Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) today
reports net income after tax of $78.7 million, or $0.99 per diluted
share, for the first quarter of 2012.
Trading highlights in the quarter included areas of improved
pricing, especially in loss affected and peak zone property lines,
targeted premium growth and net favorable reserve development.
The reinsurance segment performed strongly and recorded a loss
ratio of 50% with good performance in each of the property,
casualty and specialty lines. The insurance segment
continues to make good progress, in particular in developing its US
insurance footprint, although results overall in the insurance
segment were impacted by the Costa Concordia event.
Operating highlights for the quarter ended March 31,
2012
- Net earnings per diluted share of $0.99
for the quarter ended March 31, 2012 compared with a net loss per
diluted share of $2.25 in the first quarter of 2011(1)
- Operating earnings per diluted share of
$0.88 for the quarter ended March 31, 2012 compared with an
operating loss per diluted share of $2.38 in the first quarter of
2011(1)
- Diluted book value per share of $38.58,
up 5.8% from the first quarter of 2011 and up 1.0% from December
31, 2011(1)
- Annualized net income return on average
equity of 10.4% and annualized operating return on average equity
of 9.2% for the first quarter of 2012 (2)
- Gross written premiums of $782.1
million for the first quarter of 2012 compared with $671.3 million
for the first quarter of 2011
- Combined ratio of 93.8%, or 90.1%
excluding natural catastrophe losses for the first quarter of 2012
compared with a combined ratio of 148.7%, or 85.3% excluding
natural catastrophe losses for the first quarter of 2011. (1) The
Costa Concordia event represented 6.3 points on the combined ratio
for the first quarter of 2012
- Prior year net reserve releases of
$37.0 million for the quarter compared with $21.9 million of net
reserve releases in the first quarter of 2011
(1) See provision of ASU 2010-26 on page
12
(2) See definition of non-GAAP financial
measures on pages 11 and 12
Financial highlights, quarter ended
March 31, 2012 (unaudited)
$ in millions, except per share amounts
and percentages
Q1 2012
Q1 2011(1)
Change Gross written premiums $ 782.1
$ 671.3 16.5 % Net earned premiums $ 495.4 $
452.4 9.5 % Net investment income $ 52.4 $ 55.5 (5.6 )% Net
income (loss) after tax $ 78.7 $ (152.8 ) NM Operating income
(loss) after tax $ 70.5 $ (161.7 ) NM Diluted net income (loss) per
share $ 0.99 $ (2.25 ) NM Diluted operating earnings (loss) per
share $ 0.88 $ (2.38 ) NM Annualized net income return on equity
10.4 % (22.8 )% Annualized operating return on equity 9.2 % (24.0
)% Combined ratio 93.8 % 148.7 % Book value per ordinary share $
39.96 $ 37.96 5.3 % Diluted book value per ordinary share $ 38.58
$ 36.48 5.8 %
NM: not meaningful
(1) See provision of ASU 2010-26 on page
12
Chris O’Kane, Chief Executive Officer commented, “Our overall
results this quarter are encouraging on a number of fronts. The
quarter saw strong performance in reinsurance whereas insurance
results were impacted by the Costa Concordia event. We continue to
execute our strategy of ensuring that our capital, products and
people are well aligned with our customers, especially those who
are paying good or improving prices for our products.
Throughout the first quarter of 2012 we continued to build
capital, further strengthening our balance sheet with a preferred
stock issuance in April, and we remain very confident in our
financial flexibility. There are numerous signs that the market is
firming, and we are well positioned to deploy our capital to
profitable underwriting or share repurchases. We are also pleased
that the Board approved a 13% increase in the quarterly common
dividend to $0.17.”
Consolidated highlights
Net income for the first quarter included $16.9 million, or
$0.23 per diluted share, of catastrophe losses after tax resulting
from the severe US storms in February and March. It also included
$27.0 million or $0.37 per diluted share related to the losses from
the Costa Concordia event. These losses were net of reinsurance
recoveries, reinstatement premiums and taxes.
Net earned premiums were $495.4 million in the first quarter of
2012, up 9.5% compared with the first quarter of 2011.
Prior year net reserve releases were $37.0 million in the first
quarter of 2012 compared with $21.9 million of net reserve releases
in the first quarter of 2011. Net investment income was $52.4
million in the quarter compared with $55.5 million in the first
quarter 2011.
