Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported
results today for the twelve months ended December 31, 2020.
Mark Cloutier, Group Executive Chairman and Chief Executive
Officer, commented: “COVID-19 meant that 2020 was a year more
challenging than many of us can remember with both profound human
and economic consequences. While the vaccine program gives cause
for optimism, there can be no doubts that the pandemic will have a
deep and lasting impact on business and society. I am very proud of
the way our team at Aspen responded to the events of last year; we
stood by our clients to pay valid claims, continued to selectively
write new business to give our trading partners support and
confidence, and saw our people demonstrate admirable commitment,
determination and expertise in what were extremely trying
circumstances for many. I am also proud of and humbled by the
generosity and care displayed by so many Aspen team members in
their response to the needs of those less fortunate and more
severely impacted by the pandemic.
“Although we are reporting a combined ratio of 107.3%,
reflecting losses experienced due to COVID-19 and a significant
catastrophe year, our underlying performance gives me great
encouragement around the progress we are making as a business
including successfully reducing our catastrophe exposure. Alongside
this, our focus on underwriting discipline can be seen in our
operating combined ratio, which improved significantly to an
impressive 91.8%, and our accident year ex-catastrophe* loss ratio,
which improved to 58.5% compared to 64.3% in 2019. This performance
was achieved through a reshaping of our book which saw us dispose
of, or non-renew, business that no longer matches our underwriting
strategy. Additionally, we increased gross written premiums to $3.7
billion, up from $3.4 billion in 2019, as we continue to see
improving trading conditions.
“During 2020, we continued our journey to transform the
business. This includes refocusing on insurance and reinsurance
lines and classes of business where we have the expertise, product
set and market presence to generate underwriting profits across
market cycles; expanding our capital markets capabilities; and
implementing a strategic asset allocation aimed at improving yields
in our investment portfolio. In our capital markets business, total
capital grew to just over $800 million while fee income arising
from Aspen Capital Markets (“ACM”) operations increased $16.9
million year over year to $32.6 million. In addition to providing
additional income, ACM has played an important role in our efforts
to manage down earnings volatility. We view our capital markets
business and investors as key partners in our future growth and
innovation efforts.
The results of our efforts to simplify the business model and
pursue greater efficiency began to emerge in 2020 with our
operating expense ratio improving by 2.4% to 14.9% compared to
17.3% for the prior year.
In October, 2020, sister companies of our shareholder
successfully raised $500.0 million through a bond issuance
contributing $268.0 million to Aspen. This equity contribution
strengthens Aspen’s position as a major market participant,
providing incremental capital that enhances our ability to write
new insurance in a favorable market environment where pricing and
terms continue to improve. This capital contribution is a strong
statement of confidence in Aspen, the trajectory we are on and our
successful progress in reshaping the business.
At the same time, we are working hard to create a culture at
Aspen that can attract and retain the very best talent. As part of
this we continue to build an inclusive environment that encourages
and empowers a diverse group of people, while also taking steps to
consider how we can best manage our impact on the environment and
positively affect the communities we serve.
“As we look ahead to 2021, we are well-positioned in a market
that we believe will continue to see rate momentum. We experienced
a positive January renewal period and our capital position,
multiple platforms, healthy relationship with our distribution
partners, and reputation for technical expertise mean we are well
placed to achieve our objective of becoming a top quartile
specialty (re)insurer in the near term.
I would like to thank our people for what they have helped us
achieve in a uniquely difficult year, and I am pleased to be able
to look to the future with confidence and optimism.”
Key strategic and financial highlights
Continued transformation with improved underlying underwriting
performance
- Gross written premiums of $3,703.6 million for 2020, an
increase of 7.6% compared to $3,442.4 million for 2019, due to
improved market conditions and maintaining our strong market
position despite significant reshaping of the underwriting
portfolio in recent years for business that did not meet our
profitability requirements or risk appetite.
- General, administrative and corporate expenses, excluding
non-operating expenses, of $378.2 million in 2020 down from $396.0
million in 2019 with an operating expense ratio of 14.9% in 2020
compared with 17.3% in 2019.
- Investment income of $154.6 million for the twelve months ended
December 31, 2020 compared to $197.3 million for the twelve months
ended December 31, 2019.
- Net loss after tax of $(40.1) million and an operating loss
after tax of $(37.2) million in 2020 driven by above average
catastrophe losses, including losses associated with COVID-19 of
$181.2 million, and losses incurred on interest rate swaps totaling
$81.1 million.
- Catastrophe losses of $360.8 million in 2020 compared to $143.2
million in 2019. Catastrophe losses in 2020 included losses
associated with COVID-19 totaling $181.2 million.
- The combined ratio, excluding non-operating expenses, of 106.0%
in 2020, compared to 108.5% in 2019, was impacted by 2.2%
percentage points from legacy business.
- Total comprehensive income after preference dividends and
non-controlling interests of $8.4 million in 2020 compared with a
total comprehensive loss of $145.9 million in 2019.
Strong capital and reserve position
- Group capital position remains robust, with capital reserves of
$2,997.6 million as of December 31, 2020, an increase of $272.1
million compared with $2,725.5 million as of December 31,
2019.
Further significant progress in efforts to strengthen Aspen’s
global platform
- Capital base bolstered through receipt of $268.0 million in
capital contributions from our shareholder following successful
bond issue by its sister companies.
- Closed transaction for an Adverse Development Cover reinsurance
agreement with a subsidiary of Enstar Group Limited to reinsure
losses incurred on or prior to December 31, 2019.
- Our capital markets business contributed total fee income of
$32.6 million, split $23.6 million within our reinsurance segment,
and $9.1 million within our insurance segment. Total capital grew
to just over $800 million at December 31, 2020, an increase of $100
million compared to December 31, 2019, reflecting our view that
capital markets business and investors are key partners in our
further growth and innovation efforts.
