Market Overview

Aspen Reports Results for Quarter Ended June 30, 2018

Share:

Annualized Operating Return on Equity of 8.4% for the Second Quarter
2018
and 8.8% for First Half 2018

Annualized Net Income Return on Equity of (4.0)% for the Second
Quarter 2018
and 0.1% for First Half 2018

Aspen Insurance Holdings Limited ("Aspen") (NYSE:AHL) reported today a
net loss after tax of $(14.7) million, or $(0.38) per diluted ordinary
share, and operating income after tax of $56.3 million, or $0.80 per
diluted ordinary share, for the second quarter of 2018.

Chris O'Kane, Chief Executive Officer, commented: "Aspen's second
quarter results demonstrate ongoing execution of our plan to enhance
performance. This included the continued successful repositioning of
Aspen Insurance, which had its second consecutive record quarter in
terms of gross written premium, another quarter of solid results and
pricing discipline at Aspen Re and significant progress in the
implementation of our Operational Effectiveness and Efficiency program.
In addition, we reduced debt leverage through the partial redemption of
our senior notes."(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 June 30, 2018

  • Gross written premiums of $853.8 million in the second quarter
    of 2018, an increase of 3.9% compared with $822.1 million in the
    second quarter of 2017
    • Insurance: Gross written premiums of $527.8 million, an
      increase of 8.5% compared with $486.5 million in the second
      quarter of 2017 due to growth across all sub-segments
    • Reinsurance: Gross written premiums of $326.0 million, a
      decrease of 2.9% compared with $335.6 million in the second
      quarter of 2017 due to a decrease in Specialty sub-segment
      premiums which was partially offset by growth in all other
      sub-segments
  • Net written premiums of $486.0 million in the second quarter of
    2018, a decrease of 16.0% compared with $578.7 million in the second
    quarter of 2017 as Aspen continues to make increased use of ceded
    reinsurance. The retention ratio in the second quarter of 2018 was
    56.9% compared with 70.4% in the second quarter of 2017
    • Insurance: Net written premiums of $219.1 million, a
      decrease of 25.3% compared with $293.2 million in the second
      quarter of 2017, due primarily to the increased use of quota share
      reinsurance. The retention ratio in the second quarter of 2018 was
      41.5% compared with 60.3% in the second quarter of 2017
    • Reinsurance: Net written premiums of $266.9 million, a
      decrease of 6.5% compared with $285.5 million in the second
      quarter of 2017. As disclosed previously, Aspen no longer cedes
      business via Silverton and accounts for such business in the same
      way as other third party reinsurance. This change reduced net
      written premiums in the second quarter of 2018 by $13.7 million.
      The retention ratio in the second quarter of 2018 was 81.9%
      compared with 85.1% in the second quarter of 2017
  • Loss ratio of 59.7% in the second quarter of 2018 compared with
    61.6% in the second quarter of 2017. The loss ratio included pre-tax
    catastrophe losses of $18.2 million, or 3.5 percentage points, net of
    reinsurance recoveries, in the second quarter of 2018 compared with
    $37.4 million, or 6.7 percentage points, in the second quarter of 2017
    • Insurance: Loss ratio of 62.2% compared with 66.9% in the
      second quarter of 2017. The loss ratio included pre-tax
      catastrophe losses of $8.1 million, or 3.5 percentage points, net
      of reinsurance recoveries, in the second quarter of 2018 primarily
      as a result of weather-related events in the U.S. and U.K. Pre-tax
      catastrophe losses, net of reinsurance recoveries, totaled $27.1
      million, or 9.4 percentage points, in the second quarter of 2017
    • Reinsurance: Loss ratio of 57.8% compared with 56.0% in the
      second quarter of 2017. The loss ratio included pre-tax
      catastrophe losses of $10.1 million, or 3.5 percentage points, net
      of reinsurance recoveries, in the second quarter of 2018 primarily
      as a result of weather-related events in the U.S. Pre-tax
      catastrophe losses, net of reinsurance recoveries, totaled $10.3
      million, or 3.8 percentage points, in the second quarter of 2017