Segment highlights
Reinsurance
Operating highlights for Reinsurance for the quarter ended March
31, 2012 include:
- Gross written premiums of $474.2
million, up 8.5% compared with $437.1 million for the first quarter
of 2011
- Net earned premiums of $271.0 million,
relatively unchanged from the first quarter of 2011
- Combined ratio of 79.8% compared with
178.2% for the first quarter of 2011
Gross written premiums increased in the other property lines,
principally pro rata, and in our specialty lines, while the
property catastrophe and casualty lines were relatively flat.
The combined ratio for the quarter of 79.8% included pre-tax
catastrophe losses, net of reinsurance recoveries and reinstatement
premiums, of $17.6 million or 6.5 percentage points from the severe
US storms in February and March. There were no material changes in
estimates for the 2010 and 2011 catastrophe events. In addition,
there were reinsurance losses of $5.1 million pre-tax, net of
reinstatement premiums from the Costa Concordia event which
impacted the combined ratio by 2.0 percentage points. In
comparison, the combined ratio for the first quarter of 2011 was
178.2% which included pre-tax catastrophe losses, net of
reinsurance recoveries and reinstatement premiums, of $284.8
million or 105.8 percentage points.
The segment underwriting profit for the first quarter of 2012
was $54.6 million compared with an underwriting loss of $212.5
million for the first quarter of 2011.
Insurance
Operating highlights for Insurance for the quarter ended March
31, 2012 include:
- Gross written premiums of $307.9
million, up 31.5% compared with $234.2 million in the first quarter
of 2011
- Net earned premiums of $224.4 million,
an increase of 24.4% compared with the first quarter of 2011
- Combined ratio of 104.2% compared with
100.1% for the first quarter of 2011, with the increase primarily
attributable to $26.5 million, or 11.6 percentage points, of
pre-tax losses, net of reinsurance recoveries and reinstatement
premiums, from the Costa Concordia event
- Favorable prior year loss reserve
development of $8.9 million compared with $1.1 million in the first
quarter of 2011
The increase in gross written premiums was mainly attributable
to US property, reflecting rate improvement for catastrophe-exposed
risks and an expansion of our programs business. There was also
growth in the marine, energy and construction liability
accounts.
Investment performance
Net investment income for the first quarter of 2012 was $52.4
million compared with $55.5 million in the first quarter of 2011.
Net realized and unrealized investment gains included in net income
for the quarter were $5.5 million compared with $8.5 million of net
realized and unrealized gains in the first quarter of 2011.
Unrealized gains in the available-for-sale investment portfolio,
including equity securities, at the end of March 31, 2012 were
$324.1 million, a decrease of $11.7 million from year end 2011.
Book yield on the fixed income portfolio was 3.31%, a decrease
of 6 basis points compared with the fourth quarter of 2011 and down
34 basis points from 3.65% at the end of the first quarter of 2011.
The average credit quality of the portfolio was AA with an average
duration of 2.39 years, including the impact of interest rate
swaps.
Capital position
On April 11, 2012, Aspen issued 6,400,000 shares of its
newly designated 7.250% Perpetual Non-Cumulative Preference Shares,
par value $0.15144558 per share and a liquidation preference of
$25.00 per share (representing $160 million in aggregate
liquidation preference for net proceeds of $155 million).
Outlook for 2012
Given current market conditions, Aspen continues to anticipate
gross written premiums for 2012 to be unchanged from its initial
guidance of $2.3 billion +/- 5%, premiums ceded to be between 10%
and 12% of gross earned premiums and the combined ratio to be in
the range of 93% to 98% including a catastrophe load of $150
million for the remainder of the year, assuming normal loss
experience. Aspen continues to expect the effective tax rate in
2012 to be in the range of 8% to 12%.
See “Forward-looking Statements Safe Harbor” below.
Earnings conference call and web cast
Aspen will host a conference call to discuss the results at 9:00
am (EST) on Thursday, April 26, 2012.
To participate in the April 26 conference call by
phonePlease call to register at least 10 minutes before the
conference call begins by dialing:
+1 (888) 459 5609 (US toll free) or+1 (404) 665 9920
(international)Conference ID 57881020
To listen live onlineAspen will provide a live webcast at
www.aspen.co(Investors and Media > Investor Relations >
Presentations)
To download the materialsThe earnings press release and a
detailed financial supplement will also be published on Aspen’s web
site.
To listen laterA replay of the call will be available for
14 days via phone and internet, available two hours after the end
of the live call. To listen to the replay by phone please dial:
+1 (855) 859 2056 (US toll free) or+1 (404) 537 3406
(international)Replay ID 57881020
The recording will be also available at www.aspen.co.