- Successfully reorganized and simplified operating model around
key segments and made a number of senior appointments to the
leadership team.
- Continued to refocus underwriting portfolio on core products
including transactions to sell business that no longer fits our
underwriting strategy, including certain U.S. crop and agricultural
business, Surety insurance and U.S. Product Recall.
- Ongoing commitment to building an inclusive and diverse
business for all employees and continued focus on implementing a
comprehensive environmental, social and governance (“ESG”)
strategy, including offsetting our carbon footprint and working to
develop and implement a responsible portfolio review of business
lines and classes. In addition, our corporate social responsibility
(“CSR”) program provided funding and support to help and support
our communities during COVID-19.
*Catastrophe losses in 2020 are defined as losses associated
with COVID-19, Hurricanes Isaias and Laura, wildfires in California
and other weather-related events. Catastrophe losses in 2019 were
defined as losses associated with Hurricane Dorian, Typhoons Faxai
and Hagibis in Japan, and other weather-related events in India,
Australia and the U.S.
Non-GAAP financial measures are used throughout this
release. For additional information and reconciliation of
non-GAAP financial measures, refer to the end of this press
release. Refer to "Cautionary Statement Regarding Forward-Looking
Statements" at the end of this press release.
Operating highlights for the twelve months ended December 31,
2020
- Gross written premiums increased by 7.6% to $3,703.6
million in 2020 compared with $3,442.4 million in 2019.
- Net written premiums increased by 6.4% to $2,582.9
million in 2020 compared with $2,427.9 million in 2019. The
retention ratio in 2020 was 69.7% compared with 70.5% in 2019.
- Loss ratio of 72.7% in 2020 compared with 73.2% in 2019.
The loss ratio for 2020 included $360.8 million, or 14.2 percentage
points, of catastrophe losses, net of reinsurance recoveries,
compared with $143.2 million, or 6.3 percentage points, in 2019.
Catastrophe losses of $360.8 million for 2020 included losses
associated with COVID-19 totaling $181.2 million.
- Net favorable development on prior year loss reserves of
$0.9 million had a negligible effect on the loss ratio in 2020,
compared with net unfavorable development of $59.5 million which
increased the loss ratio by 2.6 percentage points in 2019.
- Accident year loss ratio excluding catastrophes of 58.5%
for 2020 compared with 64.3% for 2019.
- Total expense ratio of 34.6% and total expense ratio
(excluding non-operating expenses) of 33.3% for 2020 compared
with 40.7% and 35.3%, respectively, for 2019. Non-operating
expenses in 2020 were $32.7 million compared with $125.6 million in
2019. Non-operating expenses in 2020 included $18.2 million of
expenses related to severance, retention and other activities
associated with the transaction with the Apollo Funds and other
strategic expense saving initiatives, $12.9 million of impairment
charges related to lease assets as a result of sub-leasing certain
office space, and $1.6 million of other non-operating
expenses.
- Operating (loss) after tax of $(37.2) million for the
twelve months ended December 31, 2020 compared with an operating
loss of $(48.4) million for the twelve months ended December 31,
2019.
- Net loss after tax of $(40.1) million for the twelve
months ended December 31, 2020 compared with a net loss of $(241.7)
million for the twelve months ended December 31, 2019. The net loss
included an underwriting loss, including corporate expenses, of
$(152.1) million, compared to an underwriting loss of $(195.1)
million, including corporate expenses, for the twelve months ended
December 31, 2019. Investment income was $154.6 million in 2020,
compared with $197.3 million for 2019, as well as $(10.0) million
of net realized and unrealized investment losses, compared with net
realized and unrealized investment losses of $(44.0) million in
2019. The net loss in 2020 also included $3.6 million of net
realized and unrealized foreign exchange gains, including foreign
exchange contracts, compared with $(25.8) million of net realized
and unrealized foreign exchange losses in 2019.
Segment highlights for the twelve months ended December 31,
2020
- Insurance
- Gross written premiums of $2,042.8 million in 2020, an increase
compared with $1,956.9 million in 2019 due to growth in both
financial and professional lines insurance and property and
casualty line insurance as a result of improved market conditions,
partially offset by reductions in marine, aviation and energy
insurance primarily as a result of exiting certain lines of
business and products following completion of strategic
reviews.
- Net written premiums of $1,280.8 million, an increase of 8.8%
compared with $1,176.8 million in 2019 primarily due to growth in
gross written premiums Our retention ratio increased to 62.7% in
2020 compared to 60.1% in 2019.
- Loss ratio of 71.1% in 2020 compared with 73.4% in 2019. The
loss ratio included catastrophe losses of $116.8 million, or 9.4
percentage points, net of reinsurance recoveries, in 2020,
including $52.5 million of losses associated with COVID-19.
- Prior year net unfavorable reserve development of $35.2 million
increased the loss ratio by 2.8 percentage points in 2020. Prior
year net unfavorable development of $114.4 million increased the
loss ratio by 11.0 percentage points in 2019. Reserve strengthening
in the insurance segment totaling $35.2 million, primarily from
reserve strengthening on property and casualty line insurance.
- Accident year loss ratio excluding catastrophes was 58.9% in
2020 compared with 60.7% in 2019, reflecting actions taken to
enhance underwriting performance via the exist of underperforming
lines.
- Reinsurance
- Gross written premiums of $1,660.8 million, an increase of
11.8% in 2020 compared with $1,485.5 million in 2019 due to growth
in premiums written in casualty reinsurance, property catastrophe
reinsurance and other property reinsurance, partially offset by a
reduction in specialty reinsurance lines.
