Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
today a net loss after tax of $(184.9) million, or $(3.25) per
diluted ordinary share, and an operating loss after tax of $(178.1)
million, or $(3.14) per diluted ordinary share, for the fourth
quarter of 2017.
Chris O’Kane, Chief Executive Officer, commented: “Aspen's
fourth quarter 2017 results were well below acceptable levels.
While some of the losses we reported arose from abnormally high
natural catastrophe activity, we recognize that despite prior
actions to strengthen our Insurance book, we need to take further
actions to deliver substantially better results.
“We are redoubling our efforts to reduce volatility and improve
Aspen’s profitability. Most of our non-natural catastrophe losses
were concentrated in a limited number of lines within Aspen
Insurance. We are actively reviewing these lines, and our focus is
on taking all actions necessary to mitigate our residual exposure
and deliver value to our shareholders. Our loss reserves are
strong, and we continue to focus on achieving appropriate loss
ratios and realizing the benefits to our expense ratio from the
successful implementation of our operational effectiveness and
efficiency program.”(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 December 31,
2017
- Gross written premiums of $688.3
million in the fourth quarter of 2017, an increase of 13.6%
compared with $606.1 million in the fourth quarter of 2016
- Insurance: Gross written premiums of
$472.2 million, an increase of 15.5% compared with $409.0 million
in the fourth quarter of 2016, due to growth in all
sub-segments
- Reinsurance: Gross written premiums of
$216.1 million, an increase of 9.6% compared with $197.1 million in
the fourth quarter of 2016, primarily due to growth in the
Specialty sub-segment as a result of AgriLogic
- Net written premiums of $340.2
million in the fourth quarter of 2017, a decrease of 21.0% compared
with $430.8 million in the fourth quarter of 2016 as Aspen
continues to make more efficient use of ceded reinsurance to seek
to reduce volatility. The retention ratio in the fourth quarter of
2017 was 49.4% compared with 71.1% in the fourth quarter of 2016
- Insurance: Net written premiums of
$187.5 million, a decrease of 19.3% compared with $232.4 million in
the fourth quarter of 2016, primarily due to increased use of quota
share reinsurance to seek to reduce volatility. The retention ratio
in the fourth quarter of 2017 was 39.7% compared with 56.8% in the
fourth quarter of 2016
- Reinsurance: Net written premiums of
$152.7 million, a decrease of 23.0% compared with $198.4 million in
the fourth quarter of 2016, primarily due to transitional changes
to ceding of premiums following the sale of AgriLogic in the fourth
quarter of 2017
- Loss ratio of 106.5% in the
fourth quarter of 2017 compared with 63.2% in the fourth quarter of
2016. The loss ratio included pre-tax catastrophe losses of $137.6
million, or 27.0 percentage points, net of reinsurance recoveries
and $1.6 million of reinstatement premiums, in the fourth quarter
of 2017, including $133.8 million related to wildfires in
California. Pre-tax catastrophe losses, net of reinsurance
recoveries, totaled $54.6 million, or 8.9 percentage points, in the
fourth quarter of 2016
- Insurance: Loss ratio of 95.2% compared
with 68.5% in the fourth quarter of 2016. The loss ratio included
pre-tax catastrophe losses of $2.4 million, or 1.0 percentage
points, net of reinsurance recoveries and a $(0.7) million credit
for reinstatement premiums, in the fourth quarter of 2017. Total
pre-tax catastrophe losses in the Insurance segment included $10.2
million of losses related to the wildfires in California offset by
favorable development related primarily to other weather-related
events in the U.S. Pre-tax catastrophe losses, net of reinsurance
recoveries, totaled $17.0 million, or 5.2 percentage points, in the
fourth quarter of 2016
- Reinsurance: Loss ratio of 116.3%
compared with 57.2% in the fourth quarter of 2016. The loss ratio
included pre-tax catastrophe losses of $135.2 million, or 49.6
percentage points, net of reinsurance recoveries and $2.3 million
of reinstatement premiums, in the fourth quarter of 2017. Total
pre-tax catastrophe losses in the Reinsurance segment included
$123.6 million related to the wildfires in California while the
remainder related primarily to other weather-related events.
