Aspen Insurance (NYSE:AHL)
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Aspen Insurance Holdings Limited (NYSE:AHL) today reported quarterly
results for the quarter ended March 31, 2007.
Net income of $121.9 million versus $61.8 million for the same quarter
in 2006, up 97%.
Earnings per ordinary share of $1.27 versus $0.59 for the same period
in 2006, up 115%.
Underwriting income in the first quarter of 2007 increased by 134% to
$90.5 million compared to $38.7 million the first quarter 2006.
Net investment income in the first quarter of 2007 increased by 52% to
$67.5 million against $44.5 million in the first quarter of 2006.
The combined ratio for the first quarter of 2007 was 79.4% versus
90.4% for the same quarter in 2006, a 12% improvement.
Book value per ordinary share at March 31, 2007 is $23.62 versus
$19.40 at March 31, 2006, up 22%.
Annualized return on average equity for the quarter was 22.9%.
Chris O'Kane, Chief Executive Officer, said, “I
am delighted to report an excellent first quarter, with all our product
segments performing well and a very strong contribution from
investments. In addition we have recently announced a number of
significant new appointments to our management team, including Glyn
Jones as Chairman, Richard Houghton as CFO with two outstanding
underwriting talents, Nathan Warde and Matt Yeldham assuming leadership
roles for our insurance operations. I look forward to working with them
as we build on a terrific start to the year.”
Earnings conference call
Aspen will hold a conference call tomorrow, May 3, 2007 at 9:30 a.m.
(Eastern Time) to discuss its 2007 first quarter results. Investors may
participate in the live conference call by dialing 877-860-4996
(toll-free domestic U.S.) or 973-582-2854 (international); conference
ID: 8628821. Please call to register at least 10 minutes before the
conference call begins. A replay of the call will be available for 10
days via telephone starting approximately two hours following the live
call on May 3, 2007, and can be accessed at 877-519-4471 (toll-free
domestic U.S.) or 973-341-3080 (international); digital pin: 8628821.
The live call and a replay can also be heard via Aspen's website at www.aspen.bm.
In addition, a financial supplement relating to Aspen's financial
results for the first quarter 2007 is available in the Investor
Relations section of Aspen's website at www.aspen.bm.
A brief slide presentation which will be used for reference during the
earnings call will also be available in the Investor Relations section
of Aspen’s website.
About Aspen Insurance Holdings Limited
Aspen Insurance Holdings Limited was established in June 2002. Aspen is
a Bermudian holding company that provides property and casualty
reinsurance in the global market, property and liability insurance
principally in the United Kingdom and the United States and specialty
insurance and reinsurance consisting mainly of marine and energy and
aviation worldwide. Aspen's operations are conducted through its
wholly-owned subsidiaries located in London, Bermuda and the United
States: Aspen Insurance UK Limited, Aspen Insurance Limited and Aspen
Specialty Insurance Company. Aspen has four operating segments: property
reinsurance, casualty reinsurance, specialty insurance and reinsurance
and property and casualty insurance. Aspen's principal existing founding
shareholders include The Blackstone Group, Candover Partners Limited and
Credit Suisse First Boston Private Equity. For more information about
Aspen, please visit Aspen's website at www.aspen.bm.
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 impact that our future operating results, capital
position and rating agency and other considerations have on the
execution of any capital management initiatives; 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 such as Hurricanes Katrina, Rita and Wilma, than our
underwriting, reserving or investment practices have anticipated;
evolving interpretive issues with respect to coverage as a result of
Hurricanes Katrina, Rita and Wilma; 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 2007 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 the New York State Attorney General's office and
other authorities concerning contingent commission arrangements with
brokers and bid solicitation activities; the total industry losses
resulting from Hurricanes Katrina, Rita and Wilma and the actual number
of Aspen's insureds incurring losses from these storms; and with respect
to Hurricanes Katrina, Rita and Wilma, Aspen’s
continued reliance on loss reports received from cedants and loss
adjustors, Aspen's reliance on industry loss estimates and those
generated by modeling techniques, the impact of these storms on Aspen's
reinsurers, any changes in Aspen's reinsurers' credit quality, the
amount and timing of reinsurance recoverables and reimbursements
actually received by Aspen from its reinsurers and the overall level of
competition and the related demand and supply dynamics as contracts come
up for renewal. 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 22, 2007. 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.
