Aspen Reports Results for the Quarter and Year Ended December 31, 2012
Aspen Reports Results for the Quarter and Year Ended December 31, 2012
Announces new $500 million share repurchase authorization to replace prior plan
HAMILTON, Bermuda--(BUSINESS WIRE)-- Aspen Insurance Holdings Limited ("Aspen") (NYSE: AHL) today reported net income after tax of $280.4 million for the year and $2.0 million for the fourth quarter of 2012.This is equivalent to diluted net income per share of $3.38 for the year and a diluted net loss per share of $0.09 for the fourth quarter of 2012.
Results for the quarter were impacted by net catastrophe losses of $170 million, after tax and net of reinsurance and reinstatements, including $175 million from Superstorm Sandy and favorable development on the 2012 US storms.
Chris O'Kane, Chief Executive Officer commented, "In 2012 Aspen celebrated its 10 year anniversary. Our success reflects the support of our clients, with whom we have built strong relationships, the hard work and skill of all our people, and the diversified Reinsurance and Insurance platform that we have built together. In 2012, despite the impact of Superstorm Sandy, we made strong progress against our strategic objectives and generated an operating return on equity of 8.5%.
In 2013, we will be intensely focused on further improving return on equity, against a backdrop of modestly improving insurance pricing, lackluster global economies, and a continued low interest rate environment. We will allocate capital efficiently to profitable underwriting opportunities, scale back in certain lines whose performance has not been consistent with our targeted risk profile, and return excess capital to shareholders through our expanded share repurchase authorization. We will also strive to generate increased returns from our investment portfolio while ensuring that our investments remain within our risk tolerance."
Operating highlights for the quarter ended December 31, 2012
Diluted net loss per share of $0.09 for the quarter ended December 31, 2012 compared with diluted net earnings per share of $0.09 in the fourth quarter of 2011(1)
Diluted operating loss per share of $0.15 for the quarter ended December 31, 2012 compared with diluted operating loss per share of $0.01 in the fourth quarter of 2011(1)(2)
Diluted book value per share of $40.65, up 6.4% from the year ended 2011(1)(2)
Annualized net return on average equity of (0.8)% and annualized operating return on average equity of (1.6)% for the fourth quarter of 2012 compared with 0.8% and Nil%, respectively in the fourth quarter of 2011(1)(2)
Gross written premiums of $576.2 million in the fourth quarter of 2012 increased 25.6% from the fourth quarter of 2011 with the majority of the growth resulting from a 40.2% increase in the insurance segment
Combined ratio of 108.0% or 72.0% excluding catastrophes, pre-tax and net of reinsurance and reinstatements, for the fourth quarter of 2012 compared with a combined ratio of 114.3%(1) or 85.9% excluding catastrophes for the fourth quarter 2011
Net favorable development on prior year loss reserves of $42.0 million, or 7.5 combined ratio points, for the fourth quarter 2012 compared with $22.0 million, or 4.5 combined ratio points, for the fourth quarter of 2011
Operating highlights for the year ended December 31, 2012
Net return on average equity of 8.5% and operating return on average equity of 8.5% for 2012 compared with (4.8)% and (3.4)%, respectively in 2011(1)(2)
Gross written premiums of $2,583.3 million, up 17.0% from 2011, with growth principally in the insurance segment
Combined ratio for 2012 of 94.3%, including $205.0 million or 10.8 percentage points of pre-tax catastrophe losses, net of reinsurance and reinstatements compared with 115.9% for 2011, which included 31.5 percentage points of net losses from catastrophes
Net favorable development on prior year loss reserves of $137.4 million, or 6.6 combined ratio points, for the year compared with $92.3 million, or 4.9 combined ratio points, for 2011
Segment highlights
Reinsurance
Operating highlights for Reinsurance for the quarter ended December 31, 2012 include:
Gross written premiums of $194.4 million, up 4.3% compared with $186.3 million for the fourth quarter of 2011, primarily due to increased reinstatement premiums and premium adjustments to business written in prior years
Combined ratio of 107.1% compared with 124.2% for the fourth quarter of 2011
Favorable prior year loss reserve development of $37.8 million, or 12.6 combined ratio points, with a favorable development in each of the four principal lines of business compared with $14.6 million favorable prior year loss reserve development, or 5.1 combined ratio points, in the fourth quarter of 2011
The combined ratio for the fourth quarter of 2012 was 107.1%, and was impacted by $124.0 million of net catastrophe losses, pre-tax net of reinsurance and reinstatements, including $129.5 million from Superstorm Sandy. Excluding catastrophe losses, the combined ratio was 55.0%. Favorable reserve movements in the quarter included a $16.1 million release for the 2010 and 2011 catastrophe events. In comparison, the combined ratio for the fourth quarter of 2011 was 124.2% or 76.1%(1)(2) excluding catastrophe losses. The acquisition ratio was 13.7% for the fourth quarter of 2012 compared to 16.4% for the fourth quarter of 2011 due to a combination of increased reinstatement premiums and a $4.2 million reduction in profit commissions.
