Aspen Insurance Holdings Limited (NYSE:AHL) today reported a net
profit after tax for the second quarter of 2009 of $110.4 million
and operating earnings of $1.14 per diluted ordinary share. This
compares to a net profit after tax of $126.9 million, and operating
earnings of $1.44 per diluted share for the second quarter last
year.
Book value per share on a diluted basis
of $30.36 increased by $1.37 when compared to June 30, 2008 and by
$2.26 since the end of December 2008, as a result of $164.5 million
of retained income and a $45.0 million increase in unrealized gains
from the fixed income investment portfolio generated during the
first half of 2009.
Second Quarter 2009 Financial
Highlights
($ in millions, except per
share amounts and percentages)
(Unaudited)
Q2 2009 Q2 2008
Change Gross written premium $534.3 $528.8 1.0% Net earned
premium $428.6 $397.3 7.9% Net investment income $72.2 $70.5 2.4%
Net income after tax $110.4 $126.9 (13.0)% Diluted net income per
share $1.22 $1.39 (12.2)% Diluted operating earnings per share
$1.14 $1.44 (20.8)% Net income annualized return on equity 17.6%
20.4% Annualized operating return on equity 16.4% 21.2%
Combined ratio 87.7% 78.2% Book value per ordinary
share $31.45 $29.84 5.4% Diluted book value per ordinary share
$30.36 $28.99 4.7%
First Half 2009 Financial
Highlights
($ in millions, except per
share amounts and percentages)
(Unaudited)
H1 2009 H1 2008 Change Gross
written premium $1,171.1 $1,125.0 4.1% Net earned premium $875.9
$788.9 11.0% Net investment income $131.4 $109.6 19.9% Net income
after tax $201.8 $208.1 (3.0)% Diluted net income per share $2.61
$2.24 16.5% Diluted operating earnings per share $2.32 $2.23 4.0%
Net income annualized return on equity 16.2% 16.6%
Annualized operating return on equity 17.0% 16.6% Combined
ratio 86.0% 81.7%
Chris O'Kane, Chief Executive Officer said, “I am pleased to
report another good quarter for Aspen. Our annualized operating ROE
in the quarter was 16.4% which is due to strong performance from
both our underwriting operations and investments. We reported
continued growth in book value per share of 4.3% in the quarter and
8.0% year to date, which reflect our conservative investment
philosophy and underwriting discipline in a challenging market
environment. We are seeing attractive rate increases in some parts
of our business, in particular cat exposed lines, but continued
rating pressure elsewhere. As a consequence our focus will remain
on allocating our capital to those lines which offer attractive
risk adjusted returns on a relative basis consistent with our
diversified business model.”
Second Quarter 2009 Operating Highlights
- Cash flows from operating
activities were $99.1 million compared with $156.3 million in the
second quarter of 2008 with the decrease driven by claims
settlements related to Hurricane Ike.
- Reserve releases were $16.9
million for the quarter compared with $40.5 million in the second
quarter of 2008.
- Unrealized gains in the fixed
income portfolio increased by $41.7 million this quarter compared
with unrealized losses of $110.4 million in the second quarter of
2008.
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
48.1% for the second quarter compared with 65.0% in the same period
in 2008. The improvement in the combined ratio is attributable to
$20.9 million of favorable loss reserve development during the
quarter compared with $2.6 million of reserve releases in the
second quarter of 2008. A reduction in loss expectations for
Hurricane Ike has contributed to the favorable development in the
current quarter. The combined ratio for the half year was 53.0%
compared with 64.2% in 2008 driven by an increase in earned premium
resulting from increased production and a reduction in operating
expenses attributable to continued cost management discipline.
Gross written premium for the quarter of $180.0 million increased
marginally when compared to the second quarter in 2008. For the six
month period in 2009, gross written premium increased by 13% to
$400.5 million when compared to 2008, due to favorable market
conditions and the establishment of our credit and surety
reinsurance line during the period.
Casualty Reinsurance
Casualty reinsurance reported a combined ratio for the quarter
of 99.0% compared with 91.5% for the same period in 2008. The
increase in the combined ratio for the quarter is attributable
mainly to an $18.0 million reduction in reserve releases when
compared to the second quarter of 2008. For the half year, the
combined ratio was 96.4% compared with 93.4% for 2008 with the
increase driven by a reduction in reserve releases from $38.3
million in 2008 to $9.1 million in the current period. The accident
year combined ratio for the six month period improved marginally to
100.2% compared with 100.6% in 2008. Gross written premium of $59.0
million and $245.8 million for the quarter and half year of 2009
are broadly in line with 2008.
