10-Q
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the Quarterly Period Ended
June 30, 2009
|
or
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Commission file number
001-31909
ASPEN INSURANCE HOLDINGS
LIMITED
(Exact Name of Registrant as
Specified in Its Charter)
|
|
|
Bermuda
(State or other
jurisdiction
of incorporation or organization)
|
|
Not Applicable
(I.R.S. Employer
Identification No.)
|
|
|
|
Maxwell Roberts Building
1 Church Street
Hamilton, Bermuda
(Address of principal
executive offices)
|
|
HM 11
(Zip
Code)
|
Registrants telephone number, including area code
(441) 295-8201
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter periods that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated
filer þ
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
|
Smaller reporting
company o
|
|
|
(Do not check if a smaller reporting
company)
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date.
As of July 31, 2009, there were 83,038,964 outstanding
ordinary shares, with a par value of 0.15144558¢ per
ordinary share, outstanding.
INDEX
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
FINANCIAL INFORMATION
|
|
|
2
|
|
|
|
|
|
Unaudited Condensed Consolidated Financial
Statements
|
|
|
2
|
|
|
|
|
|
Condensed Consolidated Balance Sheets as at
June 30, 2009 (Unaudited) and December 31, 2008
|
|
|
2
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of
Operations, for the Three and Six Months Ended
June 30, 2009 and 2008
|
|
|
4
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of
Changes in Shareholders Equity, for the Six Months Ended
June 30, 2009 and 2008
|
|
|
5
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of
Comprehensive Income, for the Three and Six Months Ended
June 30, 2009 and 2008
|
|
|
6
|
|
|
|
|
|
Unaudited Condensed Consolidated Statements of
Cash Flows, for the Six Months Ended June 30, 2009 and
2008
|
|
|
7
|
|
|
|
|
|
Notes to the Unaudited Condensed Consolidated
Financial Statements
|
|
|
9
|
|
|
|
|
|
Managements Discussion and Analysis of
Financial Condition and Results of Operations
|
|
|
32
|
|
|
|
|
|
Quantitative and Qualitative Disclosures About
Market Risk
|
|
|
64
|
|
|
|
|
|
Controls and Procedures
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
PART II.
|
|
|
OTHER INFORMATION
|
|
|
67
|
|
|
|
|
|
Legal Proceedings
|
|
|
67
|
|
|
|
|
|
Risk Factors
|
|
|
67
|
|
|
|
|
|
Unregistered Sale of Equity Securities and Use of
Proceeds
|
|
|
67
|
|
|
|
|
|
Defaults Upon Senior Securities
|
|
|
67
|
|
|
|
|
|
Submission of Matters to a Vote of Security
Holders
|
|
|
67
|
|
|
|
|
|
Other Information
|
|
|
71
|
|
|
|
|
|
Exhibits
|
|
|
71
|
|
|
|
|
72
|
|
|
|
|
|
|
EX-10.1 |
EX-31.1 |
EX-31.2 |
EX-32.1 |
1
PART I
FINANCIAL INFORMATION
|
|
Item 1.
|
Unaudited
Condensed Consolidated Financial Statements
|
ASPEN
INSURANCE HOLDINGS LIMITED
($
in millions, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
Investments
|
|
|
|
|
|
|
|
|
Fixed income maturities, available for sale at fair value
(amortized cost $4,654.5 and $4,365.7)
|
|
$
|
4,766.9
|
|
|
$
|
4,433.1
|
|
Fixed income maturities, trading at fair value
(amortized cost $170.1 and $Nil)
|
|
|
177.0
|
|
|
|
|
|
Other investments
|
|
|
24.7
|
|
|
|
286.9
|
|
Short-term investments, available for sale at fair value
(amortized cost $311.3 and $224.9)
|
|
|
311.3
|
|
|
|
224.9
|
|
Short-term investments, trading at fair value
(amortized cost $4.3 and $Nil)
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
|
5,284.3
|
|
|
|
4,944.9
|
|
Cash and cash equivalents
|
|
|
718.3
|
|
|
|
809.1
|
|
Reinsurance recoverables
|
|
|
|
|
|
|
|
|
Unpaid losses
|
|
|
326.3
|
|
|
|
283.3
|
|
Ceded unearned premiums
|
|
|
135.7
|
|
|
|
46.3
|
|
Receivables
|
|
|
|
|
|
|
|
|
Underwriting premiums
|
|
|
850.0
|
|
|
|
677.5
|
|
Other
|
|
|
51.1
|
|
|
|
46.5
|
|
Funds withheld
|
|
|
87.5
|
|
|
|
85.0
|
|
Deferred policy acquisition costs
|
|
|
186.0
|
|
|
|
149.7
|
|
Derivatives at fair value
|
|
|
5.4
|
|
|
|
11.8
|
|
Receivable for securities sold
|
|
|
324.3
|
|
|
|
177.2
|
|
Office properties and equipment
|
|
|
29.6
|
|
|
|
33.8
|
|
Other assets
|
|
|
15.4
|
|
|
|
15.5
|
|
Intangible assets
|
|
|
8.2
|
|
|
|
8.2
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
8,022.1
|
|
|
$
|
7,288.8
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
2
ASPEN
INSURANCE HOLDINGS LIMITED
UNAUDITED
CONDENSED CONSOLIDATED BALANCE
SHEETS Continued
($ in
millions, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Insurance reserves
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
$
|
3,265.1
|
|
|
$
|
3,070.3
|
|
Unearned premiums
|
|
|
1,039.6
|
|
|
|
810.7
|
|
|
|
|
|
|
|
|
|
|
Total insurance reserves
|
|
|
4,304.7
|
|
|
|
3,881.0
|
|
Payables
|
|
|
|
|
|
|
|
|
Reinsurance premiums
|
|
|
169.5
|
|
|
|
103.0
|
|
Deferred taxation
|
|
|
74.4
|
|
|
|
63.6
|
|
Current taxation
|
|
|
24.0
|
|
|
|
9.0
|
|
Accrued expenses and other payables
|
|
|
219.7
|
|
|
|
192.5
|
|
Liabilities under derivative contracts
|
|
|
7.7
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
Total payables
|
|
|
495.3
|
|
|
|
379.2
|
|
Long-term debt
|
|
|
249.6
|
|
|
|
249.5
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
5,049.6
|
|
|
$
|
4,509.7
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities (see Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Ordinary shares: 83,021,860 shares of 0.15144558¢
each
(2008 81,506,503)
|
|
$
|
0.1
|
|
|
|
0.1
|
|
Preference shares:
|
|
|
|
|
|
|
|
|
4,600,000 5.625% shares of par value 0.15144558¢ each
(2008 4,600,000)
|
|
|
|
|
|
|
|
|
5,327,500 7.401% shares of par value 0.15144558¢ each
(2008 8,000,000)
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
1,754.1
|
|
|
|
1,754.8
|
|
Retained earnings
|
|
|
1,049.2
|
|
|
|
884.7
|
|
Accumulated other comprehensive income, net of taxes
|
|
|
169.1
|
|
|
|
139.5
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
2,972.5
|
|
|
|
2,779.1
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
8,022.1
|
|
|
$
|
7,288.8
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
3
ASPEN
INSURANCE HOLDINGS LIMITED
($
in millions, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earned premiums
|
|
$
|
428.6
|
|
|
$
|
397.3
|
|
|
$
|
875.9
|
|
|
$
|
788.9
|
|
Net investment income
|
|
|
72.2
|
|
|
|
70.5
|
|
|
|
131.4
|
|
|
|
109.6
|
|
Realized investment gains (losses)
|
|
|
4.8
|
|
|
|
0.8
|
|
|
|
(7.4
|
)
|
|
|
1.8
|
|
Change in fair value of derivatives
|
|
|
(1.9
|
)
|
|
|
(3.0
|
)
|
|
|
(3.9
|
)
|
|
|
(5.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
|
503.7
|
|
|
|
465.6
|
|
|
|
996.0
|
|
|
|
895.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
|
234.7
|
|
|
|
188.3
|
|
|
|
485.5
|
|
|
|
395.5
|
|
Policy acquisition expenses
|
|
|
80.8
|
|
|
|
65.0
|
|
|
|
159.4
|
|
|
|
141.4
|
|
Operating and administrative expenses
|
|
|
59.9
|
|
|
|
57.1
|
|
|
|
108.4
|
|
|
|
107.9
|
|
Interest on long-term debt
|
|
|
4.0
|
|
|
|
4.0
|
|
|
|
7.9
|
|
|
|
7.9
|
|
Net foreign exchange (gains) losses
|
|
|
(3.1
|
)
|
|
|
5.0
|
|
|
|
(0.8
|
)
|
|
|
0.7
|
|
Other (income) expenses
|
|
|
(2.6
|
)
|
|
|
(3.0
|
)
|
|
|
(1.9
|
)
|
|
|
(3.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
373.7
|
|
|
|
316.4
|
|
|
|
758.5
|
|
|
|
650.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations before income tax
|
|
|
130.0
|
|
|
|
149.2
|
|
|
|
237.5
|
|
|
|
244.7
|
|
Income tax expense
|
|
|
(19.6
|
)
|
|
|
(22.3
|
)
|
|
|
(35.7
|
)
|
|
|
(36.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
110.4
|
|
|
$
|
126.9
|
|
|
$
|
201.8
|
|
|
$
|
208.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares and share equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
