[February 07, 2018] |
|
Aspen Reports Results for the Fourth Quarter and Twelve Months Ended December 31, 2017
Aspen Insurance Holdings Limited ("Aspen") (NYSE: AHL) reported today a
net loss after tax of $(184.9) million, or $(3.25) per diluted ordinary
share, and an operating loss after tax of $(178.1) million, or $(3.14)
per diluted ordinary share, for the fourth quarter of 2017.
Chris O'Kane, Chief Executive Officer, commented: "Aspen's fourth
quarter 2017 results were well below acceptable levels. While some of
the losses we reported arose from abnormally high natural catastrophe
activity, we recognize that despite prior actions to strengthen our
Insurance book, we need to take further actions to deliver substantially
better results.
"We are redoubling our efforts to reduce volatility and improve Aspen's
profitability. Most of our non-natural catastrophe losses were
concentrated in a limited number of lines within Aspen Insurance. We are
actively reviewing these lines, and our focus is on taking all actions
necessary to mitigate our residual exposure and deliver value to our
shareholders. Our loss reserves are strong, and we continue to focus on
achieving appropriate loss ratios and realizing the benefits to our
expense ratio from the successful implementation of our operational
effectiveness and efficiency program."(1)
____________________
|
Non-GAAP financial measures are used throughout this release
as defined at the end of this press release.
|
(1) Refer to "Forward-looking Statements Safe Harbor" at the
end of this press release.
|
|
Operating highlights for the quarter ended December 31, 2017
-
Gross written premiums of $688.3 million in the fourth quarter
of 2017, an increase of 13.6% compared with $606.1 million in the
fourth quarter of 2016
-
Insurance: Gross written premiums of $472.2 million, an
increase of 15.5% compared with $409.0 million in the fourth
quarter of 2016, due to growth in all sub-segments
-
Reinsurance: Gross written premiums of $216.1 million, an
increase of 9.6% compared with $197.1 million in the fourth
quarter of 2016, primarily due to growth in the Specialty
sub-segment as a result of AgriLogic
-
Net written premiums of $340.2 million in the fourth quarter of
2017, a decrease of 21.0% compared with $430.8 million in the fourth
quarter of 2016 as Aspen continues to make more efficient use of ceded
reinsurance to seek to reduce volatility. The retention ratio in the
fourth quarter of 2017 was 49.4% compared with 71.1% in the fourth
quarter of 2016
-
Insurance: Net written premiums of $187.5 million, a
decrease of 19.3% compared with $232.4 million in the fourth
quarter of 2016, primarily due to increased use of quota share
reinsurance to seek to reduce volatility. The retention ratio in
the fourth quarter of 2017 was 39.7% compared with 56.8% in the
fourth quarter of 2016
-
Reinsurance: Net written premiums of $152.7 million, a
decrease of 23.0% compared with $198.4 million in the fourth
quarter of 2016, primarily due to transitional changes to ceding
of premiums following the sale of AgriLogic in the fourth quarter
of 2017
-
Loss ratio of 106.5% in the fourth quarter of 2017 compared
with 63.2% in the fourth quarter of 2016. The loss ratio included
pre-tax catastrophe losses of $137.6 million, or 27.0 percentage
points, net of reinsurance recoveries and $1.6 million of
reinstatement premiums, in the fourth quarter of 2017, including
$133.8 million related to wildfires in California. Pre-tax catastrophe
losses, net of reinsurance recoveries, totaled $54.6 million, or 8.9
percentage points, in the fourth quarter of 2016
-
Insurance: Loss ratio of 95.2% compared with 68.5% in the
fourth quarter of 2016. The loss ratio included pre-tax
catastrophe losses of $2.4 million, or 1.0 percentage points, net
of reinsurance recoveries and a $(0.7) million credit for
reinstatement premiums, in the fourth quarter of 2017. Total
pre-tax catastrophe losses in the Insurance segment included $10.2
million of losses related to the wildfires in California offset by
favorable development related primarily to other weather-related
events in the U.S. Pre-tax catastrophe losses, net of reinsurance
recoveries, totaled $17.0 million, or 5.2 percentage points, in
the fourth quarter of 2016
-
Reinsurance: Loss ratio of 116.3% compared with 57.2% in
the fourth quarter of 2016. The loss ratio included pre-tax
catastrophe losses of $135.2 million, or 49.6 percentage points,
net of reinsurance recoveries and $2.3 million of reinstatement
premiums, in the fourth quarter of 2017. Total pre-tax catastrophe
losses in the Reinsurance segment included $123.6 million related
to the wildfires in California while the remainder related
primarily to other weather-related events. Pre-tax catastrophe
losses, net of reinsurance recoveries, totaled $37.6 million, or
13.2 percentage points, in the fourth quarter of 2016
-
Net favorable development on prior year loss reserves of $12.6
million benefited the loss ratio by 2.5 percentage points in the
fourth quarter of 2017. Prior year net favorable reserve development
of $51.1 million benefited the loss ratio by 8.3 percentage points in
the fourth quarter of 2016
-
Insurance: Prior year net favorable reserve development of
$1.8 million benefited the loss ratio by 0.8 percentage points in
the fourth quarter of 2017. Prior year net favorable development
of $16.2 million benefited the loss ratio by 5.0 percentage points
in the fourth quarter of 2016
-
Reinsurance: Prior year net favorable reserve development
of $10.8 million benefited the loss ratio by 4.0 percentage points
in the fourth quarter of 2017. Prior year net favorable
development of $34.9 million benefited the loss ratio by 12.2
percentage points in the fourth quarter of 2016
-
Accident year loss ratio excluding catastrophes was 82.0% in
the fourth quarter of 2017 compared with 62.6% in the fourth quarter
of 2016
-
Insurance: Accident year loss ratio excluding catastrophes
for the quarter ended December 31, 2017 was 95.0%. This included
25.0 percentage points related to an increased frequency of
mid-sized and attritional losses in the fourth quarter of 2017
which totaled $59.3 million, net of reinstatement premiums. The
accident year loss ratio excluding catastrophes in the fourth
quarter of 2016 was 68.3%
-
Reinsurance: Accident year loss ratio excluding
catastrophes for the quarter ended December 31, 2017 was 70.7%.
