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AHL > SEC Filings for AHL > Form 10-Q on 5-Aug-2014All Recent SEC Filings

Show all filings for ASPEN INSURANCE HOLDINGS LTD

Form 10-Q for ASPEN INSURANCE HOLDINGS LTD


5-Aug-2014

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, 2014 and 2013. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes contained in this report and the audited consolidated financial statements and related notes for the fiscal year ended December 31, 2013, as well as the discussions of critical accounting policies, contained in our Audited Consolidated Financial Statements in our 2013 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 report, 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, the "Risk Factors" in Item 1A of our 2013 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. Some of the key results for the three and six months ended June 30, 2014 were:
Gross written premiums of $779.3 million for the second quarter of 2014, an increase of 13.4% from the second quarter of 2013. Gross written premiums in reinsurance remained consistent with the prior year while insurance grew by 23.7% as a result of the continued strategic growth of our U.S. and international insurance teams;

        Net favorable development on prior year loss reserves of $31.8 million
         for the second quarter of 2014 compared with $27.4 million in the second
         quarter of 2013, which had a 5.2 percentage point impact on the combined
         ratio in the second quarter of 2014 and a 5.0 percentage point impact on
         the combined ratio in the second quarter of 2013;


        Combined ratio of 90.1% for the second quarter of 2014 compared with a
         combined ratio of 97.1% for the second quarter of 2013. There were $22.1
         million, or 3.6 combined ratio points, of pre-tax catastrophe losses net
         of reinsurance recoveries and reinstatement premiums in the second
         quarter of 2014 compared with $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;


        Diluted net income per share of $1.82 for the quarter ended June 30,
         2014 compared with diluted net income per share of $0.36 (1) in the same
         quarter last year;


        Gross written premiums of $1,634.8 million for the first half of 2014,
         an increase of 11.9% from the first half of 2013. Gross written premiums
         have increased in the reinsurance segment predominantly from increased
         catastrophe and pro rata business while the insurance segment has
         experienced growth across lines of business both internationally and in
         the U.S.;


        Combined ratio of 88.9% for the first half of 2014 compared with a
         combined ratio of 93.7% for the first half of 2013. There were $32.7
         million, or 2.8 percentage points, of catastrophe losses pre-tax net of
         reinsurance recoveries and reinstatement premiums in the first half of
         2014 compared with $58.7 million, or 5.6 percentage points in the first
         half of 2013;


        Annualized net income return on average equity of 16.8% for the second
         quarter of 2014 compared with 4.4% for the second quarter of 2013 and
         annualized net income return on average equity of 16.2% for the first
         half of 2014 compared with 8.0% for the first half of 2013; and


        Diluted book value per share (2) of $44.84 as at June 30, 2014, up 9.6%
         from December 31, 2013.

We continue to execute on our strategies to expand the Aspen Capital Markets division and improve the efficiency of our reinsurance purchasing. In ?our reinsurance segment we have been able to increase our catastrophe business on a gross basis while maintaining similar net exposures through $135 million of new third party collateralized reinsurance capacity established by our capital markets team. In the insurance segment, we have reduced our ceded reinsurance spend from 27.9% of gross written premiums in the first half of 2013 to 24.3% of premiums in 2014 due to more efficient purchasing and by retaining more risk.


Total shareholders' equity increased by $167.4 million to $3,554.2 million for the three months ended June 30, 2014. The most significant movements were:
a $207.4 million increase in retained earnings for the period; and

net unrealized gains on investments, net of taxes, of $49.8 million.

(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, 2014 and December 31, 2013 was:

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