- Net written premiums of $1,302.1 million, an increase of 4.1%
compared with $1,251.1 million in 2019. Our retention ratio
decreased to 78.4% in 2020 compared to 84.2% in 2019, due to an
additional outwards reinsurance program purchased on our casualty
reinsurance lines.
- Loss ratio of 74.2% in 2020 compared with 73.1% in 2019. The
loss ratio included catastrophe losses of $244.0 million, or 18.9
percentage points, net of reinsurance recoveries, in 2020,
including $128.7 million from losses associated with COVID-19.
- Prior year net favorable reserve development of $36.1 million
reduced the loss ratio by 2.8 percentage points in 2020. Prior year
net favorable reserve development of $54.9 million reduced the loss
ratio by 4.4 percentage points in 2019. Reserve releases in the
reinsurance segment totaling $36.1 million, which arose primarily
from casualty reinsurance, property catastrophe reinsurance and
other property reinsurance, partially offset by unfavorable
development on specialty reinsurance lines.
- Accident year loss ratio excluding catastrophes was 58.1% in
2020 compared with 67.4% in 2019, reflecting the decision to exit
Credit and Surety business lines which experienced significant
losses in 2019.
Investment performance
- Investment income of $154.6 million for the twelve months ended
December 31, 2020 compared with $197.3 million for the twelve
months ended December 31, 2019.
- Net realized and unrealized investment losses reported in the
statement of income of $10.0 million for the twelve months ended
December 31, 2020 consisted of a loss of $81.1 million associated
with the interest- rate swaps offsetting investment gains of $71.1
million primarily from the fixed income portfolio. In addition,
$108.5 million of unrealized investment gains were recognized
through other comprehensive income in the twelve months ended
December 31, 2020.
- The total return on Aspen’s managed investment portfolio was
3.1% for the twelve months ended December 31, 2020 and reflects net
investment income and net realized and unrealized gains and losses
mainly in the fixed income portfolio and losses associated with
interest rate-swaps.
- Aspen’s investment portfolio as at December 31, 2020 consisted
primarily of high quality fixed income securities with an average
credit quality of “AA”. The average duration of the fixed income
portfolio was 2.74 years as at December 31, 2020.
- Book yield on the fixed income portfolio as at December 31,
2020 was 2.34% compared with 2.74% as at December 31, 2019.
Capital and Debt
- Total shareholders’ equity was $2,997.6 million as at December
31, 2020, an increase of $272.1 million compared with $2,725.5
million as at December 31, 2019.
- During the fourth quarter of 2020, Aspen received additional
capital contributions totaling $268.0 million from its immediate
parent company.
Earnings materials The earnings press release for the
year ended December 31, 2020 will be published on Aspen’s website
at www.aspen.co.
Aspen Insurance Holdings Limited Summary consolidated
balance sheet (unaudited) $ in millions
As at December 31,
2020
As at December 31,
2019
ASSETS
Total investments
$
5,755.3
$
6,771.4
Cash and cash equivalents
1,747.3
1,030.5
Reinsurance recoverables
3,648.9
2,763.5
Premiums receivable
1,279.8
1,318.4
Other assets
754.1
696.7
Total assets
$
13,185.4
$
12,580.5
LIABILITIES
Losses and loss adjustment expenses
$
7,165.3
$
6,951.8
Unearned premiums
1,817.4
1,737.7
Other payables
905.2
865.7
Long-term debt
299.9
299.8
Total liabilities
$
10,187.8
$
9,855.0
SHAREHOLDERS’ EQUITY
Total shareholders’ equity
2,997.6
2,725.5
Total liabilities and shareholders’
equity
$
13,185.4
$
12,580.5
Aspen Insurance Holdings Limited Summary consolidated
statement of income (unaudited) $ in millions, except
ratios
Twelve Months Ended
December 31, 2020
December 31, 2019
UNDERWRITING REVENUES
Gross written premiums
$
3,703.6
$
3,442.4
Premiums ceded
(1,120.7)
(1,014.5)
Net written premiums
2,582.9
2,427.9
Change in unearned premiums
(50.3)
(134.6)
Net earned premiums
2,532.6
2,293.3
UNDERWRITING EXPENSES
Losses and loss adjustment expenses
1,840.8
1,679.7
Amortization of deferred policy
acquisition costs
465.7
412.7
General, administrative and corporate
expenses
378.2
396.0
Total underwriting expenses
2,684.7
2,488.4
Underwriting (loss) including corporate
expenses
(152.1)
(195.1)
Net investment income
154.6
197.3
Interest expense (1)
(33.9)
(20.2)
Other income (2)
39.0
0.1
Total other revenue
159.7
177.2
Non-operating expenses (3)
(32.7)
(125.6)
Net realized and unrealized exchange
gains/(losses) (4)
3.6
(25.8)
Net realized and unrealized investment
(losses) (5)
(10.0)
(44.0)
Realized (loss) on debt extinguishment
—
(5.5)
(LOSS) BEFORE TAX
(31.5)
(218.8)
Income tax (expense)
(8.6)
(22.9)
NET (LOSS) AFTER TAX
(40.1)
(241.7)
Dividends paid on preference shares
(44.5)
(35.9)
Proportion due to non-controlling
interest
—
1.2
Retained (loss)
$
(84.6)
$
(276.4)
Loss ratio
72.7%
73.2%
Policy acquisition expense ratio
18.4%
18.0%
General, administrative and corporate
expense ratio
16.2%
22.7%
General, administrative and corporate
expense ratio (excluding non-operating expenses) / Operating
expense ratio
14.9%
17.3%
Expense ratio
34.6%
40.7%
Expense ratio (excluding non-operating
expenses)
33.3%
35.3%
Combined ratio
107.3%
113.9%
Combined ratio (excluding non-operating
expenses)
106.0%
108.5%
(1) Interest expense includes interest on deferred premium
payments for an adverse development cover. (2) Includes the gain on
the sale of our Surety business of $43.1 million, which has been
classified as non-operating income. A gain contingency of up to
$10.0 million could be realized in future periods, dependent upon
premium production levels prescribed in the sale agreement. (3)
Non-operating expenses includes expenses in relation to severance,
retention awards, amortization of intangible assets, impairment of
leased assets and other non-recurring costs. (4) Includes the net
realized and unrealized gains/(losses) from foreign exchange
contracts. (5) Includes the net realized and unrealized
gains/(losses) from interest rate swaps.
