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Aspen reports results for third quarter and nine months ended September 30, 2016

26th October

  • Annualized Net Income Return on Equity of 11.2% for Third Quarter 2016 and 10.9% Through the Nine Months
  • Annualized Operating Return on Equity of 8.0% for Third Quarter 2016 and 7.3% Through the Nine Months
  • Diluted Book Value Per Share of $50.49, up 9.8% from December 31, 2015

Aspen reported today net income after tax of $95.6 million, or $1.40 per diluted share, and operating income after tax of $69.3 million, or $0.97 per diluted share, for the third quarter of 2016.

Chris O’Kane, Chief Executive Officer, commented, "Aspen’s results this quarter reflect good underwriting profitability across our business. This was demonstrated by our 93.8% combined ratio and the improved accident year ex-cat loss ratios achieved by both business segments. Premium growth in the quarter was driven by Aspen Re, where the AgriLogic business is being successfully integrated and is performing well. At Aspen Insurance, we continued our efforts to reduce volatility, while also delivering growth in targeted areas such as in our Financial and Professional lines portfolio. We remain very disciplined in our selection of risk and continue to enhance our range of products."

Operating highlights for the quarter ended September 30, 2016

  • Gross written premiums increased by 6.0% to $763.5 million in the third quarter of 2016 compared with $720.5 million in the third quarter of 2015
  • Combined ratio of 93.8% for the third quarter of 2016 compared with 93.4% for the third quarter of 2015
  • Net favorable development on prior year loss reserves of $35.4 million, or 5.2 combined ratio points, for the third quarter of 2016 compared with $39.0 million, or 6.1 combined ratio points, in the comparable period 
  • Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $24.9 million, or 3.7 combined ratio points, in the third quarter of 2016 compared with $19.1 million, or 3.0 combined ratio points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the third quarter of 2015
  • Expense ratio of 36.6% in the third quarter of 2016 compared with the 36.3% in the third quarter of 2015, reflecting an increase in the general and administrative expense ratio offset by a decrease in the policy acquisition expense ratio 

Operating highlights for the nine months ended September 30, 2016

  • Gross written premiums increased by 7.6% to $2,540.9 million in the first nine months of 2016 compared with $2,362.5 million in the first nine months of 2015
  • Combined ratio of 95.4% for the first nine months of 2016 compared with 92.0% for the first nine months of 2015
  • Net favorable development on prior year loss reserves of $78.2 million, or 3.9 combined ratio points, for the first nine months of 2016 compared with $97.6 million, or 5.3 combined ratio points, for the first nine months of 2015
  • Pre-tax catastrophe losses, net of reinsurance recoveries and $3.1 million of reinstatement premiums, totaled $108.7 million, or 5.4 combined ratio points, in the first nine months of 2016 compared with $44.5 million, or 2.4 combined ratio points, of pre-tax catastrophe losses, net of reinsurance recoveries, in the first nine months of 2015
  • Expense ratio of 36.7% for the first nine months of 2016 compared with 36.0% for the first nine months of 2015, reflecting an increase in the general and administrative expense ratio offset by a decrease in the policy acquisition expense ratio 

Financial highlights for the quarter and nine months ended September 30, 2016

  • Annualized net income return on average equity of 11.2% and annualized operating return on average equity of 8.0% for the quarter ended September 30, 2016 compared with 2.8% and 8.4%, respectively, for the third quarter of 2015
  • Annualized net income return on average equity of 10.9% and annualized operating return on average equity of 7.3% for the first nine months of 2016 compared with 8.3% and 9.7%, respectively, for the first nine months of 2015
  • Net income per diluted share of $1.40 for the quarter ended September 30, 2016 compared with net income per diluted share of $0.30 for the quarter ended September 30, 2015, and net income per diluted share of $3.97 for the nine months ended September 30, 2016 compared with net income per diluted share of $2.80 for the nine months ended September 30, 2015
  • Operating income per diluted share of $0.97 for the quarter ended September 30, 2016 compared with operating income per diluted share of $0.93 for the quarter ended September 30, 2015, and operating income per diluted share of $2.65 for the nine months ended September 30, 2016 compared with operating income per diluted share of $3.31 for the nine months ended September 30, 2015
  • Diluted book value per share of $50.49 as at September 30, 2016 up 9.8% from December 31, 2015

