Aspen Insurance Holdings Limited (NYSE:AHL) today reported net
income for the fourth quarter of 2007 of $135.2 million, or $1.44
per diluted ordinary share, an increase of 20% over the same
quarter last year. Diluted operating income per share is $1.47
compared to $1.22 in the fourth quarter of 2006. The combined ratio
was 79.4%, compared to 76.8% in the prior year period. Annualized
operating return on average equity increased to 23.2% from 22.8% in
the fourth quarter of 2006. Book value per share increased 25.1% to
$27.95. Fourth Quarter Financial Highlights ($ in millions, except
per share amounts and percentages) (Unaudited) � � � � � Q4 2007 �
Q4 2006 � Change Gross written premium � $ 305.0 � � $ 286.9 � �
6.3 % Net earned premium � $ 423.7 � � $ 415.3 � � 0.2 % Net
investment income � $ 80.3 � � $ 62.7 � � 28.1 % Net income � $
135.2 � � $ 119.5 � � 13.1 % Combined ratio � � 79.4 % � � 76.8 % �
� Annualized operating return on average equity � � 23.2 % � � 22.8
% � � Net earnings per share � $ 1.44 � � $ 1.20 � � 20.0 % Book
value per share � $ 27.95 � � $ 22.35 � � 25.1 % Full Year
Financial Highlights ($ in millions, except per share amounts and
percentages) (Unaudited) � � � � � � 2007 � � � 2006 � � Change
Gross written premium � $ 1,818.5 � � $ 1,945.5 � � (6.5 )% Net
earned premium � $ 1,733.6 � � $ 1,676.2 � � 3.4 % Net investment
income � $ 299.0 � � $ 204.4 � � 46.3 % Net income � $ 489.0 � � $
378.1 � � 29.3 % Combined ratio � � 83.0 % � � 82.4 % � � Operating
return on average equity � � 21.1 % � � 18.4 % � � Net earnings per
share � $ 5.11 � � $ 3.75 � � 36.3 % Chris O'Kane, Chief Executive
Officer, commented, �For the fourth quarter and full year 2007,
Aspen delivered record net income and earnings per share. These
outstanding results reflect that all areas of the Company are
executing in-line with our strategy to diversify and leverage our
underwriting platforms, and generate strong consistent results from
our investment portfolio. We are well positioned for the softening
markets in 2008 and expect to continue delivering value for our
shareholders.� 2007 Operating Highlights AM Best announced an
upgrade of Aspen�s Bermuda operation, Aspen Insurance Limited, to a
financial strength rating of �A� and affirmed the U.K. operation�s
rating as �A�, both with a �Stable� outlook. Net investment income
for the year was $299 million, up 46.3% on last year with the Funds
of Hedge Funds producing an 11.4% return over the year. Assets
under management increased to $5.9 billion at the end of 2007 from
$5.2 billion at the end of 2006. Cash flows from operating
activities increased from $723 million in 2006 to $774 million in
2007. Limited catastrophe losses for the year of $77 million,
including $18 million of losses resulting from the California
wildfires in the fourth quarter. Following the $50 million share
buyback in the third quarter, Aspen completed the final $50 million
tranche in the fourth quarter. This completes the $300 million
buyback program authorized by the Board in November 2006. During
2007, Aspen continued to implement its successful diversification
strategy across business lines and geographies, with new
initiatives including entry into Political Risk, Global Excess
Casualty and Professional Liability insurance markets, and the
establishment of operating platforms in Zurich and Dublin. 2007
Business Segment Highlights In the third quarter of 2007, the
Company announced a change in the composition of its business
segments to reflect the manner in which the business is managed.
The new segments are Property Reinsurance, Casualty Reinsurance,
International Insurance, and U.S. Insurance. A summary of the
operating highlights for each of these segments is presented below.