  • Net favorable development on prior year loss reserves of $42.5
    million benefited the loss ratio by 8.2 percentage points in the
    second quarter of 2018. Prior year net favorable reserve development
    of $48.7 million benefited the loss ratio by 8.7 loss ratio points in
    the second quarter of 2017
    • Insurance: Prior year net favorable reserve development of
      $11.0 million benefited the loss ratio by 4.8 percentage points in
      the second quarter of 2018 and reflected releases, primarily from
      short-tail lines, including favorable development from first half
      of 2017 natural catastrophes. Prior year net favorable development
      of $16.1 million benefited the loss ratio by 5.6 percentage points
      in the second quarter of 2017
    • Reinsurance: Prior year net favorable reserve development
      of $31.5 million benefited the loss ratio by 10.9 percentage
      points in the second quarter of 2018 and reflected releases,
      primarily from short-tail lines, including favorable development
      from 2017 natural catastrophes. Prior year net favorable
      development of $32.6 million benefited the loss ratio by 12.0
      percentage points in the second quarter of 2017
  • Accident year net loss ratio excluding catastrophes was 64.4%
    in the second quarter of 2018 compared with 63.6% in the second
    quarter of 2017
    • Insurance: Accident year loss ratio excluding catastrophes was
      59.2% on a gross basis and 63.5% on a net basis in the second
      quarter of 2018 compared with 63.6% and 63.1%, respectively, in
      the second quarter of 2017
    • Reinsurance: Accident year loss ratio excluding
      catastrophes was 58.4% on a gross basis and 65.2% on a net basis
      in the second quarter of 2018 compared with 61.6% and 64.2%,
      respectively in the second quarter of 2017. As a result of the
      change in treatment of business ceded via Aspen Capital Markets,
      on a like-for-like basis, the net ratio would have been 61.6%. The
      second quarter of 2018 net ratio also included 4.6 percentage
      points of large losses from a dam collapse and a fire-related loss
  • Total expense ratio of 37.7% and total expense ratio
    (excluding amortization and non-recurring expenses)
    of 36.0% in
    the second quarter of 2018 compared with 38.4% and 38.1%,
    respectively, in the second quarter of 2017
    • The policy acquisition expense ratio decreased to 16.5% in the
      second quarter of 2018 from 17.1% in the second quarter of 2017
    • General and administrative expenses (excluding amortization and
      non-recurring expenses) decreased to $101.1 million in the second
      quarter of 2018 from $117.8 million in the second quarter of 2017.
      The general and administrative expense ratio (excluding
      amortization and non-recurring expenses) decreased to 19.5% from
      21.0% in the second quarter of 2017
    • Aspen recorded $8.6 million of expenses related to its operational
      effectiveness and efficiency program in the second quarter of 2018
  • Net (loss) after tax of $(14.7) million, or $(0.38) per diluted
    ordinary share, in the second quarter of 2018 compared with net income
    of $75.8 million, or $1.07 per diluted ordinary share, in the second
    quarter of 2017. Net (loss) income in the second quarter of
    2018 included $(20.7) million of net realized and unrealized
    investment losses and $(40.9) million of net realized and unrealized
    foreign exchange (losses) compared with $42.0 million of net realized
    and unrealized investment gains and $(3.0) million of net realized and
    unrealized foreign exchange (losses) in the second quarter of 2017. Net
    (loss) income in the second quarter of 2018 also included an $8.6
    million make-whole payment associated with the partial redemption of
    Aspen's 6.0% Senior Notes due 2020
  • Operating income after tax of $56.3 million, or $0.80 per
    diluted ordinary share, in the second quarter of 2018 compared with
    operating income of $39.2 million, or $0.47 per diluted ordinary
    share, in the second quarter of 2017
  • Annualized net income return on average equity of (4.0)% and annualized
    operating return on average
    equity of 8.4% for the quarter
    ended June 30, 2018 compared with 8.8% and 4.0%, respectively, for the
    second quarter of 2017

