Aspen Insurance (NYSE:AHL)
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From Oct 2019 to Oct 2024
Aspen Insurance Holdings Limited (“Aspen”)
(NYSE:AHL) today commented on the impact of recent events in the
financial markets on its investment portfolio. The Company also
commented on the impact of Hurricanes Ike and Gustav on third quarter
earnings. As previously announced, Aspen will release its third quarter
2008 financial results on Wednesday, October 29, 2008, following the
close of U.S. markets.
Investment Portfolio
In respect of its fixed income portfolio, Aspen disclosed on September
15, 2008 that it held approximately $38 million in principal amount of
Lehman securities comprised of $30 million in senior debt and $8 million
in subordinated debt. Aspen’s holdings in
Lehman at such time represented less than 0.7% of its total investment
portfolio. Aspen’s direct investment portfolio
has no holding in Lehman equity or preferred shares and has no holding
in preferred or ordinary stock in AIG and has less than $2 million held
in bonds issued by AIG subsidiaries. Aspen’s
direct investment portfolio also has no holdings in the subordinated
debt, preferred or ordinary stock of the Federal National Mortgage
Association (Fannie Mae), the Federal Home Loan Mortgage Corporation
(Freddie Mac) or Washington Mutual, Inc (WaMu), or any corporate debt
issued by WaMu.
Aspen may have exposure to the securities listed above through its
investments in funds of hedge funds, the value of which are discussed
below.
The turmoil in financial markets has impacted the performance and value
of Aspen’s holdings in funds of hedge funds.
The Company’s holdings in funds of hedge funds
represented approximately 9% of Aspen’s
investment portfolio at June 30, 2008, when they were valued at $555.3
million. Based on preliminary valuations received to date, the estimated
returns on Aspen’s alternative investments for
the three months ended September 30, 2008 are expected to be negative
$41.3 million or negative 7.4%, reflecting monthly results of negative
2.1% in July, negative 0.6% in August and negative 4.7% in September. On
a year to date basis to September 30, 2008 estimated returns are
expected to be negative $47.4 million, or negative 8.4%. In accordance
with Aspen’s accounting policy, any unrealized
mark to market gains and losses emanating from the alternative
investment portfolio will be recorded through its net investment income.
As these estimated returns are based on preliminary quarter end market
and reported information, they are subject to change.
Hurricanes Gustav and Ike
The Company’s preliminary net after tax loss
estimate for Hurricane Gustav is approximately $14 million, net of
reinsurance and reinstatement premiums.
The Company’s preliminary net after tax loss
estimate for Hurricane Ike is approximately $141 million, net of
reinsurance and reinstatement premiums, with its reinsurance operations
accounting for approximately 78% and 22% from its insurance segment.
Further detail is set out in the table below.
Hurricane
Loss Estimate(a)
On-shore
Off-shore
Total
Ike
Industry(a)
$13 billion
$3 billion
$16 billion
Aspen(a)
$103 million
$38 million
$141 million
(a) Aspen estimates in all cases
Firm market loss estimates for Hurricane Ike have yet to be determined
and Aspen has received only a very limited number of definitive loss
advices from its reinsurance clients. However, Aspen’s
investigation and analysis to date suggest that total industry losses
from Hurricane Ike will be in the region of $16 billion, comprised of
approximately $3 billion off-shore and $13 billion on-shore, with
approximately $11 billion of the on-shore losses arising from Texas.
Aspen’s Chief Executive Officer, Chris O’Kane
commented: “The most recent information we
have received from clients, brokers and loss adjusters has reinforced
our belief that industry losses from Hurricane Ike are likely to be more
costly than the industry initially thought and this is reflected in our
preliminary loss estimate for this event.”
Aspen’s preliminary estimate of losses from
Hurricanes Gustav and Ike are based on currently available information
and involve considerable judgment reflecting a combination of a review
of certain in-force contracts, the application of Aspen’s
catastrophe modelling systems, industry assessments of exposure, market
intelligence, preliminary data from clients, brokers and loss adjusters,
initial tentative loss reports and other sources. Due to the preliminary
nature of the information used to prepare these estimates, Aspen’s
actual losses from these events may vary materially from the estimates
provided due to inherent uncertainties in making such determinations,
including the potential inaccuracies and inadequacies in the data
provided by clients and brokers, current modeling techniques and their
application, the contingent nature of business interruption exposures,
the effects of any demand surge on claims and any coverage issues.
