Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) today
reported net income after tax of $90.0 million, or $1.21 diluted
net income per share, for the fourth quarter of 2013.
Chris O’Kane, Chief Executive Officer, commented, “In 2013 we
continued to advance our three levers for enhancing return on
equity -- capital management, enhancing investment returns and
business portfolio optimization. Our Insurance segment benefited
from the success of the buildout of our U.S. platform, which
achieved profitability in each quarter last year and is positioned
to drive meaningful operating leverage going forward. The
Reinsurance business had outstanding results in 2013 and we are
pleased with our January 1 renewals, which show that clients
recognized the strength of Aspen Re’s capabilities and our
importance as a trading partner.”
Operating highlights for the quarter ended December 31,
2013
- Gross written premiums increased
overall by 4.9% to $604.4 million in the fourth quarter of 2013
from the fourth quarter of 2012. Gross written premiums in
Reinsurance for the fourth quarter of 2013 decreased by 9.4% while
Insurance grew 12.2%
- Combined ratio of 91.9% for the fourth
quarter of 2013 compared with a combined ratio of 108.0% for the
fourth quarter of 2012. There were $34.7 million, or 6.1 combined
ratio points, of catastrophe losses pre-tax net of reinsurance
recoveries and reinstatement premiums in the fourth quarter of 2013
compared with $185.2 million, or 33.5 combined ratio points, in the
fourth quarter of 2012
- Net favorable development on prior year
loss reserves of $20.5 million, or 3.6 combined ratio points, for
the fourth quarter of 2013 compared with $42.0 million, or 7.5
combined ratio points, for the fourth quarter of 2012
Financial highlights for the quarter and year ended December
31, 2013
- Annualized net income return on average
equity of 12.0% and annualized operating return on average equity
of 11.2% for the fourth quarter of 2013 compared with (0.8)% and
(1.6)%, respectively, for the fourth quarter of 2012(1)
- Net income return on average equity of
10.6% and operating return on average equity of 9.7% for 2013
compared with 8.5% and 8.5%, respectively, for 2012(1)
- Diluted net income per share of $1.21
for the quarter ended December 31, 2013 compared with diluted net
loss per share of $0.09 for the fourth quarter of 2012, and diluted
net income per share of $4.14 for the year ended December 31, 2013
compared with diluted net income per share of $3.39 for the year
ended December 31, 2012
- Diluted operating income per share of
$1.13 for the quarter ended December 31, 2013 compared with diluted
operating loss per share of $0.15 for the fourth quarter of 2012(1)
and diluted operating income per share of $3.88 for the year ended
December 31, 2013 compared with diluted operating income per share
of $3.38 for the year ended December 31, 2012
- On an after-tax basis, net catastrophe
losses were $31.8 million, or $0.48 per diluted share, for the
fourth quarter of 2013, and $94.0 million, or $1.45 per diluted
share, for the year ended December 31, 2013
- Diluted book value per share of $40.90
at December 31, 2013, up 1.2% from September 30, 2013(1)
(1) See definition of non-GAAP financial measures on pages 13
through 15
Segment highlights
Reinsurance
Operating highlights for Reinsurance for the quarter ended
December 31, 2013 include:
- Gross written premiums of $176.2
million decreased 9.4% compared with $194.4 million for the fourth
quarter of 2012, primarily as a result of $21.0 million of prior
year reinstatement premiums associated with Superstorm Sandy in
2012
- Combined ratio of 58.6% compared with
107.1% for the fourth quarter of 2012
- Favorable prior year loss reserve
development of $46.1 million, or 16.2 combined ratio points,
compared with $37.8 million favorable prior year loss reserve
development, or 12.6 combined ratio points, for the fourth quarter
of 2012
The combined ratio of 58.6% for the fourth quarter of 2013
included $29.4 million, or 10.4 percentage points, of catastrophe
losses, pre-tax net of reinsurance recoveries and reinstatement
premiums. The combined ratio of 107.1% for the fourth quarter of
2012 was impacted by $124.0 million, or 44.0 combined ratio points,
of catastrophe losses, pre-tax net of reinsurance recoveries and
reinstatements.