Aspen Insurance Holdings Limited Summary consolidated
segment information (unaudited) $ in millions, except
ratios
Twelve Months Ended December
31, 2020
Reinsurance
Insurance
Total
Gross written premiums
$
1,660.8
$
2,042.8
$
3,703.6
Net written premiums
1,302.1
1,280.8
2,582.9
Gross earned premiums
1,616.4
2,027.1
3,643.5
Net earned premiums
1,292.1
1,240.5
2,532.6
Losses and loss adjustment expenses
958.6
882.2
1,840.8
Amortization of deferred policy
acquisition expenses
246.0
219.7
465.7
General and administrative expenses
110.8
197.2
308.0
Underwriting (loss)
$
(23.3)
$
(58.6)
$
(81.9)
Net investment income
154.6
Net realized and unrealized investment
(losses) (1)
(10.0)
Corporate expenses
(70.2)
Non-operating expenses (2)
(32.7)
Other income (3)
39.0
Interest expense
(33.9)
Net realized and unrealized foreign
exchange gains (4)
3.6
(Loss) before tax
$
(31.5)
Income tax (expense)
(8.6)
Net (loss)
$
(40.1)
Ratios
Loss ratio
74.2
%
71.1
%
72.7
%
Policy acquisition expense ratio
19.0
%
17.7
%
18.4
%
General and administrative expense ratio
(5)
8.6
%
15.9
%
16.2
%
General and administrative expense ratio
(excluding non-operating expenses) / Operating expense ratio
(6)
8.6
%
15.9
%
14.9
%
Expense ratio
27.6
%
33.6
%
34.6
%
Expense ratio (excluding non-operating
expenses)
27.6
%
33.6
%
33.3
%
Combined ratio
101.8
%
104.7
%
107.3
%
Combined ratio (excluding non-operating
expenses)
101.8
%
104.7
%
106.0
%
Accident Year Ex-cat Loss Ratio
Loss ratio
74.2
%
71.1
%
72.7
%
Prior year loss development
2.8
%
(2.8)
%
—
%
Catastrophe losses
(18.9)
%
(9.4)
%
(14.2)
%
Accident year ex-cat loss ratio
58.1
%
58.9
%
58.5
%
(1) Includes the net realized and unrealized gains/(losses) from
interest rate swaps. (2) Non-operating expenses includes expenses
in relation to severance, retention awards, amortization of
intangible assets, impairment of leased assets and other
non-recurring costs. (3) Includes the gain on the sale of our
Surety business of $43.1 million, which has been classified as
non-operating income. A gain contingency of up to $10.0 million
could be realized in future periods, dependent upon premium
production levels prescribed in the sale agreement. (4) Includes
the net realized and unrealized gains/(losses) from foreign
exchange contracts. (5) The total group general and administrative
expense ratio includes the impact from corporate expenses, and
non-operating expenses. (6) The total group general and
administrative expense ratio includes the impact from corporate
expenses.
Aspen Insurance Holdings Limited Summary consolidated
segment information (unaudited) $ in millions, except
ratios
Twelve Months Ended December
31, 2019
Reinsurance
Insurance
Total
Gross written premiums
$
1,485.5
$
1,956.9
$
3,442.4
Net written premiums
1,251.1
1,176.8
2,427.9
Gross earned premiums
1,494.9
1,927.5
3,422.4
Net earned premiums
1,255.2
1,038.1
2,293.3
Losses and loss adjustment expenses
917.9
761.8
1,679.7
Amortization of deferred policy
acquisition expenses
264.9
147.8
412.7
General and administrative expenses
111.7
229.8
341.5
Underwriting (loss)
$
(39.3)
$
(101.3)
$
(140.6)
Net investment income
197.3
Net realized and unrealized investment
(losses) (1)
(44.0)
Realized (loss) on debt extinguishment
(5.5)
Corporate expenses
(54.5)
Non-operating expenses (2)
(125.6)
Other income
0.1
Interest expense
(20.2)
Net realized and unrealized foreign
exchange (losses) (3)
(25.8)
(Loss) before tax
$
(218.8)
Income tax benefit
(22.9)
Net (loss)
$
(241.7)
Ratios
Loss ratio
73.1
%
73.4
%
73.2
%
Policy acquisition expense ratio
21.1
%
14.2
%
18.0
%
General and administrative expense ratio
(4)
8.9
%
22.1
%
22.7
%
General and administrative expense ratio
(excluding non-operating expenses) / Operating expense ratio
(5)
8.9
%
22.1
%
17.3
%
Expense ratio
30.0
%
36.3
%
40.7
%
Expense ratio (excluding non-operating
expenses)
30.0
%
36.3
%
35.3
%
Combined ratio
103.1
%
109.7
%
113.9
%
Combined ratio (excluding non-operating
expenses)
103.1
%
109.7
%
108.5
%
Accident Year Ex-cat Loss Ratio
Loss ratio
73.1
%
73.4
%
73.2
%
Prior year loss development
4.4
%
(11.0)
%
(2.6)
%
Catastrophe losses
(10.1)
%
(1.7)
%
(6.3)
%
Accident year ex-cat loss ratio
67.4
%
60.7
%
64.3
%
(1) Includes the net realized and unrealized gains/(losses) from
interest rate swaps. (2) Non-operating expenses includes $103.4
million of costs related to or triggered by the transaction with
the Apollo Funds, severance, retention and other costs, and $22.2
million of expenses related to the operational effectiveness and
efficiency program, including $12.3 million of impairment charges
related to leased assets as a result of sub-leasing certain office
space. (3) Includes the net realized and unrealized gains/(losses)
from foreign exchange contracts. (4) The total group general and
administrative expense ratio includes the impact from corporate
expenses, and non-operating expenses. (5) The total group general
and administrative expense ratio includes the impact from corporate
expenses.