This included 12.2 percentage points related to premium
adjustments which reduced net earned premium by $33.5 million. The
accident year loss ratio excluding catastrophes in the fourth
quarter of 2016 was 56.2%
-
Total expense ratio of 46.1% and total expense ratio
(excluding amortization and non-recurring expenses) of 41.5% in
the fourth quarter of 2017 compared with 44.0% and 43.5%,
respectively, in the fourth quarter of 2016
-
The policy acquisition expense ratio was 16.7% in the fourth
quarter of 2017 compared with 23.0% in the fourth quarter of 2016
-
General and administrative expenses (excluding amortization and
non-recurring expenses) were $126.9 million in the fourth quarter
of 2017, compared with $125.5 million in the fourth quarter of
2016. The general and administrative expense ratio (excluding
amortization and non-recurring expenses) increased to 24.8% from
20.5% in the fourth quarter of 2016
-
Net loss after tax of $(184.9) million, or $(3.25) per diluted
ordinary share, in the fourth quarter of 2017 compared with net loss
of $(71.5) million, or $(1.41) per diluted ordinary share, in the
fourth quarter of 2016. Net income included $14.8 million of
net realized and unrealized investment gains in the fourth quarter of
2017 compared with $(58.1) million net realized and unrealized
investment losses in the fourth quarter of 2016. Operating loss
after tax of $(178.1) million, or $(3.14) per diluted ordinary
share, in the fourth quarter of 2017 compared with operating loss of
$(7.4) million, or $(0.34) per diluted ordinary share, in the fourth
quarter of 2016
-
Annualized net income return on average equity of (30.4)% and annualized
operating return on average equity of (29.6)% for the
quarter ended December 31, 2017 compared with (11.6)% and (2.8)%,
respectively, for the fourth quarter of 2016
Operating highlights for the twelve months ended December 31, 2017
-
Gross written premiums increased by 6.8% to $3,360.9 million in
the full year of 2017 compared with $3,147.0 million in the full year
of 2016
-
Net written premiums decreased by 14.7% to $2,212.5 million in
the full year of 2017 compared with $2,593.7 million in the full year
of 2016. The retention ratio in the full year of 2017 was 65.8%
compared with 82.4% in the full year of 2016
-
Loss ratio of 86.5% for the full year of 2017 compared with
59.8% for the full year of 2016. The loss ratio included $561.9
million, or 24.6 percentage points, of pre-tax catastrophe losses, net
of reinsurance recoveries and $14.1 million of reinstatement premiums,
in the full year of 2017. This compared with $164.4 million, or 6.3
percentage points, of pre-tax catastrophe losses, net of reinsurance
recoveries and $2.0 million of reinstatement premiums, in the full
year of 2016
-
Net favorable development on prior year loss reserves of $105.4
million benefited the loss ratio by 4.6 percentage points in the full
year of 2017. In the full year of 2016, net favorable development of
$129.3 million benefited the loss ratio by 4.9 percentage points
-
Accident year loss ratio excluding catastrophes of 66.5% for
the full year of 2017 compared with 58.4% for the full year of 2016
-
Total expense ratio of 39.2% and total expense ratio
(excluding amortization and non-recurring expenses) of 37.8%
for the full year of 2017 compared with 38.7% and 38.3%, respectively,
for the full year of 2016, reflecting a decrease in the policy
acquisition expense ratio and an increase in the general and
administrative expense ratio
-
Net loss after tax of $(266.4) million or $(5.22) per diluted
ordinary share for the twelve months ended December 31, 2017 compared
with net income of $203.4 million, or $2.61 per diluted ordinary
share, for the twelve months ended December 31, 2016. Net loss
included $120.5 million of net realized and unrealized investment
gains in the full year of 2017 compared with $42.1 million in the full
year of 2016. Operating loss after tax of $(355.7) million, or
$(6.59) per diluted ordinary share, for the twelve months ended
December 31, 2017 compared with operating income of $185.9 million, or
$2.33 per diluted ordinary share, for the twelve months ended
December 31, 2016
-
Annualized net income return on average equity of (11.1)% and annualized
operating return on average equity of (14.0)% for the full year of
2017 compared with 5.4% and 4.8%, respectively, for the full year of
2016
Investment performance
-
Investment income of $47.5 million in the fourth quarter of 2017
compared with $43.2 million in the fourth quarter of 2016
-
The total return on Aspen's aggregate investment portfolio was 0.3%
for the three months ended December 31, 2017 and reflects net realized
and unrealized gains and losses in both the fixed income and equity
portfolios. In the full year of 2017, Aspen's aggregate investment
portfolio had a total return of 3.4%
-
Aspen's investment portfolio was comprised primarily of high quality
fixed income securities with an average credit quality of "AA-". The
average duration of the fixed income portfolio was 3.9 years as at
December 31, 2017 and December 31, 2016
-
Book yield on the fixed income portfolio as at December 31, 2017 was
2.56% compared with 2.49% as at December 31, 2016
Capital
-
Total shareholders' equity was $2.9 billion as at December 31, 2017
-
Diluted book value per share was $40.10 as at December 31, 2017, down
14.2% from December 31, 2016
-
Aspen repurchased 648,941 ordinary shares in 2017 at an average price
of $46.23 per ordinary share for a total cost of $30.0 million.
-
During 2017, Aspen redeemed Perpetual Non-Cumulative Preference Shares
in the aggregate amount of $293.2 million
Operational Effectiveness and Improvement Program
-
Aspen recorded $11.1 million of expenses related to its operational
effectiveness and improvement program in the fourth quarter of 2017
and $15.2 million in the full year of 2017
January 2018 Reinsurance Renewals
During the January 2018 renewal season, Aspen Re underwrote contracts
representing $585.6 million in gross written premiums, a decrease of
(0.4)% compared with the prior year. The renewal data does not include
premiums related to AgriLogic.
