Announces Preliminary View of Underwriting
Results for the Fourth Quarter of 2016
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) provided
an update today on its Insurance segment, and a preliminary view of
its underwriting results for the fourth quarter of 2016.
Chris O’Kane, Group Chief Executive Officer, said: “Our new
Insurance leadership team has conducted a thorough review of our
Insurance portfolio and identified the best opportunities for
long-term profitable growth. We expect to see continuing good
performance and increased growth in areas such as Professional
Lines, U.K. Property and Casualty, Crisis Management, and Surety.
We have exited lines where the level of volatility is too high and
where the returns are not expected to meet our requirements. The
fourth quarter has consequently been negatively impacted by these
items but this is not a reflection of the results of the underlying
business. Going forward, we expect these actions to drive improved
growth and profitability.
“Our business is now on course for its next stage of profitable
growth. We are confident in the quality of our book of business and
the strength of our balance sheet. Our Insurance and Reinsurance
leadership teams are focused and energized about the future and
will continue to drive growth and profitability by partnering with
clients to provide them with deep underwriting expertise and
understanding of their needs and risks.”
In late 2015, the Insurance leadership team commenced a project
to improve the loss ratio and reduce volatility in Aspen
Insurance’s underwriting performance. As a consequence, Aspen
has significantly reduced its appetite for Programs business and
Primary Casualty.
The Insurance review also resulted in a restructure of Aspen’s
ceded reinsurance arrangements which is expected to reduce
volatility and, over time, benefit the expense ratio. In addition,
Aspen purchased some run-off reinsurance in the fourth quarter. As
a result of these actions, together with loss activity in lines
that are being exited or re-positioned, Aspen Insurance is expected
to record an underwriting loss of approximately $30 million in the
fourth quarter of 2016.
The Reinsurance segment is expected to record underwriting
income of approximately $10 million in the fourth quarter of 2016.
Results for the quarter reflect an increase of approximately $15
million in catastrophe losses, and an increase of approximately $25
million in energy and property-related losses compared with the
fourth quarter of 2015, and one-time commission-related adjustments
of approximately $10 million in the fourth quarter of 2016.
In total, the Group expects a loss ratio of approximately 63%
and an expense ratio of approximately 44% in the fourth quarter of
2016.
Finally, financial markets were impacted by movements in the
yield curve in the fourth quarter of 2016. Consequently, the
adverse mark-to-market impact on Aspen’s investment portfolio was
approximately $190 million. Aspen expects to record a diluted book
value per share of approximately $46.70 as at December 31,
2016.
Aspen will release its full fourth quarter 2016 financial
results on Wednesday, February 8, 2017 following the close of the
New York Stock Exchange. A conference call to discuss the results
will follow at 8:00am (ET) on Thursday, February 9, 2017. The
conference call can be accessed through a listen-only dial-in
number or through a live webcast. To listen to the conference call,
please dial +1 (844) 378 6481 or +1 (412) 542 4176, Conference ID#
10098381. The webcast will be available on Aspen’s website located
at www.aspen.co. A telephone replay of the conference call will
also be available beginning at approximately 11:00am (ET) on
February 9, 2017 until February 23, 2017 by dialing +1 (877) 344
7529 or +1 (412) 317 0088, Conference ID# 10098381.
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, an “A” (“Excellent”) by A.M. Best
Company Inc. and an “A2” by Moody’s Investors Service, Inc.
Application of the Safe Harbor of the Private Securities
Litigation Reform Act of 1995
This press release contains "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,” “grow,” “improve,” “increase” 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; political and regulatory changes arising from
the vote by the U.K. electorate in favor of a U.K. exit from the
European Union; the reliability of, and changes in assumptions to,
natural and man-made catastrophe pricing, accumulation and
estimated loss models; decreased demand for our insurance or
reinsurance products 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 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 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170130005569/en/
Please visit www.aspen.co or contact:Aspen Insurance Holdings
LimitedInvestorsMark Jones, +1-646-289-4945Senior Vice
President, Investor
Relationsmark.p.jones@aspen.coorMediaSteve Colton,
+44-20-7184-8337Head of Group
CommunicationsSteve.colton@aspen.co
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