Aspen Insurance Holdings Limited Non-GAAP
supplementary summary consolidated segment information
(unaudited) $ in millions, except ratios
The following tables present supplementary financial information
regarding our two reporting segments, Reinsurance and Insurance, as
at December 31, 2020 and December 31, 2019, to show the impact on
our financial performance from the business which we have ceased
underwriting and has been classified as “Legacy”. “Legacy” business
in the 2019 table has been represented on a like for like basis,
meaning all the same lines of business have been included as Legacy
in both the 2020 and 2019 tables, notwithstanding that certain
lines of business were not yet classified as Legacy as at December
31, 2019 (e.g. Surety Insurance and certain U.S. Crop and
Agricultural Business. We believe this presentation provides for a
more complete understanding of the impact that these lines of
business have had on our underlying performance.
Twelve Months Ended December
31, 2020
Reinsurance
Insurance
Ongoing
Legacy (1)
Reinsurance Total
Ongoing
Legacy (2)
Insurance Total
Group Total
Net earned premiums
1,008.5
283.6
1,292.1
1,083.7
156.8
1,240.5
2,532.6
Losses and loss adjustment expenses
711.9
246.7
958.6
730.8
151.4
882.2
1,840.8
Amortization of deferred policy
acquisition expenses
216.0
30.0
246.0
172.7
47.0
219.7
465.7
General and administrative expenses
107.3
3.5
110.8
179.5
17.7
197.2
308.0
Underwriting (loss)/gain
$
(26.7)
$
3.4
$
(23.3)
$
0.7
$
(59.3)
$
(58.6)
$
(81.9)
Net investment income
154.6
Net realized and unrealized investment
(losses)
(10.0)
Realized (loss) on debt extinguishment
—
Corporate expenses
(70.2)
Amortization and non-recurring
expenses
(32.7)
Other income
39.0
Interest expense
(33.9)
Net realized and unrealized foreign
exchange gains
3.6
(Loss) before tax
$
(31.5)
Income tax charge
(8.6)
Net (loss)
$
(40.1)
Ratios
Loss ratio
70.6
%
87.0
%
74.2
%
67.4
%
96.6
%
71.1
%
72.7
%
Policy acquisition expense ratio
21.4
%
10.6
%
19.0
%
15.9
%
30.0
%
17.7
%
18.4
%
General and administrative expense
ratio
10.6
%
1.2
%
8.6
%
16.6
%
11.3
%
15.9
%
16.2
%
Expense ratio
32.0
%
11.8
%
27.6
%
32.5
%
41.3
%
33.6
%
34.6
%
Combined ratio
102.6
%
98.8
%
101.8
%
99.9
%
137.9
%
104.7
%
107.3
%
Accident Year Ex-cat Loss Ratio
Loss ratio
70.6
%
87.0
%
74.2
%
67.4
%
96.6
%
71.1
%
72.7
%
Prior year loss development
3.4
%
0.8
%
2.8
%
(0.5)
%
(19.0)
%
(2.8)
%
—
%
Catastrophe losses
(23.9)
%
(1.2)
%
(18.9)
%
(8.7)
%
(14.1)
%
(9.4)
%
(14.2)
%
Accident year ex-cat loss ratio
50.1
%
86.6
%
58.1
%
58.2
%
63.5
%
58.9
%
58.5
%
________________
Legacy reflects business we have elected to cease underwriting
following a series of strategic underwriting reviews. (1) Legacy
(reinsurance) represents:
(i) U.S. crop insurance business which was
previously written on a reinsurance basis through a strategic
partnership until disposed of in Q4 2020; (ii) our global credit
and surety reinsurance business that we ceased underwriting during
Q3 2019; and (iii) and our U.S. Agricultural business written via
AgriLogic which was sold in December 2017.
(2) Legacy (insurance) represents:
(i) U.S. surety business, which in July 2020
was subject to a renewal rights transaction; (ii) includes
international marine and energy liability products, and our global
accident and health line of business, which, following a strategic
review of our underwriting portfolio that began in December 2019,
we determined to cease underwriting and started to wind down in
February 2020 and March 2020, respectively; (iii) professional
liability and property and casualty coverages for small to medium
sized U.K.-based businesses that was bound through our managing
general agent, Aspen Risk Management Limited that we placed into
runoff during Q3 2019; (iv) international cargo insurance that we
ceased underwriting during Q4 2018; (v) our aviation line of
business, which we decided to cease underwriting during Q3 2018;
(vi) marine hull insurance written through the Lloyd’s platform
that we ceased underwriting during Q3 2018; (vii) international
property insurance previously written via a joint underwriting
initiative that we ceased underwriting during Q1 2017; and (viii)
employers and public liability lines previously written that we
ceased underwriting during Q4 2015.