The segment underwriting loss for the fourth quarter of 2012 was $21.4 million compared with an underwriting loss of $70.0 million for the fourth quarter of 2011.(1)
Operating highlights for Reinsurance for the twelve months ended December 31, 2012 include:
Gross written premiums of $1,227.9 million, up 3.4% compared with $1,187.5 million for the twelve months ended December 31, 2011 as a result of improved market conditions in Property Other and Casualty sub segments, specifically US Casualty
Combined ratio of 85.4% compared with 125.6% for the twelve months ended December 31, 2011(1)
Favorable prior year loss reserve development for 2012 was $102.2 million or 9.0 combined ratio points compared with $72.3 million favorable prior year loss reserve development or 6.5 combined ratio points, for 2011
The segment underwriting profit for the twelve months ended December 31, 2012 was $165.4 million compared with an underwriting loss of $284.5 million(1) for the twelve months ended December 31, 2011 which was severely impacted by natural catastrophes, primarily the Japan and New Zealand earthquakes, Thailand floods and US tornadoes.
The combined ratio for the twelve months of 2012, excluding net catastrophe losses, pre-tax and net of reinsurance recoveries and reinstatement premiums was 69.4%. In comparison, the combined ratio on the same basis for the full year 2011 was 73.6%(1)(2).
Insurance
Operating highlights for Insurance for the quarter ended December 31, 2012 include:
Gross written premiums of $381.8 million, up 40.2% compared with $272.4 million in the fourth quarter of 2011
Combined ratio of 104.2% compared with 93.7% for the fourth quarter of 2011(1)
Favorable prior year loss reserve development of $4.2 million or 1.6 combined ratio points compared with $7.4 million or 3.7 combined ratio points in the fourth quarter of 2011
The increase in gross written premiums was mainly attributable to growth in our US based insurance operations. The combined ratio for the fourth quarter of 2012 was 104.2%, negatively impacted by $61.1 million catastrophe losses, pre-tax and net of reinsurance and reinstatements, primarily from Superstorm Sandy.
Operating highlights for Insurance for the twelve months ended December 31, 2012 include:
Gross written premiums of $1,355.4 million, up 32.8% compared with $1,020.3 million in the twelve months ended December 31, 2011
Combined ratio of 99.3% compared with 96.1% for the twelve months ended December 31, 2011(1)
Favorable prior year loss reserve development of $35.2 million or 3.7 combined ratio points compared with $20.0 million or 2.6 combined ratio points in the twelve months ended December 31, 2011
The combined ratio of 99.3% for the twelve months of 2012 included catastrophe losses, pre-tax and net of reinsurance recoveries and reinstatement premiums, of $62.6 million or 4.2 percentage points. It also included losses, pre-tax net of reinsurance recoveries and reinstatement premiums of $31.1 million or 2.2 percentage points related to the Costa Concordia event. In comparison, the combined ratio for the twelve months of 2011 was 96.1% or 94.3%(1)(2) excluding catastrophe losses.
Investment performance
Net investment income for the fourth quarter of 2012 was $51.1 million compared with $54.2 million in the fourth quarter of 2011. Net realized and unrealized investment gains included in net income for the quarter were $5.6 million, which included $0.1 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 December 31, 2012 were $355.0 million, a decrease of $37.9 million from the end of the third quarter of 2012.
