Annualized Net Income Return on Equity of
11.2% for Third Quarter 2016 and 10.9% Through the Nine
Months
Annualized Operating Return on Equity of
8.0% for Third Quarter 2016 and 7.3% Through the Nine
Months
Diluted Book Value Per Share of $50.49, up
9.8% from December 31, 2015
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) reported
today net income after tax of $95.6 million, or $1.40 per diluted
share, and operating income after tax of $69.3 million, or $0.97
per diluted share, for the third quarter of 2016.
Chris O’Kane, Chief Executive Officer, commented, “Aspen’s
results this quarter reflect good underwriting profitability across
our business. This was demonstrated by our 93.8% combined ratio and
the improved accident year ex-cat loss ratios achieved by both
business segments. Premium growth in the quarter was driven by
Aspen Re, where the AgriLogic business is being successfully
integrated and is performing well. At Aspen Insurance, we continued
our efforts to reduce volatility, while also delivering growth in
targeted areas such as in our Financial and Professional lines
portfolio. We remain very disciplined in our selection of risk and
continue to enhance our range of products.”(1)
_____________________Non-GAAP financial measures are used
throughout this release as defined at the end of this press
release.(1) Refer to "Forward-looking Statements Safe Harbor" at
the end of this press release.
Operating highlights for the quarter ended September 30,
2016
- Gross written premiums increased by
6.0% to $763.5 million in the third quarter of 2016 compared with
$720.5 million in the third quarter of 2015
- Combined ratio of 93.8% for the third
quarter of 2016 compared with 93.4% for the third quarter of
2015
- Net favorable development on prior year
loss reserves of $35.4 million, or 5.2 combined ratio points, for
the third quarter of 2016 compared with $39.0 million, or 6.1
combined ratio points, in the comparable period
- Pre-tax catastrophe losses, net of
reinsurance recoveries, totaled $24.9 million, or 3.7 combined
ratio points, in the third quarter of 2016 compared with $19.1
million, or 3.0 combined ratio points, of pre-tax catastrophe
losses, net of reinsurance recoveries, in the third quarter of
2015
- Expense ratio of 36.6% in the third
quarter of 2016 compared with the 36.3% in the third quarter of
2015, reflecting an increase in the general and administrative
expense ratio offset by a decrease in the policy acquisition
expense ratio
Operating highlights for the nine months ended
September 30, 2016
- Gross written premiums increased by
7.6% to $2,540.9 million in the first nine months of 2016 compared
with $2,362.5 million in the first nine months of 2015
- Combined ratio of 95.4% for the first
nine months of 2016 compared with 92.0% for the first nine months
of 2015
- Net favorable development on prior year
loss reserves of $78.2 million, or 3.9 combined ratio points, for
the first nine months of 2016 compared with $97.6 million, or 5.3
combined ratio points, for the first nine months of 2015
- Pre-tax catastrophe losses, net of
reinsurance recoveries and $3.1 million of reinstatement premiums,
totaled $108.7 million, or 5.4 combined ratio points, in the first
nine months of 2016 compared with $44.5 million, or 2.4 combined
ratio points, of pre-tax catastrophe losses, net of reinsurance
recoveries, in the first nine months of 2015
- Expense ratio of 36.7% for the first
nine months of 2016 compared with 36.0% for the first nine months
of 2015, reflecting an increase in the general and administrative
expense ratio offset by a decrease in the policy acquisition
expense ratio
Financial highlights for the quarter and nine months ended
September 30, 2016
- Annualized net income return on average
equity of 11.2% and annualized operating return on average equity
of 8.0% for the quarter ended September 30, 2016 compared with
2.8% and 8.4%, respectively, for the third quarter of 2015
- Annualized net income return on average
equity of 10.9% and annualized operating return on average equity
of 7.3% for the first nine months of 2016 compared with 8.3% and
9.7%, respectively, for the first nine months of 2015
- Net income per diluted share of $1.40
for the quarter ended September 30, 2016 compared with net
income per diluted share of $0.30 for the quarter ended
September 30, 2015, and net income per diluted share of $3.97
for the nine months ended September 30, 2016 compared with net
income per diluted share of $2.80 for the nine months ended
September 30, 2015
- Operating income per diluted share of
$0.97 for the quarter ended September 30, 2016 compared with
