Annualized Net Income Return on Equity of
4.0% and Annualized Operating Return on Equity of 9.2% for
the First Quarter 2018
Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
today a net income after tax of $30.8 million, or $0.38 per diluted
ordinary share, and an operating income after tax of $63.0 million,
or $0.91 per diluted ordinary share, for the first quarter of
2018.
Chris O’Kane, Chief Executive Officer, commented: “The first
quarter of 2018 was the first in Aspen's history in which we wrote
more than a billion dollars of premium. Our strong results include
gross written premium growth across both Aspen Re and Aspen
Insurance as a result of our targeted growth strategy. Both
segments generated underwriting profits, we improved our total
expense ratio and we continue to implement our operational
effectiveness and efficiency program.”(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 March 31,
2018
- Gross written premiums of
$1,116.8 million in the first quarter of 2018, an increase of 11.9%
compared with $998.0 million in the first quarter of 2017
- Insurance: Gross written premiums of
$493.3 million, an increase of 14.0% compared with $432.7 million
in the first quarter of 2017, due primarily to growth in the
Financial and Professional Lines and Property and Casualty
sub-segments
- Reinsurance: Gross written premiums of
$623.5 million, an increase of 10.3% compared with $565.3 million
in the first quarter of 2017. Specialty sub-segment premiums
increased largely due to growth in agriculture business which
included a fronting arrangement written as part of the transitional
arrangements following the sale of AgriLogic in 2017 while the
Property Catastrophe sub-segment premium increase was largely
driven by rate improvement
- Net written premiums of $635.5
million in the first quarter of 2018, a decrease of 7.4% compared
with $686.2 million in the first quarter of 2017 as Aspen continues
to make increased use of ceded reinsurance to seek to reduce
volatility. The retention ratio in the first quarter of 2018 was
56.9% compared with 68.8% in the first quarter of 2017
- Insurance: Net written premiums of
$210.5 million, a decrease of 11.6% compared with $238.0 million in
the first quarter of 2017, due primarily to increased use of quota
share reinsurance to seek to reduce volatility. The retention ratio
in the first quarter of 2018 was 42.7% compared with 55.0% in the
first quarter of 2017
- Reinsurance: Net written premiums of
$425.0 million, a decrease of 5.2% compared with $448.2 million in
the first quarter of 2017. Net written premiums in the first
quarter of 2018 reflect a change in accounting treatment of
cessions related to Aspen Capital Markets and, in addition,
continued to be impacted by transitional changes to ceding of
premiums following the sale of AgriLogic. The retention ratio in
the first quarter of 2018 was 68.2% compared with 79.3% in the
first quarter of 2017
- Loss ratio of 58.1% in the first
quarter of 2018 compared with 56.5% in the first quarter of 2017.
The loss ratio included pre-tax catastrophe losses of $24.2
million, or 4.5 percentage points, net of reinsurance recoveries,
in the first quarter of 2018 compared with $29.1 million, or 5.0
percentage points, in the first quarter of 2017
- Insurance: Loss ratio of 57.1% compared
with 61.0% in the first quarter of 2017. The loss ratio included
pre-tax catastrophe losses of $9.4 million, or 3.7 percentage
points, net of reinsurance recoveries, in the first 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 $4.5 million, or 1.5 percentage points, in the first
quarter of 2017
- Reinsurance: Loss ratio of 59.1%
compared with 51.6% in the first quarter of 2017. The loss ratio
included pre-tax catastrophe losses of $14.8 million, or 5.2
percentage points, net of reinsurance recoveries, in the first
quarter of 2018 primarily as a result of Winter Storm Friederike
and other weather-related events. Pre-tax catastrophe losses, net
of reinsurance recoveries, totaled $24.6 million, or 8.9 percentage
points, in the first quarter of 2017
- Net favorable development on
prior year loss reserves of $37.7 million benefited the loss ratio
by 7.1 percentage points in the first quarter of 2018. Prior year
net favorable reserve development of $26.2 million benefited the
