
151.4 % 93.8 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Nine Months Ended
September 30,2017
September 30,2016
UNDERWRITING REVENUES Gross written premiums
$
2,672.6 $ 2,540.9 Premiums ceded
(800.3 )
(378.0 ) Net written premiums
1,872.3 2,162.9 Change in
unearned premiums
(76.7 ) (138.0 ) Net earned
premiums
1,795.6 2,024.9 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
1,450.5 1,188.8
Amortization of deferred policy acquisition costs
315.4
387.8 General, administrative and corporate expenses
342.6
354.9 Total underwriting expenses
2,108.5
1,931.5 Underwriting (loss) income
including corporate expenses
(312.9 ) 93.4
Net investment income
141.5 143.9 Interest expense
(22.2 ) (22.1 ) Other income (expenses)
6.6
(11.4 ) Total other revenue
125.9 110.4
Amortization and non-recurring expenses
(9.5 )
(6.3 ) Net realized and unrealized exchange gains (losses)
4.1 (14.1 ) Net realized and unrealized investment gains
105.7 100.2 (LOSS) INCOME BEFORE TAX
(86.7 ) 283.6 Income tax (credit) expense
5.2
(8.7 ) NET (LOSS) INCOME AFTER TAX
(81.5 )
274.9 Dividends paid on ordinary shares
(42.0 ) (39.5
) Dividends paid on preference shares
(28.7 ) (28.4 )
Preference share redemption costs
(8.0 ) — Proportion
due to non-controlling interest
(0.8 ) —
Retained (loss) income
$ (161.0 ) $ 207.0
Loss ratio
80.8 % 58.7 % Policy
acquisition expense ratio
17.6 % 19.2 % General,
administrative and corporate expense ratio
19.6 %
17.8 %
General, administrative and corporate
expense ratio (excluding amortizationand non-recurring
expenses)
19.1 % 17.5 % Expense ratio
37.2 % 37.0
% Expense ratio (excluding amortization and non-recurring expenses)
36.7 % 36.7 % Combined ratio
118.0 %
95.7 % Combined ratio (excluding amortization and non-recurring
expenses)
117.5 % 95.4 %
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, 2017
September30, 2016
September30, 2017
September30, 2016
Net (loss) income as reported
$ (253.8
) $ 95.6
$ (81.5 ) $ 274.9 Change in
redemption value of preference shares
(5.6 ) —
(8.0 ) — Net change attributable to non-controlling
interest
(0.6 ) 0.2
(0.8 ) — Preference
share dividends
(7.7 ) (9.5 )
(28.7 )
(28.4 ) Net (loss) income available to ordinary shareholders
(267.7 ) 86.3
(119.0 ) 246.5 Add
(deduct) after tax income: Net foreign exchange (gains) losses
(10.6 ) (11.1 )
(2.5 ) 10.7 Net
realized (gains) losses on investments
(16.6 ) (21.0
)
(101.8 ) (98.1 ) Change in redemption value of
preference shares
5.6 —
8.0 — Amortization and
non-recurring expenses
4.4 5.8
8.2
5.8 Operating (loss) income after tax available to
ordinary shareholders
(284.9 ) 60.0
(207.1
) 164.9 Tax (credit) expense on operating income
(11.6 ) 4.6
(9.4 ) 10.5
Operating (loss) income before tax
available to ordinaryshareholders
$ (296.5 ) $ 64.6
$
(216.5 ) $ 175.4
Basic earnings per
ordinary share
Net (loss) income adjusted for preference
share dividends andnon-controlling interest
$ (4.48 ) $ 1.43
$ (1.99
) $ 4.07 Add (deduct) after tax income: Net foreign exchange
(gains) losses
(0.18 ) (0.19 )
(0.04 )
0.17 Net realized (gains) losses on investments
(0.28
) (0.35 )
(1.70 ) (1.62 ) Change in redemption
value of preference shares
0.09 —
0.13 — Amortization
and non-recurring expenses
0.07 0.10
0.14 0.10 Operating (loss) income adjusted for
preference shares dividends and non-controlling interest
$
(4.78 ) $ 0.99
$ (3.46 )
$ 2.72
Diluted earnings per ordinary share Net
income adjusted for preference share dividends and non-controlling
interest
$ (4.48 ) $ 1.40
$
(1.99 ) $ 3.97 Add (deduct) after tax income: Net
foreign exchange (gains) losses
(0.18 ) (0.18 )
(0.04 ) 0.17 Net realized (gains) losses on
investments
(0.28 ) (0.34 )
(1.70 )
(1.58 ) Change in redemption value of preference shares
0.09
—
0.13 — Amortization and non-recurring expenses
0.07
0.09
0.14 0.09 Operating (loss)
income adjusted for preference shares dividends and non-controlling
interest
$ (4.78 ) $ 0.97
$
(3.46 ) $ 2.65
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended Nine Months Ended