operating income per diluted share of $0.93 for the quarter ended
September 30, 2015, and operating income per diluted share of
$2.65 for the nine months ended September 30, 2016 compared
with operating income per diluted share of $3.31 for the nine
months ended September 30, 2015
- Diluted book value per share of $50.49
as at September 30, 2016 up 9.8% from December 31, 2015
Segment Highlights
Insurance
Operating highlights for Insurance for the quarter ended
September 30, 2016 include:
- Gross written premiums of $397.6
million, a decrease of 1.6% compared with $403.9 million in the
third quarter of 2015, primarily due to a decrease in the Property
and Casualty sub-segment, offset by growth in the Financial and
Professional Lines, and Marine, Aviation and Energy
sub-segments
- Loss ratio of 57.7% compared with 55.0%
for the third quarter of 2015
- Combined ratio of 95.0% compared with
88.3% for the third quarter of 2015. The combined ratio for the
third quarter of 2016 included $10.1 million, or 2.8 percentage
points, of pre-tax catastrophe losses, net of reinsurance
recoveries, from U.S. weather-related events. The combined ratio
for the third quarter of 2015 included $2.3 million, or 0.6
percentage points, of pre-tax catastrophe losses net of reinsurance
recoveries
- Prior year favorable reserve
development of $15.3 million, or 4.2 combined ratio points,
compared with prior year favorable reserve development of $22.9
million, or 6.4 combined ratio points, for the third quarter of
2015
- The accident year loss ratio excluding
catastrophes for the quarter ended September 30, 2016 was
59.1% compared with 60.8% a year ago
Reinsurance
Operating highlights for Reinsurance for the quarter ended
September 30, 2016 include:
- Gross written premiums of $365.9
million, an increase of 15.6% from $316.6 million in the third
quarter of 2015, with premium growth primarily in the Specialty
sub-segment, including $103.3 million of premiums from AG Logic
Holdings, LLC (“AgriLogic”)
- Loss ratio of 56.5% compared with 59.7%
for the third quarter of 2015
- Combined ratio of 88.3% compared with
94.7% for the third quarter of 2015. The combined ratio for the
third quarter of 2016 included $14.8 million, or 4.7 percentage
points, of pre-tax catastrophe losses, net of reinsurance
recoveries, primarily as a result of weather-related events in the
U.S. and a hailstorm in the Netherlands. The combined ratio for the
third quarter of 2015 included $16.8 million, or 5.9 percentage
points, of pre-tax catastrophe losses, net of reinsurance
recoveries
- Prior year favorable reserve
development of $20.1 million, or 6.4 combined ratio points,
compared with $16.1 million prior year favorable reserve
development, or 5.7 combined ratio points, for the third quarter of
2015
- The accident year loss ratio excluding
catastrophes for the quarter ended September 30, 2016 was
58.2% compared with 59.5% a year ago
Investment performance
Investment income of $46.4 million in the third quarter of 2016
increased by 3.1% compared to $45.0 million in the third quarter of
2015.
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 3.64 years as at September 30, 2016. The total
return on Aspen’s aggregate investment portfolio was 0.50% for the
three months ended September 30, 2016 and reflects gains in
the fixed income and equity portfolios. In the first nine months of
2016, Aspen's aggregate investment portfolio had a total return of
3.98%.
Book yield as at September 30, 2016 on the fixed income
portfolio was 2.46% compared to 2.59% as at December 31, 2015.
Capital
Total shareholders’ equity was $3.9 billion as at
September 30, 2016.
During the third quarter of 2016, Aspen repurchased 144,289
ordinary shares at an average price of $45.17 per share for a cost
of $6.5 million. Since the beginning of 2016, Aspen has repurchased
1,122,328 ordinary shares at an average price of $44.55 per share
for a total cost of $50.0 million. Aspen had $366.3 million
remaining under its current share repurchase authorization as at
October 26, 2016.
On September 20, 2016, Aspen issued 10 million 5.625% Perpetual
Non-Cumulative Preference Shares (the “Preference Shares”). The
Preference Shares have a liquidation preference of $25 per share
(or $250 million in aggregate liquidation preference). Aspen
intends to use the net proceeds from the offering to redeem its
outstanding 7.401% Perpetual Non-Cumulative Preference Shares and
7.250% Perpetual Non-Cumulative Preference Shares when they become
redeemable on January 1, 2017 and July 1, 2017, respectively.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, October 27, 2016.
