Aspen Reports Q1 2013 Results (Excerpt)

Hamilton, Bermuda – 25 April, 2013 – Aspen Insurance Holdings Limited (“Aspen” or the “Company”; Ticker: NYSE:AHL; BSX: AHL.BH) has reported net income after tax of $91.8 million, or $1.15 diluted net income per share, for the first quarter of 2013.

Chris O’Kane, Chief Executive Officer commented, “We delivered good operating results in the first quarter, with an improvement in the combined ratios in both Reinsurance and Insurance, favorable prior-year reserve development and continued traction in our U.S. Insurance operations.

We also made significant progress on our three strategic pillars – business portfolio optimization, efficient capital management and enhancing investment return – with actions taken to reduce our catastrophe-exposed U.S. Property insurance book, $210 million in share repurchases and a $200 million increase in the equity component of our investment portfolio. We remain intensely focused on executing our strategic plan and driving increased profitability.”

Operating highlights for the quarter ended March 31, 2013

·         Gross written premiums decreased overall by 1% to $773.4 million in the first quarter of 2013 from the first quarter of 2012. This reflects a decline in premiums in the reinsurance segment which was partially offset by an 8.4% increase in the insurance segment

·         Combined ratio of 90.1% for the first quarter of 2013 compared with a combined ratio of 93.8% or 90.1%(1) excluding catastrophes for the first quarter of 2012

·         Net favorable development on prior year loss reserves of $26.2 million, or 5.1 combined ratio points, for the first quarter of 2013 compared with $37.0 million, or 7.5 combined ratio points, for the first quarter of 2012

·         Financial highlights for the quarter ended March 31, 2013

·         Annualized net income return on average equity of 11.6% and annualized operating return on average equity of 10.8% for the first quarter of 2013 compared with 10.4% and 9.2%, respectively in the first quarter of 2012(1)

·         Diluted net income per share of $1.15 for the quarter ended March 31, 2013 compared with diluted net income per share of $0.99 for the first quarter of 2012

·         Diluted operating income per share of $1.06 for the quarter ended March 31, 2013 an increase of 20.5% from diluted operating income per share of $0.88 for the first quarter of 2012(1)

·         Diluted book value per share of $40.68 at March 31, 2013 up 5.4% from the first quarter of 2012 and relatively unchanged from December 31, 2012(1)

 ·         As a direct result of the higher average share price in the first quarter of 2013, fully diluted ordinary shares increased by 1.2 million shares compared to the fourth quarter of 2012 attributed to Aspen’s 5.625% Perpetual Preferred Income Equity Replacement Securities (“PIERS”), and reduced diluted book value per share by $0.73 at March 31, 2013 (See additional detail in “Capital” section below).

Segment highlights

Reinsurance

Operating highlights for Reinsurance for the quarter ended March 31, 2013 include:

·         Gross written premiums of $439.6 million, down 7.3% compared with $474.2 million for the first quarter of 2012 mainly due to a combination of lower reinstatement premiums and premium reduction on policies written in prior years

·         Combined ratio of 78.5% compared with 79.8% for the first quarter of 2012

·         Favorable prior year loss reserve development of $20.1 million, or 7.8 combined ratio points, with favorable development in each of the four principal lines of business, compared with $28.1 million favorable prior year loss reserve development, or 10.4 combined ratio points, for the first quarter of 2012

The combined ratio of 78.5% for the first quarter of 2013 included no natural catastrophe losses. In comparison, the combined ratio for the first quarter of 2012 was 73.3%(1) excluding catastrophe losses. The acquisition ratio was 21.5% for the first quarter of 2013 compared to 19.1% for the first quarter of 2012 largely due to higher profit commissions on prior year contracts.

Insurance

Operating highlights for Insurance for the quarter ended March 31, 2013 include:

·         Gross written premiums of $333.8 million, up 8.4% compared with $307.9 million for the first quarter of 2012

·         Combined ratio of 96.8% compared with 104.2% for the first quarter of 2012

·         Favorable prior year loss reserve development of $6.1 million, or 2.4 combined ratio points, compared with $8.9 million, or 4.0 combined ratio points, for the first quarter of 2012

The increase in gross written premiums was mainly attributable to growth in the U.S.-based insurance operations specifically in the Professional and Global Casualty lines. The combined ratio for the first quarter of 2013 included no natural catastrophe losses. In comparison, the combined ratio for the first quarter of 2012 included no natural catastrophe losses but was negatively impacted by $26.5 million, or 11.6 percentage points, of pre-tax losses net of reinsurance recoveries and reinstatement premiums from the Costa Concordia event.

