Aspen Insurance Holdings Limited Reports Second Quarter 2006 Earnings.HAMILTON Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. , Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the -- Aspen aspen, in botanyaspen: see willow. Aspen, city, United States Aspen (ăs`pən), city (1990 pop. 5,049), alt. 7,850 ft (2,390 m), seat of Pitkin co., S central Colo. Insurance Holdings Limited (NYSE NYSE See: New York Stock Exchange :AHL AHL American Hockey League AHL Action Half-Life (Half-Life modification) AHL Acyl Homoserine Lactone AHL Aramark Harrison Lodging AHL Acylated Homoserine Lactone AHL Association for the History of Language AHL Architects Hawaii Ltd ) (BSX BSX Bermuda Stock Exchange BSX Bandai Satellaview-X BSX Bicycle Super-X (Cross) :AHL BH): --Net Profit of $101.8 Million for Three Months Ended June June: see month. 30, 2006 --Net investment income grew 84.1% to $49.9 million compared to the second quarter 2005 --Second quarter 2006 combined ratio of 81.6% Aspen Insurance Holdings Limited (NYSE:AHL) (BSX:AHL BH) today reported a net profit of $101.8 million, or $1.01 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ordinary share, for the three months ended June 30, 2006. Gross written premiums were $522.4 million for the second quarter 2006. Net investment income was $49.9 million for the second quarter 2006. Chris CHRIS Chemical Hazards Response Information System (US DoD) CHRIS California Historical Resources Information System CHRIS Computerized Human Resources Information System CHRIS Command Human Resources Intelligence System O'Kane, Chief Executive Officer, said, "I am pleased with our second quarter results, which provide us with a strong basis from which to approach the second half of the year. We have significantly strengthened our risk management capabilities and further improvements in this area remains a core focus for us. Our strategy of holding back our capacity for North Atlantic hurricane Atlantic hurricane refers to a tropical cyclone that forms in the Atlantic Ocean usually in the Northern Hemisphere summer or autumn, with one-minute maximum sustained winds of 74 mph (64 knots, 33 m/s, 119 km/h). risk earlier in the year in anticipation of improved pricing in the second quarter has been borne out by the increases we were able to achieve for renewals during the second quarter." Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. increased from $2,039.8 million at December December: see month. 31, 2005 to $2,154.4 million at June 30, 2006. Earnings conference call Aspen will hold a conference call tomorrow, July July: see month. 27, 2006 at 8:30 a.m. (Eastern Time) to discuss its 2006 second quarter financial results. Investors may participate in the live conference call by dialing 877-412-8086 (toll-free domestic U.S.) or 973-582-2842 (international); conference ID: 7559625. 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, 2006, and can be accessed at 877-519-4471 (toll-free domestic U.S.) or 973-341-3080 (international); digital pin: 7559625. The live call and a replay can also be heard via Aspen's website at http://www.aspen.bm. In addition, a financial supplement relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Aspen's financial results for the second quarter 2006 and six months ended June 30, 2006 is available in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of Aspen's website at http://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 Ber·mu·da A self-governing British colony comprising about 300 coral islands in the Atlantic Ocean southeast of Cape Hatteras. The first settlement was made in 1609 by British colonists shipwrecked on their way to Virginia. holding company that provides property and casualty reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. in the global market, property and liability insurance principally in the United Kingdom and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. 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 London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. , 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 Blackstone Group L.P. (NYSE: BX) is a prominent private equity and investment management firm founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman. The company is based in New York City, in River House on Park Avenue at Fifty-first Street, with offices in Atlanta, , Candover Candover, established in 1980 and UK based, specialises in arranging and leading large buyouts and buyins. Candover is structured as an investment trust. Investments in buyouts are provided in two forms, from Candover Investments plc and more significantly from third party funds Partners Limited and Credit Suisse First Boston Credit Suisse First Boston was originally the trading name of the Financière Crédit Suisse-First Boston, a London-based 50-50 investment banking joint venture formed in 1978 between the First Boston Corporation and Credit Suisse. Private Equity. For more information about Aspen, please visit Aspen's website at http://www.aspen.bm. Application of