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Aspen reports results for second quarter and six months ended June 30, 2017

26th July

  • Annualized Net Income Return on Equity of 10.2% for First Half 2017 and 8.8% for the Second Quarter 2017
  • Annualized Operating Return on Equity of 5.4% for First Half 2017 and 4.0% for the Second Quarter 2017
  • Diluted Book Value Per Share of $48.64, up 4.1% from December 31, 2016

Aspen Insurance Holdings Limited reported today net income after tax of $75.8 million, or $1.07 per diluted ordinary share, and operating income after tax of $39.2 million, or $0.47 per diluted ordinary share, for the second quarter of 2017

Chris O’Kane, Chief Executive Officer, commented: "With a strong regional network and deep local relationships, the Aspen Re team has been able to capture new opportunities and again deliver strong results in an operating environment that remains challenging. The Aspen Insurance team continued to make progress, showing significant profitable growth in areas such as Excess Casualty, Environmental Liability, Professional Liability and related lines.

"I am pleased that our investment performance contributed positively to diluted book value per share growth."

Operating highlights for the quarter ended June 30, 2017

Gross written premiums of $822.1 million in the second quarter of 2017, an increase of 2.5% compared with $801.7 million in the second quarter of 2016.

  • Insurance: Gross written premiums of $486.5 million, an increase of 3.7% compared with $469.1 million in the second quarter of 2016, primarily due to growth in the Financial and Professional lines sub-segment, offset by decreases in the Property and Casualty and Marine, Aviation and Energy sub-segments
  • Reinsurance: Gross written premiums of $335.6 million, an increase of 0.9% from $332.6 million in the second quarter of 2016, primarily due to growth in the Specialty sub-segment, offset by decreases in the Property Catastrophe, Other Property, and Casualty sub-segments

Net written premiums of $578.7 million in the second quarter of 2017, a decrease of 20.2% compared with $724.8 million in the second quarter of 2016 as Aspen is making more efficient use of reinsurance to reduce volatility. The retention ratio in the second quarter of 2017 was 70.4% compared with 90.4% in the second quarter of 2016.

  • Insurance: Net written premiums of $293.2 million, a decrease of 29.9% from $418.0 million in the second quarter of 2016, primarily due to increased use of quota share reinsurance to reduce volatility across our businesses. The retention ratio in the second quarter of 2017 was 60.3% compared with 89.1% in the second quarter of 2016
  • Reinsurance: Net written premiums of $285.5 million, a decrease of 6.9% from $306.8 million in the second quarter of 2016, primarily due to increased cessions to Aspen Capital Markets. The retention ratio in the second quarter of 2017 was 85.1% compared with 92.2% in the second quarter of 2016

Loss ratio of 61.6% in the second quarter of 2017 compared with 65.0% in the second quarter of 2016. The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries, of $37.4 million, or 6.7 percentage points, in the second quarter of 2017. Pre-tax catastrophe losses, net of reinsurance recoveries and reinstatement premiums, totaled $65.1 million, or 10.1 percentage points, in the second quarter of 2016 .

  • Insurance: Loss ratio of 66.9% compared with 68.5% in the second quarter of 2016. Pre-tax catastrophe losses, net of reinsurance recoveries, of $27.1 million, totaled 9.4 percentage points in the second quarter of 2017 due to weather-related events in the U.S. Pre-tax catastrophe losses net of reinsurance recoveries totaled $16.5 million, or 4.3 percentage points, in the second quarter of 2016
  • Reinsurance: Loss ratio of 56.0% compared with 60.5% in the second quarter of 2016. The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries, of $10.3 million, or 3.8 percentage points, in the second quarter of 2017 primarily due to weather-related events in the U.S. and Australia. Pre-tax catastrophe losses, net of reinsurance recoveries and reinstatement premiums, totaled $48.6 million, or 17.4% percentage points, in the second quarter of 2016

Net favorable development on prior year loss reserves in the second quarter of 2017 benefited from a $28.5 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa in 2016. The reinsurance recovery benefited the Insurance and Reinsurance segments largely evenly. Net favorable development on prior year loss reserves, excluding this reinsurance recovery, in the second quarter of 2017 was $20.2 million compared with $21.2 million in the second quarter of 2016.

  • Insurance: Prior year net favorable reserve development of $16.1 million benefited the loss ratio by 5.6 percentage points in the second quarter of 2017. Prior year net favorable development of $7.4 million benefited the loss ratio by 1.9 percentage points in the second quarter of 2016
  • Reinsurance: Prior year net favorable reserve development of $32.6 million benefited the loss ratio by 12.0 percentage points in the second quarter of 2017. Prior year net favorable development of $13.8 million benefited the loss ratio by 4.6 percentage points in the second quarter of 2016

Accident year loss ratio excluding catastrophes was 63.6% in the second quarter of 2017 compared with 58.0% in the second quarter of 2016.