Below is a table reflecting gross written premiums written during the
January 2018 renewal season, including new business, by sub-segment:
|
January Gross Written Premiums (underwriting year basis)
|
|
|
|
|
2018
|
|
2017
|
|
Increase (Decrease)
|
|
|
|
|
($ in millions)
|
%
|
Property Catastrophe
|
|
|
|
$
|
146.9
|
|
|
$
|
126.4
|
|
|
16.2
|
%
|
Other Property
|
|
|
|
133.7
|
|
|
137.3
|
|
|
(2.6
|
)%
|
Casualty
|
|
|
|
148.2
|
|
|
145.9
|
|
|
1.6
|
%
|
Specialty
|
|
|
|
156.8
|
|
|
178.6
|
|
|
(12.2
|
)%
|
|
|
|
|
$
|
585.6
|
|
|
$
|
588.2
|
|
|
(0.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: The January premiums shown in the above table include premiums
written under contracts on a proportional basis which are recognized
throughout the year to reflect the expected inception of the underlying
risks and therefore do not represent Aspen's reported gross written
premiums for each of these periods. Prior year amounts have been
conformed to current year presentation.
See "Forward-looking Statements Safe Harbor" below.
Earnings conference call and webcast
Aspen will host a conference call to discuss the results at 8:00 am (ET)
on Thursday, February 8, 2018.
To participate in the February 8 conference call by phone Please
call to register at least 10 minutes before the conference call begins
by dialing:
+1 (844) 378 6481 (US toll free) or +1 (412) 542 4176
(international) Conference ID 10114711
To listen live online Aspen will provide a live webcast on
Aspen's website at www.aspen.co.
To download the materials The earnings press release and a
detailed financial supplement will also be published on Aspen's website
at www.aspen.co.
To listen later A replay of the call will be available
approximately two hours after the end of the live call for 14 days via
phone. To listen to the replay by phone please dial:
+1 (877) 344 7529 (US toll free) or +1 (412) 317 0088
(international) Replay ID 10114711
The webcast will be also available at www.aspen.co
on the Event
Calendar page within the Investor Relations section.
|
|
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated balance sheet (unaudited)
$ in millions, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2017
|
|
As at December 31, 2016
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Total investments
|
|
|
|
$
|
7,633.0
|
|
|
$
|
7,900.3
|
Cash and cash equivalents
|
|
|
|
1,054.8
|
|
|
1,273.8
|
Reinsurance recoverables
|
|
|
|
2,030.7
|
|
|
815.9
|
Premiums receivable
|
|
|
|
1,496.5
|
|
|
1,399.4
|
Other assets
|
|
|
|
691.4
|
|
|
700.7
|
|
Total assets
|
|
|
|
$
|
12,906.4
|
|
|
$
|
12,090.1
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
|
|
$
|
6,749.5
|
|
|
$
|
5,319.9
|
Unearned premiums
|
|
|
|
1,820.8
|
|
|
1,618.6
|
Other payables
|
|
|
|
813.9
|
|
|
839.0
|
Silverton loan notes
|
|
|
|
44.2
|
|
|
115.0
|
Long-term debt
|
|
|
|
549.5
|
|
|
549.3
|
|
Total liabilities
|
|
|
|
$
|
9,977.9
|
|
|
$
|
8,441.8
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
|
2,928.5
|
|
|
3,648.3
|
Total liabilities and shareholders' equity
|
|
|
|
$
|
12,906.4
|
|
|
$
|
12,090.1
|
|
|
|
|
|
|
|
Book value per share
|
|
|
|
$
|
40.59
|
|
|
$
|
47.68
|
Diluted book value per share (treasury stock method)
|
|
|
|
$
|
40.10
|
|
|
$
|
46.72
|
|
|
|
|
|
|
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated statement of income (unaudited)
$ in millions, except ratios
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
UNDERWRITING REVENUES
|
|
|
|
|
|
|
Gross written premiums
|
|
|
|
$
|
688.3
|
|
|
$
|
606.1
|
|
Premiums ceded
|
|
|
|
(348.1
|
)
|
|
(175.3
|
)
|
Net written premiums
|
|
|
|
340.2
|
|
|
430.8
|
|
Change in unearned premiums
|
|
|
|
170.8
|
|
|
181.6
|
|
Net earned premiums
|
|
|
|
511.0
|
|
|
612.4
|
|
UNDERWRITING EXPENSES
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
|
|
544.2
|
|
|
387.3
|
|
Amortization of deferred policy acquisition costs
|
|
|
|
85.1
|
|
|
141.1
|
|
General, administrative and corporate expenses
|
|
|
|
126.9
|
|
|
125.5
|
|
Total underwriting expenses
|
|
|
|
756.2
|
|
|
653.9
|
|
|
|
|
|
|
|
|
Underwriting (loss) including corporate expenses
|
|
|
|
(245.2
|
)
|
|
(41.5
|
)
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
47.5
|
|
|
43.2
|
|
Interest expense
|
|
|
|
(7.3
|
)
|
|
(7.4
|
)
|
Other income (expenses)
|
|
|
|
18.6
|
|
|
(1.3
|
)
|
Total other revenue
|
|
|
|
58.8
|
|
|
34.5
|
|
|
|
|
|
|
|
|
Amortization and non-recurring expenses
|
|
|
|
(23.2
|
)
|
|
(3.4
|
)
|
Net realized and unrealized exchange (losses) gains