Insurance
Operating highlights for Insurance for the quarter ended
December 31, 2013 include:
- Gross written premiums of $428.2
million increased by 12.2% compared with $381.8 million for the
fourth quarter of 2012
- Combined ratio of 121.6% compared with
104.2% for the fourth quarter of 2012
- Prior year reserve strengthening of
$25.6 million, or 8.9 combined ratio points, compared with prior
year reserve favorable development of $4.2 million, or 1.6 combined
ratio points, for the fourth quarter of 2012. In the fourth quarter
of 2013, adverse prior year development in the Marine, Energy and
Transportation line of business was partially offset by favorable
prior year development in Casualty and Professional and Financial
lines.
The increase in gross written premiums was mainly attributable
to growth in Casualty and Financial and Professional lines. The
U.S. Insurance teams were again profitable and achieved an
underwriting profit in each quarter of 2013.
The combined ratio for the fourth quarter of 2013 included $5.3
million, or 1.9 percentage points, of net catastrophe losses,
pre-tax net of reinsurance recoveries. The accident year
ex-catastrophe loss ratio for the insurance segment was 74.2%
compared with 52.9% in the fourth quarter of 2012. There was a
higher frequency of mid-sized losses of $45.0 million principally
in our Marine, Energy and Transportation and Casualty lines which
accounted for 15.6 percentage points on the loss ratio. The fourth
quarter of 2012 was negatively impacted by $61.1 million, or 22.9
combined ratio points, of catastrophe losses, pre-tax and net of
reinsurance and reinstatements, primarily from Superstorm
Sandy.
Investment performance
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 3.5 years at December 31, 2013, excluding the impact
of interest rate swaps, or 3.2 years including the impact of
interest rate swaps. The total return on Aspen’s investment
portfolio was 0.32% for the fourth quarter of 2013, compared to
0.25% for the fourth quarter of 2012. The equity portfolio had a
gain of 4.9% for the quarter and a gain of 21.0% for the year ended
December 31, 2013.
Net investment income for the fourth quarter of 2013 was $47.2
million compared with $51.1 million for the fourth quarter of 2012.
Book yield as at December 31, 2013 on the fixed income portfolio
was 2.74% compared to 2.82% at September 30, 2013 and 2.88% at
December 31, 2012.
Net realized and unrealized investment gains included in net
income for the quarter were $18.9 million, excluding the make-whole
payment on the redemption of $250.0 million of 6.00% Senior Notes
due August 15, 2014 (the “2014 Senior Notes”).
Capital
Total shareholders’ equity increased by $78.5 million in the
quarter to $3.3 billion at December 31, 2013.
During the fourth quarter of 2013, Aspen repurchased 373,635
ordinary shares in the open market at an average price of $39.29
per share for a total cost of $14.7 million. Between December 31,
2013 and February 6, 2014, Aspen repurchased 542,805 ordinary
shares under its open market repurchase program at an average price
of $40.74 per share for a total cost of $22.1 million. For the year
ended December 31, 2013, Aspen repurchased a total of 8,461,174
ordinary shares at an average price of $36.59 per share for a total
cost of $309.6 million. Aspen had $224.2 million remaining under
its current share repurchase authorization as at December 31,
2013.
On November 13, 2013, Aspen issued $300 million of 4.65% Senior
Notes with a maturity date of November 15, 2023 (the “2023 Senior
Notes”). On December 16, 2013, Aspen retired the 2014 Senior Notes
using a portion of the proceeds from the 2023 Senior Notes, and
incurred a make-whole payment of $9.3 million.
Guidance
Aspen continues to expect to achieve an operating return on
equity of 10% in 2014, assuming a pre-tax catastrophe load of $185
million per annum, normal loss experience and given the current
interest rate and insurance pricing environment.
