Aspen Reports Results for the Quarter and Nine Months Ended September 30, 2012 and Announces a $400
Aspen Reports Results for the Quarter and Nine Months Ended September 30, 2012 and Announces a $400 Million Share Repurchase Authorization
HAMILTON, Bermuda--(BUSINESS WIRE)-- Aspen Insurance Holdings Limited ("Aspen") (NYSE: AHL) today reported net income after tax of $115.1 million and diluted earnings per share of $1.45 for the third quarter of 2012. Diluted book value per share increased by 3.8% from June 30, 2012 to $41.53.
Trading highlights in the quarter included low catastrophe levels, areas of pricing improvement, and net favorable reserve development with profitable performance in both the reinsurance and insurance segments.
Operating highlights for the quarter ended September 30, 2012
Diluted net earnings per share of $1.45 for the quarter ended September 30, 2012 compared with diluted net earnings per share of $0.21 in the third quarter of 2011(1)
Diluted operating earnings per share of $1.34 for the quarter ended September 30, 2012 compared with diluted operating earnings per share of $0.68 in the third quarter of 2011(1)(2)
Diluted book value per share of $41.53, up 9.1% from the third quarter of 2011 and up 3.8% from June 30, 2012(1)(2)
Annualized net income return on average equity of 14.4% and annualized operating return on average equity of 13.2% for the third quarter of 2012 compared with 2.4% and 7.2%, respectively in the third quarter of 2011(1)(2)
Gross written premiums in the third quarter of 2012 increased 12.7% from the third quarter of 2011 to $558.4 million with the majority of the growth resulting from a 36.2% increase in the insurance segment
Combined ratio of 87.0% for the third quarter of 2012 compared with a combined ratio of 96.9%(1) for the third quarter 2011
Net favorable development on prior year loss reserves of $29.8 million, or 5.8 combined ratio points, for the quarter compared with $15.6 million, or 3.2 combined ratio points, for the third quarter of 2011
(1) See provision of ASU 2010-26 on page 13
(2) See definition of non-GAAP financial measures on pages 12 and 13
Financial highlights, quarter ended September 30, 2012 (unaudited) | ||||||
$ in millions, except per share amounts and percentages | ||||||
Q3 2012 | Q3 2011(1) | |||||
Gross written premiums | $558.4 | $495.6 | ||||
Net earned premiums | $516.2 | $486.9 | ||||
Net investment income | $48.6 | $57.3 | ||||
Net income after tax | $115.1 | $21.2 | ||||
Operating income after tax | $106.5 | $55.5 | ||||
Diluted net income per share | $1.45 | $0.21 | ||||
Diluted operating earnings per share | $1.34 | $0.68 | ||||
Annualized net income return on equity | 14.4% | 2.4% | ||||
Annualized operating return on equity | 13.2% | 7.2% | ||||
Combined ratio | 87.0% | 96.9% | ||||
Combined ratio excluding catastrophes(2) | 86.6% | 85.8% | ||||
Book value per ordinary share | $42.90 | $39.41 | ||||
Diluted book value per ordinary share | $41.53 | $38.07 | ||||
Financial highlights, nine months ended September 30, 2012 (unaudited) | ||||||
$ in millions, except per share amounts and percentages | ||||||
YTD 2012 | YTD 2011(1) | |||||
Gross written premiums | $2,007.1 | $1,749.1 | ||||
Net earned premiums | $1,525.0 | $1,399.1 | ||||
Net investment income | $153.8 | $171.4 | ||||
Net income (loss) after tax | $278.4 | $(122.5) | ||||
Operating income (loss) after tax | $282.8 | $(75.4) | ||||
Diluted net income (loss) per share | $3.47 | $(1.98) | ||||
Diluted operating earnings (loss) per share | $3.53 | $(1.32) | ||||
Annualized net income (loss) return on equity | 11.9% | (6.7)% | ||||
Annualized operating return (loss) on equity | 12.0% | (4.4)% | ||||
Combined ratio | 89.3% | 116.4% | ||||
Combined ratio excluding catastrophes(2) | 87.2% | 87.1% | ||||
(1) See provision of ASU 2010-26 on page 13 | ||||||
(2) See definition of non-GAAP financial measures on pages 12 and 13 | ||||||
Chris O'Kane, Chief Executive Officer commented, "Our operating income for the third quarter was $106.5 million, equivalent to diluted earnings per share of $1.34 and the result of positive performances in both reinsurance and insurance. Diluted book value per share grew 3.8% in the quarter to $41.53 and we generated an annualized operating return on equity of 13.2%. We enter the final quarter of the year with positive momentum and a strong capital position as we continue to execute our diversified business strategy and to manage capital effectively."
Segment highlights
Reinsurance
Operating highlights for Reinsurance for the quarter ended September 30, 2012 include:
Gross written premiums of $259.5 million, down 6.0% compared with $276.1 million for the third quarter of 2011 as we continue to reduce exposure where we do not believe price reflects our current view of the risks
Combined ratio of 73.8% compared with 95.5% for the third quarter of 2011
Favorable prior year loss reserve development of $22.0 million primarily in property and specialty reinsurance compared with $11.7 million in the third quarter of 2011
The combined ratio for the third quarter of 2012 was 73.8%, benefitting from benign catastrophe activity. There was no change in reserves for the 2010 and 2011 catastrophe events. In comparison, the combined ratio for the third quarter of 2011 was 95.5% or 77.7%(1)(2) excluding natural catastrophe losses.
