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AHL > SEC Filings for AHL > Form 10-Q on 2-Aug-2013All Recent SEC Filings

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Form 10-Q for ASPEN INSURANCE HOLDINGS LTD


2-Aug-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2013 and 2012. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes contained in this Form 10-Q and the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2012, as well as the discussions of critical accounting policies, contained in our Audited Consolidated Financial Statements in our 2012 Annual Report on Form 10-K filed with the United States Securities and Exchange Commission.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business and in "Outlook and Trends" below, includes forward-looking statements that involve risks and uncertainties. Please see the section captioned "Cautionary Statement Regarding Forward-Looking Statements" in this report and the "Risk Factors" in Item 1A of our 2012 Annual Report on Form 10-K for more information on factors that could cause actual results to differ materially from the results described in, or implied by, any forward-looking statements contained in this discussion and analysis.

Overview

We are a Bermuda holding company and write insurance and reinsurance business through our wholly-owned subsidiaries in Bermuda, the U.K. and the U.S. In the quarter we continued to make progress in our establishment of Aspen Capital Markets, which will be used to leverage our existing franchise and underwriting expertise to offer investors access to diversified products.

Some of the key results for the three and six months ended June 30, 2013 were:

Gross written premiums of $687.3 million for the second quarter of 2013, an increase of 3.1% from the second quarter of 2012. Gross written premium in reinsurance were flat while insurance grew 6% as a result of the continued strategic growth of the U.S. insurance teams;

Net favorable development on prior year loss reserves of $27.4 million for the second quarter of 2013 compared with $28.6 million in the second quarter of 2012;

Combined ratio of 97.1% for the second quarter of 2013 compared with a combined ratio of 87.3% for the second quarter of 2012. This increase was mainly due to $58.7 million or 10.9 percentage points, of pre-tax catastrophe losses net of reinsurance recoveries and reinstatement premiums in the second quarter of 2013 compared with no catastrophe losses in the second quarter of 2012;

Combined ratio of 93.7% for the first half of 2013 compared with a combined ratio of 90.4% for the first half of 2012;

Diluted net income per share (1) of $0.36 for the quarter ended June 30, 2013 compared with diluted net income per share of $1.03 in the same quarter last year;

Annualized net income return on average equity of 4.4% for the second quarter of 2013 compared with 10.8% for the second quarter of 2012 and annualized net income return on equity of 8.0% for the first half of 2013 compared to an annualized net income return on average equity of 10.6% for the first half of 2012; and

Diluted book value per share (2) of $38.87 decreased by 2.8% over the end of the second quarter net change in 2012 and by 4.4% from the end of the first quarter of 2013 largely as a result of the $138.4 million net unrealized losses, gross of tax, in the investment portfolio which is attributable mainly to the increase in interest rates.

Total shareholders' equity decreased by $104.7 million to $3,234.9 million for the three months ended June 30, 2013. The most significant movements were:

the repurchase of 800,042 ordinary shares for $29.9 million through open market repurchases;

a $13.1 million increase in retained earnings for the period;

net unrealized losses on investments, net of taxes, of $127.5 million;

redemption of $230.0 million PIERS on May 30, 2013; and

net proceeds of $270.4 million from the issuance of our 5.950% Preference Shares on May 2, 2013.

(1) Diluted net income per share for the quarter ended June 30, 2013 after deducting the $7.1 million difference between the capital raised upon issuance of the PIERS, net of original issuance costs, and the final redemption of $230.0 million.

(2) Diluted book value per ordinary share is based on total shareholders' equity less preference shares (liquidation preference less issue expenses), divided by the total number of issued and potentially dilutive ordinary shares at the end of the period.

Ordinary shareholders' equity as at June 30, 2013 and December 31, 2012 was:

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