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
Operating highlights for the six months ended June 30, 2018
Investment performance
Capital and Debt
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 phonePlease
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 onlineAspen will provide a live webcast on
Aspen’s website at www.aspen.co.
To download the materialsThe earnings press release and a
detailed financial supplement will also be published on Aspen’s website
at www.aspen.co.
To listen laterA replay of the call will be available
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
Aspen Insurance Holdings Limited
Summary consolidated statement of income (unaudited)
$ in millions, except ratios
Aspen Insurance Holdings Limited
Summary consolidated statement of income (unaudited)
$ in millions, except ratios
Aspen Insurance Holdings Limited
Operating income reconciliation (unaudited)
$ in millions, except per share amounts
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
(in millions) (1)
(in millions)
(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
General and administrative expense ratio (excluding amortization
and non-recurring expenses) (4)
(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
(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.
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