To participate in the October 27 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 10092461
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 10092461
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
As at
September 30,
December 31,
2016
2015
ASSETS Total investments
$ 8,128.8 $
7,712.2
Cash and cash equivalents
1,183.3 1,099.5 Reinsurance
recoverables
649.3 523.7 Premiums receivable
1,437.7
1,115.6 Other assets
746.6 597.8 Total assets
$ 12,145.7 $ 11,048.8
LIABILITIES Losses and loss adjustment expenses
$
5,246.6 $ 4,938.2 Unearned premiums
1,781.2 1,587.2
Other payables
551.8 451.3 Silverton loan notes
112.7
103.0 Long-term debt
549.3 549.2 Total
liabilities
$ 8,241.6 $ 7,628.9 SHAREHOLDERS’
EQUITY Total shareholders’ equity
3,904.1 3,419.9
Total liabilities and shareholders’ equity
$
12,145.7 $ 11,048.8 Book value per
share
$ 51.58 $ 46.99 Diluted book value per share
(treasury stock method)
$ 50.49 $ 46.00
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended
September 30,
September 30,
2016
2015
UNDERWRITING REVENUES Gross written premiums
$ 763.5
$ 720.5 Premiums ceded
(125.1 ) (68.7 ) Net written
premiums
638.4 651.8 Change in unearned premiums
42.6
(11.2 ) Net earned premiums
681.0 640.6
UNDERWRITING EXPENSES Losses and loss adjustment expenses
389.2 365.6 Amortization of deferred policy acquisition
costs
130.9 132.0 General, administrative and corporate
expenses
118.7 100.5 Total underwriting
expenses
638.8 598.1 Underwriting income
including corporate expenses
42.2 42.5 OTHER
OPERATING REVENUE Net investment income
46.4 45.0 Interest
expense
(7.3 ) (7.4 ) Other expenses
(7.4
) (10.6 ) Total other operating revenue
31.7
27.0 OPERATING INCOME BEFORE TAX
73.9
69.5 Non operating expenses
(6.3
) — Net realized and unrealized exchange gains
11.4
4.5 Net realized and unrealized investment gains (losses)
21.5 (44.0 ) INCOME BEFORE TAX
100.5 30.0
Income tax expense
(4.9 ) (1.8 ) NET INCOME AFTER TAX
95.6 28.2 Dividends paid on ordinary shares
(13.3
) (12.7 ) Dividends paid on preference shares
(9.5
) (9.5 ) Proportion due to non-controlling interest
0.2 (0.3 ) Retained income
$ 73.0
$ 5.7 Components of net income (after tax) Operating
income
$ 69.3 $ 67.2 Non operating expenses
(5.8 ) — Net realized and unrealized exchange gains
after tax
11.1 1.4 Net realized investment gains (losses)
after tax
21.0 (40.4 ) NET INCOME AFTER TAX
$
95.6 $ 28.2 Loss ratio
57.2
% 57.1 % Policy acquisition expense ratio
19.2
% 20.6 % General, administrative and corporate expense ratio
17.4 % 15.7 % Expense ratio
36.6 % 36.3
% Combined ratio
93.8 % 93.4 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Nine Months Ended
September 30,
September 30,
2016
2015
UNDERWRITING REVENUES Gross written premiums
$
2,540.9 $ 2,362.5 Premiums ceded
(378.0 )
(303.1 ) Net written premiums
2,162.9 2,059.4 Change in
unearned premiums
(138.0 ) (215.8 ) Net earned
premiums
2,024.9 1,843.6 UNDERWRITING EXPENSES
Losses and loss adjustment expenses
1,188.8 1,032.2
Amortization of deferred policy acquisition costs
387.8
365.4 General, administrative and corporate expenses
354.9
298.1 Total underwriting expenses
1,931.5
1,695.7 Underwriting income including corporate
expenses
93.4 147.9 OTHER OPERATING REVENUE
Net investment income
143.9 139.1 Interest expense
(22.1 ) (22.1 ) Other expenses
(11.4 )
(14.9 ) Total other operating revenue
110.4 102.1
OPERATING INCOME BEFORE TAX
203.8
250.0 Non operating expenses
(6.3
) — Net realized and unrealized exchange losses
(14.1
) (15.9 ) Net realized and unrealized investment gains
(losses)
100.2 (19.8 ) INCOME BEFORE TAX
283.6
214.3 Income tax expense
(8.7 ) (9.1 ) NET INCOME
AFTER TAX
274.9 205.2 Dividends paid on ordinary shares
(39.5 ) (38.1 ) Dividends paid on preference shares
(28.4 ) (28.4 ) Proportion due to non-controlling
interest
— (0.8 ) Retained income
$