82,940,270
|
|
|
|
83,513,097
|
|
|
|
82,241,370
|
|
|
|
84,511,928
|
|
Diluted
|
|
|
85,646,132
|
|
|
|
86,010,679
|
|
|
|
84,612,770
|
|
|
|
86,980,326
|
|
Basic earnings per ordinary share adjusted for preference share
dividend
|
|
$
|
1.26
|
|
|
$
|
1.44
|
|
|
$
|
2.68
|
|
|
$
|
2.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share adjusted for preference
share dividend
|
|
$
|
1.22
|
|
|
$
|
1.39
|
|
|
$
|
2.61
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
4
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Ordinary shares
|
|
|
|
|
|
|
|
|
Beginning and end of period
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Preference shares
|
|
|
|
|
|
|
|
|
Beginning and end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
1,754.8
|
|
|
|
1,846.1
|
|
New shares issued
|
|
|
25.1
|
|
|
|
|
|
Ordinary shares repurchased and cancelled
|
|
|
|
|
|
|
(100.0
|
)
|
Preference shares repurchased and cancelled
|
|
|
(34.1
|
)
|
|
|
|
|
Share-based compensation
|
|
|
8.3
|
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
1,754.1
|
|
|
|
1,753.3
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
884.7
|
|
|
|
858.8
|
|
Net income for the period
|
|
|
201.8
|
|
|
|
208.1
|
|
Dividends on ordinary and preference shares
|
|
|
(37.3
|
)
|
|
|
(39.6
|
)
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
1,049.2
|
|
|
|
1,027.3
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
Cumulative foreign currency translation adjustments
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
87.6
|
|
|
|
80.2
|
|
Change for the period
|
|
|
(9.1
|
)
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
78.5
|
|
|
|
94.4
|
|
|
|
|
|
|
|
|
|
|
Loss on derivatives
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
(1.4
|
)
|
|
|
(1.6
|
)
|
Reclassification to interest payable
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
(1.3
|
)
|
|
|
(1.5
|
)
|
|
|
|
|
|
|
|
|
|
Unrealized appreciation/(depreciation) on investments
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
53.3
|
|
|
|
34.0
|
|
Change for the period
|
|
|
38.6
|
|
|
|
(53.7
|
)
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
91.9
|
|
|
|
(19.7
|
)
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive income
|
|
|
169.1
|
|
|
|
73.2
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders Equity
|
|
$
|
2,972.5
|
|
|
$
|
2,853.9
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
5
ASPEN
INSURANCE HOLDINGS LIMITED
($
in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Net income
|
|
$
|
110.4
|
|
|
$
|
126.9
|
|
|
$
|
201.8
|
|
|
$
|
208.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for net realized losses (gains) on
investments included in net income
|
|
|
6.3
|
|
|
|
(3.0
|
)
|
|
|
10.4
|
|
|
|
(3.8
|
)
|
Change in net unrealized gains and losses on investments
|
|
|
31.1
|
|
|
|
(85.6
|
)
|
|
|
28.2
|
|
|
|
(49.9
|
)
|
Amortization of loss on derivative contract
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Change in foreign currency translation adjustment
|
|
|
6.1
|
|
|
|
8.8
|
|
|
|
(9.1
|
)
|
|
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
43.6
|
|
|
|
(79.7
|
)
|
|
|
29.6
|
|
|
|
(39.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
154.0
|
|
|
$
|
47.2
|
|
|
$
|
231.4
|
|
|
$
|
168.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
6
ASPEN
INSURANCE HOLDINGS LIMITED
($
in millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows provided by operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
201.8
|
|
|
$
|
208.1
|
|
Adjustments to reconcile net income to net cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4.0
|
|
|
|
8.2
|
|
Share-based compensation expense
|
|
|
8.3
|
|
|
|
7.2
|
|
Net realized (gains) losses
|
|
|
7.4
|
|
|
|
(1.8
|
)
|
Other investments (gains) losses
|
|
|
(20.2
|
)
|
|
|
6.1
|
|
Loss on derivative contracts
|
|
|
0.1
|
|
|
|
0.1
|
|
Changes in:
|
|
|
|
|
|
|
|
|
Insurance reserves:
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses
|
|
|
118.3
|
|
|
|
(12.5
|
)
|
Unearned premiums
|
|
|
228.9
|
|
|
|
261.3
|
|
Reinsurance recoverables:
|
|
|
|
|
|
|
|
|
Unpaid losses
|
|
|
(43.4
|
)
|
|
|
73.0
|
|
Ceded unearned premiums
|
|
|
(89.4
|
)
|
|
|
(21.9
|
)
|
Accrued investment income and other receivables
|
|
|
(4.6
|
)
|
|
|
(19.2
|
)
|
Deferred policy acquisition costs
|
|
|
(36.3
|
)
|
|
|
(33.5
|
)
|
Reinsurance premiums payables
|
|
|
64.7
|
|
|
|
40.4
|
|
Premiums receivable
|
|
|
(190.9
|
)
|
|
|
(189.7
|
)
|
Funds withheld
|
|
|
(2.5
|
)
|
|
|
27.6
|
|
Deferred taxes
|
|
|
10.8
|
|
|
|
(12.1
|
)
|
Income tax payable
|
|
|
15.0
|
|
|
|
(25.4
|
)
|
Accrued expenses and other payables
|
|
|
27.2
|
|
|
|
9.6
|
|
Fair value of derivatives and settlement of liabilities under
derivatives
|
|
|
3.0
|
|
|
|
1.5
|
|
Other assets
|
|
|
0.1
|
|
|
|
(7.2
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
302.3
|
|
|
$
|
319.8
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
7
ASPEN
INSURANCE HOLDINGS LIMITED
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS Continued
($ in
millions)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
|
|
|
Purchases of fixed maturities
|
|
$
|
(1,373.1
|
)
|
|
$
|
(1,235.4
|
)
|
Proceeds (purchases) of other investments
|
|
|
135.0
|
|
|
|
|
|
Proceeds from sales and maturities of fixed maturities
|
|
|
972.8
|
|
|
|
950.3
|
|
Net (purchases)/sales of short-term investments
|
|
|
(91.9
|
)
|
|
|
99.5
|
|
Purchase of equipment
|
|
|
(2.5
|
)
|
|
|
(7.6
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(359.7
|
)
|
|
|
(193.2
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of ordinary shares, net of issuance
costs
|
|
|
25.1
|
|
|
|
|
|
Ordinary shares repurchased
|
|
|
|
|
|
|
(100.0
|
)
|
Costs from the redemption of preference shares
|
|
|
(34.1
|
)
|
|
|
|
|
Dividends paid on ordinary shares
|
|
|
(24.6
|
)
|
|
|
(25.7
|
)
|
Dividends paid on preference shares
|
|
|
(12.7
|
)
|
|
|
(13.9
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(46.3
|
)
|
|
|
(139.6
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate movements on cash and cash equivalents
|
|
|
12.9
|
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and cash equivalents
|
|
|
(90.8
|
)
|
|
|
(30.6
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
809.1
|
|
|
|
651.4
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
718.3
|
|
|
$
|
620.8
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for income tax
|
|
|
12.8
|
|
|
|
63.4
|
|
Cash paid during the period for interest
|
|
|
7.5
|
|
|
|
7.5
|
|
See accompanying notes to
unaudited condensed consolidated financial statements.
8
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
|
1.
|
History
and Organization
|
Aspen Insurance Holdings Limited (Aspen Holdings)
was incorporated on May 23, 2002 and holds subsidiaries
that provide insurance and reinsurance on a worldwide basis. Its
principal operating subsidiaries are Aspen Insurance UK Limited
(Aspen U.K.), Aspen Insurance Limited (Aspen
Bermuda), Aspen Specialty Insurance Company (Aspen
Specialty) and Aspen Underwriting Limited (corporate
member of Lloyds Syndicate 4711, AUL),
(collectively, the Insurance Subsidiaries).
The accompanying unaudited condensed consolidated financial
statements have been prepared on the basis of generally accepted
accounting principles in the United States (GAAP)
for interim financial information and in accordance with the
instructions to
Form 10-Q
and Article 10 of
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Results for the three and six months ended
June 30, 2009 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2009.