September 30, 2017 September 30,
2016 September 30, 2017 September
30, 2016 Basic earnings per ordinary share
Net (loss) income adjusted for preference
share dividendand non-controlling interest
($4.48 ) $1.43
($1.99 ) $4.07
Operating (loss) income adjusted for
preference sharedividend and non-controlling interest
($4.78 ) $0.99
($3.46 ) $2.72 Diluted
earnings per ordinary share
Net (loss) income adjusted for preference
share dividendand non-controlling interest
($4.48 ) $1.40
($1.99 ) $3.97
Operating (loss) income adjusted for
preference sharedividend and non-controlling interest
($4.78 ) $0.97
($3.46 ) $2.65
Weighted average number of ordinary shares outstanding (in
millions)(1)
59.760 60.226
59.863 60.588
Weighted average number of ordinary shares
outstanding anddilutive potential ordinary shares (in millions)
59.760 61.577
59.863 62.043 Book value per
ordinary share
$44.59 $51.58
$44.59 $51.58 Diluted
book value per ordinary share (treasury stock method)
$44.00
$50.49
$44.00 $50.49 Ordinary shares outstanding at
end of the period (in millions)
59.407 60.211
59.407
60.211
Ordinary shares outstanding and dilutive
potential ordinary sharesat end of the period (treasury stock
method)(in millions)
60.200 61.516
60.200 61.516
(1)
The basic and diluted number of ordinary
shares for the three and nine months ended September 30, 2017 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 September 30, 2017 Three Months
Ended September 30, 2016 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 431.5 $ 421.0
$ 852.5 $ 365.9 $ 397.6 $ 763.5 Net written premiums
363.6 243.8 607.4 314.5 323.9 638.4 Gross
earned premiums
464.0 449.3 913.3 364.3 445.5
809.8 Net earned premiums
382.0 270.5 652.5
316.3 364.7 681.0 Losses and loss adjustment expenses
502.2
274.0 776.2 178.7 210.5 389.2 Amortization of
deferred policy acquisition expenses
61.5 43.9
105.4 53.0 77.9 130.9 General and administrative expenses
32.8 59.4 92.2 47.4
57.9 105.3 Underwriting (loss) income
$
(214.5 ) $ (106.8 ) $
(321.3 ) $ 37.2 $ 18.4 $ 55.6
Net investment income
46.4 46.4 Net realized and unrealized
investment gains (1)
17.5 21.5 Corporate expenses
(13.5 ) (13.4 ) Amortization and non-recurring
expenses
(5.2 ) (6.3 ) Other income (expenses) (2)
7.6 (7.4 ) Interest expense
(7.4 ) (7.3 ) Net
realized and unrealized foreign exchange gains (3)
12.9
11.4 (Loss) income before tax
$ (263.0
) $ 100.5 Income tax credit (expense)
9.2 (4.9
)
Net (loss) income $ (253.8 ) $ 95.6
Ratios Loss ratio
131.5 %
101.3 % 119.0 % 56.5 % 57.7 % 57.2 %
Policy acquisition expense ratio
16.1 % 16.2
% 16.2 % 16.8 % 21.4 % 19.2 % General and
administrative expense ratio (4)
8.6 % 22.0
% 17.0 % 15.0 % 15.9 % 18.4 % General and
administrative expense ratio (excluding amortization and
non-recurring expenses) (4)
8.6 % 22.0
% 16.2 % 15.0 % 15.9 % 17.4 % Expense ratio
24.7 % 38.2 % 33.2 % 31.8
% 37.3 % 37.6 % Expense ratio (excluding amortization and
non-recurring expenses)
24.7 % 38.2 %
32.4 % 31.8 % 37.3 % 36.6 % Combined ratio
156.2 % 139.5 % 152.2 %
88.3 % 95.0 % 94.8 % Combined ratio (excluding amortization and
non-recurring expenses)
156.2 % 139.5 %
151.4 % 88.3 % 95.0 % 93.8 %
Accident Year Ex-cat
Loss Ratio Loss ratio
131.5 % 101.3
% 119.0 % 56.5 % 57.7 % 57.2 % Prior year loss
development
4.8 % 0.3 % 2.8
% 6.4 % 4.2 % 5.2 % Catastrophe losses
(74.6
)% (30.3 )% (55.9 )% (4.7 )%
(2.8 )% (3.7 )% Accident year ex-cat loss ratio
61.7
% 71.3 % 65.9 % 58.2 % 59.1 %
58.6 % (1)
Includes realized and unrealized capital
gains and losses
(2)
Other income (expenses) in the third
quarter of 2017 and third quarter of 2016 included $9.8 million of
income and $9.8 million of expenses, 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, 2017 Nine Months
Ended September 30, 2016 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 1,332.4 $
1,340.2 $ 2,672.6 $ 1,216.1 $ 1,324.8 $
2,540.9 Net written premiums
1,097.3 775.0
1,872.3 1,070.8 1,092.1 2,162.9 Gross earned premiums
1,112.2 1,302.1 2,414.3 1,000.9 1,345.8
2,346.7 Net earned premiums
932.2 863.4