207.0 $ 137.9 Components of net income (after
tax) Operating income
$ 193.3 $ 237.4 Non operating
expenses
(5.8 ) — Net realized and unrealized
exchange losses after tax
(10.7 ) (15.9 ) Net
realized investment gains (losses) after tax
98.1
(16.3 ) NET INCOME AFTER TAX
$ 274.9 $ 205.2
Loss ratio
58.7 % 56.0 % Policy
acquisition expense ratio
19.2 % 19.8 % General,
administrative and corporate expense ratio
17.5 %
16.2 % Expense ratio
36.7 % 36.0 % Combined ratio
95.4 % 92.0 %
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended Nine Months Ended
September 30,
September 30,
September 30,
September 30,
2016
2015
2016
2015
Basic earnings per ordinary share Net income adjusted for
preference share dividend and non-controlling interest
$1.43
$0.30
$4.07
$2.86
Operating income adjusted for preference share dividend and
non-controlling interest
$0.99 $0.94
$2.72 $3.39
Diluted earnings per ordinary share Net income adjusted for
preference share dividend and non-controlling interest
$1.40
$0.30
$3.97 $2.80 Operating income adjusted for preference
share dividend and non-controlling interest
$0.97 $0.93
$2.65 $3.31 Weighted average number of ordinary
shares outstanding (in millions)
60.226 60.779
60.588
61.442 Weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares (in millions)
61.577 62.155
62.043 62.878 Book value per
ordinary share
$51.58 $46.30
$51.58 $46.30 Diluted
book value per ordinary share (treasury stock method)
$50.49
$45.28
$50.49 $45.28 Ordinary shares outstanding at
end of the period (in millions)
60.211 60.782
60.211
60.782 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method) (in
millions)
61.516 62.147
61.516 62.147
Aspen Insurance Holdings
Limited
Summary consolidated segment
information (unaudited)
$ in millions, except ratios
Three Months Ended September 30, 2016 Three
Months Ended September 30, 2015 Reinsurance
Insurance Total Reinsurance
Insurance Total
Gross written premiums
$ 365.9 $ 397.6
$ 763.5 $ 316.6 $ 403.9 $ 720.5 Net written premiums
314.5 323.9 638.4 294.7 357.1 651.8 Gross
earned premiums
364.3 445.5 809.8 304.6 429.0
733.6 Net earned premiums
316.3 364.7 681.0
284.6 356.0 640.6 Losses and loss adjustment expenses
178.7
210.5 389.2 169.9 195.7 365.6 Amortization of
deferred policy acquisition expenses
53.0 77.9
130.9 64.8 67.2 132.0 General and administrative expenses
47.4 57.9 105.3
34.7 51.3 86.0
Underwriting income
$ 37.2 $
18.4 $ 55.6 $ 15.2 $ 41.8
$ 57.0 Net investment income
46.4 45.0 Net
realized and unrealized investment gains (losses) (1)
21.5
(44.0 ) Corporate expenses
(13.4 ) (14.5 )
Non-operating expenses
(6.3 ) — Other expenses (2)
(7.4 ) (10.6 ) Interest expense
(7.3 )
(7.4 ) Net realized and unrealized foreign exchange gains (3)
11.4 4.5 Income before tax
$
100.5 $ 30.0 Income tax expense
(4.9 ) (1.8 )
Net income $ 95.6 $ 28.2
Ratios Loss ratio
56.5 % 57.7 %
57.2 % 59.7 % 55.0 % 57.1 % Policy acquisition
expense ratio
16.8 % 21.4 % 19.2
% 22.8 % 18.9 % 20.6 % General and administrative expense
ratio (4)
15.0 % 15.9 % 17.4
% 12.2 % 14.4 % 15.7 % Expense ratio
31.8 %
37.3 % 36.6 % 35.0 % 33.3 % 36.3 %
Combined ratio
88.3 % 95.0 %
93.8 % 94.7 % 88.3 % 93.4 % (1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Other expenses in the third quarter of
2016 and third quarter of 2015 included $9.8 million and $8.3
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, 2016 Nine
Months Ended September 30, 2015 Reinsurance
Insurance Total Reinsurance
Insurance Total Gross written premiums
$ 1,216.1 $ 1,324.8 $
2,540.9 $ 1,062.1 $ 1,300.4 $ 2,362.5 Net written premiums
1,070.8 1,092.1 2,162.9 975.0 1,084.4 2,059.4
Gross earned premiums
1,000.9 1,345.8 2,346.7
857.6 1,267.3 2,124.9 Net earned premiums
896.0
1,128.9 2,024.9 802.3 1,041.3 1,843.6 Losses and loss
adjustment expenses
494.3 694.5 1,188.8 391.7
640.5 1,032.2 Amortization of deferred policy acquisition expenses