The unaudited condensed consolidated financial statements
include the accounts of Aspen Holdings and its wholly-owned
subsidiaries, which are collectively referred to herein as the
Company. All intercompany transactions and balances
have been eliminated on consolidation.
The balance sheet at December 31, 2008 has been derived
from the audited consolidated financial statements at that date
but does not include all of the information and footnotes
required by GAAP for complete financial statements. These
unaudited condensed consolidated financial statements and notes
thereto should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended
December 31, 2008 contained in Aspens Annual Report
on
Form 10-K
filed with the United States Securities and Exchange Commission
(File
No. 001-31909).
Assumptions and estimates made by management have a significant
effect on the amounts reported within the consolidated financial
statements. The most significant of these relate to the losses
and loss adjustment expenses, reinsurance recoverables, the fair
value of derivatives and the value of investments. All material
assumptions and estimates are regularly reviewed and adjustments
made as necessary, but actual results could be significantly
different from those expected when the assumptions or estimates
were made.
New
Accounting Pronouncements Adopted in 2009
In May 2009, the Financial Accounting Standards Board
(FASB) issued Statement No. 165
Subsequent Events (FAS 165).
The statement requires disclosures of the date through which
subsequent events have been evaluated and whether that date is
the date the financial statements were issued or the date the
financial statements were available to be issued. Additionally,
the statement replaces Type 1 and Type 2 subsequent events with
recognized and non-recognized subsequent events. The statement
requires prospective application and is effective for interim
and annual periods ending after June 25, 2009. The adoption
of FAS 165 requires additional disclosures and has not had
an impact on the consolidated results of operations, financial
condition or cash flows for the six months ended June 30,
2009. For more information see Note 12.
In April 2009, the FASB released Staff Position
FAS 107-1
and Accounting Principles Board (APB) Opinion
No. 28-1,
Interim Disclosures about Fair Value of Financial
Instruments (FSP
FAS 107-1
and APB
28-1).
This FSP amends FASB Statement No. 107,
Disclosures about Fair Values of Financial
Instruments, to require disclosures about the fair
value of financial instruments in interim financial statements
as well as in annual financial statements. It also amends APB
Opinion No. 28,
9
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
Interim Financial Reporting, to require those
disclosures in all interim financial statements. Additionally,
FSP
FAS 107-1
and APB 28-1
requires disclosure of the methods and significant assumptions
used to estimate the fair value of financial instruments on an
interim basis as well as changes of the methods and significant
assumptions from prior periods. FSP
FAS 107-1
and APB 28-1
does not change the accounting treatment for these financial
instruments. The adoption of FSP
FAS 107-1
and APB 28-1
has not had an impact on the consolidated financial statements
for the three or six months ended June 30, 2009.
In April 2009, the FASB issued FSP
FAS 157-4
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly
(FSP
FAS 157-4).
This FSP provides additional guidance when the volume or level
of activity for the asset or liability have significantly
decreased. The FSP also includes guidance on identifying
circumstances that indicate a transaction is not orderly. FSP
FAS 157-4
is effective for interim periods ending after June 15,
2009, but early adoption is permitted for interim periods ending
after March 15, 2009. If a reporting entity elects to early
adopt either FSP
FAS 115-2
and
FAS 124-2
or FSP
FAS 107-1
and APB 28-1
the reporting entity also is required to adopt early FSP
FAS 157-4.
The Company adopted the provisions of FSP
FAS 157-4
during the first quarter of 2009. The adoption of FSP
FAS 157-4
has not had an impact on the consolidated financial statements
for the three or six months ended June 30, 2009.
In April 2009, the FASB issued FSP
No. FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments (FSP
FAS 115-2
and
FAS 124-2).
This proposal amends the other-than-temporary impairment
guidance for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments of debt securities in the
financial statements. For debt securities where the amortized
cost is greater than the fair market value the company shall
assess if the impairment is other than temporary. If a company
intends to sell a security (that is, it has decided to sell the
security) or it is more likely than not that it will be required
to sell a security prior to recovery of its cost basis, a
security would be written down to fair value with the full
charge recorded in earnings. If a company does not intend to
sell a security and it is not more likely than not that it will
be required to sell the security prior to recovery, the amount
of other-than-temporary impairment related to credit losses
would be recognized in earnings. Any remaining difference
between the fair value and the cost basis would be recognized as
part of other comprehensive income. The adoption of FSP
FAS 115-2
and
FAS 124-2
has not had a material impact on the consolidated financial
statements for the three or six months ended June 30, 2009.
In May, 2008, the FASB issued Statement No. 163,
Accounting For Financial Guarantee Insurance Contracts
an interpretation of FASB Statement No. 60
(FAS 163). The statement requires an
insurance enterprise to recognize a claim liability prior to an
event of default when there is evidence that credit
deterioration has occurred in an insured financial obligation.
The statement also clarifies how Statement No. 60 applies
to financial guarantee insurance contracts, including the
recognition and measurement to be used to account for premium
revenue and claim liabilities. It is effective for fiscal years
beginning after December 15, 2008, and all interim periods
within the fiscal year except for some disclosures about the
insurance enterprises risk management activities. The
adoption of FAS 163 has not had an impact on the
consolidated financial statements for the three or six months
ended June 30, 2009.
In March, 2008, the FASB issued Statement No. 161,
Disclosures About Derivative Instruments and Hedging
Activities an amendment of FASB statement 133
(FAS 161). This Statement changes the
disclosure requirements for derivative instruments and hedging
activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related
hedged items are accounted for under Statement 133 and its
related
10
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
interpretations, and (c) how derivative instruments and
related hedged items affect an entitys financial position,
financial performance, and cash flows. The statement requires
qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and
disclosures about credit-risk-related contingent features in
derivative agreements. The Company adopted the disclosures
required by FAS 161 in the first quarter of fiscal 2009.
Since FAS 161 only required additional disclosure, the
adoption has not had an impact on the consolidated results of
operations, financial condition or cash flows.
Accounting
standards not yet adopted
In June 2009, the FASB issued Statement No. 168
The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162
(FAS 168). The Statement establishes the FASB
Accounting Standards Codification as the source of authoritative
accounting principles to be applied in preparation of financial
statements in accordance with GAAP. The statement is effective
for interim and reporting periods ending after
September 15, 2009. The adoption of FAS 168 is not
expected to impact the Companys consolidated financial
statements.
In June 2009, the FASB issued Statement No. 167,
Amendments to FASB Interpretation
No. 46R (FAS 167). The statement
replaces the quantitative based risk and reward calculation of
determining which entity has a controlling financial interest in
a variable interest entity with an approach focused on the power
to direct activities that significantly impact an entitys
economic performance and the obligation to absorb losses of the
entity or the right to receive benefits from the entity. It also
requires ongoing assessment of whether an enterprise is a
variable interest entity. The statement is effective for each
annual reporting period that begins after November 15,
2009. The Company is currently evaluating the impact, if any,
that the adoption of FAS 167 will have on its consolidated
financial statements.
In June 2009, the FASB issued Statement No. 166,
Accounting For Transfers Of Financial Assets an
amendment of FASB Statement No. 140
(FAS 166). The Statement eliminates the concept
of a qualifying special purpose entity and therefore any
qualifying special purpose entities in existence before the
effective date will need to be evaluated for consolidation. The
statement also modifies the criteria for reporting a transfer of
financial assets. The statement is effective on January 1,
2010. The adoption of FAS 166 is not expected to have an
impact on the Companys consolidated financial statements.
11
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
|
|
3.
|
Earnings
Per Ordinary Share
|
Basic earnings per ordinary share are calculated by dividing net
income available to holders of Aspens ordinary shares by
the weighted average number of ordinary shares outstanding.
Diluted earnings per ordinary share are based on the weighted
average number of ordinary shares and dilutive potential
ordinary shares outstanding during the period of calculation
using the treasury stock method. The following table sets forth
the computation of basic and diluted earnings per share for the
three and six months ended June 30, 2009 and 2008,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in millions, except share and per share amounts)
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as reported
|
|
$
|
110.4
|
|
|
$
|
126.9
|
|
|
$
|
201.8
|
|
|
$
|
208.1
|
|
Preference dividends
|
|
|
(5.8
|
)
|
|
|
(7.0
|
)
|
|
|
(12.7
|
)
|
|
|
(13.9
|
)
|
Preference stock repurchase gain
|
|
|
|
|
|
|
|
|
|
|
31.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to ordinary shareholders
|
|
|
104.6
|
|
|
|
119.9
|
|
|
|
220.6
|
|
|
|
194.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to ordinary shareholders
|
|
|
104.6
|
|
|
|
119.9
|
|
|
|
220.6
|
|
|
|
194.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares
|
|
|
82,940,270
|
|
|
|
83,513,097
|
|
|
|
82,241,370
|
|
|
|
84,511,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average ordinary shares
|
|
|
82,940,270
|
|
|
|
83,513,097
|
|
|
|
82,241,370
|
|
|
|
84,511,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average effect of dilutive securities
|
|
|
2,705,862
|
|
|
|
2,497,582
|
|
|
|
2,371,400
|
|
|
|
2,468,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
85,646,132
|
|
|
|
86,010,679
|
|
|
|
84,612,770
|
|
|
|
86,980,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per ordinary share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.26
|
|
|
$
|
1.44
|
|
|
$
|
2.68
|
|
|
$
|
2.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.22
|
|
|
$
|
1.39
|
|
|
$
|
2.61
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of preference shares. On
March 31, 2009, we purchased 2,672,500 of our 7.401%
$25 liquidation price preference shares (NYSE: AHL-PA) at a
price of $12.50 per share. Under
FASB-EITF
Issue D-42, The Effect on the Calculation of Earnings
Per Share for Redemption or Induced Conversion of Preferred
Stock (EITF D-42) for earnings per
share purposes, the purchase resulted in a first quarter gain of
approximately $31.5 million, net of a non-cash charge of
$1.2 million reflecting the write off of the
pro-rata
portion of the original issuance costs of the 7.401% preference
shares.
