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Aspen News

Aspen reports results for quarter ended June 30, 2018

1st August

Aspen reported today a net loss after tax of $(14.7) million, or $(0.38) per diluted ordinary share, and operating income after tax of $56.3 million, or $0.80 per diluted ordinary share, for the second quarter of 2018.

Chris O’Kane, Chief Executive Officer, commented: “Aspen’s second quarter results demonstrate ongoing execution of our plan to enhance performance. This included the continued successful repositioning of Aspen Insurance, which had its second consecutive record quarter in terms of gross written premium, another quarter of solid results and pricing discipline at Aspen Re and significant progress in the implementation of our Operational Effectiveness and Efficiency program. In addition, we reduced debt leverage through the partial redemption of our senior notes.”

Operating highlights for the quarter ended June 30, 2018

Gross written premiums of $853.8 million in the second quarter of 2018, an increase of 3.9% compared with $822.1 million in the second quarter of 2017.

  • Insurance: Gross written premiums of $527.8 million, an increase of 8.5% compared with $486.5 million in the second quarter of 2017 due to growth across all sub-segments
  • Reinsurance: Gross written premiums of $326.0 million, a decrease of 2.9% compared with $335.6 million in the second quarter of 2017 due to a decrease in Specialty sub-segment premiums which was partially offset by growth in all other sub-segments

Net written premiums of $486.0 million in the second quarter of 2018, a decrease of 16.0% compared with $578.7 million in the second quarter of 2017 as Aspen continues to make increased use of ceded reinsurance. The retention ratio in the second quarter of 2018 was 56.9% compared with 70.4% in the second quarter of 2017.

  • Insurance: Net written premiums of $219.1 million, a decrease of 25.3% compared with $293.2 million in the second quarter of 2017, due primarily to the increased use of quota share reinsurance. The retention ratio in the second quarter of 2018 was 41.5% compared with 60.3% in the second quarter of 2017
  • Reinsurance: Net written premiums of $266.9 million, a decrease of 6.5% compared with $285.5 million in the second quarter of 2017. As disclosed previously, Aspen no longer cedes business via Silverton and accounts for such business in the same way as other third party reinsurance. This change reduced net written premiums in the second quarter of 2018 by $13.7 million. The retention ratio in the second quarter of 2018 was 81.9% compared with 85.1% in the second quarter of 2017

Loss ratio of 59.7% in the second quarter of 2018 compared with 61.6% in the second quarter of 2017. The loss ratio included pre-tax catastrophe losses of $18.2 million, or 3.5 percentage points, net of reinsurance recoveries, in the second quarter of 2018 compared with $37.4 million, or 6.7 percentage points, in the second quarter of 2017

  • Insurance: Loss ratio of 62.2% compared with 66.9% in the second quarter of 2017. The loss ratio included pre-tax catastrophe losses of $8.1 million, or 3.5 percentage points, net of reinsurance recoveries, in the second quarter of 2018 primarily as a result of weather-related events in the U.S. and U.K. Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $27.1 million, or 9.4 percentage points, in the second quarter of 2017
  • Reinsurance: Loss ratio of 57.8% compared with 56.0% in the second quarter of 2017. The loss ratio included pre-tax catastrophe losses of $10.1 million, or 3.5 percentage points, net of reinsurance recoveries, in the second quarter of 2018 primarily as a result of weather-related events in the U.S. Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $10.3 million, or 3.8 percentage points, in the second quarter of 2017

Net favorable development on prior year loss reserves of $42.5 million benefited the loss ratio by 8.2 percentage points in the second quarter of 2018. Prior year net favorable reserve development of $48.7 million benefited the loss ratio by 8.7 loss ratio points in the second quarter of 2017

  • Insurance: Prior year net favorable reserve development of $11.0 million benefited the loss ratio by 4.8 percentage points in the second quarter of 2018 and reflected releases, primarily from short-tail lines, including favorable development from first half of 2017 natural catastrophes. Prior year net favorable development of $16.1 million benefited the loss ratio by 5.6 percentage points in the second quarter of 2017
  • Reinsurance: Prior year net favorable reserve development of $31.5 million benefited the loss ratio by 10.9 percentage points in the second quarter of 2018 and reflected releases, primarily from short-tail lines, including favorable development from 2017 natural catastrophes. Prior year net favorable development of $32.6 million benefited the loss ratio by 12.0 percentage points in the second quarter of 2017

Accident year net loss ratio excluding catastrophes was 64.4% in the second quarter of 2018 compared with 63.6% in the second quarter of 2017

  • Insurance: Accident year loss ratio excluding catastrophes was 59.2% on a gross basis and 63.5% on a net .basis in the second quarter of 2018 compared with 63.6% and 63.1%, respectively, in the second quarter of 2017
  • Reinsurance: Accident year loss ratio excluding catastrophes was 58.4% on a gross basis and 65.2% on a net basis in the second quarter of 2018 compared with 61.6% and 64.2%, respectively in the second quarter of 2017. As a result of the change in treatment of business ceded via Aspen Capital Markets, on a like-for-like basis, the net ratio would have been 61.6%. The second quarter of 2018 net ratio also included 4.6 percentage points of large losses from a dam collapse and a fire-related loss

Total expense ratio of 37.7% and total expense ratio (excluding amortization and non-recurring expenses) of 36.0% in the second quarter of 2018 compared with 38.4% and 38.1%, respectively, in the second quarter of 2017.