Summary of Results – Consolidated
Income Statements
(in US$ millions)
Three Months EndedMarch 31, 2007
Three Months EndedMarch 31, 2006
UNDERWRITING REVENUES
Gross written premiums
636.5
678.7
Premiums ceded
(81.4)
(226.8)
Net written premiums
555.1
451.9
Change in unearned premiums
(116.1)
(49.3)
Net earned premiums
439.0
402.6
UNDERWRITING EXPENSES
Losses and loss expenses
(225.5)
(232.4)
Acquisition expenses
(77.7)
(93.3)
General and administrative expenses
(45.3)
(38.2)
Total underwriting expenses
(348.5)
(363.9)
Underwriting income
90.5
38.7
OTHER OPERATING REVENUE
Net investment income
67.5
44.5
Interest expense
(4.2)
(3.9)
Total other operating revenue
63.3
40.6
Other expense
(7.3)
(1.9)
OPERATING INCOME BEFORE TAX
146.5
77.4
OTHER
Net realized exchange gains
5.5
1.3
Net realized investment losses
(4.8)
(1.4)
INCOME BEFORE TAX
147.2
77.3
Income taxes expense
(25.3)
(15.5)
NET INCOME AFTER TAX
121.9
61.8
Dividends paid on ordinary shares
(13.2)
(14.3)
Dividend paid on preference shares
(6.9)
(3.9)
Retained income
101.8
43.6
Components of net income (after tax)
Operating income
120.6
61.7
Net realized exchange gains (after tax)
5.5
1.3
Net realized investment losses (after tax)
(4.2)
(1.2)
NET INCOME AFTER TAX
121.9
61.8
Per Share Data
(in US$ except for number of shares)
Three Months EndedMarch 31, 2007
Three Months EndedMarch 31, 2006
Basic earnings per ordinary share
Net income adjusted for preference share dividend
1.31
0.61
Operating income adjusted for preference dividend
1.29
0.61
Diluted earnings per ordinary share
Net income adjusted for preference share dividend
1.27
0.59
Operating income adjusted for preference dividend
1.26
0.59
Weighted average ordinary shares outstanding
87,819,188
95,243,750
Weighted average ordinary shares outstanding and dilutive potential
ordinary shares
90,487,698
97,513,725
Book value per ordinary share
23.62
19.40
Diluted book value (treasury stock method)
22.93
18.95
Ordinary shares outstanding at end of the period
88,133,866
95,250,401
Ordinary shares outstanding and dilutive potential ordinary shares
at end of the period
90,797,595
97,520,376
Consolidated Balance Sheets
(in US$ millions)
As atMarch 31,2007
As atDecember 31,2006
ASSETS
Investments
Fixed maturities
4,024.2
3,828.7
Other investments
316.8
156.9
Short-term investments
621.4
695.5
Total investments
4,962.4
4,681.1
Cash and cash equivalents
346.4
495.0
Reinsurance recoverables
Unpaid losses
430.9
468.3
Ceded unearned premiums
76.1
29.8
Receivables
Underwriting premiums
815.0
688.1
Other
39.5
62.2
Deferred policy acquisition costs
161.8
141.4
Derivative at fair value
26.5
33.8
Office properties and equipment
24.6
24.6
Other assets
10.9
7.6
Intangible assets
8.2
8.2
Total assets
6,902.3
6,640.1
LIABILITIES
Insurance reserves
Losses and loss adjustment expenses
2,783.3
2,820.0
Unearned premiums
1,004.8
841.3
Total insurance reserves
3,788.1
3,661.3
Payables
Reinsurance premiums
105.0
62.4
Taxation
99.7
61.8
Accrued expenses and other payables
124.7
186.2
Liabilities under derivative contracts
26.1
29.7
Total payables
355.5
340.1
Long-term debt
249.4
249.4
Total liabilities
4,393.0
4,250.8
SHAREHOLDERS’ EQUITY
Ordinary shares
0.1
0.1
Preference shares
-
-
Additional paid-in capital
1,923.5
1,921.7
Retained earnings
552.3
450.5
Accumulated other comprehensive income, net of taxes
33.4
17.0
Total shareholders’ equity
2,509.3
2,389.3
Total liabilities and shareholders’ equity
6,902.3
6,640.1
Summarized Cash Flows
(in US$ millions)
Three Months EndedMarch 31, 2007
Three Months EndedMarch 31, 2006
Net cash from operating activities
128.8
64.4
Net cash used in investing activities
(250.8)
(395.2)
Net cash from / (used in) financing activities
(20.1)
10.9
Effect of exchange rate movements on cash and cash equivalents
(6.5)
0.6
Decrease in cash and cash equivalents
(148.6)
(319.3)
Cash at beginning of the period
495.0
748.3
Cash at end of the period
346.4
429.0
Non-GAAP Financial Measures
In presenting Aspen's results, management has included and discussed
certain "non-GAAP financial measures", as such term is defined in
Regulation G. Management believes that these non-GAAP measures, which
