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8-K - FORM 8-K - ASPEN INSURANCE HOLDINGS LTD | d356118d8k.htm |
Exhibit 99.1
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INVESTOR
PRESENTATION
FIRST QUARTER 2012
Aspen Insurance Holdings Limited
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SAFE HARBOR DISCLOSURE
This slide presentation is for information purposes only. It should be read in conjunction with our financial supplement posted on our website on the Investor Relations page and with other documents filed or to be filed shortly by Aspen Insurance Holdings Limited (the Company or Aspen) with the US Securities and Exchange Commission.
Non-GAAP Financial Measures
In presenting Aspens 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 Aspens results of operations in a manner that allows for a more complete understanding of the underlying trends in Aspens business. However, these measures should not be viewed as a substitute for those determined in accordance with 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 herein or in the financial supplement, as applicable, which can be obtained from the Investor Relations section of Aspens website at www.aspen.co
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
This presentation contains, written or oral forward-looking statements within the meaning of the US 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, do not believe, aim, project, anticipate, seek, will, estimate, may, continue, guidance, 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 possibility of greater frequency or severity of claims and loss activity, including as a result of natural or man-made (including economic and political risks) catastrophic or material loss events, than our underwriting, reserving, reinsurance purchasing or investment practices have anticipated; the reliability of, and changes in assumptions to, natural and man-made catastrophe pricing, accumulation and estimated loss models; evolving issues with respect to interpretation of coverage after major loss events and any intervening legislative or governmental action; the effectiveness of our loss limitation methods; changes in the total industry losses, or our share of total industry losses, resulting from past events and, with respect to such events, our reliance on loss reports received from cedants and loss adjustors, our reliance on industry loss estimates and those generated by modeling techniques, changes in rulings on flood damage or other exclusions as a result of prevailing lawsuits and case law; the impact of acts of terrorism and related legislation and acts of war; decreased demand for our insurance or reinsurance products and cyclical changes in the insurance and reinsurance sectors; any changes in our reinsurers credit quality and the amount and timing of reinsurance recoverables; changes in the availability, cost or quality of reinsurance or retrocessional coverage; the continuing and uncertain impact of the current depressed economic environment in many of the countries in which we operate; the level of inflation in repair costs due to limited availability of labor and materials after catastrophes; changes in insurance and reinsurance market conditions; increased competition on the basis of pricing, capacity, coverage terms or other factors and the related demand and supply dynamics as contracts come up for renewal; a decline in our operating subsidiaries ratings with Standard & Poors (S&P), A.M. Best Company, Inc. (A.M. Best) or Moodys Investor Service (Moodys); our ability to execute our business plan to enter new markets, introduce new products and develop new distribution channels, including their integration into our existing operations; the persistence of the global financial crisis and the Eurozone debt crisis, changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors that could affect our investment portfolio; the risk of a material decline in the value or liquidity of all or parts of our investment portfolio; changes in our ability to exercise capital management initiatives or to arrange banking facilities as a result of prevailing market changes or changes in our financial position; changes in government regulations or tax laws in jurisdictions where we conduct business; Aspen Holdings or Aspen Bermuda becoming subject to income taxes in the United States or the United Kingdom; loss of key personnel; and increased counterparty risk due to the credit impairment of financial institutions. For a more detailed description of these uncertainties and other factors, please see the Risk Factors section in Aspens Annual Report on Form 10-K as filed with the US Securities and Exchange Commission on February 28, 2012. 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.
In addition, any estimates relating to loss events involve the exercise of considerable judgment in the setting of reserves and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market intelligence, initial tentative loss reports and other sources. The actuarial range of reserves and managements best estimate represents a distribution from our internal capital model for reserving risk based on our then current state of knowledge and explicit and implicit assumptions relating to the incurred pattern of claims, the expected ultimate settlement amount, inflation and dependencies between lines of business. Due to the complexity of factors contributing to the losses and the preliminary nature of the information used to prepare these estimates and reserves, there can be no assurance that Aspens ultimate losses will remain within the stated amounts.