loss ratio by 4.5 percentage points in the first quarter of 2017
- Insurance: Prior year net favorable
reserve development of $30.2 million benefited the loss ratio by
12.0 percentage points in the first quarter of 2018 and reflected
releases, primarily from short-tail lines, including favorable
development from 2017 natural catastrophes. Prior year net
favorable development of $5.0 million benefited the loss ratio by
1.6 percentage points in the first quarter of 2017
- Reinsurance: Prior year net favorable
reserve development of $7.5 million benefited the loss ratio by 2.7
percentage points in the first quarter of 2018. Prior year net
favorable development of $21.2 million benefited the loss ratio by
7.6 percentage points in the first quarter of 2017
- Accident year loss ratio excluding
catastrophes was 60.7% in the first quarter of 2018 compared
with 56.0% in the first quarter of 2017
- Insurance: Accident year loss ratio
excluding catastrophes for the quarter ended March 31, 2018
was 65.4%, including 2.6 percentage points resulting from a trade
credit loss and 1.9 percentage points from a fire-related loss. The
accident year loss ratio excluding catastrophes in the first
quarter of 2017 was 61.1%
- Reinsurance: Accident year loss ratio
excluding catastrophes for the quarter ended March 31, 2018
was 56.6%, including a 2.9 percentage points from a fire-related
loss. The accident year loss ratio excluding catastrophes in the
first quarter of 2017 was 50.3%
- Total expense ratio of 39.7% and
total expense ratio (excluding amortization and non-recurring
expenses) of 37.4% in the first quarter of 2018 compared with
40.5% and 40.1%, respectively, in the first quarter of 2017
- The policy acquisition expense ratio
was 17.0% in the first quarter of 2018 compared with 19.6% in the
first quarter of 2017
- General and administrative expenses
(excluding amortization and non-recurring expenses) were $108.9
million in the first quarter of 2018, compared with $119.1 million
in the first quarter of 2017. The general and administrative
expense ratio (excluding amortization and non-recurring expenses)
decreased to 20.4% from 20.5% in the first quarter of 2017
- Net income after tax of $30.8
million, or $0.38 per diluted ordinary share, in the first quarter
of 2018 compared with net income of $96.5 million, or $1.36 per
diluted ordinary share, in the first quarter of 2017. Net income
included $(37.7) million of net realized and unrealized investment
losses in the first quarter of 2018 compared with $46.2 million net
realized and unrealized investment gains in the first quarter of
2017.
- Operating income after tax of
$63.0 million, or $0.91 per diluted ordinary share, in the first
quarter of 2018 compared with operating income of $59.8 million, or
$0.79 per diluted ordinary share, in the first quarter of 2017
- Annualized net income return on
average equity of 4.0% and annualized operating return on
average equity of 9.2% for the quarter ended
March 31, 2018 compared with 11.6% and 6.8%, respectively, for
the first quarter of 2017
Investment performance
- Investment income of $47.3 million in
the first quarter of 2018 compared with $47.7 million in the first
quarter of 2017
- The total return on Aspen’s aggregate
investment portfolio was (0.9)% for the three months ended
March 31, 2018 and reflects net realized and unrealized gains
and losses mainly in the fixed income portfolio
- Aspen’s investment portfolio was
comprised primarily of high quality fixed income securities with an
average credit quality of “AA-”. The average duration of the fixed
income portfolio was 3.98 years as at March 31, 2018
- Aspen took advantage of rising equity
markets in the first quarter of 2018 and sold its equity
portfolio
- Book yield on the fixed income
portfolio as at March 31, 2018 was 2.63% compared with 2.56%
as at December 31, 2017
Capital
- Total shareholders’ equity was $2.9
billion as at March 31, 2018
- Diluted book value per share was $38.70
as at March 31, 2018, down 3.5% from December 31, 2017
primarily due to realized and unrealized investment losses in the
quarter
Operational Effectiveness and Efficiency Program
- Aspen recorded $11.8 million of
expenses related to its operational effectiveness and efficiency
program in the first quarter of 2018
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, May 3, 2018.