Book yield at December 31, 2012 on the fixed income portfolio was 2.88%, a decrease of 49 basis points from 3.37% at the end of the fourth quarter of 2011. The average credit quality of the fixed income portfolio was AA and it had an average duration of 3.0 years at December 31, 2012, excluding the impact of interest rate swaps, or 2.5 years including the impact of interest rate swaps.
Capital
Total shareholders' equity decreased $65.8 million in the quarter to $3.5 billion at December 31, 2012.
During the fourth quarter of 2012, Aspen repurchased 308,674 ordinary shares in the open market at an average price of $31.85 per share for a total cost of $9.8 million. Between January 1, 2013 and February 6, 2013, Aspen repurchased 956,879 ordinary shares under its Rule 10b5-1 plan at an average price of $33.23 per share for a total cost of $31.8 million. Aspen had $358 million remaining under its current share repurchase authorization at February 6, 2013.
Aspen today announced that its Board of Directors has replaced its existing share repurchase authorization with a new authorization of $500 million. The total share repurchase authorization, which is effective immediately through February 7, 2015, 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.
Guidance
Assuming a pre-tax catastrophe load of $190 million per annum, normal loss experience and given the current interest rate and pricing environment, we expect to achieve an operating return on equity of 10% in 2014.
See "Forward-looking Statements Safe Harbor" below.
(1) See provision of ASU 2010-26 on page 14
(2) See definition of non-GAAP financial measures on pages 13 and 14
Earnings conference call and web cast
Aspen will host a conference call to discuss the results at 9:00 am (EST) on Friday, February 8, 2013.
To participate in the February 8 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 86526888
To listen live online
Aspen will provide a live webcast on Aspen's website at www.aspen.co
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 86526888
The recording will be also available at www.aspen.co on the Event Calendar page within the Investor Relations section.
Aspen Insurance Holdings Limited Summary consolidated balance sheet (unaudited) $ in millions, except per share data | |||||||||
As at December 31, 2012 | As at December 31, 2011 | ||||||||
ASSETS | |||||||||
Total investments | $6,692.4 | $6,335.1 | |||||||
Cash and cash equivalents | 1,463.6 | 1,239.1 | |||||||
Reinsurance recoverables | 621.6 | 514.4 | |||||||
Premiums receivable | 1,057.5 | 894.4 | |||||||
Other assets(1) | 475.5 | 477.5 | |||||||
Total assets | $10,310.6 | $9,460.5 | |||||||
LIABILITIES | |||||||||
Losses and loss adjustment expenses | $4,779.7 | $4,525.2 | |||||||
Unearned premiums | 1,120.8 | 916.1 | |||||||
Other payables | 422.6 | 364.2 | |||||||
Long-term debt | 499.1 | 499.0 | |||||||
Total liabilities | 6,822.2 | 6,304.5 | |||||||
SHAREHOLDERS' EQUITY | |||||||||
Total shareholders' equity(1) | 3,488.4 | 3,156.0 | |||||||
Total liabilities and shareholders' equity(1) | $10,310.6 | $9,460.5 | |||||||
Book value per share(1) | $42.12 | $39.66 | |||||||
Diluted book value per share (treasury stock method) (1) | $40.65 | $38.21 | |||||||
(1) See provision of ASU 2010-26 on page 14 | |||||||||
Aspen Insurance Holdings Limited Summary consolidated statement of income (unaudited) $ in millions, except ratios | |||||||||||
Three Months Ended | |||||||||||
December 31, 2012 | December 31, 2011(1) | ||||||||||
UNDERWRITING REVENUES | |||||||||||
Gross written premiums | $576.2 | $458.7 | |||||||||
Premiums ceded | (51.8) | (27.5) | |||||||||