1,795.6 896.0 1,128.9 2,024.9 Losses and loss adjustment
expenses
797.9 652.6 1,450.5 494.3 694.5
1,188.8 Amortization of deferred policy acquisition expenses
174.4 141.0 315.4 163.1 224.7 387.8 General
and administrative expenses
117.4 186.9
304.3 130.6 173.7 304.3
Underwriting (loss) income
$ (157.5 ) $
(117.1 ) $ (274.6 ) $ 108.0
$ 36.0 $ 144.0 Net investment income
141.5 143.9 Net realized and unrealized investment gains (1)
105.7 100.2 Corporate expenses
(38.3 ) (50.6 )
Amortization and non-recurring expenses
(9.5 ) (6.3 )
Other income (expenses) (2)
6.6 (11.4 ) Interest expense
(22.2 ) (22.1 ) Net realized and unrealized foreign
exchange gains (losses) (3)
4.1 (14.1 ) (Loss) income
before tax
$ (86.7 ) $ 283.6 Income tax credit
(expense)
5.2 (8.7 )
Net (loss) income
$ (81.5 ) $ 274.9
Ratios
Loss ratio
85.6 % 75.6 % 80.8
% 55.2 % 61.5 % 58.7 % Policy acquisition expense ratio
18.7 % 16.3 % 17.6 % 18.2
% 19.9 % 19.2 % General and administrative expense ratio (4)
12.6 % 21.6 % 19.6 % 14.6
% 15.4 % 17.8 % General and administrative expense ratio (excluding
amortization and non-recurring expenses) (4)
12.6 %
21.6 % 19.1 % 14.6 % 15.4 % 17.5 %
Expense ratio
31.3 % 37.9 % 37.2
% 32.8 % 35.3 % 37.0 % Expense ratio (excluding amortization
and non-recurring expenses)
31.3 % 37.9
% 36.7 % 32.8 % 35.3 % 36.7 % Combined ratio
116.9 % 113.5 % 118.0 %
88.0 % 96.8 % 95.7 % Combined ratio (excluding amortization and
non-recurring expenses)
116.9 % 113.5 %
117.5 % 88.0 % 96.8 % 95.4 %
Accident Year Ex-cat
Loss Ratio Loss ratio
85.6 % 75.6 %
80.8 % 55.2 % 61.5 % 58.7 % Prior year loss
development
7.8 % 2.5 % 5.2
% 5.8 % 2.3 % 3.9 % Catastrophe losses
(34.3
)% (12.9 )% (23.9 )% (3.1 )%
(8.3 )% (5.4 )% Accident year ex-cat loss ratio
59.1
% 65.2 % 62.1 % 57.9 % 55.5 %
57.2 % (1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Other income (expenses) in the first nine
months of 2017 and first nine months of 2016 included $3.6 million
of income and $13.7 million of expenses, 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 LimitedAspen provides
reinsurance and insurance coverage to clients in various domestic
and global markets through wholly-owned subsidiaries and offices in
Australia, Bermuda, Canada, France, Germany, Ireland, Singapore,
Switzerland, the United Arab Emirates, the United Kingdom and the
United States. For the year ended December 31, 2016, Aspen reported
$12.1 billion in total assets, $5.3 billion in gross reserves, $3.6
billion in total shareholders’ equity and $3.1 billion in gross
written premiums. Its operating subsidiaries have been assigned a
rating of “A” by Standard & Poor’s Financial Services LLC
(“S&P”), an “A” (“Excellent”) by A.M. Best Company Inc. (“A.M.
Best”) and an “A2” by Moody’s Investors Service, Inc.
(“Moody’s”).
For more information about Aspen, please visit www.aspen.co.
(1) Forward-looking Statements Safe HarborThis
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.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. Aspen believes
these factors include, but are not limited to: the actual
development of losses and expenses impacting estimates for
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 the program to create operating
and cost efficiencies through focus on improving several of our
operational levers; our ability to successfully implement steps to
further optimize the business portfolio, ensure capital efficiency
and enhance investment returns; the possibility of greater
frequency or severity of claims and loss activity, including as a
result of natural or man-made (including economic and political
risks) catastrophic or material loss events, than our underwriting,
reserving, reinsurance purchasing or investment practices have
anticipated; the assumptions and uncertainties underlying reserve
levels that may be impacted by future payments for settlements of
claims and expenses or by other factors causing adverse or
favorable development, including our assumptions on inflation costs
associated with long-tail casualty business which could differ