International Insurance
The international insurance segment reported a combined ratio
for the quarter of 99.9% compared with 79.2% for the same period in
2008. The increase in the combined ratio for the quarter is
attributable to $12.5 million of losses from the Air France
disaster and a net reserve strengthening of $1.7 million in the
quarter. This compares to $11.2 million of reserve releases in the
second quarter of 2008. The combined ratio for the six months in
2009 was 99.5% compared with 87.1% in 2008. The increase in earned
premium for the six month period in 2009, of $32.1 million was
offset by the second quarter aviation losses and $3.7 million of
net reserve strengthening in the period. This compares with $18.1
million of favorable reserve development in 2008. Gross written
premium for the quarter of $238.7 million is down 7.8% on the same
period in 2008 as we adjust our underwriting appetite in line with
market conditions. Gross written premium for the six month period
in 2009 is down 5.4% to $433.4 million compared to 2008.
U.S. Insurance
In the U.S. insurance segment, reserves in the quarter were
strengthened by $6.9 million in our U.S. casualty line which
increased the combined ratio by 27.4 percentage points as a
result of the relatively small earned premium in the segment. As a
result, the combined ratio for the quarter was 165.9% compared with
91.0% in the same period in 2008. The combined ratio for the six
months in 2009 was 128.4% compared with 96.6% in 2008. The accident
year loss ratio for the six months of 2009 was 68.5% compared to
66.0% in the same period in 2008. Gross written premium increased
by 32.9% to $56.6 million when compared to the second quarter in
2008 driven mainly by favorable market conditions in the property
book. Gross written premiums for the six month period increased by
24.9% to $91.4 million when compared to 2008.
Investment Performance
Net investment income for the quarter was $72.2 million compared
with $70.5 million in the second quarter of 2008, due primarily to
the $16.2 million contribution from the funds of hedge funds
investments, compared to a gain of $10.8 million from these
investments in the second quarter of 2008. Annualized total
investment return for the quarter was 7.9%.
Unrealized gains on the fixed income portfolio at the end of the
second quarter of 2009 were $112.4 million, an increase of $41.7
million from the end of the first quarter of 2009. The book yield
on the fixed income portfolio of 4.4%, although in line with the
first quarter of 2009, has decreased from 4.8% at June 30, 2008.
The average credit quality of the portfolio is AA+ with an average
duration of 3.2 years. Other-than-temporary impairment charges were
$2.9 million for the second quarter of 2009.
Outlook for 2009
The Company anticipates total gross written premium of $2
billion +/- 5%, premium ceded of 10% to 12% of gross earned
premium, a combined ratio in the range of 88% to 94%, a tax rate of
13% to 16% and a cat-load of $105 million for the remainder of the
year, assuming normal loss experience.
Earnings conference call
Aspen will hold a conference call to discuss its financial
results on Thursday, July 30, 2009 at 8:30 a.m. (Eastern Time).
CONFERENCE CALL PARTICIPATION
DETAILS – July 30, 2009 at 8:30 a.m. (EST)
Participant Dial-In
Numbers:
+1 (888) 459-5609 (US Toll Free) +1 (404)
665-9920 (International)
Conference ID:
17143076
Please call to register at least 10 minutes before the
conference call begins.
The conference call will be webcast live in the ‘presentations’
section of the Investor Relations page of Aspen's website, which is
located at www.aspen.bm. The earnings press release and a detailed
financial supplement will be posted to the website, as well as a
brief slide presentation which may be used for reference during the
earnings call.
REPLAY DETAILS
A replay of the call will be available
for 14 days via telephone and Internet starting two hours following
the end of the live call.
