Aspen Insurance Holdings Limited (NYSE:AHL) today reported net
income for the second quarter of 2008 of $126.9 million or diluted
earnings per share of $1.44, an increase of 26.3% over the same
quarter last year. The combined ratio was 78.2%, comparing
favorably to 88.4% in the same quarter last year. Annualized
operating return on equity was 21.2%, an increase of 1.5 percentage
points compared with the second quarter of 2007. Book value per
share increased 22.1% to $29.84 when compared to the second quarter
of 2007. Second Quarter Financial Highlights ($ in millions, except
per share amounts and percentages) (Unaudited) � � � Q2 2008 Q2
2007 Change Gross written premium $528.8 $503.5 5.0% Net earned
premium $397.3 $451.2 (11.9)% Net investment income $70.5 $78.8
(10.5)% Net income after tax $126.9 $114.7 10.6% Diluted earnings
per share $1.44 $1.14 26.3% Operating return on equity 21.2% 19.7%
Combined ratio 78.2% 88.4% Book value per share $29.84 $24.44 22.1%
Diluted book value per share $28.99 $23.63 22.7% First Half 2008
Financial Highlights ($ in millions, except per share amounts and
percentages) (Unaudited) � � � H1 2008 H1 2007 Change Gross written
premium $1,125.0 $1,140.0 (1.3)% Net earned premium $788.9 $890.2
(11.4)% Net investment income $109.6 $146.3 (25.1)% Net income
after tax $208.1 $236.6 (12.1)% Combined ratio 81.7% 83.9%
Operating return on equity 16.6% 21.1% Diluted earnings per share
$2.23 $2.40 (7.1)% Chris O'Kane, Chief Executive Officer, said,
�Aspen had a strong quarter and delivered results ahead of our
expectations including net income of $126.9 million, operating ROE
of 21.2%, EPS of $1.44 and a combined ratio of 78.2%. Our solid
underwriting performance demonstrates our well diversified
portfolio and stringent risk selection criteria." Second Quarter
2008 Operating Highlights Second quarter combined ratio of 78.2%
reflects Aspen�s benign catastrophe loss experience against a
backdrop of significant industry losses in the U.S. Midwest.
Commenced writing business in our new Lloyd�s syndicate, Syndicate
4711. Repurchased $100 million ordinary shares under our share
repurchase program. Launch of our Singapore branch at the end of
June. $40 million favorable prior year claims development for the
quarter across all segments. Improving performance from our U.S.
insurance business. Book value per share of $29.84 increased from
$24.44 a year ago, up 22.1%. Eleventh consecutive quarterly
increase in book value per share, up 2.1% in the quarter. Business
Segment Highlights A summary of the operating highlights for each
of Aspen�s four business segments is presented below. Property
Reinsurance The property reinsurance segment recorded a combined
ratio of 65.0% for the quarter, a 12.3 percentage point improvement
over the same period in 2007, with no significant loss activity in
the second quarter 2008. On a year to date basis, the combined
ratio of 64.2% compares favorably to 73.0% recorded in the first
half of 2007. Aspen�s exposure to the storms and floods in the U.S.
Midwest is within our expectations. The prior year was impacted by
catastrophe losses from windstorm Kyrill and the June U.K. Floods.
Gross written premium decreased by 10.4% compared with the second
quarter of 2007, and 7.2% year to date. Casualty Reinsurance The
combined ratio for the quarter for the casualty reinsurance segment
improved to 91.5% from 94.7% in the second quarter of 2007. The
improvement in the combined ratio was due largely to $24.0 million
of reserve releases during the quarter, reflecting favorable loss
experience from a number of classes in this segment including
international casualty and U.S. casualty reinsurance. The combined
ratio for the second quarter of 2007 included $4.6 million of
reserve strengthening. On an accident year basis, the combined
ratio for the first half of 2008 was 100.6%. Gross written premium
in this segment was down by 28.5% compared to the second quarter of
2007, and down by 21.1% for the first half of this year versus the
same period in 2007. The reduction in written premium was primarily
due to our rigorous risk selection criteria in challenging market
conditions in addition to downward premium adjustments and
commutations in our international and U.S. casualty lines.