Pre-tax catastrophe losses, net of reinsurance recoveries, totaled
$37.6 million, or 13.2 percentage points, in the fourth quarter of
2016
- Net favorable development on
prior year loss reserves of $12.6 million benefited the loss ratio
by 2.5 percentage points in the fourth quarter of 2017. Prior year
net favorable reserve development of $51.1 million benefited the
loss ratio by 8.3 percentage points in the fourth quarter of 2016
- Insurance: Prior year net favorable
reserve development of $1.8 million benefited the loss ratio by 0.8
percentage points in the fourth quarter of 2017. Prior year net
favorable development of $16.2 million benefited the loss ratio by
5.0 percentage points in the fourth quarter of 2016
- Reinsurance: Prior year net favorable
reserve development of $10.8 million benefited the loss ratio by
4.0 percentage points in the fourth quarter of 2017. Prior year net
favorable development of $34.9 million benefited the loss ratio by
12.2 percentage points in the fourth quarter of 2016
- Accident year loss ratio excluding
catastrophes was 82.0% in the fourth quarter of 2017 compared
with 62.6% in the fourth quarter of 2016
- Insurance: Accident year loss ratio
excluding catastrophes for the quarter ended December 31, 2017
was 95.0%. This included 25.0 percentage points related to an
increased frequency of mid-sized and attritional losses in the
fourth quarter of 2017 which totaled $59.3 million, net of
reinstatement premiums. The accident year loss ratio excluding
catastrophes in the fourth quarter of 2016 was 68.3%
- Reinsurance: Accident year loss ratio
excluding catastrophes for the quarter ended December 31, 2017
was 70.7%. This included 12.2 percentage points related to premium
adjustments which reduced net earned premium by $33.5 million. The
accident year loss ratio excluding catastrophes in the fourth
quarter of 2016 was 56.2%
- Total expense ratio of 46.1% and
total expense ratio (excluding amortization and non-recurring
expenses) of 41.5% in the fourth quarter of 2017 compared with
44.0% and 43.5%, respectively, in the fourth quarter of 2016
- The policy acquisition expense ratio
was 16.7% in the fourth quarter of 2017 compared with 23.0% in the
fourth quarter of 2016
- General and administrative expenses
(excluding amortization and non-recurring expenses) were $126.9
million in the fourth quarter of 2017, compared with $125.5 million
in the fourth quarter of 2016. The general and administrative
expense ratio (excluding amortization and non-recurring expenses)
increased to 24.8% from 20.5% in the fourth quarter of 2016
- Net loss after tax of $(184.9)
million, or $(3.25) per diluted ordinary share, in the fourth
quarter of 2017 compared with net loss of $(71.5) million, or
$(1.41) per diluted ordinary share, in the fourth quarter of 2016.
Net income included $14.8 million of net realized and unrealized
investment gains in the fourth quarter of 2017 compared with
$(58.1) million net realized and unrealized investment losses in
the fourth quarter of 2016. Operating loss after tax of
$(178.1) million, or $(3.14) per diluted ordinary share, in the
fourth quarter of 2017 compared with operating loss of $(7.4)
million, or $(0.34) per diluted ordinary share, in the fourth
quarter of 2016
- Annualized net income return on
average equity of (30.4)% and annualized operating return on
average equity of (29.6)% for the quarter ended
December 31, 2017 compared with (11.6)% and (2.8)%,
respectively, for the fourth quarter of 2016
Operating highlights for the twelve months ended
December 31, 2017
- Gross written premiums increased
by 6.8% to $3,360.9 million in the full year of 2017 compared with
$3,147.0 million in the full year of 2016
- Net written premiums decreased
by 14.7% to $2,212.5 million in the full year of 2017 compared with
$2,593.7 million in the full year of 2016. The retention ratio in
the full year of 2017 was 65.8% compared with 82.4% in the full
year of 2016
- Loss ratio of 86.5% for the full
year of 2017 compared with 59.8% for the full year of 2016. The
loss ratio included $561.9 million, or 24.6 percentage points, of
pre-tax catastrophe losses, net of reinsurance recoveries and $14.1
million of reinstatement premiums, in the full year of 2017. This