Replay Access: +1 (800) 642-1687 (US Toll
Free) +1 (706) 645-9291 (International)
www.aspen.bm
Replay ID: 17143076
Aspen Insurance Holdings
Limited
Summary Consolidated Balance
Sheet
($ in millions, except per
share data)
(Unaudited)
(in US$ millions)
As at June 30,
2009
As at December 31,
2008
ASSETS Total investments 5,284.3 4,944.9 Cash and cash equivalents
718.3 809.1 Reinsurance recoverables 462.0 329.6 Premium
receivables 850.0 677.5 Other assets 703.4 527.7 Total
assets 8,018.0 7,288.8 LIABILITIES Losses and loss
adjustment expenses 3,265.1 3,070.3 Unearned premiums 1,039.6 810.7
Other payables 491.2 379.2 Long-term debt 249.6 249.5 Total
liabilities 5,045.5 4,509.7 SHAREHOLDERS’ EQUITY Total
shareholders’ equity 2,972.5 2,779.1 Total liabilities and
shareholders’ equity 8,018.0 7,288.8 Tangible book value per
share 31.45 28.85 Diluted book value per share (treasury stock
method) 30.36 28.10
Aspen Insurance Holdings
Limited
Summary Consolidated Statements
of Income
($ in millions, except share,
per share data and ratios)
(Unaudited)
(in US$ millions)
Three Months Ended
June 30, 2009
Three Months Ended
June 30, 2008
UNDERWRITING REVENUES Gross written premiums 534.3 528.8
Premiums ceded (49.6) (22.8) Net written premiums 484.7 506.0
Change in unearned premiums (56.1) (108.7) Net earned premiums
428.6 397.3 UNDERWRITING EXPENSES Losses and loss expenses 234.7
188.3 Acquisition expenses 80.8 65.0 General and administrative
expenses 59.9 57.1 Total underwriting expenses 375.4 310.4
Underwriting income 53.2 86.9 OTHER OPERATING REVENUE Net
investment income 72.2 70.5 Interest expense (4.0) (4.0) Total
other operating revenue 68.2 66.5 Other income (expense) 0.7
0.0 OPERATING INCOME BEFORE TAX 122.1 153.4 OTHER Net realized
exchange gains 3.1 (5.0) Net realized investment losses 4.8 0.8
INCOME BEFORE TAX 130.0 149.2 Income taxes expense (19.6) (22.3)
NET INCOME AFTER TAX 110.4 126.9 Dividends paid on ordinary shares
(12.3) (12.8) Dividend paid on preference shares (5.8) (7.0)
Retained income 92.3 107.1 Components of net income (after tax)
Operating income 103.8 131.2 Net realized exchange gains
(after tax) 3.1 (5.0) Net realized investment losses (after tax)
3.5 0.7 NET INCOME AFTER TAX 110.4 126.9 Loss ratio 54.8%
47.4% Policy acquisition expense ratio 18.9% 16.4% General and
administrative expense ratio 14.0% 14.4% Expense ratio 32.9% 30.8%
Combined ratio 87.7% 78.2%
Aspen Insurance Holdings
Limited
Summary Consolidated Financial
Data
($ in millions, except share,
per share data and ratios)
(Unaudited)
Three Months Ended Six Months Ended (in US$
except for number of shares)
June 30,
2009
June 30,
2008
June 30,
2009
June 30,
2008
Basic earnings per ordinary share Net income adjusted for
preference share dividend
$1.26 $1.44
$2.68 $2.31
Operating income adjusted for preference dividend
$1.18
$1.49
$2.39 $2.30 Diluted earnings per ordinary share Net
income adjusted for preference share dividend
$1.22 $1.39
$2.61 $2.24 Operating income adjusted for preference
dividend
$1.14 $1.44
$2.32 $2.23 Weighted
average number of ordinary shares outstanding (in millions)
82.940 83.513
82.241 84.512 Weighted average number
of ordinary shares outstanding and dilutive potential ordinary
shares (in millions)
85.645 86.010
84.612 86.980
Book value per ordinary share
$31.45 $29.84 Diluted
book value (treasury stock method)
$30.36 $28.99
Ordinary shares outstanding at end of the period (in millions)
83.022 81.321 Ordinary shares outstanding and dilutive
potential ordinary shares at end of the period (treasury stock
method) (in millions)
85.985 83.691
Aspen Insurance Holdings
Limited
Summary Consolidated Segment
Information
($ in millions except
ratios)
(Unaudited)
Three Months Ended
June 30, 2009
Three Months Ended
June 30, 2008
Gross written premiums Property Reinsurance 180.0
170.5 Casualty Reinsurance 59.0 56.8 International Insurance 238.7
258.9 U.S. Insurance 56.6 42.6 Total 534.3 528.8
Premiums
ceded Property Reinsurance 1.6 5.0 Casualty Reinsurance 0.0 2.3
International Insurance 38.6 7.3 U.S. Insurance 9.4 8.2 Total 49.6
22.8
Net written premiums Property Reinsurance 178.4
165.5 Casualty Reinsurance 59.0 54.5 International Insurance 200.1
251.6 U.S. Insurance 47.2 34.4 Total 484.7 506.0
Net
earned premiums Property Reinsurance 132.0 123.6 Casualty
Reinsurance 101.2 85.8 International Insurance 170.2 162.9 U.S.