12
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
Dividends. On July 29, 2009, the
Companys Board of Directors declared the following
quarterly dividends:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
|
Payable on:
|
|
Record Date:
|
|
Ordinary shares
|
|
$
|
0.15
|
|
|
|
August 27, 2009
|
|
|
|
August 12, 2009
|
|
5.625% preference shares
|
|
$
|
0.703125
|
|
|
|
October 1, 2009
|
|
|
|
September 15, 2009
|
|
7.401% preference shares
|
|
$
|
0.462563
|
|
|
|
October 1, 2009
|
|
|
|
September 15, 2009
|
|
The Company has four reportable business segments: Property
Reinsurance; Casualty Reinsurance; International Insurance; and
U.S. Insurance which have been determined in accordance
with FASB statement No. 131 Disclosures About
Segments of an Enterprise and Related Information. The
Company has considered similarities in economic characteristics,
products, customers, distribution, and the regulatory
environment of the Companys operating segments and
quantitative thresholds to determine the Companys
reportable segments.
Property Reinsurance. Our property reinsurance
segment is written on both a treaty and facultative basis and
consists of the following principal lines of business: treaty
catastrophe, treaty risk excess, treaty pro rata, and property
facultative. Treaty reinsurance contracts provide for automatic
coverage of a type or category of risk underwritten by our
ceding clients. We also write some structured reinsurance
contracts out of Aspen Bermuda. These contracts are tailored to
the individual client circumstances and although written by a
single team are accounted for within the business segment that
best reflects the economic characteristics of the contract. We
also include within this segment some credit, surety and
political risk reinsurance contracts written by the Zurich
branch of Aspen U.K. This portfolio is written principally on a
treaty basis.
Casualty Reinsurance. Our casualty reinsurance
segment is written on both a treaty and facultative basis and
consists of the following principal lines of business:
U.S. treaty, international treaty, and casualty
facultative. The casualty treaty reinsurance we write includes
excess of loss and pro rata reinsurance which are applied to
portfolios of primary insurance policies. Our excess of loss
positions come most commonly from layered reinsurance structures
with underlying ceding company retentions. We also write some
structured reinsurance contracts.
International Insurance. Our international
insurance segment consists of the following principal lines of
business: U.K. commercial property (including construction),
U.K. commercial liability, excess casualty, professional
liability, marine hull, energy property damage, marine, energy
and construction liability, non-marine and transportation
liability, aviation, financial institutions, management and
technology liability, specie, financial and political risk
insurance and specialty reinsurance written principally by Aspen
U.K. and our Lloyds operations, Syndicate 4711. Specialty
reinsurance consists of marine and aviation reinsurance as well
as terrorism, nuclear, personal accident, crop and satellite.
Our international insurance lines are written on a primary and
excess of loss basis and our specialty reinsurance is written on
both a treaty pro rata and excess of loss basis.
U.S. Insurance. Our U.S. insurance
segment consists of property and casualty insurance written on
an excess and surplus lines basis.
We do not allocate our assets by segment as we evaluate
underwriting results of each segment separately from the results
of our investment portfolio. Segment profit or loss for each of
the Companys operating segments is measured by
underwriting profit or loss. Underwriting profit or loss
provides a basis for management to evaluate the segments
underwriting performance.
13
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The following tables provide a summary of gross and net written
and earned premiums, underwriting results, ratios and reserves
for each of our business segments for the three months ended
June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Investments
|
|
|
Total
|
|
|
|
($ in millions, except percentages)
|
|
|
Gross written premiums
|
|
$
|
180.0
|
|
|
$
|
59.0
|
|
|
$
|
238.7
|
|
|
$
|
56.6
|
|
|
$
|
|
|
|
$
|
534.3
|
|
Net written premiums
|
|
|
178.4
|
|
|
|
59.0
|
|
|
|
200.1
|
|
|
|
47.2
|
|
|
|
|
|
|
|
484.7
|
|
Gross earned premiums
|
|
|
145.2
|
|
|
|
101.3
|
|
|
|
209.3
|
|
|
|
35.5
|
|
|
|
|
|
|
|
491.3
|
|
Net earned premiums
|
|
|
132.0
|
|
|
|
101.2
|
|
|
|
170.2
|
|
|
|
25.2
|
|
|
|
|
|
|
|
428.6
|
|
Losses and loss expenses
|
|
|
20.6
|
|
|
|
69.0
|
|
|
|
117.2
|
|
|
|
27.9
|
|
|
|
|
|
|
|
234.7
|
|
Policy acquisition expenses
|
|
|
27.9
|
|
|
|
20.0
|
|
|
|
29.9
|
|
|
|
3.0
|
|
|
|
|
|
|
|
80.8
|
|
Operating and administrative expenses
|
|
|
15.1
|
|
|
|
11.1
|
|
|
|
22.8
|
|
|
|
10.9
|
|
|
|
|
|
|
|
59.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit/(losses)
|
|
|
68.4
|
|
|
|
1.1
|
|
|
|
0.3
|
|
|
|
(16.6
|
)
|
|
|
|
|
|
|
53.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72.2
|
|
|
|
72.2
|
|
Realized investment gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(losses)
|
|
$
|
68.4
|
|
|
$
|
1.1
|
|
|
$
|
0.3
|
|
|
$
|
(16.6
|
)
|
|
$
|
77.0
|
|
|
$
|
130.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
Interest on long term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.0
|
)
|
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
130.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reserves for loss and loss adjustment expenses
|
|
$
|
374.9
|
|
|
$
|
1,420.5
|
|
|
$
|
981.9
|
|
|
$
|
161.5
|
|
|
|
|
|
|
$
|
2,938.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
15.6
|
%
|
|
|
68.2
|
%
|
|
|
68.9
|
%
|
|
|
110.7
|
%
|
|
|
|
|
|
|
54.8
|
%
|
Policy acquisition expense ratio
|
|
|
21.1
|
%
|
|
|
19.8
|
%
|
|
|
17.6
|
%
|
|
|
11.9
|
%
|
|
|
|
|
|
|
18.9
|
%
|
Operating and administrative expense ratio
|
|
|
11.4
|
%
|
|
|
11.0
|
%
|
|
|
13.4
|
%
|
|
|
43.3
|
%
|
|
|
|
|
|
|
14.0
|
%
|
Expense ratio
|
|
|
32.5
|
%
|
|
|
30.8
|
%
|
|
|
31.0
|
%
|
|
|
55.2
|
%
|
|
|
|
|
|
|
32.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
48.1
|
%
|
|
|
99.0
|
%
|
|
|
99.9
|
%
|
|
|
165.9
|
%
|
|
|
|
|
|
|
87.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2008
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Investments
|
|
|
Total
|
|
|
|
($ in millions, except percentages)
|
|
|
Gross written premiums
|
|
$
|
170.5
|
|
|
$
|
56.8
|
|
|
$
|
258.9
|
|
|
$
|
42.6
|
|
|
$
|
|
|
|
$
|
528.8
|
|
Net written premiums
|
|
|
165.5
|
|
|
|
54.5
|
|
|
|
251.6
|
|
|
|
34.4
|
|
|
|
|
|
|
|
506.0
|
|
Gross earned premiums
|
|
|
144.5
|
|
|
|
87.7
|
|
|
|
178.6
|
|
|
|
29.6
|
|
|
|
|
|
|
|
440.4
|
|
Net premiums earned
|
|
|
123.6
|
|
|
|
85.8
|
|
|
|
162.9
|
|
|
|
25.0
|
|
|
|
|
|
|
|
397.3
|
|
Losses and loss expenses
|
|
|
38.3
|
|
|
|
54.3
|
|
|
|
83.6
|
|
|
|
12.1
|
|
|
|
|
|
|
|
188.3
|
|
Policy acquisition expenses
|
|
|
23.6
|
|
|
|
11.7
|
|
|
|
26.0
|
|
|
|
3.7
|
|
|
|
|
|
|
|
65.0
|
|
Operating and administrative expenses
|
|
|
18.4
|
|
|
|
12.5
|
|
|
|
19.2
|
|
|
|
7.0
|
|
|
|
|
|
|
|
57.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
|
|
$
|
43.3
|
|
|
$
|
7.3
|
|
|
$
|
34.1
|
|
|
$
|
2.2
|
|
|
|
|
|
|
|
86.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70.5
|
|
|
|
70.5
|
|
Realized investment gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
$
|
43.3
|
|
|
$
|
7.3
|
|
|
$
|
34.1
|
|
|
$
|
2.2
|
|
|
$
|
71.3
|
|
|
$
|
158.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.0
|
)
|
Interest on long term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4.0
|
)
|
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.0
|
)
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
149.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reserves for loss and loss adjustment expenses
|
|
$
|
396.0
|
|
|
$
|
1,334.9
|
|
|
$
|
871.3
|
|
|
$
|
110.5
|
|
|
|
|
|
|
$
|
2,712.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
31.0
|
%
|
|
|
63.3
|
%
|
|
|
51.3
|
%
|
|
|
48.4
|
%
|
|
|
|
|
|
|
47.4
|
%
|
Policy acquisition expense ratio
|
|
|
19.1
|
%
|
|
|
13.6
|
%
|
|
|
16.1
|
%
|
|
|
14.7
|
%
|
|
|
|
|
|
|
16.4
|
%
|
Operating and administrative expense ratio
|
|
|
14.9
|
%
|
|
|
14.6
|
%
|
|
|
11.8
|
%
|
|
|
27.9
|
%
|
|
|
|
|
|
|
14.4
|
%
|
Expense ratio
|
|
|
34.0
|
%
|
|
|
28.2
|
%
|
|
|
27.9
|
%
|
|
|
42.6
|
%
|
|
|
|
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
65.0
|
%
|
|
|
91.5
|
%
|
|
|
79.2
|
%
|
|
|
91.0
|
%
|
|
|
|
|
|
|
78.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net reserves for loss and loss adjustment expenses for the
International Insurance and U.S. Insurance segments were
previously reported as $906.6 and $75.2, respectively.
