Aspen Reports Results for the Six Months Ended June 30, 2022.

Aspen Reports $48.4 million Net Income, $130.0 million Operating Income and a Combined Ratio of 88.2% for the Six Months Ended June 30, 2022

Hamilton, Bermuda, September 7, 2022 – Aspen Insurance Holdings Limited (“Aspen”) (NYSE: AHL) reported results today for the six months ended June 30, 2022.

Mark Cloutier, Group Executive Chairman and Chief Executive Officer, commented: “This is a strong set of results for Aspen with the business reporting both double digit top line growth and very healthy underwriting performance. Our year over year trends continue to show the impact of the work we have done to reshape our business and improve performance, resulting in a 6.5 percentage points improvement in our combined operating ratio to 88.2% from 94.7%. Operating income increased to $130.0 million from $66.7 million for the same period last year, representing an annualized operating return on average equity of 13.8%.

“We entered the year with a well-positioned and diversified portfolio that enabled us to capitalize on positive trading conditions to grow GWP by 16.5% to $2,351.3 million. This growth came from across both the insurance and reinsurance segments and through a combination of rate increases and new business, with an average rate change across our entire portfolio of 10.9%.

“Aspen Capital Partners, our capital markets franchise, is the third important pillar of our business, and we were pleased to report total fee income of $47.0 million for the six months ended June 30, 2022, an increase of $16.5 million over the prior year. Our capital markets franchise has continued to grow and now represents approximately $1 billion of AUM. Our ability to grow and diversify the capital we manage, notwithstanding a challenging environment, supports our core proposition that capital markets investors are key partners in Aspen’s future growth and innovation efforts.

“The Russia Ukraine conflict continues to inflict tragic, humanitarian consequences and costs. We at Aspen are doing our part to support humanitarian relief efforts during the first half of this year and on an ongoing basis. Aspen does not write primary aviation risks and, our specialty insurance exposure to the events is not significant. Although we do have specialty reinsurance exposure, we have had minimal loss notifications to date and have made provision in our first half results based upon analysis of those exposures. We continue to closely monitor the potential impact to our business.

“Similar to the wider market, Aspen has seen the impact of rising interest rates result in unrealized losses in our investment portfolio. We would expect the unrealized losses to unwind as securities reach maturity, while also seeing the benefit of higher interest rates starting to impact investment income.

“The trends we see in many of the key ratios and performance indicators we track give us confidence that Aspen is in a strong position to continue to benefit from attractive trading conditions we see across our markets, while at the same time continue to manage down volatility.”

Key financial highlights

Significantly improved financial performance driven by underwriting performance 

• Gross written premiums of $2,351.3 million in the six months ended June 30, 2022, an increase of 16.5% compared to $2,018.5 million in the six months ended June 30, 2021, primarily due to rate improvement and growth in financial and professional insurance lines, casualty and liability insurance lines and casualty reinsurance lines.

• Net written premiums increased by 21.8% to $1,506.1 million in the six months ended June 30, 2022, compared with $1,236.1 million in the six months ended June 30, 2021. The retention ratio in the six months ended June 30, 2022, was 64.1% compared with 61.2% in the six months ended June 30, 2021.

• Underwriting income of $156.5 million in the six months ended June 30, 2022 up from $59.4 million in the six months ended June 30, 2021, resulting in a combined ratio of 88.2% for the six months ended June 30, 2022, compared to 94.7% in the six months ended June 30, 2021. Included in our underwriting results were catastrophe losses of $92.9 million, or 7.0 percentage points, in the six months ended June 30, 2022, compared to $84.5 million, or 7.5 percentage points, in the six months ended June 30, 2021.

• Catastrophe losses of $92.9 million for the six months ended June 30, 2022, included losses associated with floods in Australia and South Africa, the Russian/Ukraine war, Storm Eunice and other weather-related events. Catastrophe losses of $84.5 million for the six months ended June 30, 2021, included losses associated with Texas winter storms and other weather-related events.

• Net favorable development on prior year loss reserves of $7.3 million decreased the loss ratio by 0.6 percentage points in the six months ended June 30, 2022, compared with net unfavorable development of $(7.3) million which increased the loss ratio by 0.6 percentage points in the six months ended June 30, 2021.

• Investment income of $88.7 million in the six months ended June 30, 2022, compared to $68.7 million in the six months ended June 30, 2021.

• Net realized and unrealized investment losses of $126.4 million in the six months ended June 30, 2022, which includes unrealized losses of $81.5 million. This compares to $3.0 million net realized and unrealized investment gains in the six months ended June 30, 2021, which includes net unrealized gains of $16.1 million.

• Our capital markets business contributed total fee income of $47.0 million in the six months ended June 30, 2022, up from $30.5 million in the six months ended June 30, 2021. Income from Aspen Capital Markets’ activities is primarily allocated to the line of business being ceded and serves to reduce acquisition expenses for that business. Total capital grew to $999.2 million as at June 30, 2022, compared with  $917.7 million at December 31, 2021. Our continued ability to grow the capital we manage underpins our view that capital markets business and investors are key partners in Aspen’s further growth and innovation efforts.