Operating highlights for the six months ended June 30, 2018

  • Gross written premiums increased by 8.3% to $1,970.6 million in
    the first half of 2018 compared with $1,820.1 million in the first
    half of 2017
  • Net written premiums decreased by 11.3% to $1,121.5 million in
    the first half of 2018 compared with $1,264.9 million in the first
    half of 2017. The retention ratio in the first half of 2018 was 56.9%
    compared with 69.5% in the first half of 2017
  • Loss ratio of 58.9% for the first half of 2018 compared with
    59.0% for the first half of 2017. The loss ratio included $42.4
    million, or 4.0 percentage points, of pre-tax catastrophe losses, net
    of reinsurance recoveries, in the first half of 2018. This compared
    with $66.5 million, or 5.8 percentage points, of pre-tax catastrophe
    losses, net of reinsurance recoveries, in the first half of 2017
  • Net favorable development on prior year loss reserves of $80.2
    million benefited the loss ratio by 7.6 percentage points in the first
    half of 2018. In the first half of 2017, net favorable development of
    $74.9 million benefited the loss ratio by 6.6 percentage points
  • Accident year loss ratio excluding catastrophes of 62.5% for
    the first half of 2018 compared with 59.8% for the first half of 2017
  • Total expense ratio of 38.8% and total expense ratio
    (excluding amortization and non-recurring expenses)
    of 36.7%
    for the first half of 2018 compared with 39.5% and 39.1%,
    respectively, for the first half of 2017, reflecting decreases in both
    the policy acquisition expense ratio and the general and
    administrative expense ratio
    • Aspen recorded $20.4 million of expenses related to its
      operational effectiveness and efficiency program in the first six
      months of 2018
  • Net income after tax of $16.1 million or $0.01 per diluted
    ordinary share (adjusted for preference shares dividends and
    non-controlling interest) for the six months ended June 30, 2018
    compared with net income of $172.3 million, or $2.43 per diluted
    ordinary share, for the six months ended June 30, 2017. Net income in
    the first half of 2018 included $(58.4) million of net realized and
    unrealized investment (losses) and $(22.1) million of net realized and
    unrealized foreign exchange (losses) compared with net realized and
    unrealized investment gains of $88.2 million and $(8.8) million of net
    realized and unrealized foreign exchange (losses) in the first half of
    2017. Net income in the first half of 2018 also included an
    $8.6 million make-whole payment associated with the partial redemption
    of Aspen's 6.0% Senior Notes due 2020
  • Operating income after tax of $119.3 million, or $1.71
    per diluted ordinary share, for the six months ended June 30, 2018
    compared with operating income of $99.0 million, or $1.27 per diluted
    ordinary share, for the six months ended June 30, 2017
  • Annualized net income return on average equity of 0.1% and annualized
    operating return on average equity
    of 8.8% for the first half of
    2018 compared with 10.2% and 5.4%, respectively, for the first half of
    2017

Investment performance

  • Investment income of $50.4 million in the second quarter of 2018
    compared with $47.4 million in the second quarter of 2017
  • The total return on Aspen's aggregate investment portfolio was flat
    for the three months ended June 30, 2018 and reflects net realized and
    unrealized gains and losses mainly in the fixed income portfolio
  • Aspen's investment portfolio is comprised primarily of high quality
    fixed income securities with an average credit quality of "AA-". The
    average duration of the fixed income portfolio was 3.9 years as at
    June 30, 2018
  • Book yield on the fixed income portfolio as at June 30, 2018 was 2.63%
    compared with 2.56% as at December 31, 2017

Capital and Debt

  • Total shareholders' equity was $2.8 billion as at June 30, 2018
  • Diluted book value per share was $38.21 as at June 30, 2018, down 4.7%
    from December 31, 2017 primarily due to realized and unrealized
    investment losses in the first half of 2018
  • On June 18, 2018, Aspen partially redeemed its outstanding 6.0% Senior
    Notes due 2020. The Company redeemed $125 million in aggregate
    principal amount and incurred a make-whole payment of $8.6 million
    associated with the partial redemption

Earnings conference call and webcast

Aspen will host a conference call to discuss the results at 8:00 am (ET)
on Thursday, August 2, 2018.

To participate in the August 2 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 10120903

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. To listen to the replay by phone please dial:

+1 (877) 344 7529 (US toll free) or
+1 (412) 317 0088
(international)
Replay ID 10120903

The webcast 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
June 30,
2018
As at
December 31,
2017
 
ASSETS
Total investments $ 6,984.3 $ 7,633.0
Cash and cash equivalents 1,070.7 1,054.8
Reinsurance recoverables 2,381.2 2,030.7
Premiums receivable 1,725.2 1,496.5
Other assets 713.3   691.4
  Total assets $ 12,874.7   $ 12,906.4
 
LIABILITIES
Losses and loss adjustment expenses $ 6,532.8 $ 6,749.5
Unearned premiums 2,087.2 1,820.8
Other payables 981.8 813.9
Silverton loan notes 20.3 44.2
Long-term debt 424.6   549.5
Total liabilities $ 10,046.7 $ 9,977.9
 