January 2014 Reinsurance Renewals
During the January 2014 renewal season, Aspen underwrote $523.9
million in gross written premiums in Reinsurance, an increase of
15.7% compared with the prior year. The renewal data does not
include U.S. agriculture premiums.
Below is a table reflecting January 2014 renewals by Property
Catastrophe, Other Property, Casualty and Specialty
Reinsurance.
January Gross Written Premiums (underwriting year basis) ($
in millions)
2014
2013
Increase
(Decrease)
% Property catastrophe $ 164.4 $ 146.0
12.6% Other property 126.9 78.8 61.1 Casualty 120.8 122.6 (1.5)
Specialty 111.8 105.5 5.9 $ 523.9 $
452.9 15.7%
Note: The January premiums shown in the above table include
premiums written on a proportional basis which are recognized
throughout the year to reflect the expected inception of the
underlying risks and therefore do not represent Aspen’s reported
gross written premium for each of these periods. See page 19 of the
Financial Supplement as of December 31, 2013 for Worldwide Natural
Catastrophe Exposures: Major Peril Zones. While gross written
premiums in Property Catastrophe rose 12.6%, the net exposures for
Tier 1 perils (U.S. All Wind, U.S. Earthquake and European Wind)
are in the aggregate lower.
See “Forward-looking Statements Safe Harbor” below.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 9:30
am (EST) on Friday, February 7, 2014.
To participate in the February 7 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 27934010
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 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 27934010
The recording 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 at
December 31,
2013
As at
December 31,
2012
ASSETS Total investments
$6,959.8 $6,692.4
Cash and cash equivalents
1,293.6 1,463.6 Reinsurance
recoverables
484.6 621.6 Premiums receivable
999.0
1,057.5 Other assets
493.5 475.5
$10,230.5 $10,310.6 LIABILITIES Losses
and loss adjustment expenses
$4,678.9 $4,779.7 Unearned
premiums
1,280.6 1,120.8 Other payables
372.4 422.6
Long-term debt
549.0 499.1
6,880.9
6,822.2 SHAREHOLDERS’ EQUITY Total shareholders’ equity
3,349.6 3,488.4 Total liabilities and
shareholders’ equity
$10,230.5 $10,310.6
Book value per share
$41.87 $42.12 Diluted book value
per share (treasury stock method)
$40.90
$40.65
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended
December 31,
2013
December 31,
2012
UNDERWRITING REVENUES Gross written premiums
$604.4 $576.2
Premiums ceded
(56.4) (51.8) Net written premiums
548.0 524.4 Change in unearned premiums
24.6 34.1 Net
earned premiums
572.6 558.5 UNDERWRITING EXPENSES Losses and
loss adjustment expenses
331.4 437.4 Policy acquisition
expenses
99.7 80.0 General, administrative and corporate
expenses
94.9 86.1 Total underwriting expenses
526.0
603.5 Underwriting income (loss) including corporate expenses
46.6 (45.0) OTHER OPERATING REVENUE Net investment income
47.2 51.1 Interest expense
(9.5) (7.7) Other income
(expense)
3.5 (6.2) Total other operating revenue
41.2 37.2 OPERATING INCOME (LOSS) BEFORE TAX
87.8 (7.8) Net realized and unrealized exchange
(losses)
(3.8) (0.4) Net realized and unrealized investment
gains
9.6 5.6 INCOME (LOSS) BEFORE TAX
93.6 (2.6)
Income tax (expense) benefit
(3.6) 4.6 NET INCOME AFTER TAX
90.0 2.0 Dividends paid on ordinary shares
(11.8)
(12.0) Dividends paid on preference shares
(9.4) (8.5)
Dividends paid to non-controlling interest
(0.1) —