|
|
|
|
(0.3
|
)
|
|
(5.6
|
)
|
Net realized and unrealized investment gains (losses)
|
|
|
|
14.8
|
|
|
(58.1
|
)
|
(LOSS) BEFORE TAX
|
|
|
|
(195.1
|
)
|
|
(74.1
|
)
|
Income tax credit
|
|
|
|
10.2
|
|
|
2.6
|
|
NET (LOSS) AFTER TAX
|
|
|
|
(184.9
|
)
|
|
(71.5
|
)
|
Dividends paid on ordinary shares
|
|
|
|
(14.3
|
)
|
|
(13.2
|
)
|
Dividends paid on preference shares
|
|
|
|
(7.5
|
)
|
|
(13.4
|
)
|
Proportion due to non-controlling interest
|
|
|
|
(0.5
|
)
|
|
(0.1
|
)
|
Retained (loss)
|
|
|
|
$
|
(207.2
|
)
|
|
$
|
(98.2
|
)
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
|
106.5
|
%
|
|
63.2
|
%
|
Policy acquisition expense ratio
|
|
|
|
16.7
|
%
|
|
23.0
|
%
|
General, administrative and corporate expense ratio
|
|
|
|
29.4
|
%
|
|
21.0
|
%
|
General, administrative and corporate expense ratio (excluding
amortization and non-recurring expenses)
|
|
|
|
24.8
|
%
|
|
20.5
|
%
|
Expense ratio
|
|
|
|
46.1
|
%
|
|
44.0
|
%
|
Expense ratio (excluding amortization and non-recurring expenses)
|
|
|
|
41.5
|
%
|
|
43.5
|
%
|
Combined ratio
|
|
|
|
152.6
|
%
|
|
107.2
|
%
|
Combined ratio (excluding amortization and non-recurring expenses)
|
|
|
|
148.0
|
%
|
|
106.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated statement of income (unaudited)
$ in millions, except ratios
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
UNDERWRITING REVENUES
|
|
|
|
|
|
|
Gross written premiums
|
|
|
|
$
|
3,360.9
|
|
|
$
|
3,147.0
|
|
Premiums ceded
|
|
|
|
(1,148.4
|
)
|
|
(553.3
|
)
|
Net written premiums
|
|
|
|
2,212.5
|
|
|
2,593.7
|
|
Change in unearned premiums
|
|
|
|
94.1
|
|
|
43.6
|
|
Net earned premiums
|
|
|
|
2,306.6
|
|
|
2,637.3
|
|
UNDERWRITING EXPENSES
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
|
|
1,994.7
|
|
|
1,576.1
|
|
Amortization of deferred policy acquisition costs
|
|
|
|
400.5
|
|
|
528.9
|
|
General, administrative and corporate expenses
|
|
|
|
469.5
|
|
|
480.4
|
|
Total underwriting expenses
|
|
|
|
2,864.7
|
|
|
2,585.4
|
|
|
|
|
|
|
|
|
Underwriting (loss) income including corporate expenses
|
|
|
|
(558.1
|
)
|
|
51.9
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
189.0
|
|
|
187.1
|
|
Interest expense
|
|
|
|
(29.5
|
)
|
|
(29.5
|
)
|
Other income (expenses)
|
|
|
|
25.2
|
|
|
(12.7
|
)
|
Total other revenue
|
|
|
|
184.7
|
|
|
144.9
|
|
|
|
|
|
|
|
|
Amortization and non-recurring expenses
|
|
|
|
(32.7
|
)
|
|
(9.7
|
)
|
Net realized and unrealized exchange gains (losses)
|
|
|
|
3.8
|
|
|
(19.7
|
)
|
Net realized and unrealized investment gains
|
|
|
|
120.5
|
|
|
42.1
|
|
(LOSS) INCOME BEFORE TAX
|
|
|
|
(281.8
|
)
|
|
209.5
|
|
Income tax credit (expense)
|
|
|
|
15.4
|
|
|
(6.1
|
)
|
NET (LOSS) INCOME AFTER TAX
|
|
|
|
(266.4
|
)
|
|
203.4
|
|
Dividends paid on ordinary shares
|
|
|
|
(56.3
|
)
|
|
(52.7
|
)
|
Dividends paid on preference shares
|
|
|
|
(36.2
|
)
|
|
(41.8
|
)
|
Preference share redemption costs
|
|
|
|
(8.0
|
)
|
|
-
|
|
Proportion due to non-controlling interest
|
|
|
|
(1.3
|
)
|
|
(0.1
|
)
|
Retained (loss) income
|
|
|
|
$
|
(368.2
|
)
|
|
$
|
108.8
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
|
86.5
|
%
|
|
59.8
|
%
|
Policy acquisition expense ratio
|
|
|
|
17.4
|
%
|
|
20.1
|
%
|
General, administrative and corporate expense ratio
|
|
|
|
21.8
|
%
|
|
18.6
|
%
|
General, administrative and corporate expense ratio (excluding
amortization and non-recurring expenses)
|
|
|
|
20.4
|
%
|
|
18.2
|
%
|
Expense ratio
|
|
|
|
39.2
|
%
|
|
38.7
|
%
|
Expense ratio (excluding amortization and non-recurring expenses)
|
|
|
|
37.8
|
%
|
|
38.3
|
%
|
Combined ratio
|
|
|
|
125.7
|
%
|
|
98.5
|
%
|
Combined ratio (excluding amortization and non-recurring expenses)
|
|
|
|
124.3
|
%
|
|
98.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Aspen Insurance Holdings Limited
Operating income reconciliation (unaudited)
$ in millions, except per share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
(in US$ millions except where stated)
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income as reported
|
|
|
$
|
(184.9
|
)
|
|
$
|
(71.5
|
)
|
|
$
|
(266.4
|
)
|
|
$
|
203.4
|
|
Change in redemption value of preference shares
|
|
|
-
|
|
|
-
|
|
|
(8.0
|
)
|
|
-
|
|
Net change attributable to non-controlling interest
|
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
(1.3
|
)
|
|
(0.1
|
)
|
Preference share dividends
|
|
|
(7.5
|
)
|
|
(13.4
|
)
|
|
(36.2
|
)
|
|
(41.8
|
)
|
Net (loss) income available to ordinary shareholders
|
|
