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ASPEN REPORTS RESULTS FOR Q3 2014 (Excerpt)
Hamilton, Bermuda – 31 October, 2014 – Aspen Insurance Holdings Limited (“Aspen” or the “Company”; Ticker: NYSE:AHL; BSX: AHL.BH) reported net income after tax of $37.4 million, or $0.42 diluted net income per share, for the quarter ended September 30, 2014.
· Annualized Operating ROE of 10.0%
· Diluted Operating Income Per Share of $1.08
· Diluted Book Value Per Share of $44.60, up 9.0% (10.1% excluding bid defense costs) from December 31, 2013
Chris O’Kane, Chief Executive Officer, commented, “During the third quarter we continued to execute our strategy to increase ROE and shareholder value with good operating results, opportunistic share repurchases and further rebalancing of our investment portfolio. Reinsurance had another very strong quarter and continues to successfully navigate a dynamic market. Insurance continued to evidence momentum, with our U.S. Insurance teams continuing to make strong progress in building out the platform through profitable growth. As we enter the final quarter of 2014 we are well positioned to comfortably exceed our 10% ROE target for the year. We will continue to focus on ROE improvement in 2015 and beyond.”
Operating highlights for the quarter ended September 30, 2014
• Gross written premiums increased 12.2% to $652.5 million in the third quarter of 2014 from the third quarter of 2013, with growth from both Insurance and Reinsurance segments
• Combined ratio of 94.6% (91.3% excluding corporate expenses related to bid defense costs) for the third quarter of 2014 compared with 91.8% for the third quarter of 2013. There were $17.1 million, or 2.8 combined ratio points, of pre-tax catastrophe losses in the third quarter of 2014 compared with $14.2 million, or 2.6 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries and reinstatement premiums in the third quarter of 2013
• Net favorable development on prior year loss reserves of $32.6 million, or 5.3 combined ratio points, for the third quarter of 2014 compared with $33.6 million, or 6.2 combined ratio points, for the third quarter of 2013
· Financial highlights for the quarter and nine months ended September 30, 2014
• Annualized net income return on average equity of 4.0% (6.4% excluding bid defense costs) and annualized operating return on average equity of 10.0% for the third quarter of 2014 compared with 14.8% and 10.8%, respectively, for the third quarter of 2013(1)
• Annualized net income return on average equity of 12.0% (13.3% excluding bid defense costs) and annualized operating return on average equity of 12.4% for the first nine months of 2014 compared with 10.1% and 9.2%, respectively, for the first nine months of 2013(1)
• Diluted net income per share of $0.42 ($0.72 excluding $20.2 million of bid defense costs) for the quarter ended September 30, 2014, compared with diluted net income per share of $1.43 for the third quarter of 2013. Diluted net income per share of $3.91 ($4.34 excluding $28.5 million of bid defense costs) for the nine months ended September 30, 2014 compared with diluted net income per share of $2.95 for the nine months ended September 30, 2013
• Diluted operating income per share of $1.08 for the quarter ended September 30, 2014, compared with $1.05 for the third quarter of 2013. Diluted operating income per share of $4.04 for the nine months ended September 30, 2014 compared with diluted operating income per share of $2.78 for the nine months ended September 30, 2013(1)
• On a pre-tax basis, net catastrophe losses were $17.1 million, or $0.26 per diluted share, for the third quarter of 2014 compared with $14.2 million, or $0.21 per diluted share, for the third quarter of 2013
• Diluted book value per share of $44.60 at September 30, 2014 up 9.0% from December 31, 2013; Diluted book value per share increased 10.1% excluding bid defense costs from December 31, 2013
(1) See definition of non-GAAP financial measures at the end of this release on Aspen’s website at www.aspen.co
Segment highlights
Reinsurance
Operating highlights for Reinsurance for the quarter ended September 30, 2014 include:
• Gross written premiums of $256.9 million, an increase of 17.0% from $219.5 million in the third quarter of 2013
• Combined ratio of 79.5% compared with 80.5% for the third quarter of 2013
• Prior year favorable reserve development of $26.0 million, or 9.3 combined ratio points, compared with $32.3 million prior year favorable loss reserve development, or 12.6 combined ratio points, for the third quarter of 2013
The growth in gross written premiums was primarily due to increased production and new business in Other Property.