International Insurance The international insurance segment
reported a combined ratio for the second quarter of 79.2% compared
with 88.0% for the same period in 2007. The loss ratio for the
segment has improved to 51.3% in the second quarter of 2008 from
61.3% for the second quarter in 2007. This improvement was driven
by more favorable loss experience this quarter compared with 2007,
which was adversely impacted by large losses on the marine hull and
U.K. commercial property business lines during that period. On a
year to date basis, the combined ratio was 87.1% compared with
85.5% last year. Gross written premium for the quarter was up by
30.2% at $258.9 million, reflecting the incremental contributions
from lines of business such as political risk, excess casualty
insurance and professional lines. U.S. Insurance The combined ratio
for the U.S. insurance segment was 91.0%, down significantly from
122.6% for the second quarter of 2007. Year to date, the combined
ratio was 96.6%, down from 107.7% in 2007. Gross written premium on
a year to date basis has increased 3.7% when compared to the same
period last year. Our property book has changed significantly with
greater diversity and reduced loss activity. Investment Performance
Net investment income for the quarter was $70.5 million compared
with $78.8 million in the second quarter of 2007 due primarily to
the performance of our fund of hedge funds and a slight reduction
in book yield. This was a significant improvement on the first
quarter of 2008 as a result of the positive contribution from the
funds of hedge funds. Funds of hedge funds contributed $10.8
million in the quarter against the backdrop of volatile market
conditions. Net investment income year to date was $109.6 million
compared with $146.3 million in the first half of 2007, with the
decrease attributable mainly to the reduced contribution from our
investments in funds of hedge funds. The quarter also included
$88.6 million of net unrealized investment losses on the fixed term
bond portfolio. The book yield on the fixed income element of our
portfolio has remained stable at 4.8% when compared to the end of
the first quarter of 2008, and decreased marginally when compared
with 4.9% at the end of the second quarter in 2007. The average
credit quality of our fixed income book is AA+, with 89% of the
portfolio being graded A or higher. Capital Management On May 13,
2008, Aspen repurchased $100 million of ordinary shares
representing approximately 4% of Aspen�s market capitalization at
that date. The share repurchase of $100 million was funded from
cash on hand of the Company. Outlook for 2008 The Company expects
that for the remainder of 2008 pricing will continue to soften in
most lines. Total gross written premium levels will remain within
the original guidance of $1.8 billion +/- 5%. Volatility in the
capital and equity markets is expected to continue throughout the
remainder of the year and, as a result, guidance for investment
income has been revised to a range of $230 million to $265 million,
with fixed income and short-term investments expected to contribute
$230 million to $245 million and funds of hedge funds are expected
to contribute less than $20 million. The assumed cat load has also
been revised to $115 million for the full year, reflecting
experience of the half year. Estimated return on average equity is
unchanged in the range of 13.0% to 16.0% for 2008, assuming normal
loss experience for the remainder of the year. Earnings conference
call Aspen will hold a conference call to discuss its financial
results on Thursday, July 31, 2008 at 8:30 a.m. (Eastern Time).
CONFERENCE CALL PARTICIPATION DETAILS � July 31, 2008 at 8:30 a.m.