Twelve Months Ended December
31, 2019
Reinsurance
Insurance
Ongoing
Legacy (1)
Reinsurance Total
Ongoing
Legacy (2)
Insurance Total
Group Total
Net earned premiums
862.3
392.9
1,255.2
807.3
230.8
1,038.1
2,293.3
Losses and loss adjustment expenses
572.7
345.1
917.9
510.8
251.1
761.8
1,679.7
Amortization of deferred policy
acquisition expenses
199.5
65.5
264.9
100.3
47.4
147.8
412.7
General and administrative expenses
103.5
8.2
111.7
176.9
52.9
229.8
341.5
Underwriting (loss)/gain
$
(13.4)
$
(25.9)
$
(39.3)
$
19.3
$
(120.6)
$
(101.3)
$
(140.6)
Net investment income
197.3
Net realized and unrealized investment
(losses)
(44.0)
Realized (loss) on debt extinguishment
(5.5)
Corporate expenses
(54.5)
Amortization and non-recurring
expenses
(125.6)
Other income
0.1
Interest expense
(20.2)
Net realized and unrealized foreign
exchange (losses)
(25.8)
(Loss) before tax
(218.8)
Income tax charge
(22.9)
Net (loss)
(241.7)
Ratios
Loss ratio
66.4
%
87.8
%
73.1
%
63.3
%
108.8
%
73.4
%
73.2
%
Policy acquisition expense ratio
23.1
%
16.7
%
21.1
%
12.4
%
20.5
%
14.2
%
18.0
%
General and administrative expense
ratio
12.0
%
2.1
%
8.9
%
21.9
%
22.9
%
22.1
%
22.7
%
Expense ratio
35.1
%
18.8
%
30.0
%
34.3
%
43.4
%
36.3
%
40.7
%
Combined ratio
101.5
%
106.6
%
103.1
%
97.6
%
152.2
%
109.7
%
113.9
%
Accident Year Ex-cat Loss Ratio
Loss ratio
66.4
%
87.8
%
73.1
%
63.3
%
108.8
%
73.4
%
73.2
%
Prior year loss development
5.6
%
1.8
%
4.4
%
(1.4)
%
(44.7)
%
(11.0)
%
(2.6)
%
Catastrophe losses
(15.2)
%
—
%
(10.1)
%
(1.9)
%
(0.5)
%
(1.7)
%
(6.3)
%
Accident year ex-cat loss ratio
56.8
%
89.6
%
67.4
%
60.0
%
63.5
%
60.7
%
64.3
%
Legacy reflects business we have elected to cease underwriting
following a series of strategic underwriting reviews. (1) Legacy
(reinsurance) represents:
(i) U.S. crop insurance business which was
previously written on a reinsurance basis through a strategic
partnership until disposed of in Q4 2020; (ii) our global credit
and surety reinsurance business that we ceased underwriting during
Q3 2019; and (iii) and our U.S. Agricultural business written via
AgriLogic which was sold in December 2017.
(2) Legacy (insurance) represents:
(i) U.S. surety business, which in July 2020
was subject to a renewal rights transaction; (ii) includes
international marine and energy liability products, and our global
accident and health line of business, which, following a strategic
review of our underwriting portfolio that began in December 2019,
we determined to cease underwriting and started to wind down in
February 2020 and March 2020, respectively; (iii) professional
liability and property and casualty coverages for small to medium
sized U.K.-based businesses that was bound through our managing
general agent, Aspen Risk Management Limited that we placed into
runoff during Q3 2019; (iv) international cargo insurance that we
ceased underwriting during Q4 2018; (v) our aviation line of
business, which we decided to cease underwriting during Q3 2018;
(vi) marine hull insurance written through the Lloyd’s platform
that we ceased underwriting during Q3 2018; (vii) international
property insurance previously written via a joint underwriting
initiative that we ceased underwriting during Q1 2017; and (viii)
employers and public liability lines previously written that we
ceased underwriting during Q4 2015.
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
Australia, Bermuda, Canada, Singapore, Switzerland, the United
Kingdom and the United States. For the year ended December 31,
2020, Aspen reported $13.2 billion in total assets, $7.2 billion in
gross reserves, $3.0 billion in total shareholders’ equity and $3.7
billion in gross written premiums. Aspen's operating subsidiaries
have been assigned a rating of “A-” by Standard & Poor’s
Financial Services LLC and an “A” (“Excellent”) by A.M. Best
Company Inc.
For more information about Aspen, please visit www.aspen.co.
(1) Cautionary Statement Regarding Forward-Looking
Statements This press release may contain written
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that 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. In particular, statements using the words such as “expect,”
“intend,” “plan,” “believe,” “aim,” “project,” “anticipate,”
“seek,” “will,” “likely,” “assume,” “estimate,” “may,” “continue,”
“guidance,” “objective,” “outlook,” “trends,” “future,” “could,”
“would,” “should,” “target,” “predict,” “potential,” “on track” or
their negatives or variations and similar terminology and words of
similar import generally involve forward-looking statements.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and that
are subject to a number of uncertainties, assumptions and other
factors, many of which are outside Aspen’s control that could cause
actual results to differ materially from such forward-looking
statements. Aspen believes these factors include, but are not
limited to: the actual development of losses and expenses impacting
estimates for the COVID-19 pandemic; operating costs, customer loss
and business disruption (including, without limitation,
difficulties in maintaining relationships with employees,
customers, reinsurers or suppliers) related to the COVID-19
pandemic may be greater than expected; Aspen's controlling
shareholder owns all of its ordinary shares and has the power to
determine the affairs of Aspen; the impact on our operating results
from our exit or discontinuation of particular Legacy business; the
impact on our operating results and financial condition from our
entry into an adverse development cover reinsuring losses incurred
on or prior to December 31, 2019; the actual development of losses
and expenses impacting estimates for catastrophe events and other
weather-related losses; the impact of complex and unique causation
and coverage issues associated with the attribution of losses to
wind or flood damage or other perils such as fire or business
interruption relating to such events; potential uncertainties
relating to reinsurance recoveries, reinstatement premiums and
other factors inherent in loss estimation; our ability to
successfully implement steps to further optimize the business
portfolio, ensure capital efficiency and enhance investment
returns; the possibility of greater frequency or severity of claims
and loss activity, including as a result of natural or man-made
(including economic and political risks) catastrophic or material
loss events, than our underwriting, reserving, reinsurance
purchasing or investment practices have anticipated; the
assumptions and uncertainties underlying reserve levels that may be
impacted by future payments for settlements of claims and expenses
or by other factors causing adverse or favorable development,
including our assumptions on inflation costs associated with
long-tail casualty business which could differ materially from
actual experience; the United Kingdom’s withdrawal from the
European Union; a decline in our operating subsidiaries’ ratings
with S&P or A.M. Best; the reliability of, and changes in