15
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The following table provides a summary of gross and net written
and earned premiums, underwriting results, ratios and reserves
for each of our business segments for the six months ended
June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Investments
|
|
|
Total
|
|
|
|
($ in millions, except percentages)
|
|
|
Gross written premiums
|
|
$
|
400.5
|
|
|
$
|
245.8
|
|
|
$
|
433.4
|
|
|
$
|
91.4
|
|
|
$
|
|
|
|
$
|
1,171.1
|
|
Net written premiums
|
|
|
360.5
|
|
|
|
244.8
|
|
|
|
324.9
|
|
|
|
61.1
|
|
|
|
|
|
|
|
991.3
|
|
Gross earned premiums
|
|
|
296.1
|
|
|
|
211.3
|
|
|
|
408.1
|
|
|
|
69.0
|
|
|
|
|
|
|
|
984.5
|
|
Net earned premiums
|
|
|
271.1
|
|
|
|
210.7
|
|
|
|
345.2
|
|
|
|
48.9
|
|
|
|
|
|
|
|
875.9
|
|
Losses and loss expenses
|
|
|
60.8
|
|
|
|
141.2
|
|
|
|
244.2
|
|
|
|
39.3
|
|
|
|
|
|
|
|
485.5
|
|
Policy acquisition expenses
|
|
|
52.7
|
|
|
|
41.9
|
|
|
|
57.9
|
|
|
|
6.9
|
|
|
|
|
|
|
|
159.4
|
|
Operating and administrative expenses
|
|
|
30.3
|
|
|
|
20.1
|
|
|
|
41.4
|
|
|
|
16.6
|
|
|
|
|
|
|
|
108.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit/(loss)
|
|
|
127.3
|
|
|
|
7.5
|
|
|
|
1.7
|
|
|
|
(13.9
|
)
|
|
|
|
|
|
|
122.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131.4
|
|
|
|
131.4
|
|
Realized investment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.4
|
)
|
|
|
(7.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit/(loss)
|
|
$
|
127.3
|
|
|
$
|
7.5
|
|
|
$
|
1.7
|
|
|
$
|
(13.9
|
)
|
|
$
|
124.0
|
|
|
$
|
246.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.9
|
)
|
Interest on long term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.9
|
)
|
Net foreign exchange gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
237.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reserves for loss and loss adjustment expenses
|
|
$
|
374.9
|
|
|
$
|
1,420.5
|
|
|
$
|
981.9
|
|
|
$
|
161.5
|
|
|
|
|
|
|
$
|
2,938.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
22.4
|
%
|
|
|
67.0
|
%
|
|
|
70.7
|
%
|
|
|
80.4
|
%
|
|
|
|
|
|
|
55.4
|
%
|
Policy acquisition expense ratio
|
|
|
19.4
|
%
|
|
|
19.9
|
%
|
|
|
16.8
|
%
|
|
|
14.1
|
%
|
|
|
|
|
|
|
18.2
|
%
|
Operating and administrative expense ratio
|
|
|
11.2
|
%
|
|
|
9.5
|
%
|
|
|
12.0
|
%
|
|
|
33.9
|
%
|
|
|
|
|
|
|
12.4
|
%
|
Expense ratio
|
|
|
30.6
|
%
|
|
|
29.4
|
%
|
|
|
28.8
|
%
|
|
|
48.0
|
%
|
|
|
|
|
|
|
30.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
53.0
|
%
|
|
|
96.4
|
%
|
|
|
99.5
|
%
|
|
|
128.4
|
%
|
|
|
|
|
|
|
86.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Investments
|
|
|
Total
|
|
|
|
($ in millions, except percentages)
|
|
|
Gross written premiums
|
|
$
|
354.7
|
|
|
$
|
238.9
|
|
|
$
|
458.2
|
|
|
$
|
73.2
|
|
|
$
|
|
|
|
$
|
1,125.0
|
|
Net written premiums
|
|
|
340.9
|
|
|
|
234.5
|
|
|
|
393.6
|
|
|
|
56.6
|
|
|
|
|
|
|
|
1,025.6
|
|
Gross earned premiums
|
|
|
284.8
|
|
|
|
183.4
|
|
|
|
343.9
|
|
|
|
55.6
|
|
|
|
|
|
|
|
867.7
|
|
Net earned premiums
|
|
|
250.6
|
|
|
|
180.5
|
|
|
|
313.1
|
|
|
|
44.7
|
|
|
|
|
|
|
|
788.9
|
|
Losses and loss expenses
|
|
|
76.3
|
|
|
|
115.8
|
|
|
|
181.3
|
|
|
|
22.1
|
|
|
|
|
|
|
|
395.5
|
|
Policy acquisition expenses
|
|
|
49.5
|
|
|
|
29.4
|
|
|
|
54.0
|
|
|
|
8.5
|
|
|
|
|
|
|
|
141.4
|
|
Operating and administrative expenses
|
|
|
35.0
|
|
|
|
23.2
|
|
|
|
37.1
|
|
|
|
12.6
|
|
|
|
|
|
|
|
107.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
|
|
|
89.8
|
|
|
|
12.1
|
|
|
|
40.7
|
|
|
|
1.5
|
|
|
|
|
|
|
|
144.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109.6
|
|
|
|
109.6
|
|
Realized investment gains
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit
|
|
$
|
89.8
|
|
|
$
|
12.1
|
|
|
$
|
40.7
|
|
|
$
|
1.5
|
|
|
$
|
111.4
|
|
|
$
|
255.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.2
|
)
|
Interest on long term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.9
|
)
|
Net foreign exchange gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
244.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net reserves for loss and loss adjustment expenses
|
|
$
|
396.0
|
|
|
$
|
1,334.9
|
|
|
$
|
871.3
|
|
|
$
|
110.5
|
|
|
|
|
|
|
$
|
2,712.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
30.4
|
%
|
|
|
64.2
|
%
|
|
|
57.9
|
%
|
|
|
49.4
|
%
|
|
|
|
|
|
|
50.1
|
%
|
Policy acquisition expense ratio
|
|
|
19.8
|
%
|
|
|
16.3
|
%
|
|
|
17.3
|
%
|
|
|
19.0
|
%
|
|
|
|
|
|
|
17.9
|
%
|
Operating and administrative expense ratio
|
|
|
14.0
|
%
|
|
|
12.9
|
%
|
|
|
11.9
|
%
|
|
|
28.2
|
%
|
|
|
|
|
|
|
13.7
|
%
|
Expense ratio
|
|
|
33.8
|
%
|
|
|
29.2
|
%
|
|
|
29.2
|
%
|
|
|
47.2
|
%
|
|
|
|
|
|
|
31.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined ratio
|
|
|
64.2
|
%
|
|
|
93.4
|
%
|
|
|
87.1
|
%
|
|
|
96.6
|
%
|
|
|
|
|
|
|
81.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net reserves for loss and loss adjustment expenses for the
International Insurance and U.S. Insurance segments were
previously reported as $906.6 and $75.2, respectively.
