Aspen Insurance Q2 Net Income: $49 Million
Bermuda-based Aspen Insurance Holdings Limited reported net income after tax of $49 million, or $0.62 per diluted share, and operating income after tax of $72.2 million, or $0.99 per diluted share, for the second quarter of 2015.
Chris O’Kane, Chief Executive Officer, commented, “Through the first half of the year we continued to execute on our diversified Insurance and Reinsurance strategy, achieving a 10.6% annualized operating return on equity.
“Our Reinsurance segment once again had an excellent performance with an impressive accident year ex-cat loss ratio of 51.4% in the second quarter. In our Insurance segment our U.S. platform continued to grow into scale with 23.9% premium growth in the quarter. In our International markets, the rate environment varied by line and geography.
“We reduced our exposure in certain Energy-related Lloyd’s lines where rates were under pressure and competition was intense and as a result our level of Insurance premiums declined. This, combined with several mid-sized losses, had a negative effect on this quarter’s Insurance results.
“We redeployed capital to those opportunities which were better rated and will continue to do so. We expect to achieve 11% operating return on equity for 2015.”
Operating highlights for the quarter ended June 30, 2015
- Gross written premiums decreased by 7.3% to $722.8 million in the second quarter of 2015 compared with the second quarter of 2014
- Combined ratio of 93.6% for the second quarter of 2015 compared with 90.1% for the second quarter of 2014. Net favorable development on prior year loss reserves of $31.1 million, or 5.1 combined ratio points, for the second quarter of 2015 compared with $31.8 million, or 5.2 combined ratio points, in the comparable period a year ago
- Pre-tax catastrophe losses net of reinsurance recoveries totaled $11.9 million, or 2.0 combined ratio points, in the second quarter of 2015 compared with $22.1 million, or 3.6 combined ratio points, of pre-tax catastrophe losses net of reinsurance recoveries in the second quarter of 2014
Financial highlights for the quarter and six months ended June 30, 2015
- Annualized net income return on average equity of 5.6% and annualized operating return on average equity of 8.8% for the quarter ended June 30, 2015 compared with 16.8% and 12.8%, respectively, for the second quarter of 2014
- Annualized net income return on average equity of 11.0% and annualized operating return on average equity of 10.6% for the first half of 2015 compared with 16.2% and 13.8%, respectively, for the first half of 2014
- Net income per diluted share of $0.62 for the quarter ended June 30, 2015 compared with net income per diluted share of $1.82 for the quarter ended June 30, 2014, and net income per diluted share of $2.50 for the six months ended June 30, 2015 compared with net income per diluted share of $3.48 for the six months ended June 30, 2014
- Operating income per diluted share of $0.99 for the quarter ended June 30, 2015 compared with operating income per diluted share of $1.40 for the quarter ended June 30, 2014, and operating income per diluted share of $2.39 for the six months ended June 30, 2015 compared with operating income per diluted share of $2.94 for the six months ended June 30, 2014
- Diluted book value per share of $45.16 at June 30, 2015 up 0.1% from December 31, 2014.
Operating highlights for Insurance for the quarter ended June 30, 2015 include:
- Gross written premiums of $462.1 million, a decrease of 3.9% compared with $480.9 million in the second quarter of 2014
- Combined ratio of 103.6% compared with 95.5% for the second quarter of 2014
- Prior year favorable reserve development of $7.0 million, or 2.1 combined ratio points, compared with prior year favorable reserve development of $3.4 million, or 1.0 combined ratio point, for the second quarter of 2014.
Growth in Property and Casualty was more than offset by a decline in Marine, Energy and Aviation as a result of decisions to decline business where the pricing levels were not deemed adequate for the underlying risk. The U.S. platform continued its record of strong growth with a 23.9% increase in gross written premium in the quarter.
The combined ratio of 103.6% for the second quarter of 2015 included $9.5 million, or 2.8 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries. The combined ratio for the second quarter of 2014 included $10.2 million, or 3.0 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries.
For the quarter ended June 30, 2015, the Insurance accident year ex-cat loss ratio was 70.9% compared with 60.9% a year ago. In the quarter there were a number of mid-sized losses primarily in property and energy, which equated to $40.0 million or 11.7 points on the accident year ex-cat loss ratio.
Mario Vitale, CEO of Insurance, commented, “We maintained our trajectory of disciplined growth in our U.S. Insurance business and, on a trailing twelve month basis, we have now reached a level of $579 million of net earned premium.
“In our International platform, we maintained discipline and chose not to renew a meaningful amount of business in the Energy sector. This market is experiencing intense competition and in our assessment the rates offered did not adequately reflect the underlying risks.
“We are redeploying that capital into areas where the rates are not as pressured, such as Financial and Professional lines and our U.K. Property and Casualty business and are excited about these areas of growth.”
Operating highlights for Reinsurance for the quarter ended June 30, 2015 include:
- Gross written premiums of $260.7 million, a decrease of 12.6% from $298.4 million in the second quarter of 2014
- Combined ratio of 75.3% compared with 75.5% for the second quarter of 2014
- Prior year favorable reserve development of $24.1 million, or 9.0 combined ratio points, compared with $28.4 million prior year favorable loss reserve development, or 10.2 combined ratio points, for the second quarter of 2014
The combined ratio of 75.3% for the second quarter of 2015 included $2.4 million, or 0.9% percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries. The combined ratio of 75.5% for the second quarter of 2014 included $11.9 million, or 4.3 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries. For the quarter ended June 30, 2015, the Reinsurance accident year ex-cat loss ratio was 51.4% compared with 50.7% a year ago.
Stephen Postlewhite, CEO of Reinsurance, commented on the quarter, “Aspen Re continues its track record of excellent results, demonstrating our relevance in the market, close client relationships, and responsive solutions. Our strategy of pursuing targeted expansion in areas where rates are under less pressure is reaping rewards.
“We achieved growth in Asia, Latin America and MENA of 25% through the first half of the year and look forward to continuing to expand in those regions through our established international office network. While total gross written premium was down in the quarter on a GAAP basis, it was up 33% on an underwriting basis, highlighting the underlying strength of the business.
“Included in this growth were two large deals in our Other Property and Specialty sub-segments, with attractive expected returns, where we will recognize the related gross written premiums and earned premiums over future quarters. Through the six months we have seen strong performance in all of our sub-segments and we look forward to executing our strategy of profitable growth through the rest of the year and into 2016.”