Proportion due to non-controlling interest
0.2 (0.1)
Retained income (loss)
$68.9 $(18.6) Components of net
income (after tax) Operating income (loss)
$84.4 (2.9) Net
realized and unrealized exchange (losses) after tax
(3.8)
(0.4) Net realized investment gains after tax
9.4 5.3 NET
INCOME AFTER TAX
$90.0 $2.0 Loss ratio
57.9%
78.3% Policy acquisition expense ratio
17.4% 14.3% General,
administrative and corporate expense ratio
16.6% 15.4%
Expense ratio
34.0% 29.7% Combined ratio
91.9% 108.0%
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Twelve Months Ended
December 31,
2013
December 31,
2012
UNDERWRITING REVENUES Gross written premiums
$2,646.7
$2,583.3 Premiums ceded
(347.0) (336.4) Net written premiums
2,299.7 2,246.9 Change in unearned premiums
(127.9)
(163.4) Net earned premiums
2,171.8 2,083.5 UNDERWRITING
EXPENSES Losses and loss adjustment expenses
1,223.7 1,238.5
Policy acquisition expenses
422.0 381.2 General,
administrative and corporate expenses
368.1 345.1 Total
underwriting expenses
2,013.8 1,964.8 Underwriting income
including corporate expenses
158.0 118.7 OTHER OPERATING
REVENUE Net investment income
186.4 204.9 Interest expense
(32.7) (30.9) Other income
6.5 0.9 Total other
operating revenue
160.2 174.9 OPERATING INCOME BEFORE
TAX
318.2 293.6 Net realized and unrealized exchange
(losses)
(14.5) (2.0) Net realized and unrealized investment
gains
39.0 3.8 INCOME BEFORE TAX
342.7 295.4 Income
tax expense
(13.4) (15.0) NET INCOME AFTER TAX
329.3
280.4 Dividends paid on ordinary shares
(47.8) (47.0)
Dividends paid on preference shares
(35.5) (31.1) Dividends
paid to non-controlling interest
(0.1) (0.1) Change in
redemption value of the PIERS
(7.1) ─ Proportion due
to non-controlling interest
0.5 0.2 Retained income
$239.3 $202.4 Components of net income (after tax) Operating
income
$304.3 279.9 Net realized and unrealized exchange
(losses) after tax
(13.3) (2.2) Net realized investment
gains after tax
38.3 2.7 NET INCOME AFTER TAX
$329.3
$280.4 Loss ratio
56.3% 59.4% Policy acquisition
expense ratio
19.4% 18.3% General, administrative and
corporate expense ratio
16.9% 16.6% Expense ratio
36.3% 34.9% Combined ratio
92.6% 94.3%
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended
Twelve Months Ended
December
31, 2013
December
31, 2012
December
31, 2013
December
31, 2012
Basic earnings per ordinary share Net income (loss) adjusted
for preference share dividend
$ 1.23 $(0.09)
$4.29
$3.51 Operating income (loss) adjusted for preference dividend
$
1.15 $(0.15)
$4.03 $3.50 Diluted earnings per ordinary
share Net income (loss) adjusted for preference share dividend
$
1.21 $(0.09)
$4.14 $3.38 Operating income (loss)
adjusted for preference dividend
$ 1.13 $(0.15)
$3.88
$3.37 Weighted average number of ordinary shares outstanding
(in millions)
65.594 71.007
66.872 71.096
Weighted average number of ordinary shares
outstanding and dilutive
potential ordinary shares (in
millions)
67.052 73.558
69.418 73.689 Book value per
ordinary share
$41.87 $42.12 Diluted book value (treasury
stock method)
$40.90 $40.65 Ordinary shares
outstanding at end of the period (in millions)
65.547 70.754
Ordinary shares outstanding and dilutive
potential ordinary shares at end
of the period (treasury stock method) (in
millions)
67.090 73.312
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended December
31, 2013 Three Months Ended December 31,
2012 Reinsurance Insurance
Total Reinsurance
Insurance Total Gross written