Aspen Insurance Holdings
Limited
Summary consolidated balance sheet
(unaudited)
$ in millions, except per share data
As at
March 31,
2012
As at
December 31,
2011
ASSETS Total investments
$
6,497.1 $ 6,335.1 Cash and cash equivalents
1,173.3
1,239.1 Reinsurance recoverables
630.7 514.4 Premiums
receivable
1,061.2 894.4 Other assets(1)
504.9
477.5 Total assets
$
9,867.2 $ 9,460.5 LIABILITIES
Losses and loss adjustment expenses
$ 4,585.7 $
4,525.2 Unearned premiums
1,146.3 916.1 Other payables
425.3 364.2 Long-term debt
499.0
499.0 Total liabilities
6,656.3 6,304.5
SHAREHOLDERS’ EQUITY Total shareholders’ equity(1)
3,210.9 3,156.0 Total
liabilities and shareholders’ equity(1)
$ 9,867.2
$ 9,460.5 Book value per share(1)
$ 39.96 $ 39.66 Diluted book value per share
(treasury stock method) (1)
$ 38.58
$ 38.21
(1) See provision of ASU 2010-26 on page
12
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except share, per share
data and ratios
Three Months Ended
March 31, 2012
March 31, 2011(1)
UNDERWRITING REVENUES Gross written premiums
$
782.1 $ 671.3 Premiums ceded
(148.6 )
(161.7 ) Net written premiums
633.5
509.6 Change in unearned premiums
(138.1 )
(57.2 ) Net earned premiums
495.4 452.4 UNDERWRITING
EXPENSES Losses and loss adjustment expenses
284.0 528.9
Policy acquisition expenses
96.1 81.4 General,
administrative and corporate expenses
84.8
62.5 Total underwriting expenses
464.9 672.8 Underwriting
income/(loss) including corporate expenses
30.5
(220.4 ) OTHER OPERATING REVENUE Net
investment income
52.4 55.5 Interest expense
(7.7 ) (7.7 ) Total other
operating revenue
44.7
47.8 Other income
(0.3 )
(8.1 ) OPERATING INCOME/(LOSS) BEFORE TAX
74.9
(180.7 ) OTHER Net realized and unrealized exchange gains
3.7 2.9 Net realized and unrealized investment gains
5.5 8.5 INCOME/(LOSS)
BEFORE TAX
84.1 (169.3 ) Income taxes (expense)/benefit
(5.4 ) 16.5 NET
INCOME/(LOSS) AFTER TAX
78.7 (152.8 ) Dividends paid on
ordinary shares
(10.6 ) (10.6 ) Dividends paid on
preference shares
(5.7 ) (5.7 ) Proportion due to
non-controlling interest
0.1
0.2 Retained income/(loss)
$ 62.5
$ (168.9 ) Components of net income (after
tax) Operating income/(loss)
$ 70.5 $ (161.7 ) Net
realized and unrealized exchange gains after tax
3.0 1.8 Net
realized investment gains after tax
5.2
7.1 NET INCOME/(LOSS) AFTER TAX
$
78.7 $ (152.8 ) Loss ratio
57.3 % 116.9 % Policy acquisition expense ratio
19.4 % 18.0 % General, administrative and corporate
expense ratio
17.1 % 13.8 % Expense ratio
36.5
% 31.8 % Combined ratio
93.8 %
148.7 %
(1) See provision of ASU 2010-26 on page
12
Aspen Insurance
Holdings Limited
Summary
consolidated financial data (unaudited)
$ in millions,
except share, per share data and ratios
Three Months
Ended
March 31,
2012
March 31,
2011(1)
Basic earnings per ordinary share Net
income/(loss) adjusted for preference share dividend
$
1.03 $ (2.25 ) Operating income/(loss) adjusted for
preference dividend
$ 0.92 $ (2.38 ) Diluted earnings
per ordinary share Net income/(loss) adjusted for preference share
dividend
$ 0.99 $ (2.25 ) Operating income/(loss)
adjusted for preference dividend
$ 0.88 $ (2.38 )
Weighted average number of ordinary shares outstanding (in
millions)
70.944 70.552
(2)
Weighted average number of ordinary shares
outstanding and
dilutive potential ordinary shares (in
millions)
73.832 70.552
(2)
Book value per ordinary share
$ 39.96 $ 37.96 Diluted book value (treasury stock
method)
$ 38.58 $ 36.48 Ordinary shares outstanding
at end of the period (in millions)
71.496 70.731
Ordinary shares outstanding and dilutive
potential ordinary shares
at end of the period (treasury stock
method) (in millions)
74.064 73.559
(1) See provision of ASU 2010-26 on page 12.