163.1 224.7 387.8 168.6 196.8 365.4 General
and administrative expenses
130.6 173.7
304.3 102.5 151.8 254.3
Underwriting income
$ 108.0 $
36.0 $ 144.0 $ 139.5 $ 52.2
$ 191.7 Net investment income
143.9 139.1 Net
realized and unrealized investment gains (losses) (1)
100.2
(19.8 ) Corporate expenses
(50.6 ) (43.8 )
Non-operating expenses
(6.3 ) — Other expenses (2)
(11.4 ) (14.9 ) Interest expense
(22.1
) (22.1 ) Net realized and unrealized foreign exchange
(losses) (3)
(14.1 ) (15.9 ) Income before tax
$ 283.6 $ 214.3 Income tax expense
(8.7
) (9.1 )
Net income $ 274.9 $
205.2
Ratios Loss ratio
55.2 %
61.5 % 58.7 % 48.8 % 61.5 % 56.0 %
Policy acquisition expense ratio
18.2 % 19.9
% 19.2 % 21.0 % 18.9 % 19.8 % General and
administrative expense ratio (4)
14.6 % 15.4
% 17.5 % 12.8 % 14.6 % 16.2 % Expense ratio
32.8 % 35.3 % 36.7 % 33.8
% 33.5 % 36.0 % Combined ratio
88.0 % 96.8
% 95.4 % 82.6 % 95.0 % 92.0 % (1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Other expenses in the first nine months of
2016 and first nine months of 2015 included $13.7 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, Canada, France,
Germany, Ireland, Singapore, Switzerland, the United Arab Emirates,
the United Kingdom and the United States. For the year ended
December 31, 2015, Aspen reported $11.0 billion in total assets,
$4.9 billion in gross reserves, $3.4 billion in total shareholders’
equity and $3.0 billion in gross written premiums. Its operating
subsidiaries have been assigned a rating of “A” by Standard &
Poor’s Financial Services LLC (“S&P”), an “A” (“Excellent”) by
A.M. Best Company Inc. (“A.M. Best”) and an “A2” by Moody’s
Investors Service, Inc. (“Moody’s”).
For more information about Aspen, please visit www.aspen.co.
(1) Forward-looking Statements Safe Harbor
This press release contains, and Aspen’s earnings conference
call will contain, written or oral “forward-looking statements”
within the meaning of the U.S. federal securities laws. These
statements are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of
words such as “expect,” “intend,” “plan,” “believe,” “do not
believe,” “aim,” “project,” “anticipate,” “seek,” “will,” “likely,”
“assume,” “estimate,” “may,” “continue,” “guidance,” “objective,”
“outlook,” “trends,” “future,” “could,” “would,” “should,”
“target,” “on track” and similar expressions of a future or
forward-looking nature.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and are
subject to a number of uncertainties and other factors, many of
which are outside Aspen’s control that could cause actual results
to differ materially from such statements.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. Aspen believes
these factors include, but are not limited to: 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 impact of the vote and resulting
negotiations as a result of the vote by the U.K. electorate in
favor of a U.K. exit from the European Union in a recent
referendum; 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; changes in market conditions in the
agriculture industry, which may vary depending upon demand for
agricultural products, weather, commodity prices, natural
disasters, and changes in legislation and policies related to
agricultural products and producers; termination of, or changes in,
the terms of the U.S. Federal Multiple Peril Crop Insurance Program
or the U.S. Farm Bill, including modifications to the Standard
Reinsurance Agreement put in place by the Risk Management Agency of
the U.S. Department of Agriculture; the recent consolidation in the
(re)insurance industry; loss of one or more of our senior
underwriters or key personnel; 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 (the "SEC")
on February 19, 2016. Aspen undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the dates on which they are
made.