  • Insurance: Accident year loss ratio excluding catastrophes for the quarter ended June 30, 2017 was 63.1%. This was affected by a surety loss of $10.7 million, net of reinstatement premiums, and a fire loss of $9.8 million, which together equated to 7.1 percentage points on the accident year ex-cat loss ratio. The accident year loss ratio excluding catastrophes in the second quarter of 2016 was 66.1%
  • Reinsurance: Accident year loss ratio excluding catastrophes for the quarter ended June 30, 2017 was 64.2% compared with 47.7% a year ago. In the second quarter of 2017, there were $16.5 million of mid-sized losses, the largest of which was a fire at a chemical plant. These losses equated to 6.1 percentage points on the accident year loss ratio excluding catastrophes

Total expense ratio of 38.4% and total expense ratio (excluding amortization and non-recurring expenses) of 38.1% in the second quarter of 2017 compared with 35.7% and 35.7%, respectively, in the second quarter of 2016. The policy acquisition expense ratio was 17.1% in the second quarter of 2017, compared with 18.6% in the second quarter of 2016. General and administrative expenses (excluding amortization and non-recurring expenses) were $117.8 million in the second quarter of 2017, largely in-line with $116.4 million in the second quarter of 2016. The general and administrative expense ratio (excluding amortization and non-recurring expenses) increased to 21.0% from 17.1% in the second quarter of 2016 due primarily to lower net earned premiums .

Net income after tax of $75.8 million, or $1.07 per diluted ordinary share, in the second quarter of 2017 compared with net income of $64.9 million, or $0.89 per diluted ordinary share, in the second quarter of 2016. Net income included $42.0 million of net realized and unrealized investment gains in the second quarter of 2017 compared with $36.5 million in the second quarter of 2016. Operating income after tax of $39.2 million, or $0.47 per diluted ordinary share, in the second quarter of 2017 compared with operating income of $34.1 million, or $0.40 per diluted ordinary share, in the second quarter of 2016.

Annualized net income return on average equity of 8.8% and annualized operating return on average equity of 4.0% for the quarter ended June 30, 2017 compared with 7.2% and 3.2%, respectively, for the second quarter of 2016.

Operating highlights for the six months ended June 30, 2017

  • Gross written premiums increased by 2.4% to $1,820.1 million in the first half of 2017 compared with $1,777.4 million in the first half of 2016
  • Net written premiums decreased by 17.0% to $1,264.9 million in the first half of 2017 compared with $1,524.5 million in the first half of 2016. The retention ratio in the first half of 2017 was 69.5% compared with 85.8% in the first half of 2016
  • Loss ratio of 59.0% for the first half of 2017 compared with 59.5% for the first half of 2016. The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries and reinstatement premiums, of $66.5 million, or 5.8 percentage points, in the first half of 2017. This compared with $83.8 million, or 6.5 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries and reinstatement premiums, in the first half of 2016
  • Net favorable development on prior year loss reserves of $74.9 million benefited the loss ratio by 6.6 percentage points in the first half of 2017. This included an additional $28.5 million reinsurance recovery in respect of an offshore energy-related loss that occurred in Africa in 2016, and which benefited the Insurance and Reinsurance segments largely evenly. In the first half of 2016, net favorable development of $42.8 million benefited the loss ratio by 3.2 percentage points
  • Accident year loss ratio excluding catastrophes of 59.8% for the first half of 2017 compared with 56.2% for the first half of 2016
  • Total expense ratio of 39.5% and total expense ratio (excluding amortization and non-recurring expenses) of 39.1% for the first half of 2017 compared with 36.7% and 36.7%, respectively, for the first half of 2016, reflecting an increase in the general and administrative expense ratio and a decrease in the policy acquisition expense ratio. The increase in the general and administrative expense ratio (excluding amortization and non-recurring expenses) is due primarily to lower net earned premiums in the first half of 2017 compared with the first half of 2016
  • Net income after tax of $172.3 million or $2.43 per diluted ordinary share for the six months ended June 30, 2017 compared with $179.3 million or $2.57 per diluted ordinary share for the six months ended June 30, 2016. Net income included $88.2 million of net realized and unrealized investment gains in the first half of 2017 compared with $78.7 million in the first half of 2016. Operating income after tax of $99.0 million or $1.27 per diluted ordinary share for the six months ended June 30, 2017 compared with operating income of $124.0 million, or $1.68 per diluted ordinary share for the six months ended June 30, 2016
  • Annualized net income return on average equity of 10.2% and annualized operating return on average equity of 5.4% for the first half of 2017 compared with 10.8% and 7.0%, respectively, for the first half of 2016

Investment performance

  • Investment income of $47.4 million in the second quarter of 2017 decreased by 1.3% compared with $48.0 million in the second quarter of 2016
  • The total return on Aspen’s aggregate investment portfolio was 1.20% for the three months ended June 30, 2017 and reflects net realized and unrealized gains and losses in both the fixed income and equity portfolios
  • Aspen’s investment portfolio continues to be comprised primarily of high quality fixed income securities with an average credit quality of “AA-”. The average duration of the fixed income portfolio was 3.89 years as at June 30, 2017
  • Book yield on the fixed income portfolio as at June 30, 2017 was 2.53% compared with 2.49% as at December 31, 2016

Capital

  • Total shareholders’ equity was $3.6 billion as at June 30, 2017
  • Diluted book value per share was $48.64 as at June 30, 2017, up 4.1% from December 31, 2016
  • During the second quarter of 2017, Aspen repurchased 197,673 ordinary shares at an average price of $50.59 per share for a cost of $10.0 million
  • On July 3, 2017, Aspen redeemed its outstanding 7.250% Perpetual Non-Cumulative Preference Shares for $160.0 million. This redemption was primarily funded by proceeds from Aspen's 5.625% Perpetual Non-Cumulative Preference Share issue

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