(EST) Participant Dial-In Numbers: � +1 (888) 459-5609 (US Toll
Free) +1 (404) 665-9920 (International) Conference ID: 51488921
Please call to register at least 10 minutes before the conference
call begins. The conference call will be webcast live in the
�presentations� section of the Investor Relations page of Aspen's
website, which is located at www.aspen.bm. The earnings press
release and a detailed financial supplement will be posted to the
website, as well as a brief slide presentation which may be used
for reference during the earnings call. REPLAY DETAILS A replay of
the call will be available for 10 days via telephone and Internet
starting two hours following the end of the live call. Replay
Access: � +1 (800) 642-1687 (US Toll Free) +1 (706) 645-9291
(International) www.aspen.bm Replay ID: 51488921 Aspen Insurance
Holdings Limited Summary Consolidated Balance Sheet (Unaudited) � �
(in US$ millions, except for per share data) As at June 30, 2008 As
at December 31, 2007 ASSETS Total investments $5,361.6 $5,227.3
Cash and cash equivalents 620.8 651.4 Reinsurance recoverables
330.6 381.7 Premiums receivables 792.0 575.6 Other assets 394.1
365.3 Total assets $7,499.1 $7,201.3 � LIABILITIES Losses and loss
adjustment expenses $2,944.4 $2,946.0 Unearned premiums 1,018.9
757.6 Other payables 432.4 430.6 Long-term debt 249.5 249.5 Total
liabilities $4,645.2 $4,383.7 � SHAREHOLDERS� EQUITY Total
shareholders� equity 2,853.9 2,817.6 Total liabilities and
shareholders� equity $7,499.1 $7,201.3 � Book value per share
$29.84 $27.95 Diluted book value per share (treasury stock method)
$28.99 $27.08 Aspen Insurance Holdings Limited Summary Consolidated
Statements of Income (Unaudited) � � (in US$ millions, except for
percentages) Three Months Ended June 30, 2008 Three Months Ended
June 30, 2007 � UNDERWRITING REVENUES Gross written premiums $528.8
$503.5 Premiums ceded (22.8) (85.0) Net written premiums 506.0
418.5 Change in unearned premiums (108.7) 32.7 Net earned premiums
397.3 451.2 UNDERWRITING EXPENSES Losses and loss expenses 188.3
272.7 Acquisition expenses 65.0 81.7 General and administrative
expenses 57.1 44.4 Total underwriting expenses 310.4 398.8
Underwriting income 86.9 52.4 OTHER OPERATING REVENUE Net
investment income 70.5 78.8 Interest expense (4.0) (4.4) Total
other operating revenue 66.5 74.4 Other income - 1.9 OPERATING
INCOME BEFORE TAX 153.4 128.7 OTHER Net realized and unrealized
exchange gains (losses) (5.0) 8.0 Net realized and unrealized
investment gains (losses) 0.8 (5.6) INCOME BEFORE TAX 149.2 131.1
Income taxes expense (22.3) (16.4) NET INCOME AFTER TAX 126.9 114.7
Dividends paid on ordinary shares (12.8) (13.2) Dividends paid on
preference shares (7.0) (7.0) Retained income $107.1 $94.5
Components of net income (after tax) Operating income $131.2 $110.8
Net realized and unrealized exchange gains (losses) (after tax)
(5.0) 8.0 Net realized and unrealized investment gains (losses)
(after tax) 0.7 (4.1) NET INCOME AFTER TAX $126.9 $114.7 � Loss
ratio 47.4% 60.5% Policy acquisition expense ratio 16.4% 18.1%
General and administrative expense ratio 14.4% 9.8% Expense ratio
30.8% 27.9% Combined ratio 78.2% 88.4% Aspen Insurance Holdings
Limited Summary Consolidated Financial Data (Unaudited) � � Three
Months Ended Six Months Ended (in US$ except for number of shares)
June 30, 2008 � June 30, 2007 June 30, 2008 � June 30, 2007 � Basic
earnings per ordinary share Net income adjusted for preference
share dividend $1.44 $1.22 $2.31 $2.53 Operating income adjusted
for preference dividend $1.49 $1.18 $2.30 $2.47 Diluted earnings
per ordinary share Net income adjusted for preference share
dividend $1.39 $1.19 $2.24 $2.46 Operating income adjusted for
preference dividend $1.44 $1.14 $2.23 $2.40 � Weighted average
number of ordinary shares outstanding (in millions) 83.513 88.205
84.512 88.014 Weighted average number of ordinary shares
outstanding and dilutive potential ordinary shares (in millions)
86.010 90.827 86.980 90.634 � Book value per ordinary share $29.84
$24.44 Diluted book value (treasury stock method) $28.99 $23.63 �
Ordinary shares outstanding at end of the period (in millions)
81.321 88.545 Ordinary shares outstanding and dilutive potential
ordinary shares at end of the period (treasury stock method) (in
millions) 83.691 91.553 Aspen Insurance Holdings Limited Summary
Consolidated Segment Information (Unaudited) � � (in US$ millions,
except for percentages) Three Months Ended June 30, 2008 Three
Months Ended June 30, 2007 � Gross written premiums Property
Reinsurance $170.5 $190.3 Casualty Reinsurance 56.8 79.4
International Insurance 258.9 198.9 U.S. Insurance 42.6 34.9 Total
$528.8 $503.5 � Premiums ceded Property Reinsurance $5.0 $74.7
Casualty Reinsurance 2.3 1.3 International Insurance 7.3 2.0 U.S.