assumptions to, natural and man-made catastrophe pricing,
accumulation and estimated loss models; decreased demand for our
insurance or reinsurance products; cyclical changes in the
insurance and reinsurance industry; the models we use to assess our
exposure to losses from future catastrophes contain inherent
uncertainties and our actual losses may differ significantly from
expectations; our capital models may provide materially different
indications than actual results; increased competition from
existing (re)insurers and from alternative capital providers and
insurance-linked funds and collateralized special purpose insurers
on the basis of pricing, capacity, coverage terms, new capital,
binding authorities to brokers or other factors and the related
demand and supply dynamics as contracts come up for renewal; our
ability to execute our business plan to enter new markets,
introduce new products and teams and develop new distribution
channels, including their integration into our existing operations;
our acquisition strategy; the recent consolidation in the
(re)insurance industry; loss of one or more of our senior
underwriters or key personnel; our ability to exercise capital
management initiatives, including the availability of capital to
declare dividends, or to arrange banking facilities as a result of
prevailing market conditions, the level of catastrophes or other
losses or changes in our financial results; changes in general
economic conditions including the effects of the COVID-19 pandemic,
including inflation, deflation, foreign currency exchange rates,
interest rates and other factors that could affect our financial
results; the risk of a material decline in the value or liquidity
of all or parts of our investment portfolio; the risks associated
with the management of capital on behalf of investors; a failure in
our operational systems or infrastructure or those of third
parties, including those caused by security breaches or
cyber-attacks, or data protection failures; evolving issues with
respect to interpretation of coverage after major loss events; our
ability to adequately model and price the effects of climate cycles
and climate change; any intervening legislative or governmental
action and changing judicial interpretation and judgments on
insurers’ liability to various risks; the risks related to
litigation; the effectiveness of our risk management loss
limitation methods, including our reinsurance purchasing; changes
in the availability, cost or quality of reinsurance or
retrocessional coverage; changes in the total industry losses or
our share of total industry losses resulting from events, such as
catastrophes, that have occurred in prior years or may occur and,
with respect to such events, our reliance on loss reports received
from cedants and loss adjusters, our reliance on industry loss
estimates and those generated by modeling techniques, changes in
rulings on flood damage or other exclusions as a result of
prevailing lawsuits and case law; the impact of one or more large
losses from events other than catastrophes or by an unexpected
accumulation of attritional losses and deterioration in loss
estimates; the impact of acts of terrorism, acts of war and related
legislation; any changes in our reinsurers’ credit quality and the
amount and timing of reinsurance recoverables; the continuing and
uncertain impact of the current depressed lower growth economic
environment in many of the countries in which we operate; our
reliance on information and technology and third-party service
providers for our operations and systems; the level of inflation in
repair costs due to limited availability of labor and materials
after catastrophes; the failure of our reinsurers, policyholders,
brokers or other intermediaries to honor their payment obligations;
our reliance on the assessment and pricing of individual risks by
third parties; our dependence on a few brokers for a large portion
of our revenues; changes in the U.S. federal income tax laws or
regulations applicable to insurance companies and the manner in
which such laws and regulations are interpreted; the impact of U.S.
tax reform on Aspen’s business, investments, results and assets,
including (i) changes to the valuation of deferred tax assets and
liabilities, (ii) the impact on intra-group reinsurance
transactions, (iii) that the costs associated with U.S. tax reform
may be greater than initially expected, and (iv) the risk that
technical corrections, regulations and supplemental legislation and
future interpretations or applications thereof or other changes may
be issued in the future, including the rules affecting the
valuation of deferred tax assets; changes in government regulations
or tax laws in jurisdictions where we conduct business; changes in
accounting principles or policies or in the application of such
accounting principles or policies; central bank intervention in the
financial markets, trade wars or other protectionist measures
relating to international trade arrangements, adverse geopolitical
events, domestic political upheavals or other developments that
adversely impact global economic conditions; failure of our hedging
arrangements to be effective; increased counterparty risk due to
the credit impairment of financial institutions; our ability to
realize amounts on sales of securities on our balance sheet
equivalent to their values recorded for accounting purposes;
heightened volatility and/or disruption in global capital and
credit markets; and Aspen or Aspen Bermuda Limited becoming subject
to income taxes in the United States or the United Kingdom. For a
more detailed description of these uncertainties and other factors
that could impact the forward-looking statements in this press
release, please see the “Risk Factors” section in Aspen’s Annual
Report on Form 20-F for the twelve months ended December 31, 2020,
to be filed with the SEC.
The inclusion of forward-looking statements in this press
release or any other communication should not be considered as a
representation by Aspen that current plans or expectations will be
achieved. Forward-looking statements speak only as of the date on
which they are made and Aspen undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result
of new information, future developments or otherwise, except as
required by law.
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. The actuarial range of reserves and management’s
best estimate represents a distribution from our internal capital
model for reserving risk based on our current state of knowledge
and explicit and implicit assumptions relating to the incurred
pattern of claims, the expected ultimate settlement amount,
inflation and dependencies between lines of business. Due to the
complexity of factors contributing to losses and the preliminary
nature of the information used to prepare estimates, there can be
no assurance that Aspen’s ultimate losses will remain within the
stated amounts.
