Aspen Insurance Holdings Limited (NYSE: AHL) today reported a
net profit after tax for the first quarter of 2009 of $91.4 million
and operating earnings of $1.18 per diluted ordinary share. This
compares to a net profit after tax of $81.2 million, and operating
earnings of $0.79 per diluted share for the first quarter last
year.
Book value per share on a diluted basis of $29.12 increased by
$0.64 when compared to March 31, 2008 and by $1.02 since the end of
December 2008, mainly as a result of $72.2 million of retained
income generated during the first quarter of 2009.
On March 31, 2009, Aspen repurchased $66.8 million in nominal
value of its 7.401% $25 perpetual preference shares for $34.1
million and issued $25.1 million of ordinary shares, in accordance
with the replacement capital covenant which formed part of the
initial preference share transaction. This repurchase increased
diluted book value per share and diluted net income per share for
the first quarter of 2009 by $0.37 and $0.38, respectively.
First Quarter 2009 Financial
Highlights
($ in millions, except per
share amounts and percentages)
(Unaudited)
� � �
Q1 2009 �
Q1 2008 �
Change Gross written
premium � $636.8 � $596.2 � 6.8% Net earned premium � $447.3 �
$391.6 � 14.2% Net investment income � $59.2 � $39.1 � 51.4% Net
income after tax � $91.4 � $81.2 � 12.6% Diluted net income per
share � $1.39 � $0.85 � 63.5% Diluted operating earnings per share
� $1.18 � $0.79 � 49.4% Net income annualized return on equity �
14.8% � 12.8% � � Annualized operating return on equity � 17.6% �
12.0% � � Combined ratio � 84.5% � 85.4% � � Diluted book value per
share � $29.12 � $28.48 � 2.2%
Chris O'Kane, Chief Executive Officer said, �We had�a good
first�quarter with continued growth in book value per
share�of�almost 4% since the end of 2008 and positive underwriting
contributions from�each of�our four business segments. Aspen is
well positioned to benefit from the improving rate environment in a
number of our core�lines of business. Our balance sheet remains
strong and we will continue to focus on active deployment of our
capital to those segments where we see most opportunity�consistent
with our diversified business model.�
First Quarter 2009 Operating Highlights
- Combined ratio of 84.5% for the
quarter compared with 85.4% for the first quarter of 2008.
- Expense ratio of 28.4% for the
quarter, down from 32.5% over the same quarter last year.
- Repurchased perpetual preference
shares with a nominal value of $66.8 million for $34.1
million.
- Cash flows from operating
activities of $203.2 million compared with $163.5 million in the
first quarter of 2008.
- Reserve release of $9.8 million
for the quarter compared with $39.5 million in the first quarter of
2008.
Business Segment Highlights
A summary of the operating highlights for each of Aspen�s four
business segments is presented below.
Property Reinsurance
Our property reinsurance segment recorded a combined ratio of
57.6% for the quarter compared with 63.4% for the same period in
2008. The main driver for the improvement in the combined ratio is
the increase in gross earned premiums. Gross written premiums for
the first quarter of 2009 were $220.5 million compared to $184.2
million in the equivalent period in 2008. The increase in gross
written premiums is attributable to improving market conditions and
favorable prior year premium development.
Casualty Reinsurance
The casualty reinsurance segment combined ratio improved to
94.1% for the quarter from 94.9% in the first quarter of 2008. The
combined ratio in the current quarter has benefited from favorable
exchange rate movements coupled with reserve releases of $3.1
million whereas the first quarter of 2008 benefited from prior year
releases of $14.3 million. Gross written premium of $186.8 million
is up slightly from $182.1 million in the first quarter of
2008.
International Insurance
The international insurance segment reported a combined ratio
for the first quarter of 99.2% versus 95.5% in the first quarter of
2008. This segment had mixed loss experience for both prior year
claims and current year losses with limited adverse prior year
deterioration in respect of those lines exposed to the global
financial crisis. Gross written premiums in the quarter of $194.7
million are down slightly from $199.3 million in the first quarter
of 2008.