SHAREHOLDERS' EQUITY
Total shareholders' equity 2,828.0   2,928.5
Total liabilities and shareholders' equity $ 12,874.7   $ 12,906.4
 
Book value per share $ 38.75 $ 40.59
Diluted book value per share (treasury stock method) $ 38.21   $ 40.10
 
   

Aspen Insurance Holdings Limited

Summary consolidated statement of income (unaudited)

$ in millions, except ratios

 
Three Months Ended
June 30, 2018     June 30, 2017
UNDERWRITING REVENUES
Gross written premiums $ 853.8 $ 822.1
Premiums ceded   (367.8 )   (243.4 )
Net written premiums 486.0 578.7
Change in unearned premiums   33.5     (16.7 )
Net earned premiums   519.5     562.0  
UNDERWRITING EXPENSES
Losses and loss adjustment expenses 310.4 346.1
Amortization of deferred policy acquisition costs 85.9 96.3
General, administrative and corporate expenses   101.1     117.8  
Total underwriting expenses   497.4     560.2  
   
Underwriting income including corporate expenses   22.1     1.8  
 
Net investment income 50.4 47.4
Interest expense (7.6 ) (7.4 )
Other (expenses)   (1.8 )   (1.7 )
Total other revenue   41.0     38.3  
 
Amortization and non-recurring expenses (9.1 ) (2.1 )
Net realized and unrealized exchange (losses) (40.9 ) (3.0 )
Net realized and unrealized investment (losses) gains (1) (20.7 ) 42.0
Realized (loss) on debt extinguishment   (8.6 )    
(LOSS) INCOME BEFORE TAX (16.2 ) 77.0
Income tax credit (expense)   1.5     (1.2 )
NET (LOSS) INCOME AFTER TAX (14.7 ) 75.8
Dividends paid on ordinary shares (14.3 ) (14.4 )
Dividends paid on preference shares (7.6 ) (10.5 )
Proportion due to non-controlling interest   (0.1 )   (0.1 )
Retained (loss) income $ (36.7 ) $ 50.8  
 
Loss ratio 59.7 % 61.6 %
Policy acquisition expense ratio 16.5 % 17.1 %
General, administrative and corporate expense ratio 21.2 % 21.3 %
General, administrative and corporate expense ratio (excluding
amortization and non-recurring expenses)
19.5 % 21.0 %
Expense ratio 37.7 % 38.4 %
Expense ratio (excluding amortization and non-recurring expenses) 36.0 % 38.1 %
Combined ratio 97.4 % 100.0 %
Combined ratio (excluding amortization and non-recurring expenses)   95.7 %   99.7 %
 
   

Aspen Insurance Holdings Limited

Summary consolidated statement of income (unaudited)

$ in millions, except ratios

 
Six Months Ended
June 30, 2018     June 30, 2017
UNDERWRITING REVENUES
Gross written premiums $ 1,970.6 $ 1,820.1
Premiums ceded   (849.1 )   (555.2 )
Net written premiums 1,121.5 1,264.9
Change in unearned premiums   (68.5 )   (121.8 )
Net earned premiums   1,053.0     1,143.1  
UNDERWRITING EXPENSES
Losses and loss adjustment expenses 620.6 674.3
Amortization of deferred policy acquisition costs 176.7 210.0
General, administrative and corporate expenses   210.0     236.9  
Total underwriting expenses   1,007.3     1,121.2  
   
Underwriting income including corporate expenses   45.7     21.9  
 
Net investment income 97.7 95.1
Interest expense (15.0 ) (14.8 )
Other income (expenses)   0.1     (1.0 )
Total other revenue   82.8     79.3  
 
Amortization and non-recurring expenses (21.2 ) (4.3 )
Net realized and unrealized exchange (losses) (22.1 ) (8.8 )
Net realized and unrealized investment (losses) gains (1) (58.4 ) 88.2
Realized (loss) on debt extinguishment   (8.6 )    
INCOME BEFORE TAX 18.2 176.3
Income tax expense   (2.1 )   (4.0 )
NET INCOME AFTER TAX 16.1 172.3
Dividends paid on ordinary shares (28.6 ) (27.6 )
Dividends paid on preference shares (15.2 ) (21.0 )
Preference share redemption costs (2.4 )
Proportion due to non-controlling interest   (0.3 )   (0.2 )
Retained (loss) income $ (28.0 ) $ 121.1  
 