Net written premiums | 524.4 | 431.2 | |||||||||
Change in unearned premiums | 34.1 | 58.2 | |||||||||
Net earned premiums | 558.5 | 489.4 | |||||||||
UNDERWRITING EXPENSES | |||||||||||
Losses and loss adjustment expenses | 437.4 | 394.5 | |||||||||
Policy acquisition expenses | 80.0 | 85.5 | |||||||||
General, administrative and corporate expenses | 86.1 | 79.3 | |||||||||
Total underwriting expenses | 603.5 | 559.3 | |||||||||
Underwriting income (loss) including corporate expenses | (45.0) | (69.9) | |||||||||
OTHER OPERATING REVENUE | |||||||||||
Net investment income | 51.1 | 54.2 | |||||||||
Interest expense | (7.7) | (7.7) | |||||||||
Other income (expense) | (6.2) | 3.6 | |||||||||
Total other operating revenue | 37.2 | 50.1 | |||||||||
OPERATING INCOME (LOSS) BEFORE TAX | (7.8) | (19.8) | |||||||||
Net realized and unrealized exchange gains (losses) | (0.4) | 2.3 | |||||||||
Net realized and unrealized investment gains | 5.6 | 6.0 | |||||||||
INCOME (LOSS) BEFORE TAX | (2.6) | (11.5) | |||||||||
Income taxes benefit | 4.6 | 23.9 | |||||||||
NET INCOME AFTER TAX | 2.0 | 12.4 | |||||||||
Dividends paid on ordinary shares | (12.0) | (10.7) | |||||||||
Dividends paid on preference shares | (8.5) | (5.7) | |||||||||
Dividends paid to non-controlling interest | ─ | ─ | |||||||||
Proportion due to non-controlling interest | (0.1) | (0.2) | |||||||||
Retained (loss) | $(18.6) | $(4.2) | |||||||||
Components of net income (after tax) | |||||||||||
Operating income (loss) | $(2.9) | $5.0 | |||||||||
Net realized and unrealized exchange gains (losses) after tax | (0.4) | 3.7 | |||||||||
Net realized investment gains after tax | 5.3 | 3.7 | |||||||||
NET INCOME AFTER TAX | $2.0 | $12.4 | |||||||||
Loss ratio | 78.3% | 80.6% | |||||||||
Policy acquisition expense ratio | 14.3% | 17.5% | |||||||||
General, administrative and corporate expense ratio | 15.4% | 16.2% | |||||||||
Expense ratio | 29.7% | 33.7% | |||||||||
Combined ratio | 108.0% | 114.3% | |||||||||
(1) See provision of ASU 2010-26 on page 14 | |||||||||||
Aspen Insurance Holdings Limited Summary consolidated statement of income (unaudited) $ in millions, except ratios | |||||||||||
Twelve Months Ended | |||||||||||
December 31, 2012 | December 31, 2011(1) | ||||||||||
UNDERWRITING REVENUES | |||||||||||
Gross written premiums | $2,583.3 | $2,207.8 | |||||||||
Premiums ceded | (336.4) | (278.7) | |||||||||
Net written premiums | 2,246.9 | 1,929.1 | |||||||||
Change in unearned premiums | (163.4) | (40.6) | |||||||||
Net earned premiums | 2,083.5 | 1,888.5 | |||||||||
UNDERWRITING EXPENSES | |||||||||||
Losses and loss adjustment expenses | 1,238.5 | 1,556.0 | |||||||||
Policy acquisition expenses | 381.2 | 347.0 | |||||||||
General, administrative and corporate expenses | 345.1 | 284.5 | |||||||||
Total underwriting expenses | 1,964.8 | 2,187.5 | |||||||||
Underwriting income (loss) including corporate expenses | 118.7 | (299.0) | |||||||||
OTHER OPERATING REVENUE | |||||||||||
Net investment income | 204.9 | 225.6 | |||||||||
Interest expense | (30.9) | (30.8) | |||||||||
Other income (expense) | 0.9 | (6.8) | |||||||||
Total other operating revenue | 174.9 | 188.0 | |||||||||
OPERATING INCOME (LOSS) BEFORE TAX | 293.6 | (111.0) | |||||||||
Net realized and unrealized exchange (losses) | (2.0) | (2.2) | |||||||||
Net realized and unrealized investment gains (losses) | 3.8 | (34.1) | |||||||||
INCOME (LOSS) BEFORE TAX | 295.4 | (147.3) | |||||||||
Income taxes (expense) benefit | (15.0) | 37.2 | |||||||||
NET INCOME (LOSS) AFTER TAX | 280.4 | (110.1) | |||||||||
Dividends paid on ordinary shares | (47.0) | (42.5) | |||||||||
