Gross Written Premiums up 10.4% in the Third
Quarter with Growth in both Insurance and
Reinsurance
Record Insurance Underwriting Income of
$41.8 million in the Third Quarter and Combined Ratio of
88.3%
Annualized Net Income Return on Equity of
8.3% and Annualized Operating Return on Equity of 9.7% Through the
Nine Months
Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
today net income after tax of $28.2 million, or $0.30 per diluted
share, and operating income after tax of $67.2 million, or $0.93
per diluted share, for the third quarter of 2015.
Chris O’Kane, Chief Executive Officer, commented, “Aspen
achieved an excellent result in the third quarter, with a number of
important achievements. Our Insurance business delivered the
strongest quarterly underwriting performance in its history, and a
combined ratio of 88.3%. Our U.S. Insurance platform is on track to
exceed $600 million of net earned premiums in 2015, together with
an expense ratio of less than 16%, while our International
Insurance platform demonstrated a significant improvement in
underwriting performance. At Aspen Re, our teams continued to
demonstrate their innovative solutions, deep client relationships
and disciplined underwriting. This was reflected in significant
gross written premium growth, both from new business opportunities
and the large pro-rata deals that we noted last quarter. Across our
Insurance and Reinsurance businesses, we remain focused on building
value for clients in our chosen areas of expertise. We continue to
expect to achieve an 11% operating return on equity for
2015."(2)
Operating highlights for the quarter ended September 30,
2015
- Gross written premiums increased by
10.4% to $720.5 million in the third quarter of 2015 compared with
$652.5 million in the third quarter of 2014
- Combined ratio of 93.4% for the third
quarter of 2015 compared with 94.6% for the third quarter of 2014.
Net favorable development on prior year loss reserves of $39.0
million, or 6.1 combined ratio points, for the third quarter of
2015 compared with $32.6 million, or 5.3 combined ratio points, in
the comparable period a year ago
- Pre-tax catastrophe losses, net of
reinsurance recoveries, totaled $19.1 million, or 3.0 combined
ratio points, in the third quarter of 2015 compared with $17.1
million, or 2.8 combined ratio points, of pre-tax catastrophe
losses, net of reinsurance recoveries, in the third quarter of
2014
- Pre-tax losses, net of reinsurance
recoveries, related to the explosion in the port of Tianjin, China
totaled $30.0 million, or 4.7 combined ratio points, in the third
quarter of 2015
Financial highlights for the quarter and nine months ended
September 30, 2015
- Annualized net income return on average
equity of 2.8% and annualized operating return on average equity of
8.4% for the quarter ended September 30, 2015 compared with
4.0% and 10.0%, respectively, for the third quarter of 2014
- Annualized net income return on average
equity of 8.3% and annualized operating return on average equity of
9.7% for the first nine months of 2015 compared with 12.0% and
12.4%, respectively, for the first nine months of 2014
- Net income per diluted share of $0.30
for the quarter ended September 30, 2015 compared with net
income per diluted share of $0.42 for the quarter ended
September 30, 2014, and net income per diluted share of $2.80
for the nine months ended September 30, 2015 compared with net
income per diluted share of $3.91 for the nine months ended
September 30, 2014
- Operating income per diluted share of
$0.93 for the quarter ended September 30, 2015 compared with
operating income per diluted share of $1.08 for the quarter ended
September 30, 2014, and operating income per diluted share of
$3.31 for the nine months ended September 30, 2015 compared
with operating income per diluted share of $4.04 for the nine
months ended September 30, 2014
- Diluted book value per share of $45.28
at September 30, 2015 up 0.3% from December 31, 2014.
Segment Highlights
Insurance
Operating highlights for Insurance for the quarter ended
September 30, 2015 include:
- Gross written premiums of $403.9
million, an increase of 2.1% compared with $395.6 million in the
third quarter of 2014
- Combined ratio of 88.3% compared with
96.7% for the third quarter of 2014
- Prior year favorable reserve
development of $22.9 million, or 6.4 combined ratio points,
compared with prior year favorable reserve development of $6.6
million, or 2.0 combined ratio points, for the third quarter of
2014
The U.S. platform drove the increase in gross written premiums,
achieving growth of 14.2%, together with solid profitability in the
quarter. Growth in Property and Casualty, and Financial and
Professional Lines, was offset by a decline in Marine, Energy and
Aviation.