Insurance 25.2 25.0 Total 428.6 397.3
Underwriting
profit Property Reinsurance 68.4 43.3 Casualty Reinsurance 1.1
7.3 International Insurance 0.3 34.1 U.S. Insurance (16.6) 2.2
Total 53.2 86.9
Combined ratio Property Reinsurance
48.1% 65.0% Casualty Reinsurance 99.0% 91.5% International
Insurance 99.9% 79.2% U.S. Insurance 165.9% 91.0% Total 87.7% 78.2%
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, Singapore,
the United States, the United Kingdom, and Switzerland. For the
three months ended June 30, 2009, Aspen reported gross written
premiums of $534.3 million, net income of $110.4 million and total
assets of $8.0 billion. Its operating subsidiaries have been
assigned a rating of “A” (“Strong”) by Standard & Poor’s, an
“A” (“Excellent”) by A.M. Best and an “A2” (“Good”) by Moody’s
Investors Service. 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 continuing and
uncertain impact of the current depressed credit environment, the
banking crises and economic recessions in many of the countries in
which we operate and of the measures being taken by governments to
counter these issues; the risk of a material decline in the value
or liquidity of all or parts of our investment portfolio; changes
in insurance and reinsurance market conditions that could adversely
impact execution of the business plan; changes in our ability to
exercise capital management or strategic initiatives or to arrange
banking facilities as a result of prevailing market changes or
changes in our financial position; 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; increased counterparty risk due to the
impairment of financial institutions; changes in the total industry
losses, or our share of total industry losses, resulting from past
events such as Hurricanes Ike and Gustav 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 modelling techniques, changes in rulings on flood
damage or other exclusions as a result of prevailing lawsuits and
case law, any changes in our reinsurers’ credit quality and the
amount and timing of reinsurance recoverables; 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, reinsurance purchasing 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 our loss
limitation methods; changes in the availability, cost or quality of
reinsurance or retrocessional 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
(“S&P”), A.M. Best or Moody’s Investors Service (“Moody’s”);
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 2009 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 and the related demand and supply
dynamics as contracts come up for renewal; decreased demand for our
insurance or reinsurance products and cyclical changes in the
insurance and reinsurance sectors; changes in government
regulations or tax laws in jurisdictions where we conduct
business; and Aspen or its Bermudian subsidiary becoming
subject to income taxes in the United States or the United Kingdom;
and 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 26, 2009. 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 Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Annualized Operating
Return on Average 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 29 of Aspen's financial supplement for a reconciliation
of operating income to net income and page 8 for a reconciliation
of average equity.
(2) Annualized Operating Return on Average Equity excluding
gains or losses from funds of hedge funds (“Adjusted Operating
ROE”) is a non-GAAP financial measure. Annualized Operating
Return on Average Equity excluding gains or losses from funds of
hedge funds 1) is calculated using adjusted 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 Adjusted 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 31 of Aspen's financial supplement for a reconciliation
of adjusted operating income to net income and page 8 for a
reconciliation of average equity.
(3) 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 29 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.
(4) Adjusted Operating income is a non-GAAP financial
measure. Adjusted 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, after-tax net
foreign exchange gains or losses and excludes after tax net gains
or losses from our investments in funds of hedge funds.
Aspen excludes after-tax net realized capital gains or losses,
after-tax net foreign exchange gains or losses and after tax net
gains or losses from our investments in funds of hedge funds 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 31 of Aspen's financial supplement for a
reconciliation of adjusted 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.
(5) 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 27 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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