About Aspen Insurance Holdings Limited
Aspen provides reinsurance and insurance to clients in various domestic
and global markets through wholly-owned subsidiaries and offices in
Bermuda, France, Ireland, the United States, the United Kingdom,
Singapore and Switzerland. For the year ended December 31, 2007, Aspen
reported gross written premiums of $1.8 billion, net income of $489.0
million and total assets of $7.2 billion. For the six months ended June
30, 2008, Aspen reported gross written premiums of $1,125.0 million, net
income of $208.1 million and total assets of $7.5 billion. For more
information about Aspen, please visit www.aspen.bm.
Aspen's Ratings
Aspen Insurance UK Limited
Aspen Insurance Limited
A (Strong) Standard & Poor's
A (Strong) Standard & Poor's
A (Excellent) A. M. Best
A (Excellent) A. M. Best
A2 (Good) Moody's
A2 (Good) Moody's
Application of the Safe Harbor of the Private Securities Litigation
Reform Act of 1995:
This press release contains, and Aspen’s
earnings conference call may contain, written or oral “forward-looking
statements” within the meaning of the U.S.
federal securities laws. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include all statements that do not
relate solely to historical or current facts, and can be identified by
the use of words such as “expect,”
“intend,” “plan,”
“believe,” “project,”
“anticipate,” “seek,”
“will,” “estimate,”
“may,” “continue,”
and similar expressions of a future or forward-looking nature.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that
could cause actual results to differ materially from those indicated in
these statements. Aspen believes these factors include, but are not
limited to: the continuing impact of the global financial crisis and
credit crunch; a decline in the value of our investment portfolio or a
rating downgrade of the securities in our portfolio; in respect of
hurricane loss estimates such as Hurricanes Gustav and Ike, Aspen's
reliance on loss reports received from cedants and loss adjustors,
Aspen's reliance on industry loss estimates and those generated by
modeling techniques, any changes in Aspen's reinsurers' credit quality
and changes in assumptions on flood damage exclusions as a result of
prevailing lawsuits and case law; the amount and timing of reinsurance
recoverables and reimbursements actually received by Aspen from its
reinsurers; the impact that our future operating results, capital
position and rating agency and other considerations have on the
execution of any capital management initiatives; our ability to execute
our business plan to enter new markets, introduce new products and
develop new distribution channels, including their integration into our
existing operations; the impact of any capital management activities on
our financial condition; the impact of acts of terrorism and related
legislation and acts of war; the possibility of greater frequency or
severity of claims and loss activity, including as a result of natural
or man-made catastrophic events than our underwriting, reserving or
investment practices have anticipated; evolving interpretive issues with
respect to coverage after major loss events; the level of inflation in
repair costs due to limited availability of labor and materials after
catastrophes; the effectiveness of Aspen's loss limitation methods;
changes in the availability, cost or quality of reinsurance or
retrocessional coverage, which may affect our decision to purchase such
coverage; the reliability of, and changes in assumptions to, catastrophe
pricing, accumulation and estimated loss models; loss of key personnel;
a decline in our operating subsidiaries' ratings with Standard & Poor's,
A.M. Best Company or Moody's Investors Service; changes in general
economic conditions including inflation, foreign currency exchange
rates, interest rates and other factors that could affect our investment
portfolio; the number and type of insurance and reinsurance contracts
that we wrote at the January 1st and other renewal periods in 2008 and
the premium rates available at the time of such renewals within our
targeted business lines; increased competition on the basis of pricing,
capacity, coverage terms or other factors; decreased demand for Aspen's
insurance or reinsurance products and cyclical downturn of the industry;
changes in governmental regulations, interpretations or tax laws in
jurisdictions where Aspen conducts business; proposed and future changes
to insurance laws and regulations, including with respect to U.S. state-
and other government-sponsored reinsurance funds and primary insurers;
Aspen or its Bermudian subsidiary becoming subject to income taxes in
the United States or the United Kingdom; the effect on insurance
markets, business practices and relationships of ongoing litigation,
investigations and regulatory activity by insurance regulators and
prosecutors. For a more detailed description of these uncertainties and
other factors, please see the "Risk Factors" section in Aspen's Annual
Reports on Form 10-K as filed with the U.S. Securities and Exchange
Commission on February 29, 2008. Aspen undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the dates on which they are made.
In addition, any estimates relating to loss events involve the exercise
of considerable judgment and reflect a combination of ground-up
evaluations, information available to date from brokers and cedants,
market intelligence, initial tentative loss reports and other sources.
Due to the complexity of factors contributing to the losses and the
preliminary nature of the information used to prepare these estimates,
there can be no assurance that Aspen's ultimate losses will remain
within the stated amount.