The combined ratio of 88.3% for the third quarter of 2015
included $2.3 million, or 0.6 percentage points, of pre-tax
catastrophe losses, net of reinsurance recoveries, primarily
related to weather-related events in the U.S. The combined ratio
for the third quarter of 2014 included $6.6 million, or 2.0
percentage points, of pre-tax catastrophe losses net of reinsurance
recoveries. For the quarter ended September 30, 2015, the
Insurance accident year loss ratio excluding catastrophes was 60.8%
compared with 63.7% a year ago.
Mario Vitale, CEO of Insurance, commented, “We had a very good
quarter in our Insurance business, delivering record underwriting
income and an accident year ex-cat loss ratio of 60.8%. The U.S.
teams achieved strong underwriting income and drove most of the
gross written premium growth in the quarter, with significant
contributions from areas such as Casualty and Financial and
Professional lines. We recorded $614 million of net earned premium
in the U.S. platform over the last twelve months through September
30, 2015. In our International platform, we continued to see growth
in our U.K. Property and Casualty lines, and the U.K. regional
business. Our International teams delivered improved underwriting
income and maintained a disciplined approach, choosing not to renew
some business in areas where we believe that rates do not reflect
underlying risks and instead focusing more on well-rated
opportunities.”(2)
Reinsurance
Operating highlights for Reinsurance for the quarter ended
September 30, 2015 include:
- Gross written premiums of $316.6
million, an increase of 23.2% from $256.9 million in the third
quarter of 2014
- Combined ratio of 94.7% compared with
79.5% for the third quarter of 2014
- Prior year favorable reserve
development of $16.1 million, or 5.7 combined ratio points,
compared with $26.0 million prior year favorable loss reserve
development, or 9.3 combined ratio points, for the third quarter of
2014
The combined ratio of 94.7% for the third quarter of 2015
included $16.8 million, or 5.9% percentage points, of pre-tax
catastrophe losses, net of reinsurance recoveries, primarily
related to wildfires in the U.S. state of Washington, the
earthquake in Chile and weather-related events in the U.S., New
Zealand and Australia. The combined ratio of 79.5% for the third
quarter of 2014 included $10.5 million, or 3.8 percentage points,
of pre-tax catastrophe losses, net of reinsurance recoveries.
For the quarter ended September 30, 2015, the Reinsurance
accident year loss ratio excluding catastrophes was 59.5% compared
with 52.7% a year ago. The Reinsurance loss ratio for the third
quarter of 2015 was impacted by $27.0 million, or 9.5 percentage
points, of pre-tax losses, net of reinsurance recoveries, related
to the Tianjin explosion.
Stephen Postlewhite, CEO of Reinsurance, commented on the
quarter, “Aspen Re's 23% growth in the quarter continues to
demonstrate our significance as a preferred market for our clients
and is a direct result of a targeted strategy. We improved our
shares with selected clients, capitalized on new business
opportunities, and benefited from the significant pro-rata deals
written earlier in the year. Our continued success is a reflection
of our disciplined underwriting, bespoke client solutions, and
comprehensive approach to distribution, combined with the strength
of our client relationships.”(2)
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 3.44 years at September 30, 2015 excluding the
impact of interest rate swaps, or 3.33 years including the impact
of interest rate swaps. The total return on Aspen’s aggregate
investment portfolio was 0.21% for the three months ended
September 30, 2015 and reflected $32.7 million of mark to
market losses in the equity portfolio. In the first nine months of
2015, Aspen’s aggregate investment portfolio had a positive total
return of 0.69%.
Book yield as at September 30, 2015 on the fixed income
portfolio was 2.50% compared to 2.65% at December 31, 2014.
Capital
Total shareholders’ equity was $3.4 billion at
September 30, 2015.