Property Reinsurance Segment The Property Reinsurance segment
finished the year with a strong quarter recording a combined ratio
of 74.8% compared with 80.1% last year, with the only substantial
loss of $18 million attributable to the California wildfires. The
full year combined ratio improved to 72.6% in 2007 from 79.2% in
2006. In 2006, there were virtually no catastrophic events whereas
2007 has produced losses from Windstorm Kyrill, U.K. floods and the
California wildfires. While not insignificant, losses from these
events were comfortably within the initial catastrophe loss
guidance of $135 million for the year. The loss ratio for the year
was 39.7% versus 43.2% last year, and gross written premium fell by
only 3% to $602 million despite pressure on prices. Casualty
Reinsurance Segment Casualty Reinsurance finished the year with a
combined ratio of 94.6% compared with 83.4% in the prior year
reflecting increased loss experience and lower rate levels. In
addition, 2006 included favorable reserve development of $60
million compared with $32 million in 2007. International Insurance
Segment The International Insurance segment covers a wide range of
classes of business with the overall combined ratio for the year of
80.7% compared with 79.1% last year. 2007 includes some
moderate-sized losses in both the marine and aviation books, offset
by strong prior year releases within the U.K. liability account
from 2006 and prior years. In the fourth quarter of 2007, the new
lines, excess casualty and professional liability, began
contributing to the top line with increased contributions from all
new teams and distribution platforms expected in 2008. U.S.
Insurance Segment The U.S. Insurance operation has been
strategically repositioned in 2007 against the backdrop of
challenging market conditions in both the casualty and property
lines. Full year combined ratio of 98.3% compared favorably to
111.4% last year and the segment moved from an underwriting loss of
$12 million last year to a profit of $2 million in 2007. A
reshaping of the property book in particular lowered gross written
premium by 20% to $123 million. Share Repurchase Program On
February 6, 2008 Aspen�s Board authorized a new buyback program for
up to $300 million of ordinary equity. The authorization covers the
next two years and more details of the timing of these buybacks
will be provided as the year progresses. Outlook for 2008 The
Company expects a challenging pricing environment to continue in
2008. Given the prevailing market conditions and anticipated
trading performance, the Company expects to report an ROE (return
on average equity) in the range of 14% to 17% for 2008 assuming
normal loss experience. Earnings conference call Aspen will hold a
conference call February 7th, 2008 at 9:30am (Eastern Time). Dial
in details: +1 888-459-5609 (toll-free domestic U.S.) or +1
973-321-1024 (international) conference ID: 30154447. A replay of
the call will be available for 10 days starting immediately
following the live call, and can be accessed at +1 800-642-1687
(toll-free domestic U.S.) or +1 706-645-9291 (international);
digital pin: 30154447. The live call and a replay can also be heard
via Aspen's website at www.aspen.bm. In addition, a financial
supplement relating to Aspen's financial results for the fourth
quarter 2007 is available in the Investor Relations section of
Aspen's website at www.aspen.bm. A brief slide presentation which
will be used for reference during the earnings call will also be
available in the Investor Relations section of Aspen�s website.
Aspen Insurance Holdings Limited Summary Consolidated Balance Sheet
($ in millions, except per share data) (Unaudited) � � � (in US$
millions) As at December 31, 2007 As at December 31, 2006 ASSETS
Total investments 5,227.3 4,681.1 Cash and cash equivalents 651.4
495.0 Reinsurance recoverables 304.7 468.3 Premiums receivables
669.0 688.1 Other assets 337.8 307.6 Total assets 7,190.2 6,640.1 �
LIABILITIES Losses and loss adjustment expenses 2,946.0 2,820.0
Unearned premiums 757.6 841.3 Other payables 419.5 340.1 Long-term