compared with $164.4 million, or 6.3 percentage points, of pre-tax
catastrophe losses, net of reinsurance recoveries and $2.0 million
of reinstatement premiums, in the full year of 2016
- Net favorable development on
prior year loss reserves of $105.4 million benefited the loss ratio
by 4.6 percentage points in the full year of 2017. In the full year
of 2016, net favorable development of $129.3 million benefited the
loss ratio by 4.9 percentage points
- Accident year loss ratio excluding
catastrophes of 66.5% for the full year of 2017 compared with
58.4% for the full year of 2016
- Total expense ratio of 39.2% and
total expense ratio (excluding amortization and non-recurring
expenses) of 37.8% for the full year of 2017 compared with
38.7% and 38.3%, respectively, for the full year of 2016,
reflecting a decrease in the policy acquisition expense ratio and
an increase in the general and administrative expense ratio
- Net loss after tax of $(266.4)
million or $(5.22) per diluted ordinary share for the twelve months
ended December 31, 2017 compared with net income of $203.4
million, or $2.61 per diluted ordinary share, for the twelve months
ended December 31, 2016. Net loss included $120.5 million of
net realized and unrealized investment gains in the full year of
2017 compared with $42.1 million in the full year of 2016.
Operating loss after tax of $(355.7) million, or $(6.59) per
diluted ordinary share, for the twelve months ended
December 31, 2017 compared with operating income of $185.9
million, or $2.33 per diluted ordinary share, for the twelve months
ended December 31, 2016
- Annualized net income return on
average equity of (11.1)% and annualized operating return on
average equity of (14.0)% for the full year of 2017 compared
with 5.4% and 4.8%, respectively, for the full year of 2016
Investment performance
- Investment income of $47.5 million in
the fourth quarter of 2017 compared with $43.2 million in the
fourth quarter of 2016
- The total return on Aspen’s aggregate
investment portfolio was 0.3% for the three months ended
December 31, 2017 and reflects net realized and unrealized
gains and losses in both the fixed income and equity portfolios. In
the full year of 2017, Aspen's aggregate investment portfolio had a
total return of 3.4%
- Aspen’s investment portfolio was
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 December 31, 2017 and
December 31, 2016
- Book yield on the fixed income
portfolio as at December 31, 2017 was 2.56% compared with
2.49% as at December 31, 2016
Capital
- Total shareholders’ equity was $2.9
billion as at December 31, 2017
- Diluted book value per share was $40.10
as at December 31, 2017, down 14.2% from December 31,
2016
- Aspen repurchased 648,941 ordinary
shares in 2017 at an average price of $46.23 per ordinary share for
a total cost of $30.0 million.
- During 2017, Aspen redeemed Perpetual
Non-Cumulative Preference Shares in the aggregate amount of $293.2
million
Operational Effectiveness and Improvement Program
- Aspen recorded $11.1 million of
expenses related to its operational effectiveness and improvement
program in the fourth quarter of 2017 and $15.2 million in the full
year of 2017
January 2018 Reinsurance Renewals
During the January 2018 renewal season, Aspen Re underwrote
contracts representing $585.6 million in gross written premiums, a
decrease of (0.4)% compared with the prior year. The renewal data
does not include premiums related to AgriLogic.
Below is a table reflecting gross written premiums written
during the January 2018 renewal season, including new business, by
sub-segment:
January Gross Written Premiums (underwriting year
basis) 2018 2017
Increase (Decrease) ($ in millions) % Property
Catastrophe $ 146.9 $ 126.4 16.2 % Other Property 133.7 137.3 (2.6
)% Casualty 148.2 145.9 1.6 % Specialty 156.8 178.6
(12.2 )% $ 585.6 $ 588.2 (0.4 )%
Note: The January premiums shown in the above table include
premiums written under contracts on a proportional basis which are
recognized throughout the year to reflect the expected inception of
the underlying risks and therefore do not represent Aspen’s
reported gross written premiums for each of these periods. Prior
year amounts have been conformed to current year presentation.
