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Aspen Reports Results for Second Quarter and Six Months Ended June 30, 2016

Hamilton, Bermuda –31 July, 2016 – In a filing with the Bermuda Stock Exchange (“BSX”), Aspen Insurance Holdings Limited (“Aspen” or the “Company”; Ticker: NYSE:AHL; BSX: AHL.BH) announced results for Second Quarter and Six Months Ended June 30, 2016.  The filing stated:

Annualized Net Income Return on Equity of 7.2% for Second Quarter 2016 and 10.8% for First Half 2016

Annualized Operating Return on Equity of 3.2% for Second Quarter 2016 and 7.0% for First Half 2016

Diluted Book Value Per Share of $49.53, up 7.7% from December 31, 2015

 

Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported today net income after tax of $64.9 million, or $0.89 per diluted share, and operating income after tax of $34.1 million, or $0.40 per diluted share, for the second quarter of 2016.

Chris O’Kane, Chief Executive Officer, commented, “Aspen achieved 7.7% growth in diluted book value per share and annualized operating ROE of 7.0% in the first half of 2016. We delivered this in the face of an eventful second quarter impacted by higher losses from natural catastrophes and other events. However, on an accident year ex-catastrophe basis, the performance of both our Insurance and Reinsurance segments improved considerably. Our new leadership teams at Aspen Re and Aspen Insurance remain focused on disciplined underwriting, identifying and capturing attractive opportunities for profitable growth in our diversified businesses around the globe which, we believe, will create long-term value for our shareholders.”(1)

 

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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 June 30, 2016

  • Gross written premiums increased by 10.9% to $801.7 million in the second quarter of 2016 compared with $722.8 million in the second quarter of 2015
  • Combined ratio of 100.7% for the second quarter of 2016 compared with 93.6% for the second quarter of 2015. Net favorable development on prior year loss reserves of $21.2 million, or 3.1 combined ratio points, for the second quarter of 2016 compared with $31.1 million, or 5.1 combined ratio points, in the comparable period
  • Pre-tax catastrophe losses, net of reinsurance recoveries and $3.1 million of reinstatement premiums, totaled $65.1 million, or 10.1 combined ratio points, in the second quarter of 2016 compared with $11.9 million, or 2.0 combined ratio points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the second quarter of 2015

Operating highlights for the six months ended June 30, 2016

  • Gross written premiums increased by 8.2% to $1,777.4 million for the first half of 2016 compared with $1,642.0 million in the first half of 2015
  • Combined ratio of 96.2% for the first half of 2016 compared with 91.2% for the first half of 2015. Net favorable development on prior year loss reserves of $42.8 million, or 3.2 combined ratio points, for the first half of 2016 compared with $58.6 million, or 4.9 combined ratio points, for the first half of 2015
  • Pre-tax catastrophe losses, net of reinsurance recoveries and $3.1 million of reinstatement premiums, totaled $83.8 million, or 6.5 combined ratio points, in the first half of 2016 compared with $25.4 million, or 2.1 combined ratio points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the first half of 2015

Financial highlights for the quarter and six months ended June 30, 2016

  • Annualized net income return on average equity of 7.2% and annualized operating return on average equity of 3.2% for the quarter ended June 30, 2016 compared with 5.6% and 8.8%, respectively, for the second quarter of 2015
  • Annualized net income return on average equity of 10.8% and annualized operating return on average equity of 7.0% for the first half of 2016 compared with 11.0% and 10.6%, respectively, for the first half of 2015
  • Net income per diluted share of $0.89 for the quarter ended June 30, 2016 compared with net income per diluted share of $0.62 for the quarter ended June 30, 2015, and net income per diluted share of $2.57 for the six months ended June 30, 2016 compared with net income per diluted share of $2.50 for the six months ended June 30, 2015
  • Operating income per diluted share of $0.40 for the quarter ended June 30, 2016 compared with operating income per diluted share of $0.99 for the quarter ended June 30, 2015, and operating income per diluted share of $1.68 for the six months ended June 30, 2016 compared with operating income per diluted share of $2.39 for the six months ended June 30, 2015
  • Diluted book value per share of $49.53 as at June 30, 2016 up 7.7% from December 31, 2015

Segment Highlights

Insurance

Operating highlights for Insurance for the quarter ended June 30, 2016 include:

  • Gross written premiums of $469.1 million, an increase of 1.5% compared with $462.1 million in the second quarter of 2015. Growth in the Financial and Professional Lines, and Property and Casualty sub-segments was offset by a decline in the Marine, Aviation and Energy sub-segment, which includes a number of lines that continue to be impacted by rate pressures
  • Loss ratio of 68.5% compared with 71.6% for the second quarter of 2015
  • Combined ratio of 103.4% compared with 103.6% for the second quarter of 2015
  • Prior year favorable reserve development of $7.4 million, or 1.9 combined ratio points, compared with prior year favorable reserve development of $7.0 million, or 2.1 combined ratio points, for the second quarter of 2015

The combined ratio of 103.4% for the second quarter of 2016 included $16.5 million, or 4.3 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, from weather-related events in the U.S. The combined ratio for the second quarter of 2015 included $9.5 million, or 2.8 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries.