debt 249.5 249.4 Total liabilities 4,372.6 4,250.8 SHAREHOLDERS�
EQUITY Total shareholders� equity 2,817.6 2,389.3 Total liabilities
and shareholders� equity 7,190.2 6,640.1 Book value per share 27.95
22.35 Diluted book value per share (treasury stock method) 27.08
21.83 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 December 31, 2007 Three Months Ended December 31, 2006 Twelve
Months Ended December 31, 2007 Twelve Months Ended December 31,
2006 UNDERWRITING REVENUES Gross written premiums 305.0 286.9
1,818.5 1,945.5 Premiums ceded (26.0 ) (8.8 ) (217.1 ) (281.9 ) Net
written premiums 279.0 278.1 1,601.4 1,663.6 Change in unearned
premiums 144.7 � 137.2 � 132.2 � 12.6 � Net earned premiums 423.7 �
415.3 � 1,733.6 � 1,676.2 � UNDERWRITING EXPENSES Losses and loss
expenses (201.7 ) (201.7 ) (919.8 ) (889.9 ) Acquisition expenses
(78.4 ) (67.4 ) (313.9 ) (322.8 ) General and administrative
expenses (56.5 ) (49.9 ) (204.8 ) (167.9 ) Total underwriting
expenses (336.6 ) (319.0 ) (1,438.5 ) (1,380.6 ) Underwriting
income 87.1 � 96.3 � 295.1 � 295.6 � OTHER OPERATING REVENUE Net
investment income 80.3 62.7 299.0 204.4 Interest expense (2.9 )
(4.4 ) (15.7 ) (16.9 ) Total other operating revenue 77.4 � 58.3 �
283.3 � 187.5 � � Other income (expense) (3.8 ) (4.6 ) (11.9 )
(14.2 ) OPERATING INCOME BEFORE TAX 160.7 150.0 566.5 468.9 OTHER
Net realized exchange gains (losses) (2.1 ) (0.9 ) 20.6 9.5 Net
realized investment losses (0.8 ) (1.9 ) (13.1 ) (8.0 ) INCOME
BEFORE TAX 157.8 147.2 574.0 470.4 Income taxes expense (22.6 )
(27.7 ) (85.0 ) (92.3 ) NET INCOME AFTER TAX 135.2 119.5 489.0
378.1 Dividends paid on ordinary shares (13.3 ) (13.3 ) (53.0 )
(56.2 ) Dividend paid on preference shares (6.9 ) (5.2 ) (27.7 )
(15.6 ) Retained income 115.0 � 101.0 � 408.3 � 306.3 � Components
of net income (after tax) Operating income 138.0 121.8 478.6 375.3
Net realized exchange gains (losses) (after tax) (2.1 ) (0.9 ) 20.6
9.5 Net realized investment losses (after tax) (0.7 ) (1.4 ) (10.2
) (6.7 ) NET INCOME AFTER TAX 135.2 � 119.5 � 489.0 � 378.1 � Aspen
Insurance Holdings Limited Summary Consolidated Financial Data ($
in millions, except share, per share data and ratios) (Unaudited) �
� � � Three Months Ended December 31, 2007 Three Months Ended
December 31, 2006 Twelve months Ended December 31, 2007 Twelve
months Ended December 31, 2006 Basic earnings per ordinary share
Net income adjusted for preference share dividend 1.48 1.22 5.25
3.82 Operating income adjusted for preference dividend 1.52 1.25
5.14 3.79 Diluted earnings per ordinary share Net income adjusted
for preference share dividend 1.44 1.20 5.11 3.75 Operating income
adjusted for preference dividend 1.47 1.22 4.99 3.72 Combined ratio
� 79.4 % � 76.8 % � 83.0 % � 82.4 % Aspen Insurance Holdings
Limited Summary Consolidated Segment Information ($ in millions
except ratios) (Unaudited) � As a result of a shift in the
Company�s operating structure and the implementation of a number of
strategic initiatives in 2007, Aspen changed the composition of our
business segments to reflect the manner in which the business is
managed. The new segments are property reinsurance, casualty
reinsurance, international insurance, and U.S. insurance. See the
earnings supplement for further details. � � � � � Three Months
Ended December 31, 2007 � Three Months Ended December 31, 2006 �
Twelve months Ended December 31, 2007 � Twelve months Ended
December 31, 2006 Gross written premiums � Property Reinsurance
79.6 58.0 601.5 623.1 Casualty Reinsurance 51.3 49.7 431.5 485.5
International Insurance 149.8 144.8 663.0 683.4 U.S. Insurance 24.3
� � 34.4 � � 122.5 � � 153.5 � Total 305.0 286.9 1,818.5 1,945.5
Premiums ceded Property Reinsurance 8.8 5.3 106.5 146.6 Casualty
Reinsurance (2.0 ) (5.0 ) 6.4 11.5 International Insurance 14.6
(0.3 ) 72.9 76.2 U.S. Insurance 4.6 � � 8.8 � � 31.3 � � 47.6 �
Total 26.0 8.8 217.1 281.9 Net written premiums Property
Reinsurance 70.8 52.7 495.0 476.5 Casualty Reinsurance 53.3 54.7
425.1 474.0 International Insurance 135.2 145.1 590.1 607.2 U.S.
