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Aspen reports results for quarter and year ended December 31, 2016

8th February

  • Net Income Return on Equity of 5.4% for the Full Year 2016   
  • Operating Return on Equity of 4.8% for the Full Year 2016
  • Diluted Book Value Per Share of $46.72, up 1.6% from December 31, 2015
  • Announces New $250 million Share Repurchase Authorization

Aspen Insurance Holdings Limited reported today a net loss after tax of $(71.5) million, or $(1.41) per diluted share, and operating loss after tax of $(7.4) million, or $(0.34) per diluted share, for the fourth quarter of 2016.

Chris O’Kane, Chief Executive Officer, commented: "2016 was an important year in positioning Aspen for the future. Our Reinsurance business performed strongly once again despite a much higher level of catastrophe losses. We expanded further our geographic footprint, successfully integrated our diversifying AgriLogic business and continued to target opportunities for profitable growth in what continues to be a challenging market environment. During the year, our Insurance team took significant actions to reposition product lines where returns are not expected to meet our requirements while at the same time working to identify and invest in the best opportunities for long-term profitable growth.

"While the repositioning of our Insurance segment had a significant negative impact on the fourth quarter’s results, we are confident that the actions taken are the right ones and that the underlying quality of our book of business is very strong. We remain intensely focused on driving growth and profitability by offering innovative solutions to meet our clients’ needs and risks, diversifying and expanding our global product offering, and enhancing capital efficiency. Our business is now firmly on course for the next stage of profitable growth."

Operating highlights for the quarter ended December 31, 2016

Gross written premiums of $606.1 million in the fourth quarter of 2016, a decrease of 4.5% compared with $634.8 million in the fourth quarter of 2015

  • Insurance: Gross written premiums of $409.0 million, a decrease of 8.7% compared with $448.0 million in the fourth quarter of 2015, primarily due to a decrease in the Property and Casualty sub-segment reflecting Aspen's reduced appetite for Programs and Primary Casualty business, and lower premiums in the Marine, Aviation and Energy Sub-segment
  • Reinsurance: Gross written premiums of $197.1 million, an increase of 5.5% from $186.8 million in the fourth quarter of 2015, including $18.4 million of premiums from AG Logic Holdings, LLC (“AgriLogic”) in the Specialty sub-segment

Loss ratio of 63.2% in the fourth quarter of 2016 compared with 53.0% in the fourth quarter of 2015. The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries, of $54.6 million, or 8.9 percentage points, in the fourth quarter of 2016. Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $45.9 million, or 7.3 percentage points, in the fourth quarter of 2015 

  • Insurance: Loss ratio of 68.5% compared with 65.1% in the fourth quarter of 2015. Pre-tax catastrophe losses, net of reinsurance recoveries, of $17.0 million, totaled 5.2 percentage points in the fourth quarter of 2016 primarily related to Hurricane Matthew and other weather-related events in the U.S.  Pre-tax catastrophe losses net of reinsurance recoveries in the fourth quarter of 2015 totaled $23.3 million, or 6.5 percentage points. The loss ratio in the fourth quarter of 2016 also reflected a higher level of loss activity in lines that are being exited or re-positioned compared with the fourth quarter of 2015
  • Reinsurance: Loss ratio of 57.2% compared with 37.0% in the fourth quarter of 2015.  The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries, of $37.6 million, or 13.2 percentage points, in the fourth quarter of 2016, primarily as a result of Hurricane Matthew and the Tennessee wildfires in the U.S., and an earthquake in New Zealand. Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $22.6 million, or 8.4 percentage points, in the fourth quarter of 2015. The loss ratio in the fourth quarter of 2016 also reflected an increase of approximately $25 million in energy and property-related losses compared with the fourth quarter of 2015 

Net favorable development on prior year loss reserves benefited the loss ratio by $51.1 million, or 8.3 percentage points, in the fourth quarter of 2016 compared with $58.9 million, or 9.4 percentage points, in the comparable period

  • Insurance: Prior year net favorable reserve development of $16.2 million, or 5.0 percentage points, compared with $21.5 million, or 6.0 percentage points, in the fourth quarter of 2015
  • Reinsurance: Prior year net favorable reserve development of $34.9 million, or 12.2 percentage points, compared with $37.4 million, or 13.8 percentage points, in the fourth quarter of 2015

Accident year loss ratio excluding catastrophes was 62.6% in the fourth quarter of 2016 compared with 55.1% in the fourth quarter of 2015 