In addition, any estimates relating to loss events involve the
exercise of considerable judgment and reflect a combination of
ground-up evaluations, information available to date from brokers
and cedants, market intelligence, initial tentative loss reports
and other sources. The actuarial range of reserves and management’s
best estimate represents a distribution from our internal capital
model for reserving risk based on our current state of knowledge
and explicit and implicit assumptions relating to the incurred
pattern of claims, the expected ultimate settlement amount,
inflation and dependencies between lines of business. Due to the
complexity of factors contributing to losses and the preliminary
nature of the information used to prepare estimates, there can be
no assurance that Aspen’s ultimate losses will remain within the
stated amounts.
Non-GAAP Financial Measures
In presenting Aspen’s results, management has included and
discussed certain “non-GAAP financial measures.” Management
believes 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 measure is included in the financial
supplement. Aspen's financial supplement, which was filed with the
SEC on Form 8-K on October 26, 2016, can be obtained from the
Investor Relations section of Aspen’s website at www.aspen.co.
Annualized Operating Return on Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Operating ROE is
calculated using operating income, as defined below, and average
equity is calculated as the arithmetic average on a monthly basis
for the stated periods of shareholders’ equity excluding the
aggregate value of the liquidation preferences of our preference
shares net of issuance costs and the total amount of
non-controlling interest. Aspen presents Operating ROE as a measure
that is commonly recognized as a standard of performance by
investors, analysts, rating agencies and other users of its
financial information. Please see page 22 of Aspen’s financial
supplement for a reconciliation of operating income to net income
and page 7 for a reconciliation of average ordinary shareholders’
equity to average shareholders’ equity.
Operating Income is a non-GAAP financial measure.
Operating income is an internal performance measure used by Aspen
in the management of its operations and represents after-tax
operational results excluding, as applicable, after-tax net
realized and unrealized gains or losses, including net realized and
unrealized gains and losses on interest rate swaps, after-tax net
foreign exchange gains or losses, including net realized and
unrealized gains and losses from foreign exchange contracts and
certain non-operating income and expenses. In 2016, the
non-operating income and expenses relate to amortization of
intangible assets and other corporate activities.
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.
Diluted Book Value per Ordinary Share is not a non-GAAP
financial measure. Aspen has included diluted book value per
ordinary share as it illustrates the effect on basic book value per
share of dilutive securities thereby providing a better benchmark
for comparison with other companies. Diluted book value per share
is calculated using the treasury stock method, defined on page 21
of Aspen’s financial supplement.
Diluted Operating Earnings per Share and Basic Operating
Earnings per Share are non-GAAP financial measures. Aspen
believes that the presentation of diluted operating earnings per
share and basic operating earnings per share supports meaningful
comparison from period to period and the analysis of normal
business operations. Diluted operating earnings per share and basic
operating earnings per share are calculated by dividing operating
income by the diluted or basic weighted average number of shares
outstanding for the period. Please see page 22 of Aspen’s financial
supplement for a reconciliation of diluted and basic operating
earnings per share to basic earnings per share.
Accident Year Loss Ratio Excluding Catastrophes is a
non-GAAP financial measure. Aspen believes that the presentation of
loss ratios excluding catastrophes and prior year reserve movements
supports meaningful comparison from period to period of the
underlying performance of the business. Accident year loss ratios
excluding catastrophes are calculated by dividing net losses
excluding catastrophe losses, net expenses and prior year reserve
movements by net earned premiums excluding catastrophe-related
reinstatement premiums. Aspen has defined catastrophe losses
in the first nine months of 2016 as losses associated predominantly
with the wildfires in Canada, weather-related events in the U.S., a
hailstorm in the Netherlands and several earthquakes. Catastrophe
losses in the comparable period of 2015 were defined as losses
associated with storms in the U.S., Europe, New Zealand and
Australia, the Chilean earthquake and wildfires in the U.S. Please
see pages 10 and 11 of Aspen’s financial supplement for a
reconciliation of loss ratios to accident year loss ratios
excluding catastrophes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161026006776/en/
InvestorsAspenMark Jones, +1-646-289-4945Senior Vice
President, Investor
Relationsmark.p.jones@aspen.coorMediaAspenSteve Colton,
+44-20-7184-8337Group Head of
Communicationssteve.colton@aspen.coorInternational - Citigate Dewe
RogersonCaroline Merrell,
+44-20-7638-9571caroline.merrell@citigatedr.co.ukorJos Bieneman,
+44-20-7638-9571jos.bieneman@citigatedr.co.ukorNorth America - Sard
Verbinnen & CoPaul Scarpetta or Jamie Tully+1-212-687 8080
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