To participate in the May 3 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 10117537
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 10117537
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 atMarch 31, 2018 As
atDecember 31, 2017 ASSETS Total
investments
$ 7,232.3 $ 7,633.0 Cash and cash
equivalents
1,246.9 1,054.8 Reinsurance recoverables
2,295.2 2,030.7 Premiums receivable
1,743.0 1,496.5
Other assets
690.5 691.4 Total assets
$
13,207.9
$ 12,906.4 LIABILITIES Losses and loss adjustment
expenses
$ 6,679.4 $ 6,749.5 Unearned premiums
2,097.7 1,820.8 Other payables
990.1 813.9 Silverton
loan notes
32.2 44.2 Long-term debt
549.5
549.5 Total liabilities
$ 10,348.9 $ 9,977.9
SHAREHOLDERS’ EQUITY Total shareholders’ equity
2,859.0
2,928.5 Total liabilities and shareholders’ equity
$
13,207.9 $ 12,906.4 Book value per share
$ 39.30 $ 40.59 Diluted book value per share
(treasury stock method)
$ 38.70 $ 40.10
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended March 31, 2018
March 31, 2017 UNDERWRITING REVENUES Gross written
premiums
$ 1,116.8 $ 998.0 Premiums ceded
(481.3 ) (311.8 ) Net written premiums
635.5
686.2 Change in unearned premiums
(102.0 ) (105.1 )
Net earned premiums
533.5 581.1 UNDERWRITING
EXPENSES Losses and loss adjustment expenses
310.2 328.2
Amortization of deferred policy acquisition costs
90.8 113.7
General, administrative and corporate expenses
108.9
119.1 Total underwriting expenses
509.9 561.0
Underwriting income including corporate
expenses
23.6 20.1 Net investment
income
47.3 47.7 Interest expense
(7.4 ) (7.4
) Other income
1.9 0.7 Total other revenue
41.8 41.0 Amortization and
non-recurring expenses
(12.1 ) (2.2 ) Net realized
and unrealized exchange gains (losses)
18.8 (5.8 ) Net
realized and unrealized investment (losses) gains
(37.7
) 46.2 INCOME BEFORE TAX
34.4 99.3 Income tax
expense
(3.6 ) (2.8 ) NET INCOME AFTER TAX
30.8 96.5 Dividends paid on ordinary shares
(14.3
) (13.2 ) Dividends paid on preference shares
(7.6
) (10.5 ) Preference share redemption costs
— (2.4 )
Proportion due to non-controlling interest
(0.2 )
(0.1 ) Retained income
$ 8.7 $ 70.3
Loss ratio
58.1 % 56.5 % Policy acquisition
expense ratio
17.0 % 19.6 % General, administrative
and corporate expense ratio
22.7 % 20.9 % General,
administrative and corporate expense ratio (excluding amortization
and non-recurring expenses)
20.4 % 20.5 % Expense
ratio
39.7 % 40.5 % Expense ratio (excluding
amortization and non-recurring expenses)
37.4 % 40.1
% Combined ratio
97.8 % 97.0 % Combined ratio
(excluding amortization and non-recurring expenses)
95.5
% 96.6 %
Aspen Insurance Holdings
Limited
Operating income reconciliation
(unaudited)
$ in millions, except per share
amounts
Three Months Ended (in US$ millions except where
stated)
March 31,
2018
March 31,
2017
Net income as reported
$ 30.8 $ 96.5 Change in
redemption value of preference shares
— (2.4 ) Net change
attributable to non-controlling interest
(0.2 ) (0.1
) Preference share dividends
(7.6 ) (10.5 ) Net
income available to ordinary shareholders
23.0 83.5 Add
(deduct) after tax income: Net foreign exchange (gains) losses
(15.4 ) 5.1 Net realized losses (gains) on
investments
37.8 (43.8 ) Change in redemption value of
preference shares
— 2.4 Amortization and non-recurring
expenses
9.8 2.0 Operating income after tax
available to ordinary shareholders
55.2 49.2 Tax expense on
operating income
2.4 1.3 Operating income
before tax available to ordinary shareholders
$ 57.6
$ 50.5
Basic earnings per ordinary
share Net income adjusted for preference share dividends and
non-controlling interest
$ 0.39 $ 1.39 Add (deduct)
after tax income: Net foreign exchange (gains) losses
(0.26
) 0.09 Net realized losses (gains) on investments
0.63 (0.73 ) Change in redemption value of preference shares
— 0.04 Amortization and non-recurring expenses
0.16
0.03 Operating income adjusted for preference shares
dividends and non-controlling interest
$ 0.92
$ 0.82
Diluted earnings per ordinary share Net
income adjusted for preference share dividends and non-controlling
interest
$ 0.38 $ 1.36 Add (deduct) after tax income:
Net foreign exchange (gains) losses
(0.25 ) 0.08 Net
realized losses (gains) on investments
0.62 (0.72 ) Change
in redemption value of preference shares
— 0.04 Amortization
and non-recurring expenses
0.16 0.03 Operating
income adjusted for preference shares dividends and non-controlling
interest
$ 0.91 $ 0.79
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ except share amounts