  • Insurance: Accident year loss ratio excluding catastrophes for the quarter ended December 31, 2016 was 68.3% compared with 64.6% a year ago
  • Reinsurance: Accident year loss ratio excluding catastrophes for the quarter ended December 31, 2016 was 56.2% compared with 42.4% a year ago

Policy acquisition expense ratio for the Insurance segment of 23.8% in the fourth quarter of 2016 compared with 17.3% in the fourth quarter of 2015. The increase reflected $11.6 million of one-time costs associated with the lines that we have repositioned. In addition, profit commissions increased by $7.7 million, mainly due to favorable commission adjustments in the fourth quarter of 2015

Policy acquisition expense ratio for the Reinsurance segment of 22.1% in the fourth quarter of 2016 compared with 20.8% in the fourth quarter of 2015, primarily due to $8.9 million of one-time commission-related adjustments in the fourth quarter of 2016

Net loss after tax of $(71.5) million, or $(1.41) per diluted share, and operating loss after tax of $(7.4) million, or $(0.34) per diluted share, in the fourth quarter of 2016. This compares to net income of $117.9 million, or $1.75 per diluted share, and operating income of $84.0 million, or $1.21 per diluted share, in the fourth quarter of 2015

Annualized net income return on average equity of (11.6)% and annualized operating return on average equity of (2.8)% for the quarter ended December 31, 2016 compared with 15.2% and 10.4%, respectively, for the fourth quarter of 2015

Operating highlights for the twelve months ended December 31, 2016 

  • Gross written premiums increased by 5.0% to $3,147.0 million in the full year of 2016 compared with $2,997.3 million in the full year of 2015
  • Loss ratio of 59.8% for the full year of 2016 compared with 55.2% for the full year of 2015. The loss ratio included pre-tax catastrophe losses, net of reinsurance recoveries and $2.0 million of reinstatement premiums, of $164.4 million, or 6.3 percentage points, in the full year of 2016. This compared with $90.5 million, or 3.7 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the full year of 2015 
  • Net favorable development on prior year loss reserves of $129.3 million benefited the loss ratio by 4.9 percentage points for the full year of 2016 compared with $156.5 million, or 6.3 percentage points, for the full year of 2015
  • Accident year loss ratio excluding catastrophes of 58.4% for the full year of 2016 compared with 57.8% for the full year of 2015.
  • Expense ratio of 38.3% for the full year of 2016 compared with 36.7% for the full year of 2015, reflecting increases in both the general and administrative expense ratio and the policy acquisition expense ratio
  • Net income per diluted share of $2.61 and operating income per diluted share of $2.33 for the twelve months ended December 31, 2016. This compares to net income per diluted share of $4.54 and operating income per diluted share of $4.51 for the twelve months ended December 31, 2015
  • Annualized net income return on average equity of 5.4% and annualized operating return on average equity of 4.8% for the full year of 2016 compared with 10.0% and 10.0%, respectively, for the full year of 2015

Investment performance

  • Investment income of $43.2 million in the fourth quarter of 2016 decreased by (6.9)% compared to $46.4 million in the fourth quarter of 2015
  • The total return on Aspen’s aggregate investment portfolio was (1.80)% for the three months ended December 31, 2016 and reflects net realized and unrealized gains and losses in both the fixed income and  equity portfolios. For the twelve months ended December 31, 2016, Aspen's aggregate investment portfolio had a total return of 2.16%
  • 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 December 31, 2016
  • Book yield as at December 31, 2016 on the fixed income portfolio was 2.49% compared to 2.59% as at December 31, 2015 

Capital

  • Total shareholders’ equity was $3.6 billion as at December 31, 2016.
  • Diluted book value per share of $46.72 as at December 31, 2016 up 1.6% from December 31, 2015
  • During the fourth quarter of 2016, Aspen repurchased 472,748 ordinary shares at an average price of $52.88 per share for a cost of $25.0 million. In 2016, Aspen repurchased 1,595,076 ordinary shares at an average price of $47.02 per share for a total cost of $75.0 million.
  • Aspen's Board of Directors replaced the Company's existing share repurchase authorization with a new authorization of $250 million, effective February 8, 2017.  The share repurchase authorization, which is effective through February 8, 2019, permits Aspen to effect repurchases from time to time through a combination of transactions, including open market repurchases, privately negotiated transactions and accelerated share repurchase transactions.

Read the full press release