AHL: NYSE
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CONTENTS
Who We Are & What We Do
The Aspen Approach
Aspens Natural Catastrophe Exposures: Major Peril Zones
Delivering Strong Investment Returns
Pro-Active Management of Capital
Financial Highlights 1Q 2012
Appendix
Investment Portfolio
Eurozone Fixed Income Exposure at March 31, 2012
Major Loss Summary 1Q 2012
2012 Guidance
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WHO WE ARE ASPEN GROUP
Bermuda domiciled Specialty Insurer and Reinsurer
Founded 2002; IPO 2003; current market cap $2.0bn(1)
$2.2bn GWP in 2011; $2.3 bn ± 5% GWP in 2012(2)
STRONG BALANCE SHEET
$3.2bn of shareholders equity as at March 31, 2012
Ratings of A/Stable (S&P), A2/Stable (Moodys) and A/Stable (A.M. Best)
Diluted BVPS CAGR of 11.0% over five years to March 31, 2012
$1.2bn capital returned to shareholders 2003 - 2011
MULTI-PLATFORM APPROACH
3 main underwriting locations: London, Bermuda and US
Branch offices: Paris, Zurich, Cologne, Singapore, Dublin and US
More than 800 employees in 28 offices across eight countries
WELL DIVERSIFIED PORTFOLIO
Specialize in providing customized underwriting solutions to clients and brokers across an array of geographies, product and peril
54% Reinsurance, 46% Insurance(3)
54% Property, 46% Casualty(3)
AHL: NYSE
(1) As at May 1, 2012
(2) Expected full year 2012
(3) Full year 2011
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WHAT WE DO
INSURANCE VS. REINSURANCE (1)
PROPERTY VS. CASUALTY (1)
GWP BY CORE PLATFORM
GLOBAL FOOTPRINT
2003
23% 77%
Insurance
Reinsurance
39% 61%
Property
Casualty
94%
UK
US
Bermuda
2011
54% 46%
Insurance
Reinsurance
46% 54%
Property
Casualty
14% 17% 46% 23%
UK
US
Bermuda
Others(2)
176 employees 800+ employees
4 offices, 3 countries 28 offices, 8 countries
AHL: NYSE (1) By Gross Written Premium
(2) Europe and The Rest of The World
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WHAT WE DO
REINSURANCE: OVERVIEW AND STRATEGY
ASPEN APPROACH:
10 underwriting units in 4 divisions
Established market leader
Presence in major market hubs enables close proximity to customers
Deep expertise and understanding of client needs and risks
Focus on smaller, specialized companies and risks to maintain portfolio diversity
Focus on clients where reinsurance and reinsurance relationships are a vital part of their business needs
ANALYSIS OF GWP BY BUSINESS LINE (1)
26% 25% 25% 24%
Property Catastrophe Reinsurance
Other Property Reinsurance
Casualty Reinsurance
Specialty Reinsurance
PROPERTY CATASTROPHE REINSURANCE
Treaty Catastrophe
OTHER PROPERTY REINSURANCE
Treaty Risk Excess
Treaty Pro Rata
Global Property Facultative
CASUALTY REINSURANCE
U.S. Casualty Treaty
International Casualty Treaty
Global Casualty Facultative
SPECIALTY REINSURANCE
Credit & Surety Reinsurance
Agriculture
Other Specialty
AHL: NYSE (1) Gross Written Premium for the last twelve months through March 31, 2012
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THE ASPEN APPROACH
REINSURANCE: 2012 AND BEYOND
Business Key Elements
REINSURANCE
Continue diversification strategy by product and geography, with a focus on more pronounced growth in emerging markets
Further development of local market strategy with dedicated teams in:
Continental Europe (Zurich), Asia (Singapore), Latin America (Miami) and Middle East (London)
Implementation of cross-selling strategy to drive synergies across Property, Casualty and Specialty Lines
Hard market strategy
Provide our underwriters with data and facts to support the argument for improved prices
Development of specific actions, by product and territory, to achieve more adequate rates
Selective Growth in Exposures We Know and Understand, Subject to Market Conditions
AHL: NYSE
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WHAT WE DO
INSURANCE: OVERVIEW AND STRATEGY
ASPEN APPROACH:
18 underwriting units in 4 divisions
Innovative specialist E&S type approach to underwriting within Insurance operations
Strong emphasis on complex risks
Portfolio of highly differentiated insurance risks
Divisional focus compliments in-house underwriting expertise
ANALYSIS OF GWP BY BUSINESS LINE (1)
14%
23% 42%
21%
Marine, Energy and Transportation
Financial and Professional Lines
Property Insurance
Casualty Insurance
MARINE, ENERGY AND TRANSPORTATION
Marine and Energy Liability
