Aspen Insurance (NYSE:AHL)
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Aspen Insurance Holdings Limited (NYSE:AHL) today reported results for
the quarter and half year ended June 30, 2007.
Net income of $114.7 million for the quarter ended June 30, 2007
compared to $101.8 million for the same quarter in 2006, up 13%. For
the first half of 2007 net income was $236.6 million versus $163.6
million for the first half of 2006, up 45%.
Diluted earnings per share of $1.19 for the quarter ended June 30,
2007 versus $1.01 for the same period in 2006, up 18%, after payment
of preference share dividends. For the first six months of 2007,
diluted earnings per share were $2.46 versus $1.61 from the first half
of 2006, up 53%.
Annualized return on average equity for the quarter was 20.4%,
equaling the return for the second quarter of 2006 of 20.4%.
Net investment income in the second quarter of 2007 increased by 58%
to $78.8 million against $49.9 million in the second quarter of 2006.
The combined ratio for the second quarter of 2007 was 88.4% versus
81.6% for the same quarter in 2006.
Net earned premium increased for the quarter to $451.2 million versus
$429.0 million in the same period in 2006, up 5%.
Book value per ordinary share at June 30, 2007 is $24.44 versus $20.19
at June 30, 2006, up 21%.
The Company also reported UK flood losses resulting from heavy storms
during June in northern England of $23.5 million.
Chris O'Kane, Chief Executive Officer, said, “I
am delighted to report another very strong quarter for Aspen this year.
We reported a 21% increase year on year in book value per share and an
annualized return on average equity of 20.4% for the quarter, which
reflect strong performance across our underwriting segments and an
increasing contribution from investment income. Our results this quarter
and year-to-date clearly show the impact of the changes to our business
in 2006 and the benefits of our targeted approach to managing our key
performance levers.”
Earnings conference call
Aspen will hold a conference call tomorrow, July 27, 2007 at 8:30 a.m.
(Eastern Time) to discuss its 2007 second 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: 8937395. 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 July 27, 2007, and can be accessed at 877-519-4471 (toll-free
domestic U.S.) or 973-341-3080 (international); digital pin: 8937395.
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 second 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. 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 will
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.
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 associated with
these floods will remain within the stated amount.
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: changes in the total industry losses resulting from the UK
and Australian floods and Hurricanes Katrina, Rita and Wilma and the
actual number of Aspen's insureds incurring losses from these events;
with respect to the UK and Australian floods and Hurricanes Katrina,
Rita and Wilma, 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, the
impact of these events 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; 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 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
and any other events such as the UK floods; 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. 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 Ended June 30, 2007
Three Months Ended June 30, 2006
Six Months Ended June 30, 2007
Six Months Ended June 30, 2006
UNDERWRITING REVENUES
Gross written premiums
503.5
522.4
1,140.0
1,201.1
Premiums ceded
(85.0
)
(22.3
)
(166.4
)
(249.1
)
Net written premiums
418.5
500.1
973.6
952.0
Change in unearned premiums
32.7
(71.1
)
(83.4
)
(120.4
)
Net earned premiums
451.2
429.0
890.2
831.6
UNDERWRITING EXPENSES
Losses and loss expenses
(272.7
)
(223.8
)
(498.2
)
(456.2
)
Acquisition expenses
(81.7
)
(83.2
)
(159.4
)
(176.5
)
General and administrative expenses
(44.4
)
(43.0
)
(89.7
)
(81.2
)
Total underwriting expenses
(398.8
)
(350.0
)
(747.3
)
(713.9
)