U.S. Insurance
The combined ratio in the first quarter for the U.S. insurance
segment has improved to 88.7% compared with 103.6% in the first
quarter of 2008 due to favorable loss experience in the current
quarter and an increase in earned premium. Gross written premium
for the first quarter of 2009 was $34.8 million, an increase of
13.7% when compared to the first quarter of 2008.
Investment Performance
Net investment income for the quarter was $59.2 million compared
with $39.1 million in the first quarter of 2008 due primarily to
the $4.0 million contribution from our funds of hedge funds
investments, compared to $16.9 million of losses from these
investments in the first quarter of 2008. Annualized total
investment return for the quarter was 3.4%.
The book yield on the fixed income portfolio was 4.42% at the
end of the first quarter of 2009, down from 4.64% at December 31,
2008. Unrealized gains on the fixed income portfolio at the end of
the first quarter of 2009 were $70.7 million, an increase of $3.3
million from the end of the fourth quarter of 2008.
Other-than-temporary impairment charges were $15.2 million for the
first quarter of 2009.
The portfolio consists of high quality diversified assets, with
30.9% of fixed maturity assets invested in U.S. Government and
other foreign government bonds and 22.7% invested in agency-issued
mortgage-backed securities. The average credit quality of the
portfolio is AA+ with an average duration of 2.9 years.
Outlook for 2009
The Company anticipates total gross written premium of $2
billion +/- 5%, premium ceded of 10% to 12% of gross earned
premium, a combined ratio in the range of 88% to 94%, a tax rate of
13% to 16% and a cat-load of $140 million for the remainder of the
year, assuming normal loss experience.
Earnings conference call
Aspen will hold a conference call to discuss its financial
results on Thursday, April 30, 2009 at 8:30 a.m. (Eastern
Time).
CONFERENCE CALL PARTICIPATION
DETAILS � April 30, 2009 at 8:30 a.m. (EDT)
�
Participant Dial-In
Numbers:
+1 (888) 459-5609 (US Toll Free) +1 (404) 665-9920 (International)
Conference ID:
91944234
Please call to register at least
10 minutes before the conference call begins.
The conference call will be webcast live in the �presentations�
section of the Investor Relations page of Aspen's website, which is
located at www.aspen.bm. The earnings press release and a detailed
financial supplement will be posted to the website, as well as a
brief slide presentation which may be used for reference during the
earnings call.
REPLAY DETAILS A replay of the call will be available for 14 days
via telephone and Internet starting two hours following the end of
the live call. Replay Access: � +1 (800) 642-1687 (US Toll Free) +1
(706) 645-9291 (International)
www.aspen.bm
� Replay ID: 91944234
Aspen Insurance Holdings
Limited
Summary Consolidated Balance
Sheet
($ in millions, except per
share data)
(Unaudited)
�
(in US$ millions) �
As at March 31,
2009
�
As at December 31,
2008
ASSETS Total investments $ 5,149.3 $ 4,944.9 Cash and cash
equivalents 913.2 809.1 Reinsurance recoverable 436.7 329.6
Premiums receivable 793.6 677.5 Other assets � 347.0 � 527.7 �
Total assets $ 7,639.8 $ 7,288.8 � LIABILITIES Losses and loss
adjustment expenses $ 3,096.2 $ 3,070.3 Unearned premiums 963.8
810.7 Other payables 497.8 379.2 Long-term debt � 249.6 � 249.5
Total liabilities $ 4,807.4 $ 4,509.7 � SHAREHOLDERS� EQUITY Total
shareholders� equity � 2,832.4 � 2,779.1 Total liabilities and
shareholders� equity $ 7,639.8 $ 7,288.8 � Tangible book value per
