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Aspen reports its Q3 results

2nd November

Read the full press release

  • Gross written premiums up 10.4% in the third quarter with growth in both insurance and reinsurance
  • Record insurance underwriting income of $41.8 million in the third quarter and combined ratio of 88.3%
  • Annualized net income return on equity of 8.3% and annualized operating return on equity of 9.7% through the nine months

Aspen Insurance Holdings Limited reported today net income after tax of $28.2 million, or $0.30 per diluted share, and operating income after tax of $67.2 million, or $0.93 per diluted share, for the third quarter of 2015.

Chris O'Kane, Chief Executive Officer, commented, "Aspen achieved an excellent result in the third quarter, with a number of important achievements. Our Insurance business delivered the strongest quarterly underwriting performance in its history, and a combined ratio of 88.3%. Our U.S. Insurance platform is on track to exceed $600 million of net earned premiums in 2015, together with an expense ratio of less than 16%, while our International Insurance platform demonstrated a significant improvement in underwriting performance.

"At Aspen Re, our teams continued to demonstrate their innovative solutions, deep client relationships and disciplined underwriting. This was reflected in significant gross written premium growth, both from new business opportunities and the large pro-rata deals that we noted last quarter.  Across our Insurance and Reinsurance businesses, we remain focused on building value for clients in our chosen areas of expertise. We continue to expect to achieve an 11% operating return on equity for 2015."

Operating highlights for the quarter ended September 30, 2015

  • Gross written premiums increased by 10.4% to $720.5 million in the third quarter of 2015 compared with $652.5 million in the third quarter of 2014.
  • Combined ratio of 93.4% for the third quarter of 2015 compared with 94.6% for the third quarter of 2014. Net favorable development on prior year loss reserves of $39.0 million, or 6.1 combined ratio points, for the third quarter of 2015 compared with $32.6 million, or 5.3 combined ratio points, in the comparable period a year ago.
  • Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $19.1 million, or 3.0 combined ratio points, in the third quarter of 2015 compared with $17.1 million, or 2.8 combined ratio points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the third quarter of 2014.
  • Pre-tax losses, net of reinsurance recoveries, related to the explosion in the port of Tianjin, China totaled $30.0 million, or 4.7 combined ratio points, in the third quarter of 2015.

Financial highlights for the quarter and nine months ended September 30, 2015

  • Annualized net income return on average equity of 2.8% and annualized operating return on average equity of 8.4% for the quarter ended September 30, 2015 compared with 4.0% and 10.0%, respectively, for the third quarter of 2014.
  • Annualized net income return on average equity of 8.3% and annualized operating return on average equity of 9.7% for the first nine months of 2015 compared with 12.0% and 12.4%, respectively, for the first nine months of 2014.
  • Net income per diluted share of $0.30 for the quarter ended September 30, 2015 compared with net income per diluted share of $0.42 for the quarter ended September 30, 2014, and net income per diluted share of $2.80 for the nine months ended September 30, 2015 compared with net income per diluted share of $3.91 for the nine months ended September 30, 2014.
  • Operating income per diluted share of $0.93 for the quarter ended September 30, 2015 compared with operating income per diluted share of $1.08 for the quarter ended September 30, 2014,and operating income per diluted share of $3.31 for the nine months ended September 30, 2015 compared with operating income per diluted share of $4.04 for the nine months ended September 30, 2014.
  • Diluted book value per share of $45.28 at September 30, 2015 up 0.3% from December 31, 2014.

Segment Highlights

Insurance

Operating highlights for Insurance for the quarter ended September 30, 2015 include:

  • Gross written premiums of $403.9 million, an increase of 2.1% compared with $395.6 million in the third quarter of 2014.
  • Combined ratio of 88.3% compared with 96.7% for the third quarter of 2014.
  • Prior year favorable reserve development of $22.9 million, or 6.4 combined ratio points, compared with prior year favorable reserve development of $6.6 million, or 2.0 combined ratio points, for the third quarter of 2014.