|
(192.9
|
)
|
|
(85.0
|
)
|
|
(311.9
|
)
|
|
161.5
|
|
Add (deduct) after tax income:
|
|
|
|
|
|
|
|
|
|
|
Net foreign exchange (gains) losses
|
|
|
1.0
|
|
|
4.1
|
|
|
(1.5
|
)
|
|
14.8
|
|
|
Net realized (gains) losses on investments
|
|
|
(14.0
|
)
|
|
57.1
|
|
|
(115.8
|
)
|
|
(41.0
|
)
|
|
Change in redemption value of preference shares
|
|
|
-
|
|
|
-
|
|
|
8.0
|
|
|
-
|
|
|
Amortization and non-recurring expenses
|
|
|
19.8
|
|
|
2.9
|
|
|
28.0
|
|
|
8.7
|
|
Operating (loss) income after tax available to ordinary shareholders
|
|
|
(186.1
|
)
|
|
(20.9
|
)
|
|
(393.2
|
)
|
|
144.0
|
|
Tax (credit) expense on operating income
|
|
|
(8.3
|
)
|
|
0.4
|
|
|
(17.7
|
)
|
|
10.9
|
|
Operating (loss) income before tax available to ordinary shareholders
|
|
|
$
|
(194.4
|
)
|
|
$
|
(20.5
|
)
|
|
$
|
(410.9
|
)
|
|
$
|
154.9
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
Net (loss) income adjusted for preference share dividends and
non-controlling interest
|
|
|
$
|
(3.25
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(5.22
|
)
|
|
$
|
2.67
|
|
Add (deduct) after tax income:
|
|
|
|
|
|
|
|
|
|
|
Net foreign exchange (gains) losses
|
|
|
0.02
|
|
|
0.07
|
|
|
(0.03
|
)
|
|
0.24
|
|
|
Net realized (gains) losses on investments
|
|
|
(0.24
|
)
|
|
0.95
|
|
|
(1.94
|
)
|
|
(0.68
|
)
|
|
Change in redemption value of preference shares
|
|
|
-
|
|
|
-
|
|
|
0.13
|
|
|
-
|
|
|
Amortization and non-recurring expenses
|
|
|
0.33
|
|
|
0.05
|
|
|
0.47
|
|
|
0.14
|
|
Operating (loss) income adjusted for preference shares dividends and
non-controlling interest
|
|
|
$
|
(3.14
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(6.59
|
)
|
|
$
|
2.37
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
Net income adjusted for preference share dividends and
non-controlling interest
|
|
|
$
|
(3.25
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(5.22
|
)
|
|
$
|
2.61
|
|
Add (deduct) after tax income:
|
|
|
|
|
|
|
|
|
|
|
Net foreign exchange (gains) losses
|
|
|
0.02
|
|
|
0.07
|
|
|
(0.03
|
)
|
|
0.24
|
|
|
Net realized (gains) losses on investments
|
|
|
(0.24
|
)
|
|
0.95
|
|
|
(1.94
|
)
|
|
(0.66
|
)
|
|
Change in redemption value of preference shares
|
|
|
-
|
|
|
-
|
|
|
0.13
|
|
|
-
|
|
|
Amortization and non-recurring expenses
|
|
|
0.33
|
|
|
0.05
|
|
|
0.47
|
|
|
0.14
|
|
Operating (loss) income adjusted for preference shares dividends and
non-controlling interest
|
|
|
$
|
(3.14
|
)
|
|
$
|
(0.34
|
)
|
|
$
|
(6.59
|
)
|
|
$
|
2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated financial data (unaudited)
$ in millions, except number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
|
December 31, 2017
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income adjusted for preference share dividend and
non-controlling interest
|
|
|
|
($3.25)
|
|
($1.41)
|
|
($5.22)
|
|
$2.67
|
|
Operating (loss) income adjusted for preference share dividend and
non-controlling interest
|
|
|
|
($3.14)
|
|
($0.34)
|
|
($6.59)
|
|
$2.37
|
Diluted earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income adjusted for preference share dividend and
non-controlling interest
|
|
|
|
($3.25)
|
|
($1.41)
|
|
($5.22)
|
|
$2.61
|
|
Operating (loss) income adjusted for preference share dividend and
non-controlling interest
|
|
|
|
($3.14)
|
|
($0.34)
|
|
($6.59)
|
|
$2.33
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding (in millions)(1)
|
|
|
|
59.431
|
|
60.152
|
|
59.754
|
|
60.479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding and dilutive
potential ordinary shares (in millions)
|
|
|
|
59.431
|
|
60.152
|
|
59.754
|
|
61.861
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per ordinary share
|
|
|
|
$40.59
|
|
$47.68
|
|
$40.59
|
|
$47.68
|
Diluted book value per ordinary share (treasury stock method)
|
|
|
|
$40.10
|
|
$46.72
|
|
$40.10
|
|
$46.72
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares outstanding at end of the period (in millions)
|
|
|
|
59.474
|
|
59.774
|
|
59.474
|
|
59.774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares outstanding and dilutive potential ordinary shares
at end of the period (treasury stock method) (in millions)
|
|
|
|
60.202
|
|
61.001
|
|
60.202
|
|
61.001
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The basic and diluted number of ordinary shares for the three
months ended December 31, 2016 and the three and twelve months
ended December 31, 2017 is the same, as the inclusion of dilutive
securities in a loss-making period would be anti-dilutive.