Insurance 8.2 7.0 Total 22.8 85.0 � Net written premiums Property
Reinsurance $165.5 $115.6 Casualty Reinsurance 54.5 78.1
International Insurance 251.6 196.9 U.S. Insurance 34.4 27.9 Total
$506.0 $418.5 � Net earned premiums Property Reinsurance $123.6
$144.3 Casualty Reinsurance 85.8 125.7 International Insurance
162.9 156.0 U.S. Insurance 25.0 25.2 Total $397.3 $451.2 �
Underwriting profit Property Reinsurance $43.3 $32.7 Casualty
Reinsurance 7.3 6.7 International Insurance 34.1 18.7 U.S.
Insurance 2.2 (5.7) Total $86.9 $52.4 � Combined ratio Property
Reinsurance 65.0% 77.3% Casualty Reinsurance 91.5% 94.7%
International Insurance 79.2% 88.0% U.S. Insurance 91.0% 122.6%
Total 78.2% 88.4% 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 Bermuda, France, Ireland, the United States, the United
Kingdom, Singapore and Switzerland. For the six months ended June
30, 2008, Aspen reported gross written premiums of $1,125.0
million, net income of $208.1 million and total assets of $7.5
billion. For more information about Aspen, please visit
www.aspen.bm. Application of the Safe Harbor of the Private
Securities Litigation Reform Act of 1995: 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," "project," "anticipate," "seek,"
"will," "estimate," "may," "continue," �guidance� and similar
expressions of a future or forward-looking nature. 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: the impact of deteriorating credit
environment created by the sub-prime crisis and global credit
crunch; a decline in the value of our investment portfolio or a
rating downgrade of the securities in our portfolio; Aspen�s
reliance on loss reports received from cedants and loss adjustors;
Aspen's reliance on industry loss estimates and those generated by
modeling techniques; any changes in Aspen's reinsurers' credit
quality; changes in assumptions on flood damage exclusions as a
result of prevailing lawsuits and case law; the amount and timing
of reinsurance recoverables and reimbursements actually received by
Aspen from its reinsurers; the impact that our future operating
results, capital position and rating agency and other
considerations have on the execution of any capital management
initiatives; 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;
the impact of any capital management activities on our financial
condition; the impact of acts of terrorism and related legislation
and acts of war; the possibility of greater frequency or severity
of claims and loss activity, including as a result of natural or
man-made catastrophic events than our underwriting, reserving or
investment practices have anticipated; evolving interpretive issues
with respect to coverage after major loss events; the level of
inflation in repair costs due to limited availability of labor and
materials after catastrophes; the effectiveness of Aspen's loss
limitation methods; changes in the availability, cost or quality of
reinsurance or retrocessional coverage, which may affect our
decision to purchase such coverage; the reliability of, and changes
in assumptions to, catastrophe pricing, accumulation and estimated
loss models; loss of key personnel; a decline in our operating
subsidiaries' ratings with Standard & Poor's, A.M. Best Company
or Moody's Investors Service; changes in general economic
conditions including inflation, foreign currency exchange rates,
interest rates and other factors that could affect our investment
portfolio; the number and type of insurance and reinsurance
contracts that we wrote at the January 1st and other renewal
periods in 2008 and the premium rates available at the time of such
renewals within our targeted business lines; increased competition
on the basis of pricing, capacity, coverage terms or other factors;
decreased demand for Aspen�s insurance or reinsurance products and
cyclical downturn of the industry; changes in governmental
regulations, interpretations or tax laws in jurisdictions where
Aspen conducts business; proposed and future changes to insurance
laws and regulations, including with respect to U.S. state- and
other government-sponsored reinsurance funds and primary insurers;
Aspen or its Bermudian subsidiary becoming subject to income taxes
in the United States or the United Kingdom; the effect on insurance