The U.S. platform drove the increase in gross written premiums, achieving growth of 14.2%, together with solid profitability in the quarter. Growth in Property and Casualty, and Financial and Professional Lines, was offset by a decline in Marine, Energy and Aviation.

The combined ratio of 88.3% for the third quarter of 2015 included $2.3 million, or 0.6 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, primarily related to weather-related events in the U.S.  The combined ratio for the third quarter of 2014 included $6.6 million, or 2.0 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries.  For the quarter ended September 30, 2015, the Insurance accident year loss ratio excluding catastrophes was 60.8% compared with 63.7% a year ago.

Mario Vitale, CEO of Insurance, commented, "We had a very good quarter in our insurance business, delivering record underwriting income and an accident year ex-cat loss ratio of 60.8%. The U.S. teams achieved strong underwriting income and drove most of the gross written premium growth in the quarter, with significant contributions from areas such as casualty and financial and professional lines. We recorded $614 million of net earned premium in the U.S. platform over the last twelve months through September 30, 2015.

"In our International platform, we continued to see growth in our U.K. property and casualty lines, and the U.K. regional business. Our international teams delivered improved underwriting income and maintained a disciplined approach, choosing not to renew some business in areas where we believe that rates do not reflect underlying risks and instead focusing more on well-rated opportunities."

Reinsurance

Operating highlights for Reinsurance for the quarter ended September 30, 2015 include:

  • Gross written premiums of $316.6 million, an increase of 23.2% from $256.9 million in the third quarter of 2014.
  • Combined ratio of 94.7% compared with 79.5% for the third quarter of 2014.
  • Prior year favorable reserve development of $16.1 million, or 5.7 combined ratio points, compared with $26.0 million prior year favorable loss reserve development, or 9.3 combined ratio points, for the third quarter of 2014.

The combined ratio of 94.7% for the third quarter of 2015 included $16.8 million, or 5.9% percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, primarily related to wildfires in the U.S. state of Washington, the earthquake in Chile and weather-related events in the U.S., New Zealand and Australia. The combined ratio of 79.5% for the third quarter of 2014 included $10.5 million, or 3.8 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries.

For the quarter ended September 30, 2015, the Reinsurance accident year loss ratio excluding catastrophes was 59.5% compared with 52.7% a year ago. The Reinsurance loss ratio for the third quarter of 2015 was impacted by $27.0 million, or 9.5 percentage points, of pre-tax losses, net of reinsurance recoveries, related to the Tianjin explosion.

Stephen Postlewhite, CEO of Reinsurance, commented on the quarter, "Aspen Re's 23% growth in the quarter continues to demonstrate our significance as a preferred market for our clients and is a direct result of a targeted strategy. We improved our shares with selected clients, capitalized on new business opportunities, and benefited from the significant pro-rata deals written earlier in the year. Our continued success is a reflection of our disciplined underwriting, bespoke client solutions, and comprehensive approach to distribution, combined with the strength of our client relationships."

Investment performance

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 3.44 years at September 30, 2015 excluding the impact of interest rate swaps, or 3.33 years including the impact of interest rate swaps.  The total return on Aspen's aggregate investment portfolio was 0.21% for the three months ended September 30, 2015 and reflected $32.7 million of mark to market losses in the equity portfolio. In the first nine months of 2015, Aspen's aggregate investment portfolio had a positive total return of 0.69%.

Book yield as at September 30, 2015 on the fixed income portfolio was 2.50% compared to 2.65% at December 31, 2014.

Capital

Total shareholders' equity was $3.4 billion at September 30, 2015.

During the third quarter of 2015, no ordinary shares were repurchased. Aspen has repurchased 1,790,333 ordinary shares for a total cost of $83.7 million during the first nine months of 2015. Aspen continues to have $416.3 million remaining under its current share repurchase authorization as at November 2, 2015.

Outlook

Aspen continues to expect to achieve an operating return on equity of 11% in 2015.

Read the full press release