The combined ratio of 79.5% for the third quarter of 2014 included $10.5 million, or 3.8 percentage points, of pre-tax catastrophe losses primarily related to North American and European storms. The combined ratio of 80.5% for the third quarter of 2013 included $11.3 million, or 4.5 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries and $1.4 million of reinstatement premiums. For the quarter ended September 30, 2014 the Reinsurance accident year ex catastrophe loss ratio improved 320 basis points to 52.7% from 55.9% a year ago.(1)
Insurance
Operating highlights for Insurance for the quarter ended September 30, 2014 include:
• Gross written premiums of $395.6 million, an increase of 9.3% from $362.1 million in the third quarter of 2013
• Combined ratio of 96.7% in line with the third quarter of 2013
• Prior year favorable reserve development of $6.6 million, or 2.0 combined ratio points, compared with prior year favorable reserve development of $1.3 million, or 0.5 combined ratio point, for the third quarter of 2013
The increase in gross written premiums was attributable to Property and Casualty and Financial and Professional Lines, primarily resulting from the continued growth from the U.S. teams. The U.S. Insurance teams were again profitable in the quarter and through the first nine months of 2014 have achieved a loss ratio of 59.4%.
The combined ratio of 96.7% for the third quarter of 2014 included $6.6 million, or 2.0 percentage points, of pre-tax catastrophe losses related to U.S. storms. The combined ratio for the third quarter of 2013 included $2.9 million, or 1.0 percentage point, of pre-tax catastrophe losses related to U.S. storms. There was a higher frequency of non-correlated mid-sized losses of $14.3 million principally in the Marine, Energy and Aviation lines which accounted for 4.3 percentage points on the loss ratio.
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 3.51 years at September 30, 2014 excluding the impact of interest rate swaps, or 3.26 years including the impact of interest rate swaps. The total return on Aspen’s investment portfolio was relatively flat for the third quarter of 2014, and was 2.19% for the nine months ended September 30, 2014. The equity portfolio which comprises 7.6% of the total portfolio, had a total return of negative 2.25% for the quarter and a total return of positive 5.36% for the nine months ended September 30, 2014.
Net investment income for the third quarter of 2014 was $48.0 million compared with $45.0 million for the third quarter of 2013. Book yield as at September 30, 2014 on the fixed income portfolio was 2.65% compared with 2.74% at December 31, 2013 and 2.82% at September 30, 2013.
Capital
Total shareholders’ equity was $3.4 billion at September 30, 2014.
During the third quarter of 2014, 2,120,625 ordinary shares were repurchased under a Rule 10b5-1 plan at an average price of $42.46 per share for a total cost of $90.0 million. For the nine months ended September 30, 2014, a total of 2,891,130 ordinary shares were repurchased at an average price of $41.82 per ordinary share for a total cost of $120.9 million. Between September 30, 2014 and October 28, 2014, a further 1,249,326 ordinary shares were repurchased under a Rule 10b5-1 plan at an average price of $42.78 per ordinary share for a total cost of $53.4 million.
Outlook
Aspen now expects to achieve an operating return on equity comfortably in excess of 10% in 2014, assuming normal loss experience.
Aspen expects to achieve an operating return on equity of 11% in 2015, and to achieve an operating return on equity of between 11% and 12% in 2016(3).
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 9:00 am (EDT) on Thursday, October 30, 2014.
To participate in the October 30 conference call by phone
Please call to register at least 10 minutes before the conference call begins by dialing:
+1 (888) 868 3191 (US toll free) or
+1 (973) 321 1024 (international)
Conference ID 1931681
To listen live online
Aspen will provide a live webcast on Aspen’s website at www.aspen.co
To download the materials
This earnings press release and a detailed financial supplement will also be published on Aspen’s website at www.aspen.co
To listen later
A replay of the call will be available for 14 days via phone and internet, available two hours after the end of the live call. To listen to the replay by phone please dial:
+1 (855) 859 2056 (US toll free) or
+1 (404) 537 3406 (international)
Replay ID 1931681
The recording will be also available at www.aspen.co on the Event Calendar page within the Investor Relations section.
For further information please contact:
Investors
Kerry Calaiaro, Senior Vice President, Investor Relations, Aspen
+1 (646) 502 1076
Kathleen de Guzman, Vice President, Investor Relations, Aspen
+1 (646) 289 4912
Media
Steve Colton, Head of Communications, Aspen
+44 20 7184 8337
International - Citigate Dewe Rogerson
Caroline Merrell - Caroline.Merrell@citigatedr.co.uk or
Jos Bieneman - Jos.Bieneman@citigatedr.co.uk
Tel: +44 20 7638 9571
North America - Sard Verbinnen & Co
Paul Scarpetta or Jamie Tully
+1 (212) 687 8080
About Aspen Insurance Holdings Limited