Energy Physical Damage
Marine Hull
Specie
Aviation
Inland Marine & Ocean Risks
FINANCIAL AND PROFESSIONAL LINES
Financial Institutions
Professional Liability
Management and Technology Liability
Financial and Political Risks (includes Kidnap & Ransom)
US Surety Risks
PROPERTY INSURANCE
US Property
US Programs
UK Property
CASUALTY INSURANCE
UK Commercial Liability
Global Excess Casualty
US Casualty
Environmental Liability
AHL: NYSE (1) Gross Written Premium for the last twelve months through March 31, 2012
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THE ASPEN APPROACH
INSURANCE: 2012 AND BEYOND
Business Key Elements
Strong leadership
Established teams Property, Professional Liability, Management Liability,
Inland Marine/Ocean Cargo, Primary Casualty, Surety, Excess Casualty,
US INSURANCE Environmental Liability, Programs
Building momentum teams executing on strategies with all licenses in place
Round out London Market portfolio
Further development of UK regional platform
Establishment of foothold in Swiss insurance market
INTERNATIONAL INSURANCE
Strong demand for Marine, Energy, Political Risk and Kidnap & Ransom
Selective Growth in Exposures We Know and Understand, Subject to Market Conditions
AHL: NYSE
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ASPENS NATURAL CATASTROPHE EXPOSURES: MAJOR PERIL ZONES
100 year return period as % of total Shareholders Equity
US Eastern EQ
1.8%
US Pacific NW EQ
3.8%
European Wind
6.9%
Japan All Perils
8.3%
California EQ
8.8%
US All Wind
14.2%
0% 5% 10% 15% 20%
250 year return period as % of total Shareholders Equity
US Eastern EQ
6.6%
US Pacific NW EQ
6.7%
European
Wind
9.4%
Japan All Perils
10.6%
California EQ
10.6%
US All Wind
18.7%
0% 5% 10% 15% 20%
1 in 100 year tolerance: 17.5% of total shareholders equity
1 in 250 year tolerance: 25.0% of total shareholders equity
AHL: NYSE Source: Aspen analysis using RMS v11 occurrence exceedance probability as at March 31, 2012 and Shareholders Equity of $3,210.9 million at March 31, 2012. U.S. Wind is a blend of RMS v11 and AIR v13 weighted 50% for each model.
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DELIVERING STRONG INVESTMENT RETURNS
ASPENS FIXED INCOME BOOK YIELD vs. 3 YR TREASURY YIELD SINCE 2003
5.5%
5.0%
4.5%
4.0%
3.5% 3.3%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5% 0.5%
0.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Aspen FI Book Yield
INVESTMENT PORTFOLIO ASSET CLASS AND SECTOR ALLOCATIONS
Corporate bonds
Agency MBS
Cash and cash equivalents
US governments
Foreign governments
Foreign corporates
Short-term
Agency debentures
Equity
Bonds backed by foreign government
Non-agency CMES
AES
FDIC guaranteed
Municipal bonds
3% 5% 10% 15% 20% 25%
5 YEAR TOTAL RETURN(1) VS. PEERS(2)
0% 5% 10% 15% 20% 25% 30%
1 26.4%
2 25.4%
Aspen 24.9%
4 24.7%
5 22.9%
6 22.6%
7 21.1%
8 20.8%
9 20.5%
10 20.2%
11 19.8%
12 18.4%
13 17.3%
14 16.2%
15 14.6%
$7.7 BILLION AS AT MARCH 31, 2012
Outperformance vs. Peers; Aspen Ranked #3 for 5 Year Total Return
(1) 5 year cumulative performance as at December 31, 2011
AHL: NYSE (2) Peers include ACGL, ALTE, AWH, AXS, ENH, MRH, PRE, PTP, RE, RNR, TRH, VR, XL VR data not available for 5 years
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PRO-ACTIVE MANAGEMENT OF CAPITAL
CAPITAL MANAGEMENT STRATEGY
Maintain capital at levels that satisfy all regulatory and rating agency requirements as well as internal metrics
Optimize capital structure; conservatively leverage the balance sheet using high equity content preferred shares
Issued $160 million 7.250% Perpetual Non-Cumulative Preference Shares in April 2012
Competitive dividend yield; quarterly dividend increased 13% in 1Q 2012
Return capital to shareholders
Continue to monitor trading activity so as to repurchase shares at attractive levels
Remaining $192 million repurchase authorization
Mar 31, 2012
Pro Forma Mar 31, 2012(1)
Debt/total capital
13.5%
12.9%
Debt and preferred/total capital
23.2%
(1)
26.4%
Capital Requirement Based On Disciplined Risk Management Approach
(1) March 31, 2012 figure pro forma for Aspens issuance of 7.250% Perpetual Non- Cumulative Preference Shares with net proceeds of $155 million on April 11, 2012
AHL: NYSE
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FINANCIAL HIGHLIGHTS: 1Q 2012
($ millions, except per share data)