premiums
$176.2 $428.2 $604.4 $194.4 $381.8
$576.2 Net written premiums
174.5 373.5 548.0
193.7 330.7 524.4 Gross earned premiums
297.7 366.1
663.8 317.2 328.2 645.4 Net earned premiums
284.8
287.8 572.6 299.8 258.7 558.5 Losses and loss
adjustment expenses
86.8 244.6 331.4 248.9
188.5 437.4 Policy acquisition expenses
46.2 53.5
99.7 41.0 39.0 80.0 General and administrative expenses
33.8 51.9 85.7
31.3 41.9 73.2 Underwriting income
(loss)
$118.0 $(62.2) $55.8
$(21.4) $(10.7) $(32.1) Net investment income
47.2 51.1 Net realized and unrealized investment gains (1)
9.6 5.6 Corporate expenses
(9.2) (12.9) Other income
(expenses)
3.5 (6.2) Interest expenses
(9.5) (7.7)
Net realized and unrealized foreign exchange (losses) (2)
(3.8) (0.4) Income (loss) before tax
93.6 (2.6)
Income tax expense (benefit)
(3.6) 4.6
Net income
$90.0 $2.0
Ratios Loss ratio
30.5%
85.0% 57.9% 83.0% 72.9% 78.3% Policy acquisition
expense ratio
16.2% 18.6% 17.4% 13.7% 15.1%
14.3% General and administrative expense ratio (3)
11.9%
18.0% 16.6% 10.4% 16.2% 15.4% Expense ratio
28.1% 36.6% 34.0% 24.1% 31.3% 29.7% Combined
ratio
58.6% 121.6%
91.9% 107.1% 104.2%
108.0%
(1) Includes realized and unrealized capital gains and losses
and realized and unrealized gains and losses on interest rate
swaps
(2) Includes realized and unrealized foreign exchange gains and
losses and realized and unrealized gains and losses on foreign
exchange contracts
(3) The total group general and administrative expense ratio
includes the impact from corporate expenses
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Twelve Months Ended December
31, 2013 Twelve Months Ended December 31,
2012 Reinsurance Insurance
Total Reinsurance
Insurance Total
Gross written premiums
$1,133.9 $1,512.8 $2,646.7 $1,227.9 $1,355.4
$2,583.3 Net written premiums
1,082.0 1,217.7
2,299.7 1,156.9 1,090.0 2,246.9 Gross earned premiums
1,126.6 1,366.8 2,493.4 1,208.0 1,177.0
2,385.0 Net earned premiums
1,073.0 1,098.8
2,171.8 1,132.4 951.1 2,083.5 Losses and loss adjustment
expenses
481.7 742.0 1,223.7 635.3 603.2
1,238.5 Policy acquisition expenses
207.2 214.8
422.0 207.8 173.4 381.2 General and administrative expenses
131.0 185.9 316.9
123.9 168.2 292.1 Underwriting income
(loss)
$253.1 $(43.9) $209.2
$165.4 $6.3 $171.7 Net investment income
186.4 204.9 Net realized and unrealized investment gains (1)
39.0 3.8 Corporate expenses
(51.2) (53.0) Other
income
6.5 0.9 Interest expenses
(32.7) (30.9) Net
realized and unrealized foreign exchange (losses) (2)
(14.5)
(2.0) Income before tax
342.7 295.4 Income tax expense
(13.4) (15.0)
Net income $329.3 $280.4
Ratios Loss ratio
44.9% 67.5% 56.3%
56.1% 63.4% 59.4% Policy acquisition expense ratio
19.3%
19.5% 19.4% 18.4% 18.2% 18.3% General and
administrative expense ratio (3)
12.2% 16.9%
16.9% 10.9% 17.7% 16.6% Expense ratio
31.5%
36.4% 36.3% 29.3% 35.9% 34.9% Combined ratio
76.4% 103.9% 92.6%
85.4% 99.3% 94.3%
(1) Includes realized and unrealized capital gains and losses
and realized and unrealized gains and losses on interest rate
swaps
(2) Includes realized and unrealized foreign exchange gains and
losses and realized and unrealized gains and losses on foreign
exchange contracts
(3) 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, 2013, Aspen reported $10.2 billion
in total assets, $4.7 billion in gross reserves, $3.3 billion in
total shareholders’ equity and $2.6 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.