materially from actual experience; the political, regulatory and
economic effects arising from the vote by the U.K. electorate in
favor of a U.K. exit from the European Union in the referendum held
in June 2016 and resulting negotiations; the reliability of, and
changes in assumptions to, natural and man-made catastrophe
pricing, accumulation and estimated loss models; decreased demand
for our insurance or reinsurance products; cyclical changes in the
insurance and reinsurance industry; the models we use to assess our
exposure to losses from future catastrophes contain inherent
uncertainties and our actual losses may differ significantly from
expectations; our capital models may provide materially different
indications than actual results; increased competition from
existing (re)insurers and from alternative capital providers and
insurance-linked funds and collateralized special purpose insurers
on the basis of pricing, capacity, coverage terms, new capital,
binding authorities to brokers or other factors and the related
demand and supply dynamics as contracts come up for renewal; our
ability to execute our business plan to enter new markets,
introduce new products and teams and develop new distribution
channels, including their integration into our existing operations;
our acquisition strategy; changes in market conditions in the
agriculture industry, which may vary depending upon demand for
agricultural products, weather, commodity prices, natural
disasters, and changes in legislation and policies related to
agricultural products and producers; termination of, or changes in,
the terms of the U.S. Federal Multiple Peril Crop Insurance Program
or the U.S. Farm Bill, including modifications to the Standard
Reinsurance Agreement put in place by the Risk Management Agency of
the U.S. Department of Agriculture; the recent consolidation in the
(re)insurance industry; loss of one or more of our senior
underwriters or key personnel; our ability to exercise capital
management initiatives, including capital available to pursue our
share repurchase program at various levels or to declare dividends,
or to arrange banking facilities as a result of prevailing market
conditions, the level of catastrophes or other losses or changes in
our financial results; changes in general economic conditions,
including inflation, deflation, foreign currency exchange rates,
interest rates and other factors that could affect our financial
results; the risk of a material decline in the value or liquidity
of all or parts of our investment portfolio; the risks associated
with the management of capital on behalf of investors; a failure in
our operational systems or infrastructure or those of third
parties, including those caused by security breaches or cyber
attacks; evolving issues with respect to interpretation of coverage
after major loss events; our ability to adequately model and price
the effects of climate cycles and climate change; any intervening
legislative or governmental action and changing judicial
interpretation and judgments on insurers’ liability to various
risks; the risks related to litigation; the effectiveness of our
risk management loss limitation methods, including our reinsurance
purchasing; changes in the availability, cost or quality of
reinsurance or retrocessional coverage; changes in the total
industry losses or our share of total industry losses resulting
from events, such as catastrophes, that have occurred in prior
years or may occur and, with respect to such events, our reliance
on loss reports received from cedants and loss adjustors, our
reliance on industry loss estimates and those generated by modeling
techniques, changes in rulings on flood damage or other exclusions
as a result of prevailing lawsuits and case law; the impact of one
or more large losses from events other than catastrophes or by an
unexpected accumulation of attritional losses and deterioration in
loss estimates; the impact of acts of terrorism, acts of war and