See “Forward-looking Statements Safe Harbor” below.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00
am (ET) on Thursday, February 8, 2018.
To participate in the February 8 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 10114711
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 10114711
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 atDecember 31, 2017 As
atDecember 31, 2016 ASSETS Total
investments
$ 7,633.0 $ 7,900.3 Cash and cash
equivalents
1,054.8 1,273.8 Reinsurance recoverables
2,030.7 815.9 Premiums receivable
1,496.5 1,399.4
Other assets
691.4 700.7 Total assets
$
12,906.4 $ 12,090.1 LIABILITIES Losses and
loss adjustment expenses
$ 6,749.5 $ 5,319.9 Unearned
premiums
1,820.8 1,618.6 Other payables
813.9 839.0
Silverton loan notes
44.2 115.0 Long-term debt
549.5
549.3 Total liabilities
$ 9,977.9 $ 8,441.8
SHAREHOLDERS’ EQUITY Total shareholders’ equity
2,928.5 3,648.3 Total liabilities and shareholders’
equity
$ 12,906.4 $ 12,090.1 Book value
per share
$ 40.59 $ 47.68 Diluted book value per
share (treasury stock method)
$ 40.10 $ 46.72
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Three Months Ended December 31,
2017 December 31, 2016 UNDERWRITING REVENUES
Gross written premiums
$ 688.3 $ 606.1 Premiums ceded
(348.1 ) (175.3 ) Net written premiums
340.2
430.8 Change in unearned premiums
170.8 181.6
Net earned premiums
511.0 612.4 UNDERWRITING
EXPENSES Losses and loss adjustment expenses
544.2 387.3
Amortization of deferred policy acquisition costs
85.1 141.1
General, administrative and corporate expenses
126.9
125.5 Total underwriting expenses
756.2 653.9
Underwriting (loss) including corporate
expenses
(245.2 ) (41.5 ) Net investment
income
47.5 43.2 Interest expense
(7.3 ) (7.4
) Other income (expenses)
18.6 (1.3 ) Total other
revenue
58.8 34.5 Amortization and
non-recurring expenses
(23.2 ) (3.4 ) Net realized
and unrealized exchange (losses) gains
(0.3 ) (5.6 )
Net realized and unrealized investment gains (losses)
14.8
(58.1 ) (LOSS) BEFORE TAX
(195.1 ) (74.1 )
Income tax credit
10.2 2.6 NET (LOSS) AFTER
TAX
(184.9 ) (71.5 ) Dividends paid on ordinary
shares
(14.3 ) (13.2 ) Dividends paid on preference
shares
(7.5 ) (13.4 ) Proportion due to
non-controlling interest
(0.5 ) (0.1 ) Retained
(loss)
$ (207.2 ) $ (98.2 ) Loss ratio
106.5 % 63.2 % Policy acquisition expense ratio
16.7 % 23.0 % General, administrative and corporate
expense ratio
29.4 % 21.0 % General, administrative
and corporate expense ratio (excluding amortization and
non-recurring expenses)
24.8 % 20.5 % Expense ratio
46.1 % 44.0 % Expense ratio (excluding amortization
and non-recurring expenses)
41.5 % 43.5 % Combined
ratio
152.6 % 107.2 % Combined ratio (excluding
amortization and non-recurring expenses)
148.0 %
106.7 %
Aspen Insurance Holdings
Limited
Summary consolidated statement of
income (unaudited)
$ in millions, except ratios
Twelve Months Ended December 31,
2017 December 31, 2016 UNDERWRITING REVENUES
Gross written premiums
$ 3,360.9 $ 3,147.0 Premiums
ceded
(1,148.4 ) (553.3 ) Net written premiums
2,212.5 2,593.7 Change in unearned premiums
94.1
43.6 Net earned premiums
2,306.6
2,637.3 UNDERWRITING EXPENSES Losses and loss adjustment
expenses
1,994.7 1,576.1 Amortization of deferred policy
acquisition costs
400.5 528.9 General, administrative and
corporate expenses
469.5 480.4 Total
underwriting expenses
2,864.7 2,585.4
Underwriting (loss) income including corporate expenses
(558.1 ) 51.9 Net investment income
189.0 187.1 Interest expense
(29.5 ) (29.5 )
Other income (expenses)