the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This press release contains, and Aspen's earnings conference call may contain, written or oral "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " 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 of acts of terrorism and related legislation and acts of war Tom Clancy's Op-Center: Acts of War is a technothriller by Jeff Rovin Plot introduction The mobile Regional Operations Center (ROC) in Turkey investigates a dam blown up by Kurdish terrorists. ; 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 Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , reserving or investment practices have anticipated; evolving interpretive in·ter·pre·tive also in·ter·pre·ta·tive adj. Relating to or marked by interpretation; explanatory. in·ter  pre·tive·ly adv. 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 When customers of the PSTN make telephone calls, they commonly make use of a telecommunications network called a switched-circuit network. In a switched-circuit network, devices known as switches are used to connect the caller to the callee. of labor and materials labor and materials (time and materials) n. what some builders or repair people contract to provide and be paid for, rather than a fixed price or a percentage of the costs. after
catastrophes; the effectiveness of Aspen's loss limitation methods;
changes in the availability, cost or quality of reinsurance or
retrocessional coverage; the reliability of, and changes in assumptions
to, catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). 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 Moody's Investors ServiceA leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. ; changes in general economic conditions including inflation, foreign currency exchange rates, interest rates and other factors that could affect our investment portfolio; increased competition on the basis of pricing, capacity, coverage terms or other factors; decreased demand for Aspen's insurance or reinsurance products and cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. of the industry; changes in governmental regulations or tax laws in jurisdictions where Aspen conducts business; 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 An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , investigations and regulatory activity by the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State Attorney General's office and other authorities concerning contingent commission arrangements with brokers and bid solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual activities; the total industry losses resulting from Hurricanes Katrina, Rita and Wilma and the actual number of Aspen's insureds incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. losses from these storms; and with respect to 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 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 Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005, filed with the U.S. Securities and Exchange Commission on March 6, 2006. 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
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(in US$ millions) 2006 2005 2006 2005
----------------------- ----------------------
UNDERWRITING REVENUES
Gross premiums written 522.4 549.4 1,201.1 1,353.5
Premiums ceded (22.3) (62.8) (249.1) (234.5)
----------------------- ----------------------
Net premiums written 500.1 486.6 952.0 1,119.0
Change in unearned
premiums (71.1) (91.6) (120.4) (345.3)
----------------------- ----------------------
Net premiums earned 429.0 395.0 831.6 773.7
UNDERWRITING EXPENSES
Losses and loss
expenses (223.8) (195.9) (456.2) (403.3)
Acquisition expenses (83.2) (77.1) (176.5) (147.3)
General and
administrative
expenses (43.0) (29.7) (81.2) (59.1)
----------------------- ----------------------
Total underwriting
expenses (350.0) (302.7) (713.9) (609.7)
----------------------- ----------------------
Underwriting income 79.0 92.3 117.7 164.0
----------------------- ----------------------
OTHER OPERATING REVENUE
Net investment income 49.9 27.1 94.4 52.6
Interest expense (4.0) (3.9) (7.9) (7.9)
----------------------- ----------------------
Total other operating
revenue 45.9 23.2 86.5 44.7
Other expense (0.6) (3.3) (2.5) (4.4)
----------------------- ----------------------
OPERATING INCOME
BEFORE TAX 124.3 112.2 201.7 204.3
----------------------- ----------------------
OTHER
Net realized exchange
gains (losses) 6.6 (3.5) 7.9 (4.8)
Net realized
investment gains
(losses) (3.7) 0.9 (5.1) 0.0
----------------------- ----------------------
INCOME BEFORE INCOME
TAX 127.2 109.6 204.5 199.5
Income taxes (25.4) (25.8) (40.9) (45.6)
----------------------- ----------------------
NET INCOME AFTER TAX 101.8 83.8 163.6 153.9
----------------------- ----------------------
Dividends paid on
ordinary shares (14.3) (10.4) (28.6) (20.8)
Dividend declared on
preference shares (3.2) 0.0 (7.1) 0.0
----------------------- ----------------------
Retained income 84.3 73.4 127.9 133.1