Loss ratio 58.9 % 59.0 %
Policy acquisition expense ratio 16.8 % 18.4 %
General, administrative and corporate expense ratio 22.0 % 21.1 %
General, administrative and corporate expense ratio (excluding
amortization and non-recurring expenses)
19.9 % 20.7 %
Expense ratio 38.8 % 39.5 %
Expense ratio (excluding amortization and non-recurring expenses) 36.7 % 39.1 %
Combined ratio 97.7 % 98.5 %
Combined ratio (excluding amortization and non-recurring expenses)   95.6 %   98.1 %
 
           

Aspen Insurance Holdings Limited

Operating income reconciliation (unaudited)

$ in millions, except per share amounts

 
Three Months Ended Six Months Ended
(in US$ millions except where stated) June 30, 2018     June 30, 2017 June 30, 2018     June 30, 2017
 
Net (loss) income as reported $ (14.7 ) $ 75.8 $ 16.1 $ 172.3
Change in redemption value of preference shares (2.4 )
Net change attributable to non-controlling interest (0.1 ) (0.1 ) (0.3 ) (0.2 )
Preference share dividends   (7.6 )   (10.5 )   (15.2 )   (21.0 )
Net (loss) income available to ordinary shareholders (22.4 ) 65.2 0.6 148.7
Add (deduct) after tax income:
Net foreign exchange losses 32.6 3.0 17.2 8.1
Net realized losses (gains) on investments 20.3 (41.4 ) 58.1 (85.2 )
Net realized loss on debt extinguishment 8.6 8.6
Change in redemption value of preference shares 2.4
Amortization and non-recurring expenses   9.5     1.8     19.3     3.8  
Operating income after tax available to ordinary shareholders 48.6 28.6 103.8 77.8
Tax expense on operating income   6.8     0.9     9.2     2.2  
Operating income before tax available to ordinary shareholders $ 55.4   $ 29.5   $ 113.0   $ 80.0  
 
Basic earnings per ordinary share
Net (loss) income adjusted for preference share dividends and
non-controlling interest
$ (0.38 ) $ 1.09 $ 0.01 $ 2.48
Add (deduct) after tax income:
Net foreign exchange losses 0.55 0.05 0.29 0.13
Net realized losses (gains) on investments 0.34 (0.69 ) 0.97 (1.42 )
Net realized loss on debt extinguishment 0.14 0.14
Change in redemption value of preference shares 0.04
Amortization and non-recurring expenses   0.16     0.03     0.32     0.06  
Operating income adjusted for preference shares dividends and
non-controlling interest
$ 0.81   $ 0.48   $ 1.73   $ 1.29  
 
Diluted earnings per ordinary share
Net (loss) income adjusted for preference share dividends and
non-controlling interest
$ (0.38 ) $ 1.07 $ 0.01 $ 2.43
Add (deduct) after tax income:
Net foreign exchange losses 0.54 0.05 0.28 0.13
Net realized losses (gains) on investments 0.34 (0.68 ) 0.96 (1.39 )
Net realized loss on debt extinguishment 0.14 0.14
Change in redemption value of preference shares 0.04
Amortization and non-recurring expenses   0.16     0.03     0.32     0.06  
Operating income adjusted for preference shares dividends and
non-controlling interest
$ 0.80   $ 0.47   $ 1.71   $ 1.27  
 

The basic and diluted number of ordinary shares for the three
months ended June 30, 2018 is the same, as the inclusion of
dilutive securities in a loss-making period would be anti-dilutive.

 
 

Aspen Insurance Holdings Limited

Summary consolidated financial data (unaudited)

$ except share amounts

 
      Three Months Ended     Six Months Ended
June 30,
2018
    June 30,
2017
June 30,
2018
    June 30,
2017
 
Basic earnings per ordinary share
  Net (loss) income adjusted for preference share dividend and
non-controlling interest
($0.38 ) $ 1.09 $ 0.01 $ 2.48
Operating income adjusted for preference share dividend and
non-controlling interest
$ 0.81 $ 0.48 $ 1.73 $ 1.29
Diluted earnings per ordinary share
Net (loss) income adjusted for preference share dividend and
non-controlling interest
($0.38 ) $ 1.07 $ 0.01 $ 2.43
Operating income adjusted for preference share dividend and
non-controlling interest
$ 0.80 $ 0.47 $ 1.71 $ 1.27
 