During the third quarter of 2015, no ordinary shares were
repurchased. Aspen has repurchased 1,790,333 ordinary shares for a
total cost of $83.7 million during the first nine months of 2015.
Aspen continues to have $416.3 million remaining under its current
share repurchase authorization as at November 2, 2015.
Outlook
Aspen continues to expect to achieve an operating return on
equity of 11% in 2015.(2)
See “Forward-looking Statements Safe Harbor” below.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Tuesday, November 3, 2015.
To participate in the November 3 conference call by
phone
Please 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 10072605
To listen live online
Aspen will provide a live webcast on Aspen’s website at
www.aspen.co.
To download the materials
The earnings press release and a detailed financial supplement
will also be published on Aspen’s website at www.aspen.co.
To listen later
A replay of the call will be available approximately two hours
after the end of the live call for 14 days via phone and internet.
To listen to the replay by phone please dial:
+1 (877) 344 7529 (US toll free) or +1 (412) 317 0088
(international) Replay ID 10072605
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 atSeptember
30,2015
As atDecember
31,2014
ASSETS Total investments
$ 7,422.1 $ 7,428.9
Cash and cash equivalents
1,196.7 1,178.5 Reinsurance
recoverables
573.3 556.8 Premiums receivable
1,208.4
1,011.7 Other assets
603.2 540.4 Total assets
$ 11,003.7 $ 10,716.3 LIABILITIES
Losses and loss adjustment expenses
$ 4,913.9 $
4,750.8 Unearned premiums
1,686.9 1,441.8 Other payables
397.9 484.6 Silverton loan notes
84.5 70.7 Long-term
debt
549.2 549.1 Total liabilities
$
7,632.4 $ 7,297.0 SHAREHOLDERS’ EQUITY Total
shareholders’ equity
3,371.3 3,419.3 Total
liabilities and shareholders’ equity
$ 11,003.7
$ 10,716.3 Book value per share
$ 46.30
$ 46.16 Diluted book value per share (treasury stock method)
$ 45.28 $ 45.13
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended
September 30,2015
September 30,2014
UNDERWRITING REVENUES Gross written premiums
$ 720.5
$ 652.5 Premiums ceded
(68.7 ) (75.2 ) Net written
premiums
651.8 577.3 Change in unearned premiums
(11.2 ) 33.1 Net earned premiums
640.6
610.4 UNDERWRITING EXPENSES Losses and loss
adjustment expenses
365.6 342.7 Amortization of deferred
policy acquisition costs
132.0 115.5 General, administrative
and corporate expenses (excluding non-recurring corporate expenses)
100.5 99.6 Total underwriting expenses
598.1 557.8 Underwriting income including
corporate expenses
42.5 52.6 OTHER OPERATING
REVENUE Net investment income
45.0 48.0 Interest expense
(7.4 ) (7.4 ) Other (expense)
(10.6 )
(7.8 ) Total other operating revenue
27.0 32.8
OPERATING INCOME BEFORE TAX
69.5 85.4
Non-recurring corporate expenses (bid defense costs)
— (20.2 ) Net realized and unrealized exchange gains (losses)
4.5 (9.9 ) Net realized and unrealized investment (losses)
(44.0 ) (16.6 ) INCOME BEFORE TAX
30.0 38.7
Income tax expense
(1.8 ) (1.3 ) NET INCOME AFTER TAX
28.2 37.4 Dividends paid on ordinary shares
(12.7
) (13.1 ) Dividends paid on preference shares
(9.5
) (9.5 ) Proportion due to non-controlling interest
(0.3 ) 0.1 Retained income
$ 5.7
$ 14.9 Components of net income (after tax) Operating
income
$ 67.2 $ 81.7 Non-recurring corporate expenses
— (20.2 ) Net realized and unrealized exchange gains (losses) after
tax
1.4 (7.5 ) Net realized investment (losses) after tax
(40.4 ) (16.6 ) NET INCOME AFTER TAX
$
28.2 $ 37.4 Loss ratio
57.1
% 56.1 % Policy acquisition expense ratio
20.6
% 18.9 % General, administrative and corporate expense ratio
15.7 % 19.6 % General, administrative and corporate
expense ratio (excluding non-recurring corporate expenses)
15.7 % 16.3 % Expense ratio
36.3 % 38.5
% Expense ratio (excluding non-recurring corporate expenses)
36.3 % 35.2 % Combined ratio
93.4 %