25.2 (12.7 ) Total other
revenue
184.7 144.9 Amortization and
non-recurring expenses
(32.7 ) (9.7 ) Net realized
and unrealized exchange gains (losses)
3.8 (19.7 ) Net
realized and unrealized investment gains
120.5 42.1
(LOSS) INCOME BEFORE TAX
(281.8 ) 209.5 Income
tax credit (expense)
15.4 (6.1 ) NET (LOSS) INCOME
AFTER TAX
(266.4 ) 203.4 Dividends paid on ordinary
shares
(56.3 ) (52.7 ) Dividends paid on preference
shares
(36.2 ) (41.8 ) Preference share redemption
costs
(8.0 ) — Proportion due to non-controlling
interest
(1.3 ) (0.1 ) Retained (loss) income
$ (368.2 ) $ 108.8 Loss ratio
86.5 % 59.8 % Policy acquisition expense ratio
17.4 % 20.1 % General, administrative and corporate
expense ratio
21.8 % 18.6 % General, administrative
and corporate expense ratio (excluding amortization and
non-recurring expenses)
20.4 % 18.2 % Expense ratio
39.2 % 38.7 % Expense ratio (excluding amortization
and non-recurring expenses)
37.8 % 38.3 % Combined
ratio
125.7 % 98.5 % Combined ratio (excluding
amortization and non-recurring expenses)
124.3 % 98.1
%
Aspen Insurance Holdings
Limited
Operating income reconciliation
(unaudited)
$ in millions, except per share
amounts
Three Months Ended
Twelve Months Ended (in US$ millions except where
stated) December 31, 2017 December 31,
2016 December 31, 2017 December 31,
2016 Net (loss) income as reported
$
(184.9 ) $ (71.5 )
$ (266.4 ) $
203.4 Change in redemption value of preference shares
— —
(8.0 ) — Net change attributable to non-controlling
interest
(0.5 ) (0.1 )
(1.3 ) (0.1 )
Preference share dividends
(7.5 ) (13.4 )
(36.2 ) (41.8 ) Net (loss) income available to
ordinary shareholders
(192.9 ) (85.0 )
(311.9
) 161.5 Add (deduct) after tax income: Net foreign exchange
(gains) losses
1.0 4.1
(1.5 ) 14.8 Net
realized (gains) losses on investments
(14.0 ) 57.1
(115.8 ) (41.0 ) Change in redemption value of
preference shares
— —
8.0 — Amortization and
non-recurring expenses
19.8 2.9
28.0 8.7 Operating (loss) income after tax
available to ordinary shareholders
(186.1 ) (20.9 )
(393.2 ) 144.0 Tax (credit) expense on operating
income
(8.3 ) 0.4
(17.7 )
10.9 Operating (loss) income before tax available to
ordinary shareholders
$ (194.4 ) $ (20.5 )
$ (410.9 ) $ 154.9
Basic earnings per ordinary share Net (loss) income adjusted
for preference share dividends and non-controlling interest
$ (3.25 ) $ (1.41 )
$ (5.22
) $ 2.67 Add (deduct) after tax income: Net foreign exchange
(gains) losses
0.02 0.07
(0.03 ) 0.24 Net
realized (gains) losses on investments
(0.24 ) 0.95
(1.94 ) (0.68 ) Change in redemption value of
preference shares
— —
0.13 — Amortization and
non-recurring expenses
0.33 0.05
0.47 0.14 Operating (loss) income adjusted for
preference shares dividends and non-controlling interest
$
(3.14 ) $ (0.34 )
$ (6.59
) $ 2.37
Diluted earnings per ordinary
share Net income adjusted for preference share dividends and
non-controlling interest
$ (3.25 ) $ (1.41 )
$ (5.22 ) $ 2.61 Add (deduct) after tax
income: Net foreign exchange (gains) losses
0.02 0.07
(0.03 ) 0.24 Net realized (gains) losses on
investments
(0.24 ) 0.95
(1.94 ) (0.66
) Change in redemption value of preference shares
— —
0.13 — Amortization and non-recurring expenses
0.33
0.05
0.47 0.14 Operating (loss)
income adjusted for preference shares dividends and non-controlling
interest
$ (3.14 ) $ (0.34 )
$
(6.59 ) $ 2.33
Aspen Insurance Holdings
Limited
Summary consolidated financial data
(unaudited)
$ in millions, except number of shares
Three Months Ended
Twelve Months Ended December 31, 2017
December 31, 2016 December 31, 2017