The segment underwriting profit for the third quarter of 2012 was $73.2 million compared with an underwriting profit of $12.3 million for the third quarter of 2011.(1)
Operating highlights for Reinsurance for the nine months ended September 30, 2012 include:
Gross written premiums of $1,033.5 million, up 3.2% compared with $1,001.2 million for the first nine months of 2011
Combined ratio of 77.5% compared with 126.1% for the first nine months of 2011(1)
Favorable prior year loss reserve development for the first nine months of 2012 was $64.2 million compared with $57.8 million for the first nine months of 2011
The combined ratio of 77.5% for the first nine months of 2012 included pre-tax catastrophe losses, net of reinsurance recoveries and reinstatement premiums, of $19.5 million or 2.6 percentage points. In comparison, the combined ratio for the first nine months of 2011 was 126.1% or 77.6%(1)(2) excluding natural catastrophe losses.
The segment underwriting profit for the first nine months of 2012 was $186.8 million compared with an underwriting loss of $214.5 million(1) for the first nine months of 2011 which was severely impacted by natural catastrophes, primarily the Japan and New Zealand earthquakes.
(1) See provision of ASU 2010-26 on page 13
(2) See definition of non-GAAP financial measures on pages 12 and 13
Insurance
Operating highlights for Insurance for the quarter ended September 30, 2012 include:
Gross written premiums of $298.9 million, up 36.2% compared with $219.5 million in the third quarter of 2011
Combined ratio of 96.4% compared with 93.5% for the third quarter of 2011(1)
Favorable prior year loss reserve development of $7.8 million compared with $3.9 million in the third quarter of 2011 primarily in property and casualty
The increase in gross written premiums was mainly attributable to growth in our US based insurance operations.
Operating highlights for Insurance for the nine months ended September 30, 2012 include:
Gross written premiums of $973.6 million, up 30.2% compared with $747.9 million in the first nine months of 2011
Combined ratio of 97.5% compared with 97.0% for the first nine months of 2011(1)
Favorable prior year loss reserve development of $31.2 million compared with $12.5 million in the first nine months of 2011
Investment performance
Net investment income for the third quarter of 2012 was $48.6 million compared with $57.3 million in the third quarter of 2011. Net realized and unrealized investment gains included in net income for the quarter were $2.7 million which included $8.1 million of losses from the Company's interest rate swaps.
Unrealized gains in the available for sale investment portfolio, including equity securities, at the end of September 30, 2012 were $392.9 million, an increase of $32.2 million from the end of the second quarter of 2012.
Book yield at September 30, 2012 on the fixed income portfolio was 3.04% a decrease of 50 basis points from 3.54% at the end of the third quarter of 2011. The average credit quality of the fixed income portfolio was AA and it had an average duration of 2.8 years at September 30, 2012, excluding the impact of interest rate swaps.
Capital
Total shareholders' equity increased $119.1 million in the quarter to $3.6 billion at September 30, 2012.
During the third quarter of 2012, Aspen repurchased 864,634 ordinary shares in the open market at an average price of $28.91 per share for a total cost of $25.0 million. Aspen had $142.4 million remaining under its current share buyback authorization at September 30, 2012.
Aspen today announced that its Board of Directors has approved a new share repurchase authorization for up to $400 million of outstanding ordinary shares. The share repurchase authorization, which is effective immediately and replaces the previous authorization, permits Aspen to effect the repurchases from time to time through a combination of transactions, including open market repurchases, privately negotiated transactions and accelerated share repurchase transactions.
(1) See provision of ASU 2010-26 on page 13
Outlook for 2012
Aspen continues to anticipate gross written premiums for 2012 to be $2.4 billion +/- 5% and premiums ceded to be between 10% and 12% of gross earned premiums. The full year guidance range for combined ratio is reduced to 89% to 93% from 93% to 98% reflecting the absence of significant third quarter catastrophe losses and assuming normal loss experience in the fourth quarter. The revised combined ratio range includes a catastrophe load for the remainder of the year of $45 million. Aspen has also lowered its expectations for the effective tax rate in 2012 to be in the range of 5% to 8%.
See "Forward-looking Statements Safe Harbor" below.
Earnings conference call and web cast
Aspen will host a conference call to discuss the results at 9:00 am (EST) on Thursday, October 25, 2012.
To participate in the October 25 conference call by phone
Please call to register at least 10 minutes before the conference call begins by dialing:
+1 (888) 459 5609 (US toll free) or
+1 (404) 665 9920 (international)
Conference ID 30243864
To listen live online
Aspen will provide a live webcast at www.aspen.co
(Investors and Media > Investor Relations > Event calendar)
To download the materials
The earnings press release and a detailed financial supplement will also be published on Aspen's website at www.aspen.co.