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated segment information (unaudited)
$ in millions, except ratios
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, 2017
|
|
Three Months Ended December 31, 2016
|
|
|
|
Reinsurance
|
Insurance
|
Total
|
|
Reinsurance
|
Insurance
|
Total
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums
|
|
|
$
|
216.1
|
|
$
|
472.2
|
|
$
|
688.3
|
|
|
$
|
197.1
|
|
$
|
409.0
|
|
$
|
606.1
|
|
Net written premiums
|
|
|
152.7
|
|
187.5
|
|
340.2
|
|
|
198.4
|
|
232.4
|
|
430.8
|
|
Gross earned premiums
|
|
|
339.6
|
|
455.3
|
|
794.9
|
|
|
317.0
|
|
422.6
|
|
739.6
|
|
Net earned premiums
|
|
|
273.9
|
|
237.1
|
|
511.0
|
|
|
285.9
|
|
326.5
|
|
612.4
|
|
Losses and loss adjustment expenses
|
|
|
318.5
|
|
225.7
|
|
544.2
|
|
|
163.6
|
|
223.7
|
|
387.3
|
|
Amortization of deferred policy acquisition expenses
|
|
|
61.1
|
|
24.0
|
|
85.1
|
|
|
63.3
|
|
77.8
|
|
141.1
|
|
General and administrative expenses
|
|
|
39.9
|
|
67.0
|
|
106.9
|
|
|
47.6
|
|
54.7
|
|
102.3
|
|
Underwriting (loss) income
|
|
|
$
|
(145.6
|
)
|
$
|
(79.6
|
)
|
$
|
(225.2
|
)
|
|
$
|
11.4
|
|
$
|
(29.7
|
)
|
$
|
(18.3
|
)
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
47.5
|
|
|
|
|
43.2
|
|
Net realized and unrealized investment gains (losses) (1)
|
14.8
|
|
|
|
|
(58.1
|
)
|
Corporate expenses
|
|
|
|
|
(20.0
|
)
|
|
|
|
(23.2
|
)
|
Amortization and non-recurring expenses (2)
|
|
(23.2
|
)
|
|
|
|
(3.4
|
)
|
Other income (expenses) (3)
|
|
|
|
|
18.6
|
|
|
|
|
(1.3
|
)
|
Interest expense
|
|
|
|
|
(7.3
|
)
|
|
|
|
(7.4
|
)
|
Net realized and unrealized foreign exchange (losses) (4)
|
(0.3
|
)
|
|
|
|
(5.6
|
)
|
(Loss) income before tax
|
|
|
|
|
$
|
(195.1
|
)
|
|
|
|
$
|
(74.1
|
)
|
Income tax credit
|
|
|
|
|
10.2
|
|
|
|
|
2.6
|
|
Net (loss)
|
|
|
|
|
$
|
(184.9
|
)
|
|
|
|
$
|
(71.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
116.3
|
%
|
95.2
|
%
|
106.5
|
%
|
|
57.2
|
%
|
68.5
|
%
|
63.2
|
%
|
|
Policy acquisition expense ratio
|
|
|
22.3
|
%
|
10.1
|
%
|
16.7
|
%
|
|
22.1
|
%
|
23.8
|
%
|
23.0
|
%
|
|
General and administrative expense ratio (5)
|
|
|
14.6
|
%
|
28.3
|
%
|
29.4
|
%
|
|
16.6
|
%
|
16.8
|
%
|
21.0
|
%
|
|
General and administrative expense ratio (excluding amortization and
non-recurring expenses) (5)
|
|
|
14.6
|
%
|
28.3
|
%
|
24.8
|
%
|
|
16.6
|
%
|
16.8
|
%
|
20.5
|
%
|
Expense ratio
|
|
|
36.9
|
%
|
38.4
|
%
|
46.1
|
%
|
|
38.7
|
%
|
40.6
|
%
|
44.0
|
%
|
Expense ratio (excluding amortization and non-recurring expenses)
|
|
|
36.9
|
%
|
38.4
|
%
|
41.5
|
%
|
|
38.7
|
%
|
40.6
|
%
|
43.5
|
%
|
Combined ratio
|
|
|
153.2
|
%
|
133.6
|
%
|
152.6
|
%
|
|
95.9
|
%
|
109.1
|
%
|
107.2
|
%
|
Combined ratio (excluding amortization and non-recurring expenses)
|
|
|
153.2
|
%
|
133.6
|
%
|
148.0
|
%
|
|
95.9
|
%
|
109.1
|
%
|
106.7
|
%
|
Accident Year Ex-cat Loss Ratio
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
116.3
|
%
|
95.2
|
%
|
106.5
|
%
|
|
57.2
|
%
|
68.5
|
%
|
63.2
|
%
|
Prior year loss development
|
|
|
4.0
|
%
|
0.8
|
%
|
2.5
|
%
|
|
12.2
|
%
|
5.0
|
%
|
8.3
|
%
|
Catastrophe losses
|
|
|
(49.6
|
)%
|
(1.0
|
)%
|
(27.0
|
)%
|
|
(13.2
|
)%
|
(5.2
|
)%
|
(8.9
|
)%
|
Accident year ex-cat loss ratio
|
|
|
70.7
|
%
|
95.0
|
%
|
82.0
|
%
|
|
56.2
|
%
|
68.3
|
%
|
62.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes realized and unrealized capital gains and losses
|
(2)
|
|
Amortization and non-recurring expenses included $11.1
million of expenses related to the operational effectiveness and
efficiency program
|
(3)
|
|
Other income (expenses) in the fourth quarter of 2017 and
fourth quarter of 2016 included $17.6 million of income and $3.4
million of expenses, respectively, related to a change in the fair
value of loan notes issued by Silverton Re
|
(4)
|
|
Includes realized and unrealized foreign exchange gains and
losses and realized and unrealized gains and losses on foreign
exchange contracts
|
(5)
|
|
Total group general and administrative expense ratio includes
the impact from corporate and amortization and non-recurring
expenses
|
|
|
|
|
Aspen Insurance Holdings Limited
Summary consolidated segment information (unaudited)
$ in millions, except ratios
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2017
|
|
Twelve Months Ended December 31, 2016
|
|
|
Reinsurance
|
Insurance
|
Total
|
|
Reinsurance
|
Insurance
|
Total
|
|
|
|
|
|
|
|
|
|
Gross written premiums