17
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
Fixed Maturities Available For
Sale. The following presents the cost, gross
unrealized gains and losses, and estimated fair value of
available for sale investments in fixed maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
($ in millions)
|
|
|
U.S. Government Securities
|
|
$
|
595.2
|
|
|
$
|
21.6
|
|
|
$
|
(1.8
|
)
|
|
$
|
615.0
|
|
U.S. Agency Securities
|
|
|
409.0
|
|
|
|
22.0
|
|
|
|
(0.8
|
)
|
|
|
430.2
|
|
Municipal Securities
|
|
|
8.0
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
7.8
|
|
Corporate Securities
|
|
|
1,877.3
|
|
|
|
52.8
|
|
|
|
(16.0
|
)
|
|
|
1,914.1
|
|
Foreign Government Securities
|
|
|
385.1
|
|
|
|
15.6
|
|
|
|
(0.5
|
)
|
|
|
400.2
|
|
Asset-backed Securities
|
|
|
153.8
|
|
|
|
2.9
|
|
|
|
(0.3
|
)
|
|
|
156.4
|
|
Non-agency Residential Mortgage-backed Securities
|
|
|
57.8
|
|
|
|
3.1
|
|
|
|
(8.3
|
)
|
|
|
52.6
|
|
Non-agency Commercial Mortgage-backed Securities
|
|
|
229.3
|
|
|
|
1.1
|
|
|
|
(13.9
|
)
|
|
|
216.5
|
|
Agency Mortgage-backed Securities
|
|
|
939.0
|
|
|
|
35.5
|
|
|
|
(0.4
|
)
|
|
|
974.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income
|
|
$
|
4,654.5
|
|
|
$
|
154.6
|
|
|
$
|
(42.2
|
)
|
|
|
4,766.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2008
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
($ in millions)
|
|
|
U.S. Government Securities
|
|
$
|
601.3
|
|
|
$
|
49.9
|
|
|
$
|
(0.5
|
)
|
|
$
|
650.7
|
|
U.S. Agency Securities
|
|
|
356.6
|
|
|
|
36.7
|
|
|
|
(0.2
|
)
|
|
|
393.1
|
|
Municipal Securities
|
|
|
7.7
|
|
|
|
0.3
|
|
|
|
|
|
|
|
8.0
|
|
Corporate Securities
|
|
|
1,426.0
|
|
|
|
29.0
|
|
|
|
(30.5
|
)
|
|
|
1,424.5
|
|
Foreign Government Securities
|
|
|
363.6
|
|
|
|
20.9
|
|
|
|
|
|
|
|
384.5
|
|
Asset-backed Securities
|
|
|
218.1
|
|
|
|
|
|
|
|
(12.6
|
)
|
|
|
205.5
|
|
Non-agency Residential Mortgage-backed Securities
|
|
|
80.0
|
|
|
|
0.4
|
|
|
|
(24.1
|
)
|
|
|
56.3
|
|
Non-agency Commercial Mortgage-backed Securities
|
|
|
253.9
|
|
|
|
|
|
|
|
(34.7
|
)
|
|
|
219.2
|
|
Agency Mortgage-backed Securities
|
|
|
1,058.5
|
|
|
|
33.2
|
|
|
|
(0.4
|
)
|
|
|
1,091.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income
|
|
$
|
4,365.7
|
|
|
$
|
170.4
|
|
|
$
|
(103.0
|
)
|
|
|
4,433.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The scheduled maturity distribution of fixed maturity securities
as of June 30, 2009 is set forth below. Actual maturities
may differ from contractual maturities because issuers of
securities may have the right to call or prepay obligations with
or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
|
|
|
|
Cost or
|
|
|
Fair
|
|
(Amounts in millions)
|
|
Cost
|
|
|
Value
|
|
|
Due one year or less
|
|
$
|
374.5
|
|
|
$
|
379.7
|
|
Due after one year through five years
|
|
|
1,760.5
|
|
|
|
1,818.6
|
|
Due after five years through ten years
|
|
|
1,043.1
|
|
|
|
1,069.2
|
|
Due after ten years
|
|
|
1,035.5
|
|
|
|
1,073.9
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
4,213.6
|
|
|
|
4,341.4
|
|
Residential mortgage-backed securities
|
|
|
57.8
|
|
|
|
52.6
|
|
Commercial mortgage-backed securities
|
|
|
229.3
|
|
|
|
216.5
|
|
Other asset-backed securities
|
|
|
153.8
|
|
|
|
156.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,654.5
|
|
|
$
|
4,766.9
|
|
|
|
|
|
|
|
|
|
|
Net
Investment Gains (Losses)
The following table sets forth net investment gains (losses) for
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
(Amounts in millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains on sale
|
|
$
|
8.4
|
|
|
$
|
1.8
|
|
|
$
|
13.5
|
|
|
$
|
4.3
|
|
Realized losses on sale
|
|
|
(7.0
|
)
|
|
|
(1.0
|
)
|
|
|
(9.7
|
)
|
|
|
(2.5
|
)
|
Impairments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other-than-temporary impairments
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
(18.1
|
)
|
|
|
|
|
Trading securities
|
|
|
6.3
|
|
|
|
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment gains (losses)
|
|
$
|
4.8
|
|
|
$
|
0.8
|
|
|
$
|
(7.4
|
)
|
|
$
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from securities sold during the three months ended
June 30, 2009 and 2008 was $287.0 million and
$248.9 million, respectively. Proceeds from securities sold
during the six months ended June 30, 2009 and 2008 were
$664.5 million and $469.5 million, respectively.
19
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
Fixed Maturities Trading. The
following presents the cost, gross unrealized gains and losses,
and estimated fair value of trading investments in fixed
maturities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
($ in millions)
|
|
|
Corporate Securities
|
|
$
|
164.0
|
|
|
$
|
6.8
|
|
|
$
|
(0.2
|
)
|
|
$
|
170.6
|
|
Municipal Securities
|
|
|
2.9
|
|
|
|
0.2
|
|
|
|
|
|
|
|
3.1
|
|
U.S. Government Securities
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
0.5
|
|
Foreign Government Securities
|
|
|
2.7
|
|
|
|
0.1
|
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income
|
|
$
|
170.1
|
|
|
$
|
7.1
|
|
|
$
|
(0.2
|
)
|
|
$
|
177.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has elected to apply the provisions of FAS 159
The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB
Statement No. 115 to these financial instruments as
this most closely reflects the facts and circumstances of the
investments held.