94.6 % Combined ratio (excluding non-recurring corporate expenses)
93.4 % 91.3 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Nine Months Ended
September 30,2015
September 30,2014
UNDERWRITING REVENUES Gross written premiums
$
2,362.5 $ 2,287.3 Premiums ceded
(303.1 )
(326.1 ) Net written premiums
2,059.4 1,961.2 Change in
unearned premiums
(215.8 ) (168.1 ) Net earned
premiums
1,843.6 1,793.1 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
1,032.2 967.9
Amortization of deferred policy acquisition costs
365.4
336.4 General, administrative and corporate expenses (excluding
non-recurring corporate expenses)
298.1 295.7
Total underwriting expenses
1,695.7 1,600.0
Underwriting income including corporate expenses
147.9
193.1 OTHER OPERATING REVENUE Net investment income
139.1 143.6 Interest expense
(22.1 ) (22.1 )
Other (expense)
(14.9 ) (5.9 ) Total other operating
revenue
102.1 115.6 OPERATING
INCOME BEFORE TAX
250.0 308.7
Non-recurring corporate expenses (bid defense costs) — (28.5 ) Net
realized and unrealized exchange (losses) gains
(15.9
) 0.4 Net realized and unrealized investment (losses) gains
(19.8 ) 19.3 INCOME BEFORE TAX
214.3
299.9 Income tax expense
(9.1 ) (11.3 ) NET INCOME
AFTER TAX
205.2 288.6 Dividends paid on ordinary shares
(38.1 ) (37.9 ) Dividends paid on preference shares
(28.4 ) (28.4 ) Proportion due to non-controlling
interest
(0.8 ) — Retained income
$
137.9 $ 222.3 Components of net income (after
tax) Operating income
$ 237.4 $ 297.2 Non-recurring
corporate expenses — (28.5 ) Net realized and unrealized exchange
(losses) gains after tax
(15.9 ) 0.9 Net realized
investment (losses) gains after tax
(16.3 ) 19.0
NET INCOME AFTER TAX
$ 205.2 $ 288.6
Loss ratio
56.0 % 54.0 % Policy
acquisition expense ratio
19.8 % 18.8 % General,
administrative and corporate expense ratio
16.2 %
18.1 % General, administrative and corporate expense ratio
(excluding non-recurring corporate expenses)
16.2 %
16.5 % Expense ratio
36.0 % 36.9 % Expense ratio
(excluding non-recurring corporate expenses)
36.0 %
35.3 % Combined ratio
92.0 % 90.9 % Combined ratio
(excluding non-recurring corporate expenses)
92.0 %
89.3 %
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended Nine Months Ended
September 30, 2015 September 30,
2014 September 30, 2015 September
30, 2014 Basic earnings per ordinary share
Net income adjusted for preference share dividend and
non-controlling interest
$0.30 $0.43
$2.86 $3.99
Operating income adjusted for preference share dividend and
non-controlling interest
$0.94 $1.11
$3.39 $4.13
Diluted earnings per ordinary share Net income adjusted for
preference share dividend and non-controlling interest
$0.30
$0.42
$2.80 $3.91 Operating income adjusted for preference
share dividend and non-controlling interest
$0.93 $1.08
$3.31 $4.04 Weighted average number of ordinary
shares outstanding (in millions)
60.779 65.116
61.442
65.284 Weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares (in millions)
62.155 66.513
62.878 66.599 Book value per
ordinary share
$46.30 $45.60
$46.30 $45.60 Diluted
book value per ordinary share (treasury stock method)
$45.28
$44.60
$45.28 $44.60 Ordinary shares outstanding at
end of the period (in millions)
60.782 63.350
60.782
63.350 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method) (in
millions)
62.147 64.783
62.147 64.783
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended September 30, 2015 Three
Months Ended September 30, 2014 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 316.6 $ 403.9
$ 720.5 $ 256.9 $ 395.6 $ 652.5 Net written premiums
294.7 357.1 651.8 250.9 326.4 577.3 Gross
earned premiums
304.6 429.0 733.6 291.0 403.9
694.9 Net earned premiums
284.6 356.0 640.6
279.6 330.8 610.4 Losses and loss adjustment expenses
169.9
195.7 365.6 132.0 210.7 342.7 Policy acquisition
expenses
64.8 67.2 132.0 52.1 63.4 115.5
General and administrative expenses
34.7
51.3 86.0 38.4