QUARTER ENDED MARCH 31 2012 2011 CHANGE
Gross written premiums 782.1 671.3 16.5%
Net written premiums 633.5 509.6 24.3%
Net earned premiums 495.4 452.4 9.5%
Underwriting income / (loss) incl corp expense 30.5 (220.4) NM
Net investment income 52.4 55.5 (5.6%)
Net income / (loss) after tax 78.7 (152.8) NM
FINANCIAL RATIOS
Loss ratio 57.3% 116.9%
Policy acquisition expense ratio 19.4% 18.0%
General, administrative and corporate expense ratio 17.1% 13.8%
Combined ratio 93.8% 148.7%
Annualized operating ROE(2) 9.2% (24.0%)
Operating EPS(1) 0.88 (2.38)
Diluted book value per share 38.58 36.48 5.8%
NM: Not meaningful
(1) Note: See Aspens quarterly financial supplement for a reconciliation of operating income to net income, average equity to closing shareholders equity, diluted book value per share to basic book value per share in the Investor Relations section of Aspens website at www.aspen.co
(2) In this presentation, we present data for return on equity based on average equity including all components of shareholder equity other than the aggregate liquidation preference of our preference shares. Previously, we excluded net unrealized investment and foreign exchange gains included in Other Comprehensive Income form the definition of average equity for this purpose. This change applies for Net Income ROE and Operating ROE
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APPENDIX
INVESTMENT PORTFOLIO BY ASSET TYPE
TOTAL INVESTMENT PORTFOLIO AT MARKET VALUE ($ millions)(1): $7,670.4
CASH, SHORT-TERM SECURITIES AND EQUITY SECURITIES GOVERNMENT / AGENCY STRUCTURED SECURITIES CREDIT SECURITIES
Short-term securities 433.8 US government 935.2 Asset-backed securities 64.0 Corporate bonds 1,747.5
Equity securities 188.1 Agency debentures 333.1 Agency rated mortgage-backed securities (GNMA, FINMA, FHLB) 1,298.1 FDIC guaranteed corporate bonds 63.6
Cash and cash equivalents 1,173.3 Foreign governments 632.4 Non-agency rated commercial mortgage-backed securities 84.6 Foreign corporates 483.5
Investment in Iris Re 33.1 Bonds backed by foreign government 158.5
Municipal bonds 41.6
Q1 2012 1,828.3 Q1 2012 1,900.7 Q1 2012 1,446.7 Q1 2012 2,494.7
Q4 2011 1,754.0 Q4 2011 1,929.8 Q4 2011 1,415.4 Q4 2011 2,475.0
Overall Portfolio Asset Allocations Have Not Changed Significantly During The First Quarter Of 2012
(1) As at March 31, 2012
AHL: NYSE 15
EUROZONE FIXED INCOME EXPOSURE
($ in millions except for percentages)
RATINGS
MARKET MARKET UNREALIZED
COUNTRY AAA AA A BBB VALUE VALUE % PRE-TAX GAIN
Austria - 100% - - 18.1 5.9% 0.3
Belgium - - 100% - 1.3 0.4% 0.2
Finland 100% - - - 11.2 3.6% 0.2
France 9% 77% 13% 1% 103.9 33.6% 3.4
Germany 74% 8% 18% 1% 78.9 25.5% 3.9
Italy - - - 100% 0.7 0.2% -
Luxembourg - - - 100% 1.7 0.6% -
Netherlands 41% 41% 18% - 89.8 29.1% 2.7
Spain - - 20% 80% 3.4 1.1% -
Eurozone Exposures Q1 2012 37% 46% 15% 2% 309.0 100.0% 10.7
Eurozone exposures consist of sovereigns and high quality corporates with 98% having a rating of
A or above, with de minimis exposure to Italian and Spanish corporate bonds
Eurozone exposure is approximately 4% of Aspens aggregate investment portfolio
Aspen has no exposure to the sovereign debt of Greece, Ireland, Italy, Portugal or Spain
AHL: NYSE Note - Aspen takes the lower of the Moodys and S&P ratings.
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MAJOR LOSS SUMMARY 1Q 2012
MAJOR LOSS SUMMARY AS AT MARCH 31, 2012 ($ millions)
COSTA CONCORDIA US TORNADOES
GROSS LOSSES
Reinsurance 7 20
Insurance 35 1
TOTAL GROSS LOSSES 42 21
NET LOSSES
Reinsurance 7 19
Insurance 24 1
TOTAL NET LOSSES 31 20
Reinsurance reinstatement premiums (1) (2)
TOTAL LOSS 32 18
Less Estimated Tax Credits (5) (1)
TOTAL LOSS NET OF TAX 1Q 2012 27 17
No Net Overall Movement On The Reserves for 2010 and 2011 Catastrophe Events
AHL: NYSE
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2012 GUIDANCE
ACTUAL 2011 RESULTS FEBRUARY 7, 2012 GUIDANCE APRIL 25, 2012 UPDATED GUIDANCE
Gross written premiums $2.2 billion $2.3 billion ± 5% $2.3 billion ± 5%
% premium ceded 12% of GEP 10% - 12% of GEP 10% - 12% of GEP
Combined ratio 115.6% 93% - 98% 93% - 98%
Tax rate 26% 8% to 12% 8% to 12%
Catastrophe-load $190 million (assuming normal loss experience) $150 million (assuming normal loss experience)
AHL: NYSE 18
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