share $ 29.85 $ 28.85 Diluted book value per share (treasury stock
method) $ 29.12 $ 28.10
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 March
31, 2009
�
Three Months Ended March
31, 2008
�
UNDERWRITING REVENUES Gross written premiums $ 636.8 $ 596.2
Premiums ceded (130.2 ) (76.6 ) Net written premiums 506.6 519.6
Change in unearned premiums (59.3 ) (128.0 ) Net earned premiums $
447.3 � $ 391.6 � UNDERWRITING EXPENSES Losses and loss expenses
250.8 207.2 Acquisition expenses 78.6 76.4 General and
administrative expenses 48.5 � 50.8 � Total underwriting expenses $
377.9 � $ 334.4 � Underwriting income 69.4 � 57.2 � OTHER OPERATING
REVENUE Net investment income 59.2 39.1 Interest expense (3.9 )
(3.9 ) Total other operating revenue $ 55.3 � $ 35.2 � � Other
income (expense) (2.7 ) (2.2 ) OPERATING INCOME BEFORE TAX 122.0
90.2 OTHER Net realized and unrealized exchange (losses) gains (2.3
) 4.3 Net realized investment (losses) gains (12.2 ) 1.0 � INCOME
BEFORE TAX 107.5 95.5 Income taxes expense (16.1 ) (14.3 ) NET
INCOME AFTER TAX 91.4 81.2 Dividends paid on ordinary shares (12.3
) (12.9 ) Dividend paid on preference shares (6.9 ) (6.9 ) Retained
income $ 72.2 � $ 61.4 � Components of net income (after tax) �
Operating income 105.7 76.0 Net realized and unrealized exchange
(losses) gains after tax (2.3 ) 4.3 Net realized investment
(losses) gains after tax (12.0 ) 0.9 � NET INCOME AFTER TAX $ 91.4
� $ 81.2 � � � Loss ratio 56.1 % 52.9 % Policy acquisition expense
ratio 17.6 % 19.5 % General and administrative expense ratio 10.8 %
13.0 % Expense ratio 28.4 % 32.5 % Combined ratio 84.5 % 85.4 %
Aspen Insurance Holdings
Limited
Summary Consolidated Financial
Data
($ in millions, except share,
per share data and ratios)
(Unaudited)
�
(in US$ except for number of shares) �
Three Months Ended March
31, 2009
�
Three Months Ended March
31, 2008
� Basic earnings per ordinary share Net income adjusted for
preference share dividend and cancellation of preference shares
$ 1.42 $ 0.87 Operating income adjusted for
preference dividend
$ 1.21 $ 0.81 Diluted earnings
per ordinary share Net income adjusted for preference share
dividend and cancellation of preference shares
$ 1.39
$ 0.85 Operating income adjusted for preference dividend
$
1.18 $ 0.79 � Weighted average number of ordinary shares
outstanding (in millions)
81.535 85.511 Weighted average
number of ordinary shares outstanding and dilutive potential
ordinary shares (in millions)
83.572 87.957
Aspen Insurance Holdings
Limited
Summary Consolidated Segment
Information
($ in millions except
ratios)
(Unaudited)
� �
Three Months Ended March
31,2009
�
Three Months Ended March
31, 2008
�
Gross written premiums Property Reinsurance $ 220.5 $
184.2 Casualty Reinsurance 186.8 182.1 International Insurance
194.7 199.3 U.S. Insurance �
34.8 � �
30.6 � Total
$ 636.8 �
$ 596.2 � �
Premiums ceded
Property Reinsurance $ 38.4 $ 8.8 Casualty Reinsurance 1.0 2.1
International Insurance 69.9 57.3 U.S. Insurance �
20.9 � �
8.4 � Total
$
130.2 �
$ 76.6 � �
Net
written premiums Property Reinsurance $ 182.1 $ 175.4 Casualty
Reinsurance 185.8 180.0 International Insurance 124.8 142.0 U.S.
Insurance �
13.9 � �
22.2 � Total
$ 506.6 �
$
519.6 � �
Net earned premiums Property
Reinsurance $ 139.1 $ 127.0 Casualty Reinsurance 109.5 94.7
International Insurance 175.0 150.2 U.S. Insurance �
23.7 � �
19.7 � Total
$
447.3 �
$ 391.6 � �
Underwriting profit Property Reinsurance $ 58.9 $ 46.5
Casualty Reinsurance 6.4 4.8 International Insurance 1.4 6.6 U.S.