December 31, 2016 Basic earnings
per ordinary share Net (loss) income adjusted for preference
share dividend and non-controlling interest
($3.25) ($1.41)
($5.22) $2.67 Operating (loss) income adjusted for
preference share dividend and non-controlling interest
($3.14) ($0.34)
($6.59) $2.37 Diluted earnings per
ordinary share Net (loss) income adjusted for preference share
dividend and non-controlling interest
($3.25) ($1.41)
($5.22) $2.61 Operating (loss) income adjusted for
preference share dividend and non-controlling interest
($3.14) ($0.34)
($6.59) $2.33 Weighted average
number of ordinary shares outstanding (in millions)(1)
59.431 60.152
59.754 60.479 Weighted average
number of ordinary shares outstanding and dilutive potential
ordinary shares (in millions)
59.431 60.152
59.754
61.861 Book value per ordinary share
$40.59 $47.68
$40.59 $47.68 Diluted book value per ordinary share
(treasury stock method)
$40.10 $46.72
$40.10 $46.72
Ordinary shares outstanding at end of the period (in
millions)
59.474 59.774
59.474 59.774 Ordinary
shares outstanding and dilutive potential ordinary shares at end of
the period (treasury stock method) (in millions)
60.202
61.001
60.202 61.001 (1)
The basic and diluted number of ordinary
shares for the three months ended December 31, 2016 and the three
and twelve months ended December 31, 2017 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 December 31, 2017
Three Months Ended December 31, 2016 Reinsurance
Insurance Total Reinsurance Insurance
Total Gross written premiums
$ 216.1
$ 472.2 $ 688.3 $ 197.1 $ 409.0 $ 606.1
Net written premiums
152.7 187.5 340.2 198.4
232.4 430.8 Gross earned premiums
339.6 455.3
794.9 317.0 422.6 739.6 Net earned premiums
273.9
237.1 511.0 285.9 326.5 612.4 Losses and loss
adjustment expenses
318.5 225.7 544.2 163.6
223.7 387.3 Amortization of deferred policy acquisition expenses
61.1 24.0 85.1 63.3 77.8 141.1 General and
administrative expenses
39.9 67.0
106.9 47.6 54.7 102.3
Underwriting (loss) income
$ (145.6 ) $
(79.6 ) $ (225.2 ) $ 11.4
$ (29.7 ) $ (18.3 ) Net investment income
47.5 43.2
Net realized and unrealized investment gains (losses) (1)
14.8 (58.1 ) Corporate expenses
(20.0 ) (23.2
) Amortization and non-recurring expenses (2)
(23.2 )
(3.4 ) Other income (expenses) (3)
18.6 (1.3 ) Interest
expense
(7.3 ) (7.4 ) Net realized and unrealized
foreign exchange (losses) (4)
(0.3 ) (5.6 ) (Loss)
income before tax
$ (195.1 ) $ (74.1 ) Income
tax credit
10.2 2.6
Net (loss) $
(184.9 ) $ (71.5 )
Ratios Loss ratio
116.3 % 95.2 % 106.5 %
57.2 % 68.5 % 63.2 % Policy acquisition expense ratio
22.3 % 10.1 % 16.7 % 22.1
% 23.8 % 23.0 % General and administrative expense ratio (5)
14.6 % 28.3 % 29.4 % 16.6
% 16.8 % 21.0 % General and administrative expense ratio (excluding
amortization and non-recurring expenses) (5)
14.6 %
28.3 % 24.8 % 16.6 % 16.8 % 20.5 %
Expense ratio
36.9 % 38.4 % 46.1
% 38.7 % 40.6 % 44.0 % Expense ratio (excluding amortization
and non-recurring expenses)
36.9 % 38.4
% 41.5 % 38.7 % 40.6 % 43.5 % Combined ratio
153.2 % 133.6 % 152.6 %
95.9 % 109.1 % 107.2 % Combined ratio (excluding amortization and
non-recurring expenses)
153.2 % 133.6 %
148.0 % 95.9 % 109.1 % 106.7 %
Accident Year
Ex-cat Loss Ratio Loss ratio
116.3 % 95.2
% 106.5 % 57.2 % 68.5 % 63.2 % Prior year loss
development
4.0 % 0.8 % 2.5
% 12.2 % 5.0 % 8.3 % Catastrophe losses
(49.6
)% (1.0 )% (27.0 )% (13.2 )%
(5.2 )% (8.9 )% Accident year ex-cat loss ratio
70.7
% 95.0 % 82.0 % 56.2 % 68.3 %
62.6 % (1)
Includes realized and unrealized capital
gains and losses
(2)