Insurance 19.7 � � 25.6 � � 91.2 � � 105.9 � Total 279.0 278.1
1,601.4 1,663.6 Net earned premiums Property Reinsurance 132.6
116.7 555.6 495.1 Casualty Reinsurance 119.5 125.1 475.3 489.9
International Insurance 147.7 148.3 597.2 587.6 U.S. Insurance 23.9
� � 25.2 � � 105.5 � � 103.6 � Total 423.7 415.3 1,733.6 1,676.2
Underwriting profit Property Reinsurance 33.4 23.2 152.2 103.1
Casualty Reinsurance 4.7 18.2 25.7 81.3 International Insurance
43.5 55.6 115.4 123.0 U.S. Insurance 5.5 � � (0.7 ) � 1.8 � � (11.8
) Total 87.1 96.3 295.1 295.6 Combined ratio Property Reinsurance
74.8 % 80.1 % 72.6 % 79.2 % Casualty Reinsurance 96.1 % 85.5 % 94.6
% 83.4 % International Insurance 70.5 % 62.5 % 80.7 % 79.1 % U.S.
Insurance 77.0 % 102.8 % 98.3 % 111.4 % Total 79.4 % 76.8 % 83.0 %
82.4 % 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, the United States, the United Kingdom,
and Switzerland. For the twelve months ended December 31, 2007,
Aspen reported gross written premiums of $1.8 billion, net income
of $489.0 million and total assets of $7.2 billion. 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. 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. 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 impact of deteriorating credit
environment created by the sub-prime crisis; a decline in the value
of our investment portfolio or a rating downgrade of the securities
in our portfolio; changes in the total industry losses resulting
from Hurricanes Katrina, Rita and Wilma and any other events, and
the actual number of Aspen's insureds incurring losses from these
events; with respect to events such as Hurricanes Katrina, Rita and
Wilma, Aspen�s reliance on loss reports received from cedants and
loss adjustors, Aspen's reliance on industry loss estimates and
those generated by modeling techniques, the impact of these events
on Aspen's reinsurers, any changes in Aspen's reinsurers' credit
quality, the amount and timing of reinsurance recoverables and
reimbursements actually received by Aspen from its reinsurers and
the overall level of competition and the related demand and supply
dynamics as contracts come up for renewal; the impact that our
future operating results, capital position and rating agency and
other considerations have on the execution of any capital
management initiatives; the impact of any capital management
activities on our financial condition; 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 or investment practices have
anticipated; evolving interpretive issues with respect to coverage
as a result of Hurricanes Katrina, Rita and Wilma and any other
events such as the U.K. floods; the level of inflation in repair
costs due to limited availability of labor and materials after
catastrophes; the effectiveness of Aspen's loss limitation methods;
changes in the availability, cost or quality of reinsurance or
retrocessional coverage, which may affect our decision to purchase
such 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, A.M. Best Company or Moody's Investors
Service; 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 2008 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; decreased
demand for Aspen�s insurance or reinsurance products and cyclical
downturn of the industry; changes in governmental regulations,
interpretations or tax laws in jurisdictions where Aspen conducts
business; proposed and future changes to insurance laws and
regulations, including with respect to U.S. state- and other
government-sponsored reinsurance funds and primary insurers; Aspen
or its Bermudian subsidiary becoming subject to income taxes in the
United States or the United Kingdom; the effect on insurance
markets, business practices and relationships of ongoing
litigation, investigations and regulatory activity by the New York
State Attorney General's office and other authorities concerning
contingent commission arrangements with brokers and bid
solicitation activities. 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 22, 2007. 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. 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 ROAE�) 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
ROAE 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 25 of Aspen's financial
supplement for a reconciliation of operating income to net income
and page 18 for a reconciliation of average equity. (2) 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 25 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. (3) 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 25 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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