may be defined differently by other companies, better explain Aspen's
results of operations in a manner that allows for a more complete
understanding of the underlying trends in Aspen's business. However,
these measures should not be viewed as a substitute for those determined
in accordance with GAAP. The reconciliation of such non-GAAP financial
measures to their respective most directly comparable GAAP financial
measures in accordance with Regulation G is included in the financial
supplement, which can be obtained from the Investor Relations section of
Aspen's website at www.aspen.bm.
(1) Annualized Operating Return on Average Equity (“Operating
ROAE”) is a non-GAAP financial measure.
Annualized Operating Return on Average Equity 1) is calculated using
operating income, as defined below and 2) excludes from average equity,
the average after-tax unrealized appreciation or depreciation on
investments and the average after-tax unrealized foreign exchange gains
or losses and the aggregate value of the liquidation preferences of our
preference shares. Unrealized appreciation (depreciation) on investments
is primarily the result of interest rate movements and the resultant
impact on fixed income securities, and unrealized appreciation
(depreciation) on foreign exchange is the result of exchange rate
movements between the U.S. dollar and the British pound. Such
appreciation (depreciation) is not related to management actions or
operational performance (nor is it likely to be realized). Therefore
Aspen believes that excluding these unrealized appreciations
(depreciations) provides a more consistent and useful measurement of
operating performance, which supplements GAAP information. Average
equity is calculated as the arithmetic average on a monthly basis for
the stated periods.
Aspen presents Operating ROAE as a measure that is commonly recognized
as a standard of performance by investors, analysts, rating agencies and
other users of its financial information.
See page 19 of Aspen's financial supplement for a reconciliation of
operating income to net income and page 12 for a reconciliation of
average equity.
(2) Operating income is a non-GAAP financial measure. Operating
income is an internal performance measure used by Aspen in the
management of its operations and represents after-tax operational
results excluding, as applicable, after-tax net realized capital gains
or losses and after-tax net foreign exchange gains or losses.
Aspen excludes after-tax net realized capital gains or losses and
after-tax net foreign exchange gains or losses from its calculation of
operating income because the amount of these gains or losses is heavily
influenced by, and fluctuates in part, according to the availability of
market opportunities. Aspen believes these amounts are largely
independent of its business and underwriting process and including them
distorts the analysis of trends in its operations. In addition to
presenting net income determined in accordance with GAAP, Aspen believes
that showing operating income enables investors, analysts, rating
agencies and other users of its financial information to more easily
analyze Aspen's results of operations in a manner similar to how
management analyzes Aspen's underlying business performance. Operating
income should not be viewed as a substitute for GAAP net income. Please
see above and page 19 of Aspen's financial supplement for a
reconciliation of operating income to net income. Aspen’s
financial supplement can be obtained from the Investor Relations section
of Aspen's website at www.aspen.bm.
(3) Diluted book value per ordinary share is a non-GAAP financial
measure. Aspen has included diluted book value per ordinary share
because it takes into account the effect of dilutive securities;
therefore, Aspen believes it is a better measure of calculating
shareholder returns than book value per share. Please see page 19 of
Aspen's financial supplement for a reconciliation of diluted book value
per share to basic book value per share. Aspen's financial supplement
can be obtained from the Investor Relations section of Aspen's website
at www.aspen.bm.