Underwriting income
52.4
79.0
142.9
117.7
OTHER OPERATING REVENUE
Net investment income
78.8
49.9
146.3
94.4
Interest expense
(4.4
)
(4.0
)
(8.6
)
(7.9
)
Total other operating revenue
74.4
45.9
137.7
86.5
Other income (expense)
1.9
(0.6
)
(5.4
)
(2.5
)
OPERATING INCOME BEFORE TAX
128.7
124.3
275.2
201.7
OTHER
Net realized exchange gains
8.0
6.6
13.5
7.9
Net realized investment losses
(5.6
)
(3.7
)
(10.4
)
(5.1
)
INCOME BEFORE TAX
131.1
127.2
278.3
204.5
Income taxes expense
(16.4
)
(25.4
)
(41.7
)
(40.9
)
NET INCOME AFTER TAX
114.7
101.8
236.6
163.6
Dividends paid on ordinary shares
(13.2
)
(14.3
)
(26.4
)
(28.6
)
Dividend paid on preference shares
(7.0
)
(3.2
)
(13.9
)
(7.1
)
Retained income
94.5
84.3
196.3
127.9
Components of net income (after tax)
Operating income
110.8
98.3
231.4
160.0
Net realized exchange gains (after tax)
8.0
6.6
13.5
7.9
Net realized investment losses (after tax)
(4.1
)
(3.1
)
(8.3
)
(4.3
)
NET INCOME AFTER TAX
114.7
101.8
236.6
163.6
Per Share Data
(in US$ except for number of shares)
Three Months Ended
June 30, 2007
Three Months Ended
June 30, 2006
Six
Months Ended
June 30, 2007
Six
Months Ended
June 30, 2006
Basic earnings per ordinary share
Net income adjusted for preference share dividend
1.22
1.04
2.53
1.64
Operating income adjusted for preference dividend
1.18
1.00
2.47
1.61
Diluted earnings per ordinary share
Net income adjusted for preference share dividend
1.19
1.01
2.46
1.61
Operating income adjusted for preference dividend
1.14
0.98
2.40
1.57
Weighted average ordinary shares outstanding
88,204,654
95,250,409
88,013,841
95,246,684
Weighted average ordinary shares outstanding and dilutive potential
ordinary shares
90,826,560
97,332,916
90,633,531
97,243,409
Book value per ordinary share
24.44
20.19
Diluted book value (treasury stock method)
23.63
19.76
Ordinary shares outstanding at end of the period
88,544,590
95,250,451
Ordinary shares outstanding and dilutive potential ordinary shares
at end of the period
91,553,439
97,334,195
Consolidated Balance Sheets
(in US$ millions)
As at June 30, 2007
As at December 31, 2006
ASSETS
Investments
Fixed maturities
4,083.9
3,828.7
Other investments
481.6
156.9
Short-term investments
492.1
695.5
Total investments
5,057.6
4,681.1
Cash and cash equivalents
397.9
495.0
Reinsurance recoverables
Unpaid losses
324.4
468.3
Ceded unearned premiums
130.2
29.8
Receivables
Underwriting premiums
904.0
688.1
Other
48.8
62.2
Deferred policy acquisition costs
166.3
141.4
Derivatives at fair value
27.2
33.8
Office properties and equipment
24.9
24.6
Other assets
13.3
7.6
Intangible assets
8.2
8.2
Total assets
7,102.8
6,640.1
LIABILITIES
Insurance reserves
Losses and loss adjustment expenses
2,854.5
2,820.0
Unearned premiums
1,028.8
841.3
Total insurance reserves
3,883.3
3,661.3
Payables
Reinsurance premiums
132.2
62.4
Taxation
90.2
61.8
Accrued expenses and other payables
134.3
186.2
Liabilities under derivative contracts
22.4
29.7
Total payables
379.1
340.1
Long-term debt
249.4
249.4
Total liabilities
4,511.8
4,250.8
SHAREHOLDERS’ EQUITY
Ordinary shares
0.1
0.1
Preference shares
-
-
Additional paid-in capital
1,933.8
1,921.7
Retained earnings
646.8
450.5
Accumulated other comprehensive income, net of taxes
10.3
17.0
Total shareholders’ equity
2,591.0
2,389.3
Total liabilities and shareholders’ equity
7,102.8
6,640.1
Summarized Cash Flows
(in US$ millions)
Six Months Ended
June 30, 2007
Six Months Ended
June 30, 2006
Net cash from operating activities
319.5
148.5
Net cash used in investing activities
(381.7
)
(544.4
)
Net cash used in financing activities
(33.2
)
(6.5
)
Effect of exchange rate movements on cash and cash equivalents
(1.7
)
7.2
Decrease in cash and cash equivalents
(97.1
)
(395.2
)
Cash at beginning of the period
495.0
748.3
Cash at end of the period
397.9
353.1
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 22 of Aspen's financial supplement for a reconciliation of
operating income to net income and page 15 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 22 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 22 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.