45.6 84.0 Underwriting income
$
15.2 $ 41.8 $
57.0 $ 57.1 $ 11.1 $ 68.2 Net
investment income
45.0 48.0 Net realized and unrealized
investment (losses) (1)
(44.0 ) (16.6 ) Corporate
expenses
(14.5 ) (15.6 ) Non-recurring corporate
expenses — (20.2 ) Other (expense) (2)
(10.6 ) (7.8 )
Interest expense
(7.4 ) (7.4 ) Net realized and
unrealized foreign exchange gains (losses) (3)
4.5
(9.9 ) Income before tax
$ 30.0 $ 38.7 Income tax
expense
(1.8 ) (1.3 )
Net income $
28.2 $ 37.4
Ratios Loss ratio
59.7 % 55.0 % 57.1 % 47.2
% 63.7 % 56.1 % Policy acquisition expense ratio
22.8
% 18.9 % 20.6 % 18.6 % 19.2 %
18.9 % General and administrative expense ratio (4)
12.2
% 14.4 % 15.7 % 13.7 % 13.8 %
19.6 % General and administrative expense ratio (excluding
non-recurring corporate expenses) (4)
12.2 %
14.4 % 15.7 % 13.7 % 13.8 % 16.3 %
Expense ratio
35.0 % 33.3 % 36.3
% 32.3 % 33.0 % 38.5 % Expense ratio (excluding
non-recurring corporate expenses)
35.0 % 33.3
% 36.3 % 32.3 % 33.0 % 35.2 % Combined ratio
94.7 % 88.3 % 93.4 % 79.5
% 96.7 % 94.6 % Combined ratio (excluding non-recurring corporate
expenses)
94.7 % 88.3 %
93.4 % 79.5 % 96.7 % 91.3 %
(1)
Includes realized and unrealized capital gains and losses
and realized and unrealized gains and losses on interest rate swaps
(2)
Other (expense) in the third quarter of 2015 and third quarter of
2014 included $8.3 million and $8.5 million, respectively, related
to a change in the fair value of loan notes issued by Silverton Re
(3)
Includes realized and unrealized foreign exchange gains and losses
and realized and unrealized gains and losses on foreign exchange
contracts
(4)
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
Nine Months Ended September 30, 2015 Nine
Months Ended September 30, 2014 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 1,062.1 $
1,300.4 $ 2,362.5 $ 1,027.5 $ 1,259.8 $
2,287.3 Net written premiums
975.0 1,084.4
2,059.4 980.4 980.8 1,961.2 Gross earned premiums
857.6 1,267.3 2,124.9 859.2 1,182.0 2,041.2
Net earned premiums
802.3 1,041.3 1,843.6
825.1 968.0 1,793.1 Losses and loss adjustment expenses
391.7 640.5 1,032.2 367.4 600.5 967.9 Policy
acquisition expenses
168.6 196.8 365.4 152.3
184.1 336.4 General and administrative expenses
102.5
151.8 254.3 107.0
142.6 249.6 Underwriting income
$ 139.5 $ 52.2
$ 191.7 $ 198.4 $ 40.8 $ 239.2
Net investment income
139.1 143.6 Net realized and
unrealized investment (losses) gains (1)
(19.8 ) 19.3
Corporate expenses
(43.8 ) (46.1 ) Non-recurring
corporate expenses
— (28.5 ) Other (expense) (2)
(14.9 ) (5.9 ) Interest expense
(22.1 )
(22.1 ) Net realized and unrealized foreign exchange (losses)
gains(3)
(15.9 ) 0.4 Income before tax
$ 214.3 $ 299.9 Income tax expense
(9.1
) (11.3 )
Net income $ 205.2 $
288.6
Ratios Loss ratio
48.8 %
61.5 % 56.0 % 44.5 % 62.0 % 54.0 %
Policy acquisition expense ratio
21.0 % 18.9
% 19.8 % 18.5 % 19.0 % 18.8 % General and
administrative expense ratio (4)
12.8 % 14.6
% 16.2 % 13.0 % 14.7 % 18.1 % General and
administrative expense ratio (excluding non-recurring corporate
expenses) (4)
12.8 % 14.6 % 16.2
% 13.0 % 14.7 % 16.5 % Expense ratio
33.8 %
33.5 % 36.0 % 31.5 % 33.7 % 36.9 %
Expense ratio (excluding non-recurring corporate expenses)
33.8 % 33.5 % 36.0 % 31.5
% 33.7 % 35.3 % Combined ratio
82.6 % 95.0
% 92.0 % 76.0 % 95.7 % 90.9 % Combined ratio
(excluding non-recurring corporate expenses)
82.6 %
95.0 % 92.0 % 76.0 %
95.7 % 89.3 %
(1)
Includes realized and unrealized capital gains and losses
and realized and unrealized gains and losses on interest rate swaps
(2)
Other (expense) in the nine months ended September 30, 2015 and
September 30, 2014 included $14.5 million and $14.5 million,
respectively, related to a change in the fair value of loan notes
issued by Silverton Re
(3)
Includes realized and unrealized foreign exchange gains and losses
and realized and unrealized gains and losses on foreign exchange
contracts
(4)