related legislation; any changes in our reinsurers’ credit quality
and the amount and timing of reinsurance recoverables; the
continuing and uncertain impact of the current depressed lower
growth economic environment in many of the countries in which we
operate; our reliance on information and technology and third-party
service providers for our operations and systems; the level of
inflation in repair costs due to limited availability of labor and
materials after catastrophes; a decline in our operating
subsidiaries’ ratings with S&P, A.M. Best or Moody’s; the
failure of our reinsurers, policyholders, brokers or other
intermediaries to honor their payment obligations; our reliance on
the assessment and pricing of individual risks by third parties;
our dependence on a few brokers for a large portion of our
revenues; the persistence of heightened financial risks, including
excess sovereign debt, the banking system and the Eurozone crisis;
changes in government regulations or tax laws in jurisdictions
where we conduct business; changes in accounting principles or
policies or in the application of such accounting principles or
policies; increased counterparty risk due to the credit impairment
of financial institutions; and Aspen or Aspen Bermuda Limited
becoming subject to income taxes in the United States or the United
Kingdom. For a more detailed description of these uncertainties and
other factors, please see the “Risk Factors” section in Aspen’s
Annual Report on Form 10-K for the year ended December 31, 2016 and
Quarterly Reports on Form 10-Q for the quarters ended March 31,
2017 and June 30, 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.
Furthermore, seismic events, such as the Mexico earthquakes,
generally have longer development periods than windstorm events,
which may be amplified in this instance by dynamics such as the
risk of geological liquefaction and the potential for uncertainty
in claims adjudication. In respect of Hurricane Maria, recovery
efforts are ongoing and expanding, with power outages,
infrastructure damage, communications disruptions and other issues
complicating loss mitigation and estimation. Accordingly, our
actual net negative impact from all events noted above, both
individually and in the aggregate, will vary from these preliminary
estimates, perhaps materially.
Non-GAAP Financial Measures
In presenting Aspen’s results, management has included and
discussed certain “non-GAAP financial measures.” Management
believes these non-GAAP financial measures, which may be defined
differently by other companies, better explain Aspen’s results of
operations in a manner that allows for a more complete
understanding of the underlying trends in Aspen’s business.
However, these measures should not be viewed as a substitute for
those determined in accordance with GAAP. The reconciliation of
such non-GAAP financial measures to their respective most directly
comparable GAAP financial measure is included in the financial
supplement or this release. Aspen’s financial supplement and third
quarter 2017 earnings press release, which were filed with the SEC
on Form 8-K on October 25, 2017, can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
Annualized Operating Return on Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Operating ROE is
calculated using operating income, as defined below, and average
equity is calculated as the arithmetic average on a monthly basis
for the stated periods of shareholders’ equity excluding the
aggregate value of the liquidation preferences of our preference
shares net of issuance costs and the total amount of
non-controlling interest. Aspen presents Operating ROE as a measure
that is commonly recognized as a standard of performance by
investors, analysts, rating agencies and other users of its
financial information. Please see page 22 of Aspen’s financial
supplement for a reconciliation of net income to operating income
and page 7 for a reconciliation of average shareholders’ equity to
average ordinary shareholders’ equity.