----------------------- ----------------------
Components of net
income (after tax)
Operating income 98.3 86.6 160.0 158.7
Net realized
exchange gains
(losses) (after
tax) 6.6 (3.5) 7.9 (4.8)
Net realized
investment gains
(losses) (after
tax) (3.1) 0.7 (4.3) 0.0
----------------------- ----------------------
NET INCOME AFTER TAX 101.8 83.8 163.6 153.9
----------------------- ----------------------
Per Share Data
Three Three Six Six
Months Months Months Months
(in US$ except for Ended June Ended June Ended June Ended June
number of shares) 30, 2006 30, 2005 30, 2006 30, 2005
----------------------- ----------------------
Basic earnings per
ordinary share
Net income adjusted
for preference
share dividend 1.04 1.21 1.64 2.22
Operating income
adjusted for
preference dividend 1.00 1.25 1.61 2.29
Diluted earnings per
ordinary share
Net income adjusted
for preference
share dividend 1.01 1.16 1.61 2.13
Operating income
adjusted for
preference
dividend 0.98 1.20 1.57 2.20
Weighted average
ordinary shares
outstanding 95,250,409 69,342,486 95,246,684 69,336,524
Weighted average
ordinary shares
outstanding and
dilutive potential
ordinary shares 97,332,916 72,176,578 97,243,409 72,173,377
Book value per
ordinary share 20.19 23.07
Diluted book value
(treasury stock
method) 19.76 22.16
Ordinary shares
outstanding at end
of the period 95,250,451 69,329,931
Ordinary shares
outstanding and
dilutive potential
ordinary shares at
end of the period 97,334,195 72,166,784
Consolidated Balance Sheets
As at June 30, As at December 31,
(in US$ millions) 2006 2005
------------------ ------------------
ASSETS
Investments
Fixed maturities 3,609.1 3,046.1
Short-term investments 443.6 643.0
Other investments 151.0 0.0
------------------ ------------------
Total investments 4,203.7 3,689.1
Cash and cash equivalents 353.1 748.3
Reinsurance recoverables
Unpaid losses 1,113.0 1,192.7
Ceded unearned premiums 154.2 72.7
Receivables
Underwriting premiums 658.5 541.4
Other 50.0 55.7
Deferred policy acquisition costs 179.6 156.2
Derivative at fair value 38.8 40.5
Office properties and equipment 24.2 22.8
Other assets 11.0 10.2
Intangible assets 8.2 8.2
-------------- ------------------
Total assets 6,794.3 6,537.8
============== ==================
LIABILITIES
Insurance reserves
Losses and loss adjustment
expenses 2,957.9 3,041.6
Unearned premiums 1,087.0 868.0
-------------- ------------------
Total insurance reserves 4,044.9 3,909.6
Payables
Reinsurance premiums 152.0 155.0
Taxation 47.0 32.7
Accrued expenses and other
payables 139.2 139.4
Liabilities under derivative
contracts 7.4 12.0
-------------- ------------------
Total payables 345.6 339.1
Long-term debt 249.4 249.3
-------------- ------------------
Total liabilities 4,639.9 4,498.0
SHAREHOLDERS' EQUITY
Ordinary shares 1,698.0 1,693.3
Preference shares 222.9 193.8
Retained earnings 272.1 144.2
Accumulated other comprehensive
income (loss), net of taxes (38.6) 8.5
-------------- ------------------
Total shareholders' equity 2,154.4 2,039.8
-------------- ------------------
Total liabilities and shareholders'
equity 6,794.3 6,537.8
============== ==================
Summarized Cash Flows
Six Months Six Months
Ended June Ended June
(in US$ millions) 30, 2006 30, 2005
----------- -----------
Net cash from operating activities 148.5 378.7
Net cash from investing activities (544.4) (254.8)
Net cash from financing activities (6.5) (20.5)
Effect of exchange rate movements on cash and
cash equivalents 7.2 (3.2)
Increase (decrease) in cash and cash
equivalents (395.2) 100.2
Cash at beginning of the period 748.3 284.9
----------- -----------
Cash at end of the period 353.1 385.1
----------- -----------
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 Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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 http://www.aspen.bm. (1) Annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. Operating Return on Average Equity ("ROAE ROAE Return on Average Equity ") is a non-GAAP financial measure. Annualized Operating Return on Average Equity 1) is calculated using operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , 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. Unrealized appreciation (depreciation) on investments is primarily the result of interest rate movements and the resultant This article is about the resultant of polynomials. For the result of adding two or more vectors, see Parallelogram rule. For the technique in organ building, see Resultant (organ). In mathematics, the resultant of two monic polynomials 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 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 capital gains or losses n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called "basis" and the sales price. 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 according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. 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 http://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 http://www.aspen.bm. |
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