Amortization and non-recurring expenses
included $11.1 million of expenses related to the operational
effectiveness and efficiency program
(3)
Other income (expenses) in the fourth
quarter of 2017 and fourth quarter of 2016 included $17.6 million
of income and $3.4 million of expenses, respectively, related to a
change in the fair value of loan notes issued by Silverton Re
(4)
Includes realized and unrealized foreign
exchange gains and losses and realized and unrealized gains and
losses on foreign exchange contracts
(5)
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
Twelve Months Ended December 31, 2017
Twelve Months Ended December 31, 2016 Reinsurance
Insurance Total Reinsurance Insurance
Total Gross written premiums
$ 1,548.5
$ 1,812.4 $ 3,360.9 $ 1,413.2 $ 1,733.8
$ 3,147.0 Net written premiums
1,250.0 962.5
2,212.5 1,269.2 1,324.5 2,593.7 Gross earned premiums
1,451.8 1,757.4 3,209.2 1,317.9 1,768.4
3,086.3 Net earned premiums
1,206.1 1,100.5
2,306.6 1,181.9 1,455.4 2,637.3 Losses and loss adjustment
expenses
1,116.4 878.3 1,994.7 657.9 918.2
1,576.1 Amortization of deferred policy acquisition expenses
235.5 165.0 400.5 226.4 302.5 528.9 General
and administrative expenses
157.3 253.9
411.2 178.2 228.4 406.6
Underwriting (loss) income
$ (303.1 ) $
(196.7 ) $ (499.8 ) $ 119.4
$ 6.3 $ 125.7 Net investment income
189.0 187.1 Net realized and unrealized investment gains (1)
120.5 42.1 Corporate expenses
(58.3 ) (73.8 )
Amortization and non-recurring expenses (2)
(32.7 )
(9.7 ) Other income (expenses) (3)
25.2 (12.7 ) Interest
expense
(29.5 ) (29.5 ) Net realized and unrealized
foreign exchange gains (losses) (4)
3.8 (19.7 )
(Loss) income before tax
$ (281.8 ) $ 209.5
Income tax credit (expense)
15.4 (6.1 )
Net (loss)
income $ (266.4 ) $ 203.4
Ratios Loss ratio
92.6 % 79.8 %
86.5 % 55.7 % 63.1 % 59.8 % Policy acquisition
expense ratio
19.5 % 15.0 % 17.4
% 19.2 % 20.8 % 20.1 % General and administrative expense
ratio (5)
13.0 % 23.1 % 21.8
% 15.1 % 15.7 % 18.6 % General and administrative expense
ratio (excluding amortization and non-recurring expenses) (5)
13.0 % 23.1 % 20.4 % 15.1
% 15.7 % 18.2 % Expense ratio
32.5 % 38.1
% 39.2 % 34.3 % 36.5 % 38.7 % Expense ratio
(excluding amortization and non-recurring expenses)
32.5
% 38.1 % 37.8 % 34.3 % 36.5 %
38.3 % Combined ratio
125.1 % 117.9 %
125.7 % 90.0 % 99.6 % 98.5 % Combined ratio
(excluding amortization and non-recurring expenses)
125.1
% 117.9 % 124.3 % 90.0 % 99.6 %
98.1 %
Accident Year Ex-cat Loss Ratio Loss ratio
92.6 % 79.8 % 86.5 % 55.7
% 63.1 % 59.8 % Prior year loss development
6.9 %
2.1 % 4.6 % 7.4 % 2.9 % 4.9 %
Catastrophe losses
(37.7 )% (10.4 )%
(24.6 )% (9.7 )% (3.5 )% (6.3 )% Accident year ex-cat
loss ratio
61.8 % 71.5 % 66.5
% 53.4 % 62.5 % 58.4 % (1)
Includes realized and unrealized capital
gains and losses and realized and unrealized gains and losses on
interest rate swaps
(2)
Amortization and non-recurring expenses
included $15.2 million of expenses related to the operational
effectiveness and efficiency program
(3)
Other income (expenses) in the full year
of 2017 and full year of 2016 included $21.2 million of income and
$17.1 million of expenses, respectively, related to a change in the
fair value of loan notes issued by Silverton Re
(4)
Includes realized and unrealized foreign
exchange gains and losses and realized and unrealized gains and
losses on foreign exchange contracts
(5)
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, France,
Germany, 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 the
