Aspen Insurance Holdings Limited (NYSE:AHL) today reported a net
profit after tax for 2009 of $473.9 million or an operating profit
of $5.16 per diluted ordinary share and net profit after tax for
the fourth quarter of 2009 of $126.3 million or an operating profit
of $1.44 per diluted ordinary share. This compares to a net profit
after tax of $103.8 million for 2008, or operating earnings of
$1.44 per diluted share and net profit after tax of $21.8 million,
or operating earnings of $0.17 per diluted share for the fourth
quarter last year.
Book value per share on a diluted basis of $34.04 increased by
21.1% when compared to December 31, 2008 and by 2.9% since the end
of September 2009, as a result of $400.3 million of retained income
and a $101.8 million increase in unrealized gains, net of tax, from
the fixed income investment portfolio generated during 2009.
Chris O’Kane, Chief Executive Officer said: “2009 was a very
good year and I am delighted to report a combined ratio of 84.1%
and an operating return on equity of 18.0% for the group against a
challenging pricing environment and historically low interest
rates. We have entered 2010 in a very strong position and our $200
million share buy-back in early January demonstrated our continued
commitment to active capital management. Trading conditions are
demanding but I remain confident of achieving a 2010 ROE that
reaches into the teens assuming normal loss experience as we seek
to maximize the advantages of our diversified business model.”
Fourth Quarter 2009 Financial
Highlights
($ in millions, except per
share amounts and percentages)
(Unaudited)
Q4 2009 Q4 2008
Change Gross written premium $405.7 $435.4
(6.8%) Net earned premium $476.2 $478.6
(0.5%) Net investment income $58.2 $10.3
465.0% Net income after tax $126.3 $21.8
479.4% Diluted net income per share $1.40 $0.18
677.8% Diluted operating earnings per share $1.44
$0.17 747.1% Net income annualized return on equity
18.4% 2.8% Annualized operating return
on equity 18.8% 2.4% Combined ratio
84.7% 93.4% Book value per ordinary
share $35.33 $28.85 22.5% Diluted book value
per ordinary share $34.04 $28.10 21.1%
Twelve Months of 2009 Financial
Highlights
($ in millions, except per
share amounts and percentages)
(Unaudited)
2009 2008
Change Gross written premium $2,067.1 $2,001.7
3.3% Net earned premium $1,823.0 $1,701.7
7.1% Net investment income $248.5 $139.2
78.5% Net income after tax $473.9 $103.8
356.6% Diluted net income per share $5.64
$0.89 533.7% Diluted operating earnings per share
$5.16 $1.44 258.3% Net income annualized return on
equity 18.4% 3.3% Annualized operating
return on equity 18.0% 5.4% Combined
ratio 84.1% 95.6%
Fourth Quarter and Full Year 2009 Operating
Highlights
- Cash flows from operating
activities were $157.5 million for the quarter and $646.6 million
for the full year in 2009 compared with $86.2 million and $530.5
million, respectively in 2008.
- Reserve releases were $13.4
million for the quarter compared with $12.1 million of reserve
strengthening for the same period in 2008. For the full year,
reserve releases were $84.4 million and $83.5 million in 2008.
- Unrealized gains in the fixed
income portfolio, gross of tax, increased by $118.2 million when
compared to December 31, 2008. For the fourth quarter in 2009
unrealized gains decreased by $33.1 million compared with a $138.3
million increase in the same period in 2008.
- The fourth quarter of 2009
benefited from a small tax credit of $0.2 million, which is a
product of lowering the full year estimated effective tax rate from
15.0% at the end of the third quarter of 2009 to an actual rate of
11.4% at the end of the year. This compares with an effective tax
rate for the fourth quarter of 47.3% and 26.0% for the full year in
2008.
Business Segment Highlights
A summary of the operating highlights for each of Aspen’s four
business segments is presented below.
Property Reinsurance
The combined ratio for the property reinsurance segment was
58.0% for the fourth quarter compared with 85.2% in the same period
in 2008 and 55.6% for the full year compared with 91.1% in 2008.