markets, business practices and relationships of ongoing
litigation, investigations and regulatory activity by insurance
regulators and prosecutors. For a more detailed description of
these uncertainties and other factors, please see the "Risk
Factors" section in Aspen's Annual Reports on Form 10-K as filed
with the U.S. Securities and Exchange Commission on February 29,
2008. 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. 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. Non-GAAP
Financial Measures In presenting Aspen's results, management has
included and discussed certain "non-GAAP financial measures" as
such term is defined in Regulation G. Management believes that
these non-GAAP measures, which may be defined differently by other
companies, better explain Aspen's results of operations in a manner
that allows for a more complete understanding of the underlying
trends in Aspen's business. However, these measures should not be
viewed as a substitute for those determined in accordance with
GAAP. The reconciliation of such non-GAAP financial measures to
their respective most directly comparable GAAP financial measures
in accordance with Regulation G is included in the financial
supplement, which can be obtained from the Investor Relations
section of Aspen's website at www.aspen.bm. (1) Annualized
Operating Return on Equity (�Operating ROE�) is a non-GAAP
financial measure which divides operating income by average equity.
Annualized Operating Return on Equity 1) is calculated using
operating income, as defined below and 2) excludes from average
equity, the average after-tax unrealized appreciation or
depreciation on investments and the average after-tax unrealized
foreign exchange gains or losses and the aggregate value of the
liquidation preferences of our preference shares. Unrealized
appreciation (depreciation) on investments is primarily the result
of interest rate movements and the resultant impact on fixed income
securities, and unrealized appreciation (depreciation) on foreign
exchange is the result of exchange rate movements between the U.S.
dollar and the British pound. Such appreciation (depreciation) is
not related to management actions or operational performance (nor
is it likely to be realized). Therefore, Aspen believes that
excluding these unrealized appreciations (depreciations) provides a
more consistent and useful measurement of operating performance,
which supplements GAAP information. Average equity is calculated as
the arithmetic average on a monthly basis for the stated periods.
Aspen presents Operating ROE as a measure that is commonly
recognized as a standard of performance by investors, analysts,
rating agencies and other users of its financial information. See
page 28 of Aspen's financial supplement for a reconciliation of
operating income to net income and page 7 for a reconciliation of
average equity. Aspen�s financial supplement can be obtained from
the Investor Relations section of Aspen's website at www.aspen.bm.
(2) 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 capital
gains or losses and after-tax net foreign exchange gains or losses.
Aspen excludes after-tax net realized capital gains or losses and
after-tax net foreign exchange gains or losses from its calculation
of operating income because 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 distorts 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 above and
page 28 of Aspen's financial supplement for a reconciliation of
operating income to net income. Aspen�s financial supplement can be
obtained from the Investor Relations section of Aspen's website at
www.aspen.bm. (3) Diluted book value per ordinary share is a
non-GAAP financial measure. Aspen has included diluted book value
per ordinary share because it takes into account the effect of
dilutive securities; therefore, Aspen believes it is a better
measure of calculating shareholder returns than book value per
share. Please see page 26 of Aspen's financial supplement for a
reconciliation of diluted book value per share to basic book value
per share. Aspen's financial supplement can be obtained from the
Investor Relations section of Aspen's website at www.aspen.bm.
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