Segment Highlights

Insurance

Operating highlights for Insurance for the quarter ended September 30, 2016 include:

  • Gross written premiums of $397.6 million, a decrease of 1.6% compared with $403.9 million in the third quarter of 2015, primarily due to a decrease in the Property and Casualty sub-segment, offset by growth in the Financial and Professional Lines, and Marine, Aviation and Energy sub-segments
  • Loss ratio of 57.7% compared with 55.0% for the third quarter of 2015
  • Combined ratio of 95.0% compared with 88.3% for the third quarter of 2015. The combined ratio for the third quarter of 2016 included $10.1 million, or 2.8 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, from U.S. weather-related events. The combined ratio for the third quarter of 2015 included $2.3 million, or 0.6 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries
  • Prior year favorable reserve development of $15.3 million, or 4.2 combined ratio points, compared with prior year favorable reserve development of $22.9 million, or 6.4 combined ratio points, for the third quarter of 2015
  • The accident year loss ratio excluding catastrophes for the quarter ended September 30, 2016 was 59.1% compared with 60.8% a year ago

Reinsurance

Operating highlights for Reinsurance for the quarter ended September 30, 2016 include:

  • Gross written premiums of $365.9 million, an increase of 15.6% from $316.6 million in the third quarter of 2015, with premium growth primarily in the Specialty sub-segment, including $103.3 million of premiums from AG Logic Holdings, LLC (“AgriLogic”)
  • Loss ratio of 56.5% compared with 59.7% for the third quarter of 2015 
  • Combined ratio of 88.3% compared with 94.7% for the third quarter of 2015. The combined ratio for the third quarter of 2016 included $14.8 million, or 4.7 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries, primarily as a result of weather-related events in the U.S. and a hailstorm in the Netherlands. The combined ratio for the third quarter of 2015 included $16.8 million, or 5.9 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries
  • Prior year favorable reserve development of $20.1 million, or 6.4 combined ratio points, compared with $16.1 million prior year favorable reserve development, or 5.7 combined ratio points, for the third quarter of 2015
  • The accident year loss ratio excluding catastrophes for the quarter ended September 30, 2016 was 58.2% compared with 59.5% a year ago 

Investment performance 

Investment income of $46.4 million in the third quarter of 2016 increased by 3.1% compared to $45.0 million in the third quarter of 2015.

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 3.64 years as at September 30, 2016. The total return on Aspen’s aggregate investment portfolio was 0.50% for the three months ended September 30, 2016 and reflects gains in the fixed income and equity portfolios. In the first nine months of 2016, Aspen's aggregate investment portfolio had a total return of 3.98%.

Book yield as at September 30, 2016 on the fixed income portfolio was 2.46% compared to 2.59% as at December 31, 2015.

Capital

Total shareholders’ equity was $3.9 billion as at September 30, 2016. 

During the third quarter of 2016, Aspen repurchased 144,289 ordinary shares at an average price of $45.17 per share for a cost of $6.5 million. Since the beginning of 2016, Aspen has repurchased 1,122,328 ordinary shares at an average price of $44.55 per share for a total cost of $50.0 million. Aspen had $366.3 million remaining under its current share repurchase authorization as at October 26, 2016.

On September 20, 2016, Aspen issued 10 million 5.625% Perpetual Non-Cumulative Preference Shares (the “Preference Shares”). The Preference Shares have a liquidation preference of $25 per share (or $250 million in aggregate liquidation preference). Aspen intends to use the net proceeds from the offering to redeem its outstanding 7.401% Perpetual Non-Cumulative Preference Shares and 7.250% Perpetual Non-Cumulative Preference Shares when they become redeemable on January 1, 2017 and July 1, 2017, respectively.

Read the full press release