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,” “likely,”
"estimate," "may," "continue," “guidance,” “outlook,” “trends,”
“future,” “could” 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: 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; 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 and
cyclical changes in the highly competitive insurance and
reinsurance industry; changes in insurance and reinsurance market
conditions; increased competition from existing insurers and
reinsurers 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;
changes in the availability, cost or quality of reinsurance or
retrocessional coverage; 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; evolving issues with
respect to interpretation of coverage after major loss events; our
ability to adequately model and price the effect of climate cycles
and climate change; any intervening legislative or governmental
action and changing judicial interpretation and judgements on
insurers’ liability to various risks; the effectiveness of our loss
limitation methods, including our reinsurance purchasing; 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 one or more large losses from events other
than natural catastrophes or by an unexpected accumulation of
attritional losses; 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; 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
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; 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 debt
crisis; changes in our ability to exercise capital management
initiatives (including our share repurchase program) 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;
changes in accounting principles or policies or in the application
of such accounting principles or policies; Aspen or Aspen Bermuda
Limited becoming subject to income taxes in the United States or
the United Kingdom; loss of one or more of our senior underwriters
or key personnel; our reliance on information and technology and
third party service providers for our operations and systems; 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
U.S. Securities and Exchange Commission on February 26, 2013. 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
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 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. 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.
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 23 of Aspen's financial supplement for a reconciliation of
operating income to net income and page 7 for a reconciliation of
average ordinary shareholders’ equity to average shareholders’
equity. Aspen’s financial supplement can be obtained from the
Investor Relations section of Aspen's website at www.aspen.co.
(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 net
realized and unrealized gains or 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 and certain non-recurring items. In 2013, a non-recurring
item occurred for the $9.3 million make-whole payment associated
with the redemption of the 2014 Senior Notes.
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 page 23 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 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 22 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 23 of Aspen’s financial
supplement 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.
(5) Combined Ratio Excluding Catastrophes is a non-GAAP
financial measure. Aspen believes that the presentation of combined
ratio excluding catastrophes supports meaningful comparison from
period to period of the underlying performance of the business.
Combined ratio excluding catastrophes is calculated by dividing net
losses excluding catastrophe losses and net expenses by net earned
premiums excluding catastrophe related reinstatement premiums. We
have defined catastrophe losses in 2013 as losses associated with
floods in Central Europe, Canada and India as well as tornadoes and
hailstorms in the United States which occurred in Q2; losses
associated with hailstorms in Germany, floods in Canada and Mexico
which occurred in Q3; and with storms and associated flooding in
Europe, India and the Philippines which occurred in Q4. We have
defined 2012 catastrophe losses as losses associated with the
severe weather in the US in February and March 2012, Hurricane
Isaac in August 2012 and Superstorm Sandy in October 2012 and
movements in losses associated with the 2011 catastrophe
events.
Other
(1) Catastrophe Load included in our guidance is
an estimate of the average annual aggregate loss before tax and
after reinsurance 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 worldwide 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 U.S. Wind events in this period. As an organization,
Aspen monitors its current catastrophe losses to date against
expected losses 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.
InvestorsAspenKerry Calaiaro, +1-646-502-1076Senior Vice
President, Investor
Relations,Kerry.Calaiaro@aspen.coorAspenKathleen de Guzman,
+1-646-289-4912Vice President, Investor
RelationsKathleen.deGuzman@aspen.coorMediaAspenSteve Colton,
+44 20 7184 8337Head of
CommunicationsSteve.Colton@aspen.coorInternational – Citigate Dewe
RogersonCaroline Merrell or Jos Bieneman+44 20 7638
9571caroline.merrell@citigatedr.co.ukjos.bieneman@citigatedr.co.ukorNorth
America – Abernathy MacGregorCarina Davidson,
+1-212-371-5999ccd@abmac.com
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