|
|
$
|
1,548.5
|
|
$
|
1,812.4
|
|
$
|
3,360.9
|
|
|
$
|
1,413.2
|
|
$
|
1,733.8
|
|
$
|
3,147.0
|
|
Net written premiums
|
|
1,250.0
|
|
962.5
|
|
2,212.5
|
|
|
1,269.2
|
|
1,324.5
|
|
2,593.7
|
|
Gross earned premiums
|
|
1,451.8
|
|
1,757.4
|
|
3,209.2
|
|
|
1,317.9
|
|
1,768.4
|
|
3,086.3
|
|
Net earned premiums
|
|
1,206.1
|
|
1,100.5
|
|
2,306.6
|
|
|
1,181.9
|
|
1,455.4
|
|
2,637.3
|
|
Losses and loss adjustment expenses
|
|
1,116.4
|
|
878.3
|
|
1,994.7
|
|
|
657.9
|
|
918.2
|
|
1,576.1
|
|
Amortization of deferred policy acquisition expenses
|
|
235.5
|
|
165.0
|
|
400.5
|
|
|
226.4
|
|
302.5
|
|
528.9
|
|
General and administrative expenses
|
|
157.3
|
|
253.9
|
|
411.2
|
|
|
178.2
|
|
228.4
|
|
406.6
|
|
Underwriting (loss) income
|
|
$
|
(303.1
|
)
|
$
|
(196.7
|
)
|
$
|
(499.8
|
)
|
|
$
|
119.4
|
|
$
|
6.3
|
|
$
|
125.7
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
189.0
|
|
|
|
|
187.1
|
|
Net realized and unrealized investment gains (1)
|
120.5
|
|
|
|
|
42.1
|
|
Corporate expenses
|
|
|
|
(58.3
|
)
|
|
|
|
(73.8
|
)
|
Amortization and non-recurring expenses (2)
|
|
(32.7
|
)
|
|
|
|
(9.7
|
)
|
Other income (expenses) (3)
|
|
|
|
25.2
|
|
|
|
|
(12.7
|
)
|
Interest expense
|
|
|
|
(29.5
|
)
|
|
|
|
(29.5
|
)
|
Net realized and unrealized foreign exchange gains (losses) (4)
|
3.8
|
|
|
|
|
(19.7
|
)
|
(Loss) income before tax
|
|
|
|
$
|
(281.8
|
)
|
|
|
|
$
|
209.5
|
|
Income tax credit (expense)
|
|
|
|
15.4
|
|
|
|
|
(6.1
|
)
|
Net (loss) income
|
|
|
|
$
|
(266.4
|
)
|
|
|
|
$
|
203.4
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
92.6
|
%
|
79.8
|
%
|
86.5
|
%
|
|
55.7
|
%
|
63.1
|
%
|
59.8
|
%
|
|
Policy acquisition expense ratio
|
|
19.5
|
%
|
15.0
|
%
|
17.4
|
%
|
|
19.2
|
%
|
20.8
|
%
|
20.1
|
%
|
|
General and administrative expense ratio (5)
|
|
13.0
|
%
|
23.1
|
%
|
21.8
|
%
|
|
15.1
|
%
|
15.7
|
%
|
18.6
|
%
|
|
General and administrative expense ratio (excluding amortization and
non-recurring expenses) (5)
|
|
13.0
|
%
|
23.1
|
%
|
20.4
|
%
|
|
15.1
|
%
|
15.7
|
%
|
18.2
|
%
|
Expense ratio
|
|
32.5
|
%
|
38.1
|
%
|
39.2
|
%
|
|
34.3
|
%
|
36.5
|
%
|
38.7
|
%
|
Expense ratio (excluding amortization and non-recurring expenses)
|
|
32.5
|
%
|
38.1
|
%
|
37.8
|
%
|
|
34.3
|
%
|
36.5
|
%
|
38.3
|
%
|
Combined ratio
|
|
125.1
|
%
|
117.9
|
%
|
125.7
|
%
|
|
90.0
|
%
|
99.6
|
%
|
98.5
|
%
|
Combined ratio (excluding amortization and non-recurring expenses)
|
|
125.1
|
%
|
117.9
|
%
|
124.3
|
%
|
|
90.0
|
%
|
99.6
|
%
|
98.1
|
%
|
Accident Year Ex-cat Loss Ratio
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
92.6
|
%
|
79.8
|
%
|
86.5
|
%
|
|
55.7
|
%
|
63.1
|
%
|
59.8
|
%
|
Prior year loss development
|
|
6.9
|
%
|
2.1
|
%
|
4.6
|
%
|
|
7.4
|
%
|
2.9
|
%
|
4.9
|
%
|
Catastrophe losses
|
|
(37.7
|
)%
|
(10.4
|
)%
|
(24.6
|
)%
|
|
(9.7
|
)%
|
(3.5
|
)%
|
(6.3
|
)%
|
Accident year ex-cat loss ratio
|
|
61.8
|
%
|
71.5
|
%
|
66.5
|
%
|
|
53.4
|
%
|
62.5
|
%
|
58.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes realized and unrealized capital gains and losses and
realized and unrealized gains and losses on interest rate swaps
|
(2)
|
|
Amortization and non-recurring expenses included $15.2
million of expenses related to the operational effectiveness and
efficiency program
|
(3)
|
|
Other income (expenses) in the full year of 2017 and full
year of 2016 included $21.2 million of income and $17.1 million of
expenses, respectively, related to a change in the fair value of
loan notes issued by Silverton Re
|
(4)
|
|
Includes realized and unrealized foreign exchange gains and
losses and realized and unrealized gains and losses on foreign
exchange contracts
|
(5)
|
|
Total group general and administrative expense ratio includes
the impact from corporate and amortization and non-recurring
expenses
|
|
|
|
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, France, Germany, Ireland,
Singapore, Switzerland, the United Arab Emirates, the United Kingdom and
the United States. For the year ended December 31, 2017, Aspen reported
$12.9 billion in total assets, $6.7 billion in gross reserves, $2.9
billion in total shareholders' equity and $3.4 billion in gross written
premiums. Its operating subsidiaries have been assigned a rating of "A"
by Standard & Poor's Financial Services LLC ("S&P"), an "A"
("Excellent") by A.M. Best Company Inc. ("A.M. Best") and an "A2" by
Moody's Investors Service, Inc. ("Moody's").