Gross unrealized loss. The following tables
summarize as at June 30, 2009 and December 31, 2008,
by type of security, the aggregate fair value and gross
unrealized loss by length of time the security has been in an
unrealized loss position for our available for sale portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
|
0-12 months
|
|
|
Over 12 months
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
|
($ in millions)
|
|
|
U.S. Government Securities
|
|
$
|
101.2
|
|
|
$
|
(1.8
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
101.2
|
|
|
$
|
(1.8
|
)
|
U.S. Agency Securities
|
|
|
37.3
|
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
37.3
|
|
|
|
(0.8
|
)
|
Municipal Securities
|
|
|
7.8
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
7.8
|
|
|
|
(0.2
|
)
|
Foreign Government Securities
|
|
|
46.0
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
46.0
|
|
|
|
(0.5
|
)
|
Corporate Securities
|
|
|
251.7
|
|
|
|
(5.8
|
)
|
|
|
218.4
|
|
|
|
(10.2
|
)
|
|
|
470.1
|
|
|
|
(16.0
|
)
|
Asset-backed Securities
|
|
|
|
|
|
|
|
|
|
|
7.6
|
|
|
|
(0.3
|
)
|
|
|
7.6
|
|
|
|
(0.3
|
)
|
Agency Mortgage-backed Securities
|
|
|
47.5
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
47.5
|
|
|
|
(0.4
|
)
|
Non-agency Residential Mortgage-backed Securities
|
|
|
8.2
|
|
|
|
(2.5
|
)
|
|
|
16.8
|
|
|
|
(5.8
|
)
|
|
|
25.0
|
|
|
|
(8.3
|
)
|
Non-agency Commercial Mortgage-backed Securities
|
|
|
31.9
|
|
|
|
(2.9
|
)
|
|
|
108.9
|
|
|
|
(11.0
|
)
|
|
|
140.8
|
|
|
|
(13.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
531.6
|
|
|
$
|
(14.9
|
)
|
|
$
|
351.7
|
|
|
$
|
(27.3
|
)
|
|
$
|
883.3
|
|
|
$
|
(42.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2008
|
|
|
|
0-12 months
|
|
|
Over 12 months
|
|
|
Total
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
Value
|
|
|
Loss
|
|
|
|
($ in millions)
|
|
|
U.S. Government Securities
|
|
$
|
7.4
|
|
|
$
|
(0.4
|
)
|
|
$
|
1.0
|
|
|
$
|
(0.1
|
)
|
|
$
|
8.4
|
|
|
$
|
(0.5
|
)
|
U.S. Agency Securities
|
|
|
11.4
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
11.4
|
|
|
|
(0.2
|
)
|
Corporate Securities
|
|
|
326.8
|
|
|
|
(19.0
|
)
|
|
|
192.0
|
|
|
|
(11.5
|
)
|
|
|
518.8
|
|
|
|
(30.5
|
)
|
Asset-backed Securities
|
|
|
190.4
|
|
|
|
(11.1
|
)
|
|
|
15.0
|
|
|
|
(1.5
|
)
|
|
|
205.4
|
|
|
|
(12.6
|
)
|
Non-agency Residential Mortgage-backed Securities
|
|
|
55.9
|
|
|
|
(24.0
|
)
|
|
|
0.4
|
|
|
|
(0.1
|
)
|
|
|
56.3
|
|
|
|
(24.1
|
)
|
Non-agency Commercial Mortgage-backed Securities
|
|
|
114.2
|
|
|
|
(7.2
|
)
|
|
|
105.0
|
|
|
|
(27.5
|
)
|
|
|
219.2
|
|
|
|
(34.7
|
)
|
Agency Mortgage-backed Securities
|
|
|
42.3
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
42.3
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
748.4
|
|
|
$
|
(62.3
|
)
|
|
$
|
313.4
|
|
|
$
|
(40.7
|
)
|
|
$
|
1,061.8
|
|
|
$
|
(103.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009, the Company held 314 fixed maturities
(December 31, 2008 634 fixed maturities) in an
unrealized loss position with a fair value of
$883.3 million (2008 $1,061.8 million) and
gross unrealized losses of $42.2 million (2008
$103.0 million). The Company believes that the gross
unrealized losses are attributable mainly to a combination of
widening credit spreads and interest rate movements and has
concluded that the period of those investments in an unrealized
loss position is temporary.
Other-than-temporary impairments. The Company
recorded other-than-temporary impairments for the three and six
months ended June 30, 2009 of $2.9 million
(2008 $Nil) and $18.1 million (2008
$Nil), respectively. We review all of our investments in fixed
maturities designated available for sale for potential
impairment each quarter based on criteria including
issuer-specific circumstances, credit ratings actions and
general macro-economic conditions. The process of determining
whether a decline in value is other-than-temporary
requires considerable judgment. As part of the assessment
process we evaluate whether it is more likely than not that we
will sell any fixed maturity security in an unrealized loss
position until its market value recovers to amortized cost. Once
a security has been identified as other-than-temporarily
impaired, the amount of any impairment included in net income is
determined by reference to that portion of the unrealized loss
that is considered to be credit related. Non-credit related
unrealized losses are included in other comprehensive income.
Other-than-temporary impairment is discussed further in Note 2
of the unaudited condensed consolidated financial statements.
Other investments. Other investments as at
June 30, 2009 and December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
($ in millions)
|
|
|
Investment funds
|
|
$
|
|
|
|
$
|
|
|
|
$
|
311.3
|
|
|
$
|
286.9
|
|
Cartesian Iris 2009A L.P.
|
|
|
25.0
|
|
|
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other investments
|
|
$
|
25.0
|
|
|
$
|
24.7
|
|
|
$
|
311.3
|
|
|
$
|
286.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment funds. Investment funds represented
our investments in funds of hedge funds which were recorded
using the equity method of accounting. Adjustments to the
carrying value of these
21
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
investments were made based on the net asset values reported by
the fund managers, resulting in a carrying value that
approximated fair value. Realized and unrealized gains of
$16.2 million (2008 $10.8 million) and
$20.2 million (2008 loss of $6.1 million)
were recognized through the statement of operations in the three
and six months ended June 30, 2009, respectively. We
invested $150.0 million in the share capital of two funds
in 2006, a further $247.5 million in one of these funds and
$112.5 million in the share capital of a third fund in
2007. In 2008, we sold share capital in the funds that cost
$198.6 million for proceeds of $177.2 million
realizing a loss of $21.4 million. In February 2009, we
gave notice to redeem the balance of the funds in June 2009. As
a result, we recognized proceeds from the redemption of funds of
$307.1 million at June 30, 2009.
The Companys involvement with the funds ceased at
June 30, 2009. The carrying value of the receivables
represents the Companys maximum exposure to loss at the
balance sheet date. All proceeds from the redemption of the
funds of hedge fund investments are scheduled to be received by
October 31, 2009. Refer to Note 12, for further
information related to receivables for securities sold.
On May 19, 2009, Aspen Holdings invested $25 million
in Cartesian Iris 2009A L.P. through its wholly owned
subsidiary, Acorn Limited. Cartesian Iris 2009A L.P. is a
Delaware Limited Partnership formed to provide capital to Iris
Re, a newly formed Class 3 Bermudian reinsurer focusing on
insurance linked securities. In addition to the investment in
Cartesian Iris 2009A L.P., Aspen will provide certain
underwriting and actuarial services in return for a percentage
of profits from Iris Re. In the three and six months ended
June 30, 2009, no fee was paid or payable to the Company.
The Company accounts for its investment in accordance with the
equity method of accounting. Adjustments to the carrying value
of this investment are made based on the Companys share of
capital including its share of income and expenses, which is
provided in the quarterly management accounts of the
partnership. The adjusted carrying value approximates fair
value. In the three and six months ended June 30, 2009, the
Companys share of gains and losses reduced the value of
our investment by $0.3 million (2008-$Nil) and
$0.3 million (2008-$Nil), respectively. The reduction in
value has been recognized in realized gains and losses. For more
information see Note 11(c).
The Companys involvement with Cartesian Iris 2009A L.P. is
limited to its investment in the partnership and it is not
committed to making further investments in Cartesian Iris 2009A
L.P.; accordingly, the carrying value of the investment
represents the Companys maximum exposure to a loss as a
result of its involvement with the partnership at each balance
sheet date.
Classification within the fair value hierarchy under
FAS 157. In September 2006, the FASB issued
FAS 157, Fair Value Measurements
(FAS 157). From January 1, 2008, the
Company adopted FAS 157.
Under FAS 157, a company must determine the appropriate
level in the fair value hierarchy for each fair value
measurement. The fair value hierarchy in FAS 157
prioritizes the inputs, which refer broadly to assumptions
market participants would use in pricing an asset or liability,
into three levels, which are described in more detail below.
The Company considers prices for actively traded Treasury
securities to be derived based on quoted prices in active
markets for identical assets (Level 1 inputs as defined in
FAS 157). The Company considers prices for other securities
priced via vendors, indices, or broker-dealers to be derived
based on inputs that are observable for the asset, either
directly or indirectly (Level 2 inputs as defined in
FAS 157).
The Company considers securities, other financial instruments
and derivative insurance contracts subject to fair value
measurement whose valuation is derived by internal valuation
models to be based
22
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
largely on unobservable inputs (Level 3 inputs as defined
in FAS 157). There have been no changes in the
Companys use of valuation techniques since its adoption of
FAS 157.
Our fixed income securities are traded on the over-the-counter
market, based on prices provided by one or more market makers in
each security. Securities such as U.S. Government,
U.S. Agency, Foreign Government and investment grade
corporate bonds have multiple market makers in addition to
readily observable market value indicators such as expected
credit spread, except for Treasury securities, over the yield
curve. We use a variety of pricing sources to value our fixed
income securities including those securities that have pay
down/prepay features such as mortgage-backed securities and
asset-backed securities in order to ensure fair and accurate
pricing. The fair value estimates of the investment grade
securities in our portfolio do not use significant unobservable
inputs or modeling techniques.