The improvement in the combined ratio for the quarter and the year
reflects not only the absence of any material catastrophic events,
but also the strong results in the risk excess, pro rata and
facultative accounts, with the latter recording a loss ratio of 5%
for the full year. Gross written premium for the quarter was $77.0
million compared with $81.5 million for the same period in 2008.
For the full year in 2009, gross written premium was $648.7 million
compared with $589.0 million in 2008, with the increase
attributable to attractive rates in catastrophic exposed business
lines, coupled with a contribution of $48.8 million from the credit
and surety reinsurance team in Zurich in its first full year of
operation.
Casualty Reinsurance
The combined ratio for the full year 2009 was 96.1% compared
with 92.0% for 2008, and 103.9% for the fourth quarter compared
with 92.0% for the same period in 2008. The combined ratio in the
fourth quarter of 2008 benefited from positive premium adjustments
and favorable movement in exchange rates. Full year reserve
releases fell to $27.5 million from $67.2 million in 2008. The
accident year combined ratio for the twelve-month period improved
to 102.8% compared with 105.8% in 2008. Gross written premium for
the quarter was $65.8 million, a decrease of 32.7% over the same
period in 2008 with the prior year comparative driven by positive
premium adjustments. Gross written premium for the twelve-month
period in 2009 decreased marginally to $408.1 million as the
Company continued to reduce its account to align with the
challenging market conditions.
International Insurance
The combined ratio for the international insurance segment was
78.9% for the fourth quarter of 2009 compared with 104.9% for the
same period in 2008, and for the twelve-month period was 91.5%
compared with 99.8% in 2008. The improvement in the combined ratio
across this diverse portfolio of insurance lines was driven by
active portfolio management. In addition there was a modest
contribution from favorable prior year reserve development. Gross
written premium for the quarter of $230.4 million is broadly in
line with the same period in 2008. Gross written premium for the
full year in 2009 has decreased by 2.3% to $847.7 million compared
to 2008.
U.S. Insurance
In the U.S. insurance segment, reserves in the quarter were
strengthened by $12.4 million in the U.S. casualty line in response
to developing experience, in particular in relation to its New York
contractors’ exposure. As a result of the relatively small earned
premium in the segment, the reserve strengthening increased the
combined ratio by 49 percentage points in the quarter. The combined
ratio for the quarter was 200.4% compared with 59.0% in the same
period in 2008. The combined ratio for the twelve-month period in
2009 was 137.9% compared with 105.8% in 2008. Gross written premium
for the quarter increased by $5.1 million to $32.5 million when
compared to the same period in 2008 as the property book has been
repositioned and grown over the past two years. Gross written
premiums for the twelve-month period increased by $34.0 million to
$162.6 million when compared to 2008, with virtually all the growth
coming in U.S. property insurance.
Investment Performance
Net investment income for the quarter was $58.2 million compared
with $10.3 million in the fourth quarter of 2008. The fourth
quarter of 2008 featured $49.0 million of losses from funds of
hedge funds investments. The funds of hedge funds investments were
redeemed effective June 30, 2009. Net investment income for the
twelve-month period in 2009 was $248.5 million compared with $139.2
million in 2008.
Net realized and unrealized gains included in income for the
quarter were $4.2 million compared with $8.4 million in the fourth
quarter of 2008. Other-than-temporary impairment charges were $3.3
million for the quarter compared with $3.8 million for the same
period in 2008.
Net realized and unrealized gains included in income for the
twelve-month period in 2009 were $11.4 million compared with net
realized and unrealized losses of $47.9 million in 2008. The
twelve-month period in 2009 included $15.6 million of
mark-to-market gains from the trading portfolios.
Other-than-temporary impairment charges for the twelve-month period
in 2009 were $23.2 million compared with $59.6 million in 2008 with
the prior year charge being attributable primarily to the collapse
of Lehman Brothers.
Unrealized gains on the available for sale fixed income
portfolio at the end of the fourth quarter of 2009 were $185.6
million, an increase of $118.2 million from the end of 2008.
Annualized total investment return for the current quarter was 1.8%
and 6.1% for the twelve months in 2009.