For more information about Aspen, please visit www.aspen.co.
(1) Forward-looking Statements Safe Harbor
This press release contains written, and Aspen's earnings conference
call will contain 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," "do not believe," "aim," "project," "anticipate," "seek,"
"will," "likely," "assume," "estimate," "may," "continue," "guidance,"
"objective," "outlook," "trends," "future," "could," "would," "should,"
"target," "on track" and similar expressions of a future or
forward-looking nature.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and are subject
to a number of uncertainties and other factors, many of which are
outside Aspen's control that could cause actual results to differ
materially from such statements. Aspen believes these factors include,
but are not limited to: the actual development of losses and expenses
impacting estimates for the Northern and Southern California wildfires
that occurred in the fourth quarter of 2017 and Hurricanes Harvey, Irma
and Maria and the earthquakes in Mexico that occurred in the third
quarter of 2017; 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 develop and execute the program to create
operating and cost efficiencies through focus on improving several of
our operational levers; 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 political, regulatory and
economic effects arising from the vote by the U.K. electorate in favor
of a U.K. exit from the European Union in the referendum held in June
2016 and resulting negotiations; 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;
changes in market conditions in the agriculture industry, which may vary
depending upon demand for agricultural products, weather, commodity
prices, natural disasters, and changes in legislation and policies
related to agricultural products and producers; termination of, or
changes in, the terms of the U.S. Federal Multiple Peril Crop Insurance
Program or the U.S. Farm Bill, including modifications to the Standard
Reinsurance Agreement put in place by the Risk Management Agency of the
U.S. Department of Agriculture; 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 capital available to pursue our share repurchase
program at various levels or 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 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;
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 adjustors, 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; a decline in our
operating subsidiaries' ratings with S&P, A.M. Best or Moody's; 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; the
persistence of heightened financial risks, including excess sovereign
debt, the banking system and the Eurozone crisis; 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; increased counterparty risk due to the credit
impairment of financial institutions; 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, please see the "Risk Factors" section in Aspen's Annual
Report on Form 10-K for the year ended December 31, 2016 and Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2017, June 30,
2017 and September 30, 2017 as filed with the U.S. Securities and
Exchange Commission (the "SEC"). 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.
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.
Furthermore, seismic events, such as the Mexico earthquakes, generally
have longer development periods than windstorm events, which may be
amplified in this instance by dynamics such as the risk of geological
liquefaction and the potential for uncertainty in claims adjudication.
In respect of Hurricane Maria, recovery efforts are ongoing, with power
outages, infrastructure damage, communications disruptions and other
issues complicating loss mitigation and estimation. Accordingly, our
actual net negative impact from all events noted above, both
individually and in the aggregate, will vary from these estimates,
perhaps materially.
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. The
reconciliation of such non-GAAP financial measures to their respective
most directly comparable GAAP financial measure is included in the
financial supplement or this release. Aspen's financial supplement,
which was filed with the SEC on Form 8-K on February 7, 2018, can be
obtained from the Investor Relations section of Aspen's website at www.aspen.co.
Annualized Operating Return on Average Equity ("Operating ROE")
is a non-GAAP financial measure. Operating ROE is calculated using
operating income, as defined below, and average equity is calculated as
the arithmetic average on a monthly basis for the stated periods of
shareholders' equity excluding the aggregate value of the liquidation
preferences of our preference shares net of issuance costs and the total
amount of non-controlling interest. 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. Please see page 22 of Aspen's financial supplement for a
reconciliation of net income to operating income and page 7 for a
reconciliation of average shareholders' equity to average ordinary
shareholders' equity.
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, including net realized and unrealized gains and losses
on interest rate swaps, 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 the Company's operational
effectiveness and efficiency program. Operating income in the year ended
December 31, 2017 excluded the issue costs associated with the
redemption of Aspen's 7.401% Perpetual Non-Cumulative Preference Shares
and 7.250% Perpetual Non-Cumulative Preference Shares.
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. Please see page 22 of Aspen's financial supplement for a
reconciliation of net income to operating income.
Diluted Book Value per Ordinary Share is not a non-GAAP financial
measure. Aspen has included diluted book value per ordinary share as it
illustrates the effect on basic book value per share of dilutive
securities thereby providing a better benchmark for comparison with
other companies. Diluted book value per share is calculated using the
treasury stock method, defined on page 21 of Aspen's financial
supplement.
Diluted Operating Earnings per Share and Basic Operating Earnings per
Share are non-GAAP financial measures. 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. Please see page 22 of
Aspen's financial supplement for a reconciliation of basic earnings per
share to diluted and basic operating earnings per share.
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, net expenses and prior year reserve movements by net earned
premiums excluding catastrophe-related reinstatement premiums. Aspen has
defined catastrophe losses in the full year of 2017 as losses associated
with Hurricanes Harvey, Irma and Maria, the earthquakes in Mexico, a
tornado in Mississippi, Cyclone Debbie in Australia, wildfires in
California and other U.S. weather-related events. Catastrophe losses in
the full year of 2016 were defined as losses associated with wildfires
in North America, Hurricane Matthew and other weather-related events in
the U.S., a hailstorm in the Netherlands and several earthquakes. Please
see pages 12 and 13 of this release for a reconciliation of loss ratios
to accident year loss ratios excluding catastrophes.
Retention Ratio is a non-GAAP financial measure. It is calculated
by dividing net written premium by gross written premium.
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