Basis of Preparation Aspen has prepared the financial
information contained within this financial results press release
in accordance with the principles of U.S. Generally Accepted
Accounting Principles (“GAAP”).
Non-GAAP Financial Measures In presenting Aspen’s
results, management has included and discussed certain “non-GAAP
financial measures.” Management believes these non-GAAP financial
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.
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 and unrealized gains or losses, after-tax net foreign
exchange gains or losses, including net realized and unrealized
gains and losses from foreign exchange contracts, net realized
gains or losses on investments, amortization of intangible assets
and certain non-recurring income and expenses, including expenses
associated with Aspen's operational effectiveness and efficiency
program.
Aspen excludes the items above from its calculation of operating
income because they are either not expected to recur and therefore
are not reflective of underlying performance or 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 would distort 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.
Twelve Months Ended
(in US$ millions except where
stated)
December 31, 2020
December 31, 2019
Net (loss) after tax as reported
(40.1)
(241.7)
Add (deduct) non-operating expenses
Net foreign exchange losses
(0.1)
23.9
Net realized losses on investments
14.3
45.8
Net realized loss on debt
extinguishment
—
5.5
Non-operating income
(43.1)
—
Non-operating expenses
31.8
118.1
Operating (loss) income after tax
$
(37.2)
$
(48.4)
Retention ratio is a non-GAAP financial measure and is
calculated by dividing net written premiums by gross written
premiums.
Accident Year Loss Ratio Excluding Catastrophes is a
non-GAAP financial measure. Aspen believes that the presentation of
loss ratios excluding catastrophes and prior year reserve movements
supports meaningful comparison from period to period of the
underlying performance of the business. Accident year loss ratios
excluding catastrophes are calculated by dividing net losses
excluding catastrophe losses and prior year reserve movements by
net earned premiums excluding catastrophe-related reinstatement
premiums. Aspen has defined catastrophe losses in 2020 as losses
associated with COVID-19, Hurricanes Isaias and Laura, wildfires in
California and other weather-related events. Catastrophe losses in
2019 were defined as losses associated with Hurricane Dorian,
Typhoons Faxai and Hagibis in Japan, and other weather-related
events in India, Australia and the U.S.
Twelve Months Ended December
31, 2020
Accident year ex
CAT loss ratio
Reinsurance
Insurance
Total
($ in millions)
Net earned premium
$
1,292.1
$
1,240.5
$
2,532.6
Losses and loss adjustment expenses
958.6
882.2
1,840.8
Prior year reserve movements
(36.1)
35.2
(0.9)
Catastrophe losses (including COVID-19
losses)
244.0
116.8
360.8
Losses excluding catastrophes and prior
year reserve movements
750.7
730.2
1,480.9
Accident year ex CAT loss ratio
58.1
%
58.9
%
58.5
%
Twelve Months Ended December
31, 2019
Accident year ex
CAT loss ratio
Reinsurance
Insurance
Total
($ in millions)
Net earned premium
$
1,255.2
—
$
1,038.1
—
$
2,293.3
Losses and loss adjustment expenses
917.9
761.8
1,679.7
Prior year reserve movements
(54.9)
114.4
59.5
Catastrophe losses
125.1
18.1
143.2
Losses excluding catastrophes and prior
year reserve movements
847.7
629.3
1,477.0
Accident year ex CAT loss ratio
67.4
%
60.7
%
64.3
%
Operating Combined Ratio is a non-GAAP financial measure
and is calculated as the sum of the Accident year ex CAT loss ratio
and the expenses ratio excluding non-operating expenses.
Twelve Months Ended December
31, 2020
Twelve Months Ended December
31, 2019
($ in millions)
Accident year ex CAT loss ratio
58.5
%
64.3
%
Expense ratio (excluding non-operating
expenses)
33.3
%
35.3
%
Operating Combined Ratio
91.8
%
99.6
%
Combined Ratio Excluding Non-Operating Expenses is a
non-GAAP financial measure and is calculated as the sum of the loss
ratio and the expenses ratio excluding non-operating expenses. The
loss ratio is calculated by dividing losses and loss adjustment
expenses by net premiums earned. The expense ratio (excluding
non-operating expenses) is calculated by dividing the sum of
amortization and deferred policy acquisition costs and operating
expenses, by net premiums earned.
Combined Ratio (excluding non-operating
expenses)
Twelve Months Ended
(in US$ millions except where stated)
December 31, 2020
December 31, 2019
Numerator: Sum of:
Losses and loss adjustment expenses
1,840.8
1,679.7
Amortization and deferred policy
acquisition costs
465.7
412.7
General, administrative and corporate
expenses
378.2
396.0
Non-operating expenses
32.7
125.6
Numerator total
2,717.4
2,614.0
Denominator: Net earned premiums
2,532.6
2,293.3
Combined ratio
107.3%
113.9%
Adjustments to numerator:
Exclude non-operating expenses
(32.7)
(125.6)
Numerator total - excluding non-operating
expenses
2,684.7
2,488.4
Combined ratio (excluding non-operating
expenses)
106.0%
108.5%
Comprehensive Income excluding preference dividends is
calculated by taking the operating loss after tax, less dividends
paid on preference shares and other comprehensive income.
Twelve Months Ended December
31, 2020
Twelve Months Ended December
31, 2019
($ in millions)
Net (Loss) after tax as reported
$
(40.1)
$
(241.7)
Dividends paid on preference shares
(44.5)
(35.9)
Proportion due to non-controlling
interest
—
1.2
Other comprehensive income
93.0
$
130.5
Total comprehensive income/(loss), less
preference dividends
$
8.4
$
(145.9)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210331005123/en/
Helen Rose, Chief Accounting Officer, Aspen Helen.Rose@Aspen.co +44 20 7184 8953
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