The book yield on the fixed income portfolio was 4.2% compared
with 4.6% at December 31, 2008. The average credit quality of the
portfolio remains AA+ with an average duration of 3.3 years, which
has increased marginally from December 31, 2008.
Outlook for 2010 and Share Repurchase Authorization
At this early stage in the year and given the state of the
market, the Company anticipates gross written premium for the full
year to be $2.2 billion +/- 5%, premium ceded to be between 8% and
12% of gross earned premium and the combined ratio to be in the
range of 88%-94% including a cat load of $170 million assuming
normal loss experience in the year. The Company expects the
effective tax rate to be in the range of 10% to 14%.
At a Board meeting on February 9, 2010, the Board authorized a
new share repurchase program for up to $400 million over two years,
the previous authorization having been fully utilized following a
$200 million accelerated share repurchase entered into on January
5, 2010.
Earnings conference call
Aspen will hold a conference call to discuss its financial
results on Wednesday, February 10, 2010 at 8:30 a.m. (Eastern
Time).
CONFERENCE CALL PARTICIPATION DETAILS – February 10, 2010 at
8:30 a.m. (ET)
Participant Dial-In
Numbers:
+1 (888) 459-5609 (US Toll Free) +1 (404)
665-9920 (International)
Conference ID:
49500217
Please call to register at least 10 minutes before the
conference call begins.
The conference call will be webcast live in the ‘presentations’
section of the Investor Relations page of Aspen's website, which is
located at www.aspen.bm. The earnings press release and a detailed
financial supplement will be posted to the website, as well as a
brief slide presentation which may be used for reference during the
earnings call.
REPLAY DETAILS
A replay of the call will be available for 14 days via telephone
and Internet starting two hours following the end of the live
call.
Replay Access: +1 (800) 642-1687
(US Toll Free) +1 (706) 645-9291 (International)
www.aspen.bm
Replay ID: 49500217
Aspen Insurance Holdings
Limited
Summary Consolidated Balance
Sheet
($ in millions, except per
share data)
(Unaudited)
(in US$ millions)
As at December 31,
2009
As at December 31,
2008
ASSETS Total investments 5,997.0 4,944.9 Cash and cash equivalents
748.4 809.1 Reinsurance recoverables 425.3 329.6 Premiums
receivable 708.3 677.5 Other assets 373.2 527.7 Total assets
8,252.2 7,288.8 LIABILITIES Losses and loss adjustment
expenses 3,331.1 3,070.3 Unearned premiums 907.6 810.7 Other
payables 458.5 379.2 Long-term debt 249.6 249.5 Total liabilities
4,946.8 4,509.7 SHAREHOLDERS’ EQUITY Total shareholders’
equity 3,305.4 2,779.1 Total liabilities and shareholders’ equity
8,252.2 7,288.8 Tangible book value per share $ 35.33 $
28.85 Diluted book value per share (treasury stock method) $ 34.04
$ 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
December 31, 2009
Three Months
Ended
December 31, 2008
UNDERWRITING REVENUES Gross written premiums 405.7 435.4
Premiums ceded (22.3 ) (29.3 ) Net written premiums 383.4 406.1
Change in unearned premiums 92.8 72.5 Net earned
premiums 476.2 478.6 UNDERWRITING EXPENSES Losses and loss expenses
227.5 310.6 Acquisition expenses 95.1 87.5 General and
administrative expenses 80.3 48.6 Total underwriting
expenses 402.9 446.7 Underwriting income 73.3 31.9
OTHER OPERATING REVENUE Net investment income 58.2 10.3
Interest expense (3.8 ) (3.9 ) Total other operating revenue 54.4
6.4 Other income (expense) 0.9 (0.5 )
OPERATING INCOME BEFORE TAX 128.6 37.8 OTHER Net realized exchange
gains (6.7 ) (4.8 ) Net realized investment losses 4.2 8.4
INCOME BEFORE TAX 126.1 41.4 Income taxes expense 0.2
(19.6 ) NET INCOME AFTER TAX
126.3
21.8 Dividends paid on ordinary shares (12.6 ) (12.3 ) Dividend
paid on preference shares (5.5 ) (6.9 ) Retained income 108.2
2.6 Components of net income (after tax)
Operating
Income 129.2 20.5 Net realized exchange gains (after tax) (6.7