To listen later
A replay of the call will be available for 14 days via phone and internet, available two hours after the end of the live call. To listen to the replay by phone please dial:
+1 (855) 859 2056 (US toll free) or
+1 (404) 537 3406 (international)
Replay ID 30243864
The recording will be also available at www.aspen.co.
Aspen Insurance Holdings Limited Summary consolidated balance sheet (unaudited) $ in millions, except per share data | ||||||||
As at | As at | |||||||
September 30, | December 31, | |||||||
2012 | 2011 | |||||||
ASSETS | ||||||||
Total investments | $6,720.3 | $6,335.1 | ||||||
Cash and cash equivalents | 1,374.2 | 1,239.1 | ||||||
Reinsurance recoverables | 612.9 | 514.4 | ||||||
Premiums receivable | 993.4 | 894.4 | ||||||
Other assets(1) | 537.0 | 477.5 | ||||||
Total assets | $10,237.8 | $9,460.5 | ||||||
LIABILITIES | ||||||||
Losses and loss adjustment expenses | $4,639.6 | $4,525.2 | ||||||
Unearned premiums | 1,184.0 | 916.1 | ||||||
Other payables | 360.9 | 364.2 | ||||||
Long-term debt | 499.1 | 499.0 | ||||||
Total liabilities | 6,683.6 | 6,304.5 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Total shareholders' equity(1) | 3,554.2 | 3,156.0 | ||||||
Total liabilities and shareholders' equity(1) | $10,237.8 | $9,460.5 | ||||||
Book value per share(1) | $42.90 | $39.66 | ||||||
Diluted book value per share (treasury stock method) (1) | $41.53 | $38.21 | ||||||
(1) See provision of ASU 2010-26 on page 13 | ||||||||
Aspen Insurance Holdings Limited Summary consolidated statement of income (unaudited) $ in millions, except ratios | |||||||
Three Months Ended | |||||||
September 30, | September 30, | ||||||
2012 | 2011(1) | ||||||
UNDERWRITING REVENUES | |||||||
Gross written premiums | $558.4 | $495.6 | |||||
Premiums ceded | (51.3) | (33.0) | |||||
Net written premiums | 507.1 | 462.6 | |||||
Change in unearned premiums | 9.1 | 24.3 | |||||
Net earned premiums | 516.2 | 486.9 | |||||
UNDERWRITING EXPENSES | |||||||
Losses and loss adjustment expenses | 255.0 | 306.2 | |||||
Policy acquisition expenses | 103.1 | 93.4 | |||||
General, administrative and corporate expenses | 90.7 | 72.0 | |||||
Total underwriting expenses | 448.8 | 471.6 | |||||
Underwriting income including corporate expenses | 67.4 | 15.3 | |||||
OTHER OPERATING REVENUE | |||||||
Net investment income | 48.6 | 57.3 | |||||
Interest expense | (7.8) | (7.7) | |||||
Other income/(expense) | 4.5 | (9.1) | |||||
Total other operating revenue | 45.3 | 40.5 | |||||
OPERATING INCOME BEFORE TAX | 112.7 | 55.8 | |||||
Net realized and unrealized exchange gains | 7.7 | 0.3 | |||||
Net realized and unrealized investment gains/(losses) | 2.7 | (32.9) | |||||
INCOME BEFORE TAX | 123.1 | 23.2 | |||||
Income taxes (expense) | (8.0) | (2.0) | |||||
NET INCOME AFTER TAX | 115.1 | 21.2 | |||||
Dividends paid on ordinary shares | (12.2) | (10.6) | |||||
Dividends paid on preference shares | (8.6) | (5.7) | |||||
Dividends paid to non-controlling interest | (0.1) | (0.1) | |||||
Proportion due to non-controlling interest | ─ | (0.1) | |||||
Retained income | $94.2 | $4.7 | |||||
Components of net income (after tax) | |||||||
Operating Income | $106.5 | $55.5 | |||||
Net realized and unrealized exchange gains/(losses) after tax | 6.1 | (0.8) | |||||
Net realized investment gains/(losses) after tax | 2.5 | (33.5) | |||||
NET INCOME AFTER TAX | $115.1 | $21.2 | |||||
Loss ratio | 49.4% | 62.9% | |||||
Policy acquisition expense ratio | 20.0% | 19.2% | |||||
General, administrative and corporate expense ratio | 17.6% | 14.8% | |||||
Expense ratio | 37.6% | 34.0% | |||||
Combined ratio | 87.0% | 96.9% | |||||
(1) See provision of ASU 2010-26 on page 13 | |||||||
Aspen Insurance Holdings Limited | |||||||||||||
Summary consolidated financial data (unaudited) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September | September | September | September | ||||||||||
(in US$ except for number of shares) | 30, 2012 | 30, 2011(1) | 30, 2012 | 30, 2011(1) | |||||||||
Basic earnings per ordinary share | |||||||||||||
Net income/(loss) adjusted for preference share dividend | $1.50 | $0.22 | $3.60 | $(1.98) | |||||||||
Operating income/(loss) adjusted for preference dividend | $1.37 | $0.70 | $3.67 | $(1.32) | |||||||||
Diluted earnings per ordinary share | |||||||||||||