Investment performance

Aspen’s investment portfolio continues to be comprised primarily of high quality fixed income securities with an average credit quality of “AA”. The average duration of the fixed income portfolio was 3.2 years at March 31, 2013, excluding the impact of interest rate swaps, or 2.7 years including swaps. The total return on the Company’s investment portfolio was 0.5% for the first quarter of 2013, compared to 0.6% for the first quarter of 2012. Aspen increased the equity component of the portfolio by $200 million in the quarter. The equity portfolio returned 8.7% for the quarter.

Net investment income for the first quarter of 2013 was $48.3 million. Book yield as at March 31, 2013 on the fixed income portfolio was 2.80% compared to 3.31% at March 31, 2012. The decline in the yield primarily reflects the effect of lower prevailing interest rates.

Net realized and unrealized investment gains included in net income for the quarter were $15.8 million. Unrealized gains in the available for sale investment portfolio, including equity securities, at March 31, 2013 were $337.4 million, a decrease of $17.5 million from December 31, 2012.

Dividend Increase

The Board of Directors has declared a quarterly cash dividend on Aspen’s ordinary shares of $0.18 per ordinary share. The amount payable has been increased by 5.9% from Aspen’s previous quarterly dividend of $0.17 per ordinary share. The dividend is payable on May 28, 2013 to the holders of record as of the close of trading on May 10, 2013.

Capital Primarily as a result of Aspen’s share repurchase program, total shareholders’ equity decreased by $148.8 million in the quarter to $3.3 billion at March 31, 2013.

In conjunction with a $150 million Accelerated Share Repurchase (“ASR”) agreement announced on February 26, 2013, approximately 3.35 million ordinary shares were delivered under the ASR in February 2013, and Aspen may receive additional ordinary shares at the maturity of the ASR, or Aspen may be obligated to make a delivery of shares, or a payment of cash, at Aspen’s election. In addition, during the first quarter of 2013, Aspen repurchased 1.68 million ordinary shares in the open market at an average price of $34.63 per share for a total cost of $58.2 million. Between April 1, 2013 and April 23, 2013, Aspen repurchased 252,177 ordinary shares under its Rule 10b5-1 plan at an average price of $38.37 per share for a total cost of $9.7 million. Aspen had $314 million remaining under its current share repurchase authorization at April 23, 2013.

During 2005 and 2006, Aspen issued 4.6 million PIERS. The PIERS are convertible at Aspen’s option if, at any time on or after January 1, 2009, the closing sale price of Aspen’s ordinary shares equals or exceeds 130% of the then prevailing conversion price for 20 trading days during any consecutive 30-trading day trading period as well as the last day of such 30-day period.

The PIERS are dilutive when Aspen’s share price exceeds the prevailing conversion price (currently $29.20) and therefore as the Aspen share price is above the conversion price they are included in Aspen’s fully diluted share count as at March 31, 2013. As the Aspen share price increases so does the dilutive effect of the PIERS. In the first quarter of 2013 the dilutive effect of the PIERS increased Aspen’s fully diluted average shares by 1.9 million shares, an increase of 1.2 million from year end 2012.

The PIERS are mandatorily convertible by Aspen, in whole and not in part, into $50 in cash for each PIERS plus a number of ordinary shares based on the conversion rate calculated based on the trading prices of Aspen ordinary shares over a 20-trading day settlement period following Aspen’s issuance of a press release announcing the mandatory conversion. Currently, it is Aspen’s intention to mandatorily convert the PIERS if and when the conditions are met. Additional information on the PIERS is provided in the Company’s Form 10-K filed on February 26, 2013.

Guidance

We continue to expect to achieve an operating return on equity of 10% in 2014, assuming a pre-tax catastrophe load of $190 million per annum, normal loss experience and given the current interest rate and pricing environment.

The earnings press release and a detailed financial supplement will also be published on Aspen’s website at www.aspen.co.

For further information please visit www.aspen.co  or contact:

Investors

Kerry Calaiaro, Senior Vice President, Investor Relations, Aspen

Kerry.Calaiaro@aspen.co

+1 (646) 502 1076

Media

Steve Colton, Head of Communications, Aspen

Steve.Colton@aspen.co

+44 20 7184 8337

International – Citigate Dewe Rogerson Caroline Merrell or Jos Bieneman

caroline.merrell@citigatedr.co.uk

jos.bieneman@citigatedr.co.uk

+44 20 7638 9571

North America – Abernathy MacGregor

Allyson Vento

amv@abmac.com

+1 (212) 371 5999