) (4.8 ) Net realized investment losses (after tax) 3.8 6.1
NET INCOME AFTER TAX 126.3 21.8 Loss
ratio 47.8 % 64.9 % Policy acquisition expense ratio 20.0 % 18.3 %
General and administrative expense ratio 16.9 % 10.2 % Expense
ratio 36.9 % 28.5 % Combined ratio 84.7 % 93.4 %
Aspen Insurance Holdings
Limited
Summary Consolidated Financial
Data
($ in millions, except share,
per share data and ratios)
(Unaudited)
Three Months Ended Twelve Months Ended (in
US$ except for number of shares)
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
Basic earnings per ordinary share Net income adjusted for
preference share dividend
$1.45 $0.18
$5.82 $0.92
Operating income adjusted for preference dividend
$1.48
$0.17
$5.33 $1.49 Diluted earnings per ordinary share Net
income adjusted for preference share dividend
$1.40 $0.18
$5.64 $0.89 Operating income adjusted for preference
dividend
$1.44 $0.17
$5.16 $1.44 Weighted
average number of ordinary shares outstanding (in millions)
83.239 81.485
82.698 82.963 Weighted average number
of ordinary shares outstanding and dilutive potential ordinary
shares (in millions)
86.412 83.423
85.327 85.532
Book value per ordinary share
$35.33 $28.85 Diluted
book value (treasury stock method)
$34.04 $28.10
Ordinary shares outstanding at end of the period (in millions)
83.328 81.507 Ordinary shares outstanding and dilutive
potential ordinary shares at end of the period (treasury stock
method) (in millions)
86.465 83.706
Aspen Insurance Holdings
Limited
Summary Consolidated Segment
Information
($ in millions except
ratios)
(Unaudited)
Three Months Ended
December 31, 2009
Three Months Ended
December 31, 2008
Gross written premiums Property Reinsurance 77.0 81.5
Casualty Reinsurance 65.8 97.7 International Insurance 230.4 228.8
U.S. Insurance 32.5 27.4 Total 405.7 435.4
Premiums ceded Property Reinsurance 9.8 (1.5 ) Casualty
Reinsurance (0.7 ) (0.9 ) International Insurance 2.8 26.8 U.S.
Insurance 10.4 4.9 Total 22.3 29.3
Net
written premiums Property Reinsurance 67.2 83.0 Casualty
Reinsurance 66.5 98.6 International Insurance 227.6 202.0 U.S.
Insurance 22.1 22.5 Total 383.4 406.1
Net
earned premiums Property Reinsurance 148.0 143.0 Casualty
Reinsurance 109.8 120.1 International Insurance 193.1 190.1 U.S.
Insurance 25.3 25.4 Total 476.2 478.6
Underwriting profit Property Reinsurance 62.1 21.1 Casualty
Reinsurance (4.2 ) 9.8 International Insurance 40.8 (9.4 ) U.S.
Insurance (25.4 ) 10.4 Total 73.3 31.9
Combined
ratio Property Reinsurance 58.0 % 85.2 % Casualty Reinsurance
103.9 % 92.0 % International Insurance 78.9 % 104.9 % U.S.
Insurance 200.4 % 59.0 % Total 84.7 % 93.4 %
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
twelve months ended December 31, 2009, Aspen reported gross written
premiums of $2,067.1 million, net income of $473.9 million and
total assets of $8.3 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 29 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 31 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 29 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 31 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 27 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.
(6) Diluted Operating Earnings Per Share and Basic Operating
Earnings Per Share is a non-GAAP financial measure. Aspen
believes that the presentation of diluted operating earnings per
share and basic operating earnings per share supports meaningful
comparison from period to period and the analysis of normal
business operations. Diluted operating earnings per share and basic
operating earnings per share are calculated by dividing operating
income by the diluted or basic weighted average number of shares
outstanding for the period. See page 29 for a reconciliation of
diluted and basic operating earnings per share to basic earnings
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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