For the quarter ended June 30, 2016, the Insurance accident year loss ratio excluding catastrophes was 66.1% compared with 70.9% a year ago. In the quarter there were approximately $41.7 million of mid-sized losses, including $25.7 million of energy-related losses, $11.8 million of fire-related losses and a $4.2 million aviation loss, which together equated to 10.9 percentage points on the accident year ex-cat loss ratio.

Stephen Postlewhite, CEO of Insurance, commented, “During the quarter, we continued to generate growth from select Financial and Professional lines, our new global lines, including Accident and Health, along with regional business in our UK Corporate P&C operation. We are focused on deploying capital to those areas where we are seeing better prospects, less rate pressure and less volatile experience. We improved our performance on an accident year ex-catastrophe basis and we continue to focus on delivering profitable growth.”(1)

Reinsurance

Operating highlights for Reinsurance for the quarter ended June 30, 2016 include:

  • Gross written premiums of $332.6 million, an increase of 27.6% from $260.7 million in the second quarter of 2015. Premium growth was driven primarily by the Specialty and Property Catastrophe sub-segments and, to a lesser degree, by the Casualty sub-segment, while the Other Property sub-segment was largely unchanged. Adjusting for timing of renewals, contract adjustments and the inclusion of $12.0 million of premiums from AG Logic Holdings, LLC (“AgriLogic”), gross written premiums increased 6% compared with the second quarter of 2015
  • Loss ratio of 60.5% compared with 43.3% for the second quarter of 2015
  • Combined ratio of 90.5% compared with 75.3% for the second quarter of 2015
  • Prior year favorable reserve development of $13.8 million, or 4.6 combined ratio points, compared with $24.1 million prior year favorable reserve development, or 9.0 combined ratio points, for the second quarter of 2015

The combined ratio of 90.5% for the second quarter of 2016 included $48.6 million, or 17.4 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries and $3.1 million of reinstatement premiums, primarily as a result of wildfires in Canada, the earthquake in Japan and weather-related events in the U.S. The combined ratio of 75.3% for the second quarter of 2015 included $2.4 million, or 0.9 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries.

For the quarter ended June 30, 2016, the Reinsurance accident year loss ratio excluding catastrophes was 47.7% compared with 51.4% a year ago.

Thomas Lillelund, CEO of Reinsurance, commented, "Aspen Re has continued to perform well and our results on an accident year ex-catastrophe loss basis showed good improvement year over year. We had successful mid-year renewals and our diversifying AgriLogic business performed well. While we remain disciplined and will walk away from business that does not meet our underwriting standards, we continue to find opportunities for profitable growth in select areas of business around the globe.”(1)

Investment performance

Investment income of $48.0 million in the second quarter of 2016 increased by 2.8% compared to $46.7 million in the second quarter of 2015.

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 3.55 years as at June 30, 2016. The total return on Aspen’s aggregate investment portfolio was 1.44% for the three months ended June 30, 2016 and reflected gains in the fixed income and equity portfolios. In the first six months of 2016, Aspen's aggregate investment portfolio had a positive total return of 3.50%.

Book yield as at June 30, 2016 on the fixed income portfolio was 2.50% compared to 2.59% as at December 31, 2015.

Capital

Total shareholders’ equity was $3.6 billion as at June 30, 2016.

During the second quarter of 2016, Aspen repurchased 409,800 ordinary shares at an average price of $45.10 per share for a cost of $18.5 million. Since the beginning of 2016, through to July 26, Aspen has repurchased 1,122,328 ordinary shares at an average price of $44.55 per share for a total cost of $50.0 million.

Aspen had $366.3 million remaining under its current share repurchase authorization as at July 26, 2016.

Earnings conference call and webcast

Aspen will host a conference call to discuss the results at 8:00 am (ET) on Thursday, July 28, 2016.

Complete press release can be found using the following link:

http://www.aspen.co/globalassets/documents/investor-relations/financial-results/2016/ahl-q2-16-press-release.pdf

 

To participate in the July 28 conference call by phone
Please 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 10087751

To listen live online
Aspen will provide a live webcast on Aspen’s website at www.aspen.co.

To download the materials
The 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 approximately two hours after the end of the live call for 14 days via phone and internet. To listen to the replay by phone please dial:

+1 (877) 344 7529 (US toll free) or
+1 (412) 317 0088 (international)
Replay ID 10087751

The recording will be also available at www.aspen.co on the Event Calendar page within the Investor Relations section.