Three Months Ended March 31, 2018
March 31, 2017 Basic
earnings per ordinary share Net income adjusted for preference
share dividend and non-controlling interest
$0.39 $1.39
Operating income adjusted for preference share dividend and
non-controlling interest
$0.92 $0.82 Diluted earnings per
ordinary share Net income adjusted for preference share dividend
and non-controlling interest
$0.38 $1.36 Operating income
adjusted for preference share dividend and non-controlling interest
$0.91 $0.79 Weighted average number of ordinary
shares outstanding (in millions)
59.546 59.863
Weighted average number of ordinary shares outstanding and dilutive
potential ordinary shares (in millions)
60.513 61.197
Book value per ordinary share
$39.30 $48.79 Diluted book
value per ordinary share (treasury stock method)
$38.70
$47.89 Ordinary shares outstanding at end of the period (in
millions)
59.653 59.988 Ordinary shares outstanding
and dilutive potential ordinary shares at end of the period
(treasury stock method) (in millions)
60.574 61.107
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended March 31, 2018 Three
Months Ended March 31, 2017 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 623.5 $ 493.3
$ 1,116.8 $ 565.3 $ 432.7 $ 998.0 Net written
premiums
425.0 210.5 635.5 448.2 238.0 686.2
Gross earned premiums
375.0 467.6 842.6 327.6
423.7 751.3 Net earned premiums
282.5 251.0
533.5 277.5 303.6 581.1 Losses and loss adjustment expenses
166.9 143.3 310.2 143.1 185.1 328.2
Amortization of deferred policy acquisition expenses
55.9
34.9 90.8 59.5 54.2 113.7 General and administrative
expenses
31.6 63.6
95.2 43.9 61.8 105.7
Underwriting income
$ 28.1
$ 9.2 $ 37.3 $ 31.0
$ 2.5 $ 33.5 Net investment income
47.3
47.7 Net realized and unrealized investment (losses) gains
(37.7 ) 46.2 Corporate expenses
(13.7 )
(13.4 ) Amortization and non-recurring expenses (1)
(12.1
) (2.2 ) Other income (2)
1.9 0.7 Interest expense
(7.4 ) (7.4 ) Net realized and unrealized foreign
exchange gains (losses) (3)
18.8 (5.8 ) Income before
tax
$ 34.4 $ 99.3 Income tax expense
(3.6
) (2.8 )
Net income $ 30.8 $
96.5
Ratios Loss ratio
59.1 %
57.1 % 58.1 % 51.6 % 61.0 % 56.5 %
Policy acquisition expense ratio
19.8 % 13.9
% 17.0 % 21.4 % 17.9 % 19.6 % General and
administrative expense ratio (4)
11.2 % 25.3
% 22.7 % 15.8 % 20.4 % 20.9 % General and
administrative expense ratio (excluding amortization and
non-recurring expenses) (4)
11.2 % 25.3
% 20.4 % 15.8 % 20.4 % 20.5 % Expense ratio
31.0 % 39.2 % 39.7 % 37.2
% 38.3 % 40.5 % Expense ratio (excluding amortization and
non-recurring expenses)
31.0 % 39.2 %
37.4 % 37.2 % 38.3 % 40.1 % Combined ratio
90.1 % 96.3 % 97.8 % 88.8
% 99.3 % 97.0 % Combined ratio (excluding amortization and
non-recurring expenses)
90.1 % 96.3 %
95.5 % 88.8 % 99.3 % 96.6 %
Accident Year Ex-cat
Loss Ratio Loss ratio
59.1 % 57.1 %
58.1 % 51.6 % 61.0 % 56.5 % Prior year loss
development
2.7 % 12.0 % 7.1
% 7.6 % 1.6 % 4.5 % Catastrophe losses
(5.2
) %
(3.7
) %
(4.5
) %
(8.9
) %
(1.5
) %
(5.0
) %
Accident year ex-cat loss ratio
56.6 % 65.4
% 60.7 % 50.3 % 61.1 % 56.0 %
(1)
Amortization and non-recurring expenses in
the first quarter of 2018 included $11.8 million of expenses
related to the operational effectiveness and efficiency program
(2)
Other income in the first quarter of 2018
and first quarter of 2017 included income of $1.0 million and $2.9
million expense, 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; 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 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
filed with the SEC on Form 8-K on May 2, 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 21 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 first quarter 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 21 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 20
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 21 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 three months ended March 31, 2018 as
losses associated with Winter Storm Friederike in Europe and
weather-related events. Catastrophe losses in the three months
ended March 31, 2017 were defined as losses associated
predominantly with a tornado in Mississippi, Cyclone Debbie in
Australia, and various other weather-related events. Please see
page 10 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: https://www.businesswire.com/news/home/20180502006775/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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