(2) The basic and diluted number of
ordinary shares for the three months ended March 31, 2011 used in
the above table
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 March 31,
2012 Three Months Ended March 31,
2011 Reinsurance Insurance
Total Reinsurance
Insurance Total
Gross written premiums
$
474.2 $ 307.9 $ 782.1 $ 437.1 $
234.2 $ 671.3 Net written premiums
429.5 204.0
633.5 388.4 121.2 509.6 Gross earned premiums
290.2
266.9 557.1 284.8 224.0 508.8 Net earned premiums
271.0 224.4 495.4 272.0 180.4 452.4 Losses and
loss adjustment expenses
135.6 148.4 284.0
410.1 118.8 528.9 Policy acquisition expenses
51.8
44.3 96.1 49.4 32.0 81.4 General and administrative
expenses(1)
29.0
41.4 70.4
25.0 29.8
54.8 Underwriting income/(loss) (1)
$ 54.6
$ (9.7 ) 44.9 $
(212.5 ) $ (0.2 ) (212.7 ) Net investment
income
52.4 55.5 Net investment gains (2)
5.5 8.5
Corporate expenses
(14.4 ) (7.7 ) Other
income/(expenses)
(0.3 ) (8.1 ) Interest expenses
(7.7 ) (7.7 ) Net foreign exchange gains (3)
3.7 2.9 Income/(loss) before tax
84.1 (169.3 ) Income tax (expense)/benefit
(5.4 ) 16.5
Net income/(loss)(1)
$ 78.7 $ (152.8 )
Ratios Loss
ratio
50.0 % 66.1 % 57.3
% 150.8 % 65.9 % 116.9 % Policy acquisition expense
ratio
19.1 % 19.7 % 19.4
% 18.2 % 17.7 % 18.0 % General and administrative expense
ratio (1, 4)
10.7 % 18.4 % 17.1
% 9.2 % 16.5 % 13.8 % Expense ratio(1)
29.8 %
38.1 % 36.5 % 27.4 % 34.2 % 31.8 %
Combined ratio(1)
79.8 %
104.2 % 93.8 %
178.2 % 100.1 %
148.7 % (1) See provision of ASU
2010-26 on page 12. (2) Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps. (3) Includes realized and unrealized foreign
exchange gains and losses and realized and unrealized gains and
losses on foreign exchange contracts. (4) The total group general
and administrative expense ratio includes the impact from corporate
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 Bermuda, France, Germany, Ireland,
Singapore, Switzerland, the United Kingdom and the United States.
For the year ended December 31, 2011, Aspen reported $9.5 billion
in total assets, $4.5 billion in gross reserves, $3.2 billion in
shareholders’ equity and $2.2 billion in gross written premiums.
Its operating subsidiaries have been assigned a rating of “A”
(“Strong”) by Standard & Poor’s, an “A” (“Excellent”) by A.M.
Best and an “A2” (“Good”) by Moody’s Investors Service.
For more information about Aspen, please visit www.aspen.co.
Forward-looking Statements Safe Harbor
This press release contains, and Aspen's earnings conference
call will contain, written or oral "forward-looking statements"
within the meaning of the US 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,"
"estimate," "may," "continue," “guidance,” and similar expressions
of a future or forward-looking nature.