      • The policy acquisition expense ratio decreased to 16.5% in the second quarter of 2018 from 17.1% in the second quarter of 2017
      • General and administrative expenses (excluding amortization and non-recurring expenses) decreased to $101.1 million in the second quarter of 2018 from $117.8 million in the second quarter of 2017. The general and administrative expense ratio (excluding amortization and non-recurring expenses) decreased to 19.5% from 21.0% in the second quarter of 2017
      • Aspen recorded $8.6 million of expenses related to its operational effectiveness and efficiency program in the second quarter of 2018

Net (loss) after tax of $(14.7) million, or $(0.38) per diluted ordinary share, in the second quarter of 2018 compared with net income of $75.8 million, or $1.07 per diluted ordinary share, in the second quarter of 2017. Net (loss) income in the second quarter of 2018 included $(20.7) million of net realized and unrealized investment losses and $(40.9) million of net realized and unrealized foreign exchange (losses) compared with $42.0 million of net realized and unrealized investment gains and $(3.0) million of net realized and unrealized foreign exchange (losses) in the second quarter of 2017. Net (loss) income in the second quarter of 2018 also included an $8.6 million make-whole payment associated with the partial redemption of Aspen's 6.0% Senior Notes due 2020.

Operating income after tax of $56.3 million, or $0.80 per diluted ordinary share, in the second quarter of 2018 compared with operating income of $39.2 million, or $0.47 per diluted ordinary share, in the second quarter of 2017.

Annualized net income return on average equity of (4.0)% and annualized operating return on average equity of 8.4% for the quarter ended June 30, 2018 compared with 8.8% and 4.0%, respectively, for the second quarter of 2017.

Operating highlights for the six months ended June 30, 2018

Gross written premiums increased by 8.3% to $1,970.6 million in the first half of 2018 compared with $1,820.1 million in the first half of 2017.

Net written premiums decreased by 11.3% to $1,121.5 million in the first half of 2018 compared with $1,264.9 million in the first half of 2017. The retention ratio in the first half of 2018 was 56.9% compared with 69.5% in the first half of 2017.

Loss ratio of 58.9% for the first half of 2018 compared with 59.0% for the first half of 2017. The loss ratio included $42.4 million, or 4.0 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the first half of 2018. This compared with $66.5 million, or 5.8 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the first half of 2017.

Net favorable development on prior year loss reserves of $80.2 million benefited the loss ratio by 7.6 percentage points in the first half of 2018. In the first half of 2017, net favorable development of $74.9 million benefited the loss ratio by 6.6 percentage points.

Accident year loss ratio excluding catastrophes of 62.5% for the first half of 2018 compared with 59.8% for the first half of 2017.

Total expense ratio of 38.8% and total expense ratio (excluding amortization and non-recurring expenses) of 36.7% for the first half of 2018 compared with 39.5% and 39.1%, respectively, for the first half of 2017, reflecting decreases in both the policy acquisition expense ratio and the general and administrative expense ratio.

      • Aspen recorded $20.4 million of expenses related to its operational effectiveness and efficiency program in the first six months of 2018

Net income after tax of $16.1 million or $0.01 per diluted ordinary share (adjusted for preference shares dividends and non-controlling interest) for the six months ended June 30, 2018 compared with net income of $172.3 million, or $2.43 per diluted ordinary share, for the six months ended June 30, 2017. Net income in the first half of 2018 included $(58.4) million of net realized and unrealized investment (losses) and $(22.1) million of net realized and unrealized foreign exchange (losses) compared with net realized and unrealized investment gains of $88.2 million and $(8.8) million of net realized and unrealized foreign exchange (losses) in the first half of 2017. Net income in the first half of 2018 also included an $8.6 million make-whole payment associated with the partial redemption of Aspen's 6.0% Senior Notes due 2020.

Operating income after tax of $119.3 million, or $1.71 per diluted ordinary share, for the six months ended June 30, 2018 compared with operating income of $99.0 million, or $1.27 per diluted ordinary share, for the six months ended June 30, 2017.

Annualized net income return on average equity of 0.1% and annualized operating return on average equity of 8.8% for the first half of 2018 compared with 10.2% and 5.4%, respectively, for the first half of 2017.

Investment performance

      • Investment income of $50.4 million in the second quarter of 2018 compared with $47.4 million in the second quarter of 2017
      • The total return on Aspen’s aggregate investment portfolio was flat for the three months ended June 30, 2018 and reflects net realized and unrealized gains and losses mainly in the fixed income portfolio
      • Aspen’s investment portfolio is 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 June 30, 2018
      • Book yield on the fixed income portfolio as at June 30, 2018 was 2.63% compared with 2.56% as at December 31, 2017

Capital and Debt

    • Total shareholders’ equity was $2.8 billion as at June 30, 2018
    • Diluted book value per share was $38.21 as at June 30, 2018, down 4.7% from December 31, 2017 primarily due to realized and unrealized investment losses in the first half of 2018
    • On June 18, 2018, Aspen partially redeemed its outstanding 6.0% Senior Notes due 2020. The Company redeemed $125 million in aggregate principal amount and incurred a make-whole payment of $8.6 million associated with the partial redemption