• Net income of $48.4 million and an operating income of $130.0 million in the six months ended June 30, 2022, compared to a net income of $87.4 million and an operating income of $66.7 million in the six months ended June 30, 2021.

• Annualized operating return on average equity of 13.8% in the six months ended June 30, 2022, compared to 6.2% in the six months ended June 30, 2021.

Segment highlights for six months ended June 30, 2022

• Insurance

• Gross written premiums of $1,305.7 million in the six months ended June 30, 2022, an increase of 16.4% compared to $1,122.2 million in the six months ended June 30, 2021, primarily due to organic growth, new business and rate improvement in financial and professional lines.
  • Net written premiums of $722.4 million, in the six months ended June 30, 2022, an increase of 16.8% compared with $618.5 million in the six months ended June 30, 2021, primarily due to growth in gross written premiums. The retention ratio in the six months ended June 30, 2022, was 55.3% compared with 55.1% in the six months ended June 30, 2021.
  • Loss ratio of 54.9% in the six months ended June 30, 2022 compared with 66.0% in the six months ended June 30, 2021. The loss ratio included catastrophe losses of $19.7 million, or 2.7 percentage points, net of reinsurance recoveries, in the six months ended June 30, 2022, compared with $25.9 million, or 4.1 percentage points, net of reinsurance recoveries, in the six months ended June 30, 2021.
  • Prior year net favorable reserve development of $16.1 million in the six months ended June 30, 2022, with a decrease in loss ratio by 2.2 percentage points. Prior year net unfavorable development of $(37.5) million in the six months ended June 30, 2021, increased the loss ratio by 6.0 percentage points. Net favorable reserve development in the insurance segment of $16.1 million was mainly due to favorable claims experience within our first party and specialty lines together with net favorable impact of the loss portfolio transfer (“LPT”), partially offset by deterioration within casualty and financial and professional lines.

• Reinsurance
  • Gross written premiums of $1,045.6 million, in the six months ended June 30, 2022, an increase of 16.7% compared to $896.3 million in the six months ended June 30, 2021, primarily due to rate improvement and organic growth within our casualty and specialty reinsurance lines.
  • Net written premiums of $783.7 million, in the six months ended June 30, 2022, an increase of 26.9% compared with $617.6 million in the six months ended June 30, 2021. The retention ratio in the six months ended June 30, 2022, was 75.0% compared with 68.9% in the six months ended June 30, 2021.
  • Loss ratio of 61.4% in the six months ended June 30, 2022, compared with 59.6% in the six months ended June 30, 2021. The loss ratio included catastrophe losses of $73.3 million, or 12.2 percentage points, net of reinsurance recoveries, in the six months ended June 30, 2022, compared with $58.6 million, or 11.7 percentage points, net of reinsurance recoveries, in the six months ended June 30, 2021.
  • Prior year net unfavorable reserve development of $(8.8) million in the six months ended June 30, 2022, with an increase in loss ratio by (1.5) percentage points. Prior year net favorable reserve development of $30.2 million in the six months ended June 30, 2021, reduced the loss ratio by 6.0 percentage points. Reserve strengthening in the reinsurance segment totaling $(8.8) million, arose primarily from unfavorable experience within property catastrophe reinsurance together with a net unfavorable impact of the loss portfolio transfer (“LPT”), partially offset by favourable reserve development on casualty reinsurance and other property reinsurance lines.

Investment performance

• Investment income of $88.7 million for the six months ended June 30, 2022, compared with $68.7 million for the six months ended June 30, 2021.

• Net realized and unrealized investment losses of $126.4 million in the six months ended June 30, 2022, which includes unrealized losses of $81.5 million. This compares to $3.0 million net realized and unrealized investment gains in the six months ended June 30, 2021, which includes net unrealized gains of $16.1 million.

• Net realized and unrealized investment losses reported in the statement of income of $126.4 million for the six months ended June 30, 2022, compared to net realized and unrealized investment gains of $3.0 million for the six months ended June 30, 2021. In addition, $335.8 million of unrealized investment losses before tax were recognized through other comprehensive income in the six months ended June 30, 2022, compared to $74.0 million in the six months ended June 30, 2021.

• The total return on Aspen’s managed investment portfolio was (4.5)% for the six months ended June 30, 2022, compared to 0.1% in the six months ended June 30, 2021, and reflects net investment income and net realized and unrealized gains and losses mainly in the fixed income portfolio.

• Aspen’s investment portfolio as at June 30, 2022, consisted primarily of high quality fixed income securities with an average credit quality of “AA-”. The average duration of the fixed income portfolio was 3.06 years as at June 30, 2022.

• Book yield on the fixed income portfolio as at June 30, 2022, was 2.4% compared with 2.1% as at December 31, 2021.

Shareholders’ equity

• Total shareholders’ equity was $2,469.0 million as at June 30, 2022, a decrease of $425.9 million, compared with $2,894.9 million as at June 30, 2021, and a decrease of $305.8 million, compared with $2,774.8 million as at December 31, 2021.