Weighted average number of ordinary shares outstanding

(in millions) (1)

59.672 59.966 59.609 59.915
 
Weighted average number of ordinary shares outstanding and dilutive
potential ordinary shares (in millions)
59.672 61.023 60.528 61.096
 
Book value per ordinary share $ 38.75 $ 49.34 $ 38.75 $ 49.34
Diluted book value per ordinary share (treasury stock method) $ 38.21 $ 48.64 $ 38.21 $ 48.64
 
Ordinary shares outstanding at end of the period (in millions) 59.688 59.844 59.688 59.844
 
Ordinary shares outstanding and dilutive potential ordinary shares
at end of the period (treasury stock method)

(in millions)

60.534 60.712 60.534 60.712
 

(1) The basic and diluted number of ordinary shares for the
three months ended June 30, 2018 is the same, as the inclusion of
dilutive securities in a loss-making period would be anti-dilutive.

 
 

Aspen Insurance Holdings Limited

Summary consolidated segment information (unaudited)

$ in millions, except ratios

 

    Three Months Ended June 30, 2018     Three Months Ended June 30, 2017
Reinsurance     Insurance     Total Reinsurance     Insurance     Total
 
Gross written premiums $ 326.0 $ 527.8 $ 853.8 $ 335.6 $ 486.5 $ 822.1
Net written premiums 266.9 219.1 486.0 285.5 293.2 578.7
Gross earned premiums 366.2 479.3 845.5 320.6 429.1 749.7
Net earned premiums 289.0 230.5 519.5 272.7 289.3 562.0
Losses and loss adjustment expenses 167.0 143.4 310.4 152.6 193.5 346.1
Amortization of deferred policy acquisition expenses 62.8 23.1 85.9 53.4 42.9 96.3
General and administrative expenses 27.9   57.2   85.1   40.7   65.7   106.4  
Underwriting income $ 31.3   $ 6.8   $ 38.1 $ 26.0   $ (12.8 ) $ 13.2
 
Net investment income 50.4 47.4
Net realized and unrealized investment (losses) gains (20.7 ) 42.0
Realized (loss) on debt extinguishment (8.6 )
Corporate expenses (16.0 ) (11.4 )
Amortization and non-recurring expenses (1) (9.1 ) (2.1 )
Other (expenses) (2) (1.8 ) (1.7 )
Interest expense (7.6 ) (7.4 )
Net realized and unrealized foreign exchange (losses)(3) (40.9 ) (3.0 )
Income before tax $ (16.2 ) $ 77.0
Income tax credit (expense) 1.5   (1.2 )
Net (loss) income $ (14.7 ) $ 75.8  
 
Ratios
Loss ratio 57.8 % 62.2 % 59.7 % 56.0 % 66.9 % 61.6 %
  Policy acquisition expense ratio 21.7 % 10.0 % 16.5 % 19.6 % 14.8 % 17.1 %
General and administrative expense ratio (4) 9.7 % 24.8 % 21.2 % 14.9 % 22.7 % 21.3 %

General and administrative expense ratio (excluding amortization
and non-recurring expenses) (4)

9.7 % 24.8 % 19.5 % 14.9 % 22.7 % 21.0 %
Expense ratio 31.4 % 34.8 % 37.7 % 34.5 % 37.5 % 38.4 %
Expense ratio (excluding amortization and non-recurring expenses) 31.4 % 34.8 % 36.0 % 34.5 % 37.5 % 38.1 %
Combined ratio 89.2 % 97.0 % 97.4 % 90.5 % 104.4 % 100.0 %
Combined ratio (excluding amortization and non-recurring expenses) 89.2 % 97.0 % 95.7 % 90.5 % 104.4 % 99.7 %
Accident Year Ex-cat Loss Ratio
Loss ratio 57.8 % 62.2 % 59.7 % 56.0 % 66.9 % 61.6 %
Prior year loss development 10.9 % 4.8 % 8.2 % 12.0 % 5.6 % 8.7 %
Catastrophe losses (3.5 )% (3.5 )% (3.5 )% (3.8 )% (9.4 )% (6.7 )%
Accident year ex-cat loss ratio 65.2 % 63.5 % 64.4 % 64.2 % 63.1 % 63.6 %