program to create operating and cost efficiencies through focus on
improving several of our operational levers; 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 political, regulatory and economic effects
arising from the vote by the U.K. electorate in favor of a U.K.
exit from the European Union in the referendum held in June 2016
and resulting negotiations; 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; 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; a decline in our operating
subsidiaries’ ratings with S&P, A.M. Best or Moody’s; the
failure of our reinsurers, policyholders, brokers or other
intermediaries to honor their payment obligations; our reliance on
the assessment and pricing of individual risks by third parties;
our dependence on a few brokers for a large portion of our
revenues; the persistence of heightened financial risks, including
excess sovereign debt, the banking system and the Eurozone crisis;
changes in 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, 2016 and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2017, June 30, 2017 and September 30, 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.
Furthermore, seismic events, such as the Mexico earthquakes,
generally have longer development periods than windstorm events,
which may be amplified in this instance by dynamics such as the
risk of geological liquefaction and the potential for uncertainty
in claims adjudication. In respect of Hurricane Maria, recovery
efforts are ongoing, with power outages, infrastructure damage,
communications disruptions and other issues complicating loss
mitigation and estimation. Accordingly, our actual net negative
impact from all events noted above, both individually and in the
aggregate, will vary from these estimates, perhaps materially.
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
filed with the SEC on Form 8-K on February 7, 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, including net realized and
unrealized gains and losses on interest rate swaps, 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 year ended December
31, 2017 excluded the issue costs associated with the redemption of
Aspen’s 7.401% Perpetual Non-Cumulative Preference Shares and
7.250% 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 loss ratios excluding catastrophes are calculated by dividing
net losses excluding catastrophe losses, net expenses and prior
year reserve movements by net earned premiums excluding
catastrophe-related reinstatement premiums. Aspen has defined
catastrophe losses in the full year of 2017 as losses associated
with Hurricanes Harvey, Irma and Maria, the earthquakes in Mexico,
a tornado in Mississippi, Cyclone Debbie in Australia, wildfires in
California and other U.S. weather-related events. Catastrophe
losses in the full year of 2016 were defined as losses associated
with wildfires in North America, Hurricane Matthew and other
weather-related events in the U.S., a hailstorm in the Netherlands
and several earthquakes. Please see pages 12 and 13 of this release
for a reconciliation of loss ratios to accident year loss ratios
excluding catastrophes.
Retention Ratio is a non-GAAP financial measure. It is
calculated by dividing net written premium by gross written
premium.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180207006268/en/
AspenInvestorsMark Jones, +1-646-289 4945Senior
Vice President, Investor Relationsmark.p.jones@aspen.coorMediaSteve Colton,
+44 20 7184 8337Group Head of Communicationssteve.colton@aspen.co
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