Insurance �
2.7 � �
(0.7 )
Total
$ 69.4 �
$
57.2 � �
Combined ratio Property Reinsurance
57.6 % 63.4 % Casualty Reinsurance 94.1 % 94.9 % International
Insurance 99.2 % 95.5 % U.S. Insurance 88.7 % 103.6 % Total 84.5 %
85.4 %
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, Singapore,
the United States, the United Kingdom, and Switzerland. For the
three months ended March 31, 2009, Aspen reported gross written
premiums of $636.8 million, net income of $94.1 million and total
assets of $7.6 billion. Its operating subsidiaries have been
assigned a rating of �A� (�Strong�) by Standard & Poor�s, an
�A� (�Excellent�) by A.M. Best and an �A2� (�Good�) by Moody�s
Investors Service. 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.
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 continuing and
uncertain impact of the current depressed credit environment, the
banking crises and economic recessions in many of the countries in
which we operate and of the measures being taken by governments to
counter these issues; the risk of a material decline in the value
or liquidity of all or parts of our investment portfolio; changes
in insurance and reinsurance market conditions that could adversely
impact execution of the business plan; changes in our ability to
exercise capital management or strategic initiatives or to arrange
banking facilities as a result of prevailing market changes or
changes in our financial position; our ability to execute our
business plan to enter new markets, introduce new products and
develop new distribution channels, including their integration into
our existing operations; increased counterparty risk due to the
impairment of financial institutions; changes in the total industry
losses, or our share of total industry losses, resulting from past
events such as Hurricanes Ike and Gustav 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 modelling techniques, changes in rulings on flood
damage or other exclusions as a result of prevailing lawsuits and
case law, any changes in our reinsurers� credit quality and the
amount and timing of reinsurance recoverables; 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, reinsurance purchasing or
investment practices have anticipated; evolving interpretive issues
with respect to coverage after major loss events; the level of
inflation in repair costs due to limited availability of labor and
materials after catastrophes; the effectiveness of our loss
limitation methods; changes in the availability, cost or quality of
reinsurance or retrocessional 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
(�S&P�), A.M. Best or Moody�s Investors Service (�Moody�s�);
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 2009 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 and the related demand and supply
dynamics as contracts come up for renewal; decreased demand for our
insurance or reinsurance products and cyclical changes in the
insurance and reinsurance sectors; changes in government
regulations or tax laws in jurisdictions where we conduct
business;�and Aspen or its Bermudian subsidiary becoming subject to
income taxes in the United States or the United Kingdom; and the
effect on insurance markets, business practices and relationships
of ongoing litigation, investigations and regulatory activity by
insurance regulators and prosecutors. 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 26, 2009. 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. 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.
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
ROE�) 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 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.
See page 27 of Aspen's financial supplement for a reconciliation
of operating income to net income and page 8 for a reconciliation
of average equity.
(2) Annualized Operating Return on Average Equity excluding
gains or losses from funds of hedge funds (�Adjusted Operating
ROE�) is a non-GAAP financial measure. Annualized Operating
Return on Average Equity excluding gains or losses from funds of
hedge funds 1) is calculated using adjusted 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 Adjusted 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.
See page 29 of Aspen's financial supplement for a reconciliation
of adjusted operating income to net income and page 8 for a
reconciliation of average equity.
(3) 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 27 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.
(4) Adjusted Operating income is a non-GAAP financial
measure. Adjusted 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, after-tax net
foreign exchange gains or losses and excludes after tax net gains
or losses from our investments in funds of hedge funds.
Aspen excludes after-tax net realized capital gains or losses,
after-tax net foreign exchange gains or losses and after tax net
gains or losses from our investments in funds of hedge funds 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 29 of Aspen's financial supplement for a
reconciliation of adjusted 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.
(5) 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 26 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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