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 Australia, Bermuda, France, Germany,
Ireland, Singapore, Switzerland, the United Kingdom and the United
States. For the year ended December 31, 2014, Aspen reported $10.7
billion in total assets, $4.8 billion in gross reserves, $3.4
billion in total shareholders’ equity and $2.9 billion in gross
written premiums. Its operating subsidiaries have been assigned a
rating of “A” (“Strong”) by Standard & Poor’s Financial
Services LLC (“S&P”), an “A” (“Excellent”) by A.M. Best Company
Inc. (“A.M. Best”) and an “A2” (“Good”) by Moody’s Investor
Service, Inc. (“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,”
“assume,” “estimate,” “may,” “continue,” “guidance,” “objective,”
“outlook,” “trends,” “future,” “could,” “would,” “should,”
“target,” "on track" and similar expressions of a future or
forward-looking nature.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and are
subject to a number of uncertainties and other factors, many of
which are outside Aspen’s control that could cause actual results
to differ materially from such statements.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. Aspen believes
these factors include, but are not limited to: 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 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 insurance and
reinsurance industry; the models we use to assess our exposure to
losses from future natural 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 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; 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 acquisition strategy; the recent consolidation in the
(re)insurance industry; loss of one or more of our senior
underwriters or key personnel; 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 conditions or changes in our financial position; 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; the risks associated with the
management of capital on behalf of investors; 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 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 and deterioration with loss estimates; the
impact of acts of terrorism, acts of war and related legislation;
any changes in our reinsurers’ credit quality and the amount and
timing of reinsurance recoverables; the continuing and uncertain
impact of the current depressed lower growth economic environment
in many of the countries in which we operate; our reliance on
information and technology and third-party service providers for
our operations and systems; the level of inflation in repair costs
due to limited availability of labor and materials after
catastrophes; a decline in our operating subsidiaries’ ratings with
S&P, A.M. Best or Moody’s; the failure of our reinsurers,
policyholders, brokers or other intermediaries to honor their
payment obligations; our reliance on the assessment and pricing of
individual risks by third parties; our dependence on a few brokers
for a large portion of our revenues; the persistence of heightened
financial risks, including excess sovereign debt, the banking
system and the Eurozone crisis; changes in government regulations
or tax laws in jurisdictions where we conduct business; changes in
accounting principles or policies or in the application of such
accounting principles or policies; increased counterparty risk due
to the credit impairment of financial institutions; and Aspen or
Aspen Bermuda Limited becoming subject to income taxes in the
United States or the United Kingdom. For a more detailed
description of these uncertainties and other factors, please see
the “Risk Factors” section in Aspen’s Annual Report on Form 10-K as
filed with the U.S. Securities and Exchange Commission on February
23, 2015. 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 then 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 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.