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 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 reliability of, and changes in
assumptions to, natural and man-made catastrophe pricing,
accumulation and estimated loss models; evolving issues with
respect to interpretation of coverage after major loss events and
any intervening legislative or governmental action; the
effectiveness of our loss limitation methods; changes in the total
industry losses, or our share of total industry losses, resulting
from past events 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 acts
of terrorism and related legislation and acts of war; decreased
demand for our insurance or reinsurance products and cyclical
changes in the insurance and reinsurance sectors; any changes in
our reinsurers’ credit quality and the amount and timing of
reinsurance recoverables; changes in the availability, cost or
quality of reinsurance or retrocessional coverage; the continuing
and uncertain impact of the current depressed economic environment
in many of the countries in which we operate; the level of
inflation in repair costs due to limited availability of labor and
materials after catastrophes; changes in insurance and reinsurance
market conditions; increased competition on the basis of pricing,
capacity, coverage terms or other factors and the related demand
and supply dynamics as contracts come up for renewal; a decline in
our operating subsidiaries’ ratings with S&P, A.M. Best or
Moody’s; our ability to execute our business plan to enter new
markets, introduce new products and develop new distribution
channels, including their integration into our existing operations;
the persistence of the global financial crisis and the Eurozone
debt crisis, changes in general economic conditions, including
inflation, foreign currency exchange rates, interest rates and
other factors that could affect our investment portfolio; the risk
of a material decline in the value or liquidity of all or parts of
our investment portfolio; changes in our ability to exercise
capital management initiatives or to arrange banking facilities as
a result of prevailing market changes or changes in our financial
position; changes in government regulations or tax laws in
jurisdictions where we conduct business; Aspen Holdings or Aspen
Bermuda becoming subject to income taxes in the United States or
the United Kingdom; loss of key personnel; and increased
counterparty risk due to the credit impairment of financial
institutions. For a more detailed description of these
uncertainties and other factors, please see the "Risk Factors"
section in Aspen's Annual Report on Form 10-K as filed with the US
Securities and Exchange Commission on February 28, 2012. 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. Due to the complexity of factors contributing to
the losses and the preliminary nature of the information used to
prepare these estimates, there can be no assurance that Aspen's
ultimate losses will remain within the stated amount.
Non-GAAP Financial Measures
In presenting Aspen's results, management has included and
discussed certain "non-GAAP financial measures" as such term is
defined in Regulation G. Management believes that these non-GAAP
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 measures in
accordance with Regulation G is included in the financial
supplement, which can be obtained from the Investor Relations
section of Aspen's website at www.aspen.co.
(1) Annualized Operating Return on Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Annualized Operating
Return on Average Equity is calculated using operating income, as
defined below, and average equity 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.
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. See
page 26 of Aspen's financial supplement for a reconciliation of
operating income to net income and page 8 for a reconciliation of
average equity.
Previously, Aspen excluded net unrealized investment and foreign
exchange gains from the definition of average equity for this
purpose. Aspen has made this change to bring its definition of
Operating ROE into line with that used by the majority of Aspen’s
market peers and because Aspen believes it better represents the
performance relative to total ordinary shareholders’ accumulated
investment in the business and retained earnings. See page 2 of
Aspen’s financial supplement for the effect of this change on
previously reported Operating ROE.
(2) 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 capital gains or losses, including realized
and unrealized gains or losses on interest rate swaps, and
after-tax net foreign exchange gains or
losses including net realized and unrealized gains and
losses from foreign exchange contracts.
Aspen excludes these items from its calculation of operating
income because 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 above and
page 26 of Aspen's financial supplement for a reconciliation of
operating income to net income. Aspen’s financial supplement can be
obtained from the Investor Relations section of Aspen's website at
www.aspen.co.
(3) Diluted Book Value per Ordinary Share is 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 24
of Aspen’s financial supplement, which can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
(4) 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. See page 26 for a reconciliation of
diluted and basic operating earnings per share to basic earnings
per share. Aspen’s financial supplement can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
Other
(1) Provision of ASU 2010-26. In the current
quarter, Aspen adopted the provision of ASU 2010-26, “Accounting
for Costs Associated with Acquiring or Renewing Insurance
Contracts.” Under the standard, Aspen is required to expense the
proportion of its general and administrative deferred acquisition
costs not directly related to successful business acquisition. The
application of this standard has resulted in a net $16.0 million
write down of deferred acquisition costs through retained earnings
brought forward and the restatement of our quarterly balance sheets
from December 31, 2010 to December 31, 2011.
(2) Catastrophe Load included in our guidance is
an estimate of the average annual aggregate loss before reinsurance
and tax from natural catastrophe events based on 50,000 simulations
of our internal capital model which, in relation to its catastrophe
modeling components, is based on a combination of catastrophe
models selected by Aspen to best fit its current understanding of
the world wide natural catastrophe perils to which Aspen has known
exposures. It does not include losses from non-natural catastrophe
events such as terrorism or industrial accidents.
This load is attributed and then released quarter by quarter
based on historic claims patterns. For example, there is a higher
proportion allocated to the third quarter due to the historical
frequency of US Wind events in this period. As an organization,
Aspen monitors its current catastrophe losses to date against
expected and updates the projected numbers accordingly based on
this experience.
Actual catastrophe loss experience may materially differ from
the catastrophe load in any one year for reasons which include
natural variability in the frequency and severity of catastrophe
events, and limitations in one or more of the models or
uncertainties in the application of policy terms and limits.
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