(1) Amortization and non-recurring expenses in the second
quarter of 2018 included $8.6 million of expenses related to the
operational effectiveness and efficiency program

(2) Other (expenses) income in the second quarter of 2018 and
second quarter of 2017 included expenses of $3.4 million and $3.3
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) Total group general and administrative expense ratio
includes the impact from corporate and amortization and
non-recurring expenses

 
       

Aspen Insurance Holdings Limited

Summary consolidated segment information (unaudited)

$ in millions, except ratios

 
Six Months Ended June 30, 2018 Six Months Ended June 30, 2017
Reinsurance     Insurance     Total Reinsurance     Insurance     Total
 
Gross written premiums $ 949.5 $ 1,021.1 $ 1,970.6 $ 900.9 $ 919.2 $ 1,820.1
Net written premiums 691.9 429.6 1,121.5 733.7 531.2 1,264.9
Gross earned premiums 741.2 946.9 1,688.1 648.2 852.8 1,501.0
Net earned premiums 571.5 481.5 1,053.0 550.2 592.9 1,143.1
Losses and loss adjustment expenses 333.9 286.7 620.6 295.7 378.6 674.3
Amortization of deferred policy acquisition expenses 118.7 58.0 176.7 112.9 97.1 210.0
General and administrative expenses 59.5   120.8   180.3   84.6   127.5   212.1  
Underwriting income (loss) $ 59.4   $ 16.0   $ 75.4 $ 57.0   $ (10.3 ) $ 46.7
 
Net investment income 97.7 95.1
Net realized and unrealized investment (losses) gains (58.4 ) 88.2
Realized (loss) on debt extinguishment (8.6 )
Corporate expenses (29.7 ) (24.8 )
Amortization and non-recurring expenses (1) (21.2 ) (4.3 )
Other income (expenses) (2) 0.1 (1.0 )
Interest expense (15.0 ) (14.8 )
Net realized and unrealized foreign exchange (losses) (3) (22.1 ) (8.8 )
Income before tax $ 18.2 $ 176.3
Income tax expense (2.1 ) (4.0 )
Net income $ 16.1   $ 172.3  
 
Ratios
Loss ratio 58.4 % 59.5 % 58.9 % 53.7 % 63.9 % 59.0 %
  Policy acquisition expense ratio 20.8 % 12.0 % 16.8 % 20.5 % 16.4 % 18.4 %
General and administrative expense ratio (4) 10.4 % 25.1 % 22.0 % 15.4 % 21.5 % 21.1 %
General and administrative expense ratio (excluding amortization and
non-recurring expenses) (4)
10.4 % 25.1 % 19.9 % 15.4 % 21.5 % 20.7 %
Expense ratio 31.2 % 37.1 % 38.8 % 35.9 % 37.9 % 39.5 %
Expense ratio (excluding amortization and non-recurring expenses) 31.2 % 37.1 % 36.7 % 35.9 % 37.9 % 39.1 %
Combined ratio 89.6 % 96.6 % 97.7 % 89.6 % 101.8 % 98.5 %
Combined ratio (excluding amortization and non-recurring expenses) 89.6 % 96.6 % 95.6 % 89.6 % 101.8 % 98.1 %
Accident Year Ex-cat Loss Ratio
Loss ratio 58.4 % 59.5 % 58.9 % 53.7 % 63.9 % 59.0 %
Prior year loss development 6.8 % 8.6 % 7.6 % 9.8 % 3.6 % 6.6 %
Catastrophe losses (4.4 )% (3.6 )% (4.0 )% (6.3 )% (5.3 )% (5.8 )%
Accident year ex-cat loss ratio 60.8 % 64.5 % 62.5 % 57.2 % 62.2 % 59.8 %
 

(1) Amortization and non-recurring expenses in the first half
of 2018 included $20.4 million of expenses related to the
operational effectiveness and efficiency program