(1) 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.
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.
See page 22 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.
Operating Income is a non-GAAP financial measure.
Operating income is an internal performance measure used by Aspen
in the management of its operations and represents after-tax
operational results excluding, as applicable, after-tax net
realized and unrealized gains or losses, including net realized and
unrealized gains and losses on interest rate swaps, after-tax net
foreign exchange gains or losses, including net realized and
unrealized gains and losses from foreign exchange contracts and
certain non-recurring items. In 2014, non-recurring items included
costs associated with defending the unsolicited approach from
Endurance Specialty Holdings Ltd. in the amount of $20.2 million
and $28.5 million for the three and nine months ended
September 30, 2014.
Aspen excludes the items above from its calculation of operating
income because they are either not expected to recur and therefore
are not reflective of underlying performance or the amount of these
gains or losses is heavily influenced by, and fluctuates in part,
according to the availability of market opportunities. Aspen
believes these amounts are largely independent of its business and
underwriting process and including them would distort the analysis
of trends in its operations. In addition to presenting net income
determined in accordance with GAAP, Aspen believes that showing
operating income enables investors, analysts, rating agencies and
other users of its financial information to more easily analyze
Aspen’s results of operations in a manner similar to how management
analyzes Aspen’s underlying business performance. Operating income
should not be viewed as a substitute for GAAP net income. Please
see page 22 of Aspen’s financial supplement for a reconciliation of
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.
Diluted Book Value per Ordinary Share is not a non-GAAP
financial measure. Aspen has included diluted book value per
ordinary share as it illustrates the effect on basic book value per
share of dilutive securities thereby providing a better benchmark
for comparison with other companies. Diluted book value per share
is calculated using the treasury stock method, defined on page 21
of Aspen’s financial supplement, which can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
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 22 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.
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
third quarter of 2015 as losses associated with wildfires in the
U.S. state of Washington, the earthquake in Chile and
weather-related events in the U.S., New Zealand and Australia and
in 2014 as losses predominantly associated with North American and
European storms. See pages 10 and 11 of Aspen’s financial
supplement for a reconciliation of loss ratios to accident year
loss ratios excluding catastrophes.
(2) The outlook for 2015
The outlook for 2015 assumes our expectations of normal loss
experience, our current view of interest rates and our view of the
insurance rate environment. Our outlook in 2015 is necessarily
subject to heightened sensitivity in relation to these assumptions
which are likely to be the subject of future change, amendment,
update and review, as necessary. Our assumptions are based on the
retention of our senior underwriters and client relationships. In
addition, the models underlying our normal loss experience
assumptions will produce different illustrative loss patterns if
the modeling assumptions are changed. Greater decreases in pricing
in certain business lines, if sustained, are also expected to have
an adverse effect on operating return on equity. This outlook is
subject to change for many reasons, including unusual or
unpredictable items, such as catastrophe losses, loss reserve
development, investment results and other items.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151102006762/en/
Aspen Insurance Holdings LimitedInvestorsMark Jones,
+1-646-289-4945Senior Vice President, Investor
RelationsMark.P.Jones@aspen.coMediaKaren
Green, +44-20-7184-8110Office of the CEOKaren.green@aspen.coorInternational - Citigate
Dewe RogersonCaroline Merrell or Jos Bieneman,
+44-20-7638-9571Caroline.Merrell@citigatedr.co.ukJos.Bieneman@citigatedr.co.ukorNorth America -
Sard Verbinnen & CoPaul Scarpetta or Jamie Tully,
+1-212-687-8080
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