Operating Income is a non-GAAP financial measure.
Operating income is an internal performance measure used by Aspen
in the management of its operations and represents after-tax
operational results excluding, as applicable, after-tax net
realized and unrealized gains or losses, including net realized and
unrealized gains and losses on interest rate swaps, after-tax net
foreign exchange gains or losses, including net realized and
unrealized gains and losses from foreign exchange contracts, net
realized gains or losses on investments, amortization of intangible
assets and certain non-recurring income and expenses. Operating
income in the first nine months of 2017 also included the issue
costs associated with the redemption of Aspen’s 7.401% Perpetual
Non-Cumulative Preference Shares and 7.250% Perpetual
Non-Cumulative Preference Shares.
Aspen excludes the items above from its calculation of operating
income because they are either not expected to recur and therefore
are not reflective of underlying performance or the amount of these
gains or losses is heavily influenced by, and fluctuates in part,
according to the availability of market opportunities. Aspen
believes these amounts are largely independent of its business and
underwriting process and including them would distort the analysis
of trends in its operations. In addition to presenting net income
determined in accordance with GAAP, Aspen believes that showing
operating income enables investors, analysts, rating agencies and
other users of its financial information to more easily analyze
Aspen’s results of operations in a manner similar to how management
analyzes Aspen’s underlying business performance. Operating income
should not be viewed as a substitute for GAAP net income. Please
see page 22 of Aspen’s financial supplement for a reconciliation of
net income to operating income.
Diluted Book Value per Ordinary Share is not a non-GAAP
financial measure. Aspen has included diluted book value per
ordinary share as it illustrates the effect on basic book value per
share of dilutive securities thereby providing a better benchmark
for comparison with other companies. Diluted book value per share
is calculated using the treasury stock method, defined on page 21
of Aspen’s financial supplement.
Diluted Operating Earnings per Share and Basic Operating
Earnings per Share are non-GAAP financial measures. Aspen
believes that the presentation of diluted operating earnings per
share and basic operating earnings per share supports meaningful
comparison from period to period and the analysis of normal
business operations. Diluted operating earnings per share and basic
operating earnings per share are calculated by dividing operating
income by the diluted or basic weighted average number of shares
outstanding for the period. Please see page 22 of Aspen’s financial
supplement for a reconciliation of basic earnings per share to
diluted and basic operating earnings per share.
Accident Year Loss Ratio Excluding Catastrophes is a
non-GAAP financial measure. Aspen believes that the
presentation of loss ratios excluding catastrophes and prior year
reserve movements supports meaningful comparison from period to
period of the underlying performance of the business. Accident
year loss ratios excluding catastrophes are calculated by dividing
net losses excluding catastrophe losses, net expenses and prior
year reserve movements by net earned premiums excluding
catastrophe-related reinstatement premiums. Aspen has defined
catastrophe losses in the first nine months of 2017 as losses
associated with Hurricanes Harvey, Irma and Maria, the earthquakes
in Mexico, a tornado in Mississippi, Cyclone Debbie in Australia
and other weather-related events. Catastrophe losses in the first
nine months of 2016 were defined as losses associated with
wildfires in Canada, weather-related events in the U.S., a
hailstorm in the Netherlands and several earthquakes. Please see
pages 11 and 12 of this release for a reconciliation of loss ratios
to accident year loss ratios excluding catastrophes.
Retention Ratio is a non-GAAP financial measure. It is
calculated by dividing net written premium by gross written
premium.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171025006372/en/
AspenInvestorsMark Jones, +1-646-289-4945Senior Vice
President, Investor
Relationsmark.p.jones@aspen.coorMediaSteve Colton, +44 20
7184 8337Group Head of Communicationssteve.colton@aspen.co
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