(2) Other income (expenses) in the first half of 2018 and
first half of 2017 included expenses of $2.4 million and $6.2
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) Total group general and administrative expense ratio
includes the impact from corporate and amortization and
non-recurring 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, Ireland, Singapore, Switzerland,
the United Arab Emirates, the United Kingdom and the United States. For
the year ended December 31, 2017, Aspen reported $12.9 billion in total
assets, $6.7 billion in gross reserves, $2.9 billion in total
shareholders' equity and $3.4 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 written, and Aspen's earnings conference
call will contain 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. Aspen believes these factors include,
but are not limited to: the actual development of losses and expenses
impacting estimates for the Northern and Southern California wildfires
that occurred in the fourth quarter of 2017 and Hurricanes Harvey, Irma
and Maria and the earthquakes in Mexico that occurred in the third
quarter of 2017; the impact of complex and unique causation and coverage
issues associated with the attribution of losses to wind or flood damage
or other perils such as fire or business interruption relating to such
events; potential uncertainties relating to reinsurance recoveries,
reinstatement premiums and other factors inherent in loss estimation;
our ability to successfully develop and execute our operating
effectiveness and efficiency program; 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
United Kingdom's decision to withdraw from the European Union; a decline
in our operating subsidiaries' ratings with S&P, A.M. Best or Moody's;
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; cyclical changes in
the insurance and reinsurance industry; the models we use to assess our
exposure to losses from future 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
(re)insurers 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 teams 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; our ability to exercise capital
management initiatives, including capital available to pursue our share
repurchase program at various levels or to declare dividends, or to
arrange banking facilities as a result of prevailing market conditions,
the level of catastrophes or other losses or changes in our financial
results; changes in general economic conditions, including inflation,
deflation, foreign currency exchange rates, interest rates and other
factors that could affect our financial results; 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; a
failure in our operational systems or infrastructure or those of third
parties, including those caused by security breaches or cyber attacks;
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
availability, cost or quality of reinsurance or retrocessional coverage;
changes in the total industry losses or our share of total industry
losses resulting from events, such as catastrophes, that have occurred
in prior years or may occur 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 catastrophes or by an unexpected
accumulation of attritional losses and deterioration in 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; 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; changes in the U.S. federal income tax
laws or regulations applicable to insurance companies and the manner in
which such laws and regulations are interpreted; the impact of U.S. tax
reform on Aspen's business, investments, results and assets, including
(i) changes to the valuation of deferred tax assets and liabilities,
(ii) the impact on intra-group reinsurance transactions, (iii) that the
costs associated with U.S. tax reform may be greater than initially
expected, and (iv) the risk that technical corrections, regulations and
supplemental legislation and future interpretations or applications
thereof or other changes may be issued in the future, including the
rules affecting the valuation of deferred tax assets; 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 for
the year ended December 31, 2017 as filed with the U.S. Securities and
Exchange Commission (the "SEC"). 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 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 or this release. Aspen's financial supplement,
which was furnished with the SEC on Form 8-K on August 1, 2018, 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 net income to operating income and page 7 for a
reconciliation of average shareholders' equity to average ordinary
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, after-tax net foreign exchange gains or losses,
including net realized and unrealized gains and losses from foreign
exchange contracts, net realized gains or losses on investments,
amortization of intangible assets and certain non-recurring income and
expenses, including expenses associated with the Company's operational
effectiveness and efficiency program. Operating income in the second
quarter of 2018 excluded the make-whole payment associated with the
partial redemption of Aspen's 6.0% Senior Notes due 2020. Operating
income in the first half of 2017 excluded the issue costs associated
with the redemption of Aspen's 7.401% Perpetual Non-Cumulative
Preference Shares.

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 net income to operating 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 basic earnings per
share to diluted and basic operating 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 gross loss ratios excluding
catastrophes are calculated by dividing gross losses excluding
catastrophe losses and prior year reserve movements by gross earned
premiums excluding catastrophe-related reinstatement premiums. Accident
year net loss ratios excluding catastrophes are calculated by dividing
net losses excluding catastrophe losses and prior year reserve movements
by net earned premiums excluding catastrophe-related reinstatement
premiums. Aspen has defined catastrophe losses in the six months ended
June 30, 2018 as losses associated with Winter Storm Friederike in
Europe, and U.K. and U.S. weather-related events. Catastrophe losses in
the six months ended June 30, 2017 were defined as losses associated
predominantly with a tornado in Mississippi, Cyclone Debbie in Australia
and other U.S. weather-related events. Please see pages 11-12 of this
release for a reconciliation of loss ratios to accident year loss ratios
excluding catastrophes.

Retention Ratio is a non-GAAP financial measure and is calculated
by dividing net written premium by gross written premium.

View Comments and Join the Discussion!