The Companys assets subject to FAS 157 as at
June 30, 2009 and December 31, 2008 allocated between
Levels 1, 2 and 3 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
($ in millions)
|
|
|
Fixed income maturities available for sale, at fair value
|
|
$
|
1,015.2
|
|
|
$
|
3,733.4
|
|
|
$
|
18.3
|
|
Short-term investments available for sale, at fair value
|
|
|
221.5
|
|
|
|
89.8
|
|
|
|
|
|
Fixed income maturities, trading at fair value
|
|
|
3.3
|
|
|
|
173.7
|
|
|
|
|
|
Short-term investments, trading at fair value
|
|
|
|
|
|
|
4.4
|
|
|
|
|
|
Derivatives at fair value
|
|
|
|
|
|
|
|
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,240.0
|
|
|
$
|
4,001.3
|
|
|
$
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
($ in millions)
|
|
|
Fixed income maturities available for sale, at fair value
|
|
$
|
1,035.2
|
|
|
$
|
3,395.1
|
|
|
$
|
2.8
|
|
Short-term investments available for sale, at fair value
|
|
$
|
141.2
|
|
|
$
|
83.7
|
|
|
|
|
|
Derivatives at fair value
|
|
|
|
|
|
|
|
|
|
|
11.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,176.4
|
|
|
$
|
3,478.8
|
|
|
$
|
14.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income maturities classified as Level 3 include
holdings where there are significant unobservable inputs in
determining the assets fair value and also securities of Lehman
Brothers Holdings, Inc. (Lehman Brothers). Although
the market value of Lehman Brothers bonds was based on broker
dealer quoted prices, management believes that the valuation is
based, in part, on market expectations of future recoveries out
of bankruptcy proceedings, which involve significant
unobservable inputs to the valuation. Derivatives at fair value
consists of the credit insurance contract as described in
Note 7.
23
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The following table presents a reconciliation of the beginning
and ending balances for all assets measured at fair value on a
recurring basis using Level 3 inputs for the three and six
months ended June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009
|
|
|
|
Fixed Maturity
|
|
|
Derivatives at
|
|
|
|
|
|
|
Investments
|
|
|
Fair Value
|
|
|
Total
|
|
|
|
($ in millions)
|
|
|
Level 3 assets as of April 1, 2009
|
|
$
|
10.5
|
|
|
$
|
7.2
|
|
|
$
|
17.7
|
|
Securities transferred in/(out) of Level 3
|
|
|
8.3
|
|
|
|
|
|
|
|
8.3
|
|
Total unrealized gains or (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings
|
|
|
|
|
|
|
(1.8
|
)
|
|
|
(1.8
|
)
|
Included in comprehensive income
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets as of June 30, 2009
|
|
$
|
18.3
|
|
|
$
|
5.4
|
|
|
$
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009
|
|
|
|
Fixed Maturity
|
|
|
Derivatives at
|
|
|
|
|
|
|
Investments
|
|
|
Fair Value
|
|
|
Total
|
|
|
|
($ in millions)
|
|
|
Level 3 assets as of January 1, 2009
|
|
$
|
2.8
|
|
|
$
|
11.8
|
|
|
$
|
14.6
|
|
Securities transferred in/(out) of Level 3
|
|
|
14.0
|
|
|
|
|
|
|
|
14.0
|
|
Total unrealized gains or (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in earnings
|
|
|
|
|
|
|
(3.7
|
)
|
|
|
(3.7
|
)
|
Included in comprehensive income
|
|
|
1.5
|
|
|
|
|
|
|
|
1.5
|
|
Settlements
|
|
|
|
|
|
|
(2.7
|
)
|
|
|
(2.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 assets as of June 30, 2009
|
|
$
|
18.3
|
|
|
$
|
5.4
|
|
|
$
|
23.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Companys liabilities subject to FAS 157 as at
June 30, 2009 and December 31, 2008 are allocated
between Levels 1, 2 and 3 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
($ in millions)
|
|
|
Liabilities under derivatives contracts
|
|
|
|
|
|
|
|
|
|
$
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
($ in millions)
|
|
|
Liabilities under derivatives contracts
|
|
|
|
|
|
|
|
|
|
$
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities under derivative contracts includes the credit
insurance contract described in Note 7.
24
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The following table presents a reconciliation of the beginning
and ending balances for the liabilities under derivative
contracts measured at fair value on a recurring basis using
Level 3 inputs during the three and six months ended
June 30, 2009.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2009
|
|
|
|
($ in millions)
|
|
|
($ in millions)
|
|
|
Beginning Balance
|
|
$
|
9.4
|
|
|
$
|
11.1
|
|
Total realized losses
|
|
|
|
|
|
|
|
|
Settlements
|
|
|
(1.7
|
)
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
7.7
|
|
|
$
|
7.7
|
|
|
|
|
|
|
|
|
|
|
We purchase retrocession and reinsurance to limit and diversify
our own risk exposure and to increase our own insurance
underwriting capacity. These agreements provide for recovery of
a portion of losses and loss expenses from reinsurers. As is the
case with most reinsurance treaties, we remain liable to the
extent that reinsurers do not meet their obligations under these
agreements, and therefore, in line with our risk management
objectives, we evaluate the financial condition of our
reinsurers and monitor concentrations of credit risk. In
addition, we have entered into reinsurance agreements and
derivative instruments as described below:
Ajax Re. On April 25, 2007, we entered
into a reinsurance agreement that provided us with coverage
incepting on August 18, 2007. Under the reinsurance
agreement, Ajax Re Limited (Ajax Re) provided us
with $100 million of aggregate indemnity protection for
certain losses from individual earthquakes in California
occurring between August 18, 2007 and May 1, 2009. The
reinsurance agreement was fully collateralized by proceeds
received by Ajax Re from the issuance of catastrophe bonds. The
amount of the recovery was limited to the lesser of our losses
and the proportional amount of $100 million based on the
Property Claims Services (PCS) reported losses and
the attachment level of $23.1 billion and the exhaustion
level of $25.9 billion. The $100 million of aggregate
indemnity protection was exhausted when the reported industry
insured losses by PCS reach $25.9 billion. For further
information, see Note 11. At the balance sheet date and at
expiry of the contract on May 1, 2009, no recovery was due
from Ajax Re.
In order to ensure that Ajax Re had sufficient funding to
service the LIBOR portion of interest due on the bonds issued by
Ajax Re, Ajax Re entered into a total return swap (the
swap) with Lehman Brothers Special Financing, Inc.
(Lehman Financing), whereby Lehman Financing
directed Ajax Re to invest the proceeds from the bonds into
permitted investments. Lehman Brothers also provided a guarantee
of Lehman Financings obligations under the swap.
On September 15, 2008, Lehman Brothers filed for
bankruptcy, which is a termination event under the swap. Ajax Re
terminated the swap on September 16, 2008. Nevertheless,
Aspen remains within its risk tolerances without benefit of this
cover. We currently expect the value of the collateral to be
substantially less than $100 million, being the limit of
our cover.
25
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The following table summarizes information on the location and
amounts of derivative fair values on the consolidated balance
sheet as at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Notional
|
|
|
Balance Sheet
|
|
|
|
|
Balance Sheet
|
|
|
|
Derivatives Not Designated as Hedging Instruments Under
FAS 133
|
|
Amount
|
|
|
Location
|
|
Fair Value
|
|
|
Location
|
|
Fair Value
|
|
|
|
($ in millions)
|
|
|
|
|
($ in millions)
|
|
|
|
|
($ in millions)
|
|
|
Credit insurance contract
|
|
$
|
452.4
|
|
|
Derivatives at fair value
|
|
$
|
5.4
|
|
|
Liabilities under
derivatives
|
|
$
|
7.7
|
|
As at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Notional
|
|
|
Balance Sheet
|
|
|
|
|
Balance Sheet
|
|
|
|
Derivatives Not Designated as Hedging Instruments Under
FAS 133
|
|
Amount
|
|
|
Location
|
|
Fair Value
|
|
|
Location
|
|
Fair Value
|
|
|
|
($ in millions)
|
|
|
|
|
($ in millions)
|
|
|
|
|
($ in millions)
|
|
|
Credit Insurance Contract
|
|
$
|
452.4
|
|
|
Derivatives at fair value
|
|
$
|
9.1
|
|
|
Liabilities under
derivatives
|
|
$
|
11.1
|
|
Foreign Exchange Contract
|
|
$
|
18.8
|
|
|
Derivatives at fair value
|
|
$
|
2.7
|
|
|
|
|
|
|
|
The following table provides the total unrealized and realized
gains (losses) recorded in earnings for the three and six months
ended June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss)
|
|
|
|
|
|
Recognized in Income
|
|
|
|
|
|
Six Months Ended
|
|
Derivatives Not Designated as
|
|
|
|
June 30,
|
|
|
June 30,
|
|
Hedging Instruments Under FAS 133
|
|
Location of Gain/(Loss) Recognized in Income
|
|
2009
|
|
|
2008
|
|
|
|
|
|
($ millions)
|
|
|
Credit Insurance Contract
|
|
Change in Fair Value of Derivatives
|
|
$
|
3.9
|
|
|
$
|
3.8
|
|
Foreign Exchange Contract
|
|
Change in Fair Value of Derivatives
|
|
$
|
|
|
|
$
|
1.4
|
|
Foreign Exchange Contract
|
|
Net Foreign Exchange (Gains)/Losses
|
|
$
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain/(Loss)
|
|
|
|
|
|
Recognized in Income
|
|
|
|
|
|
Three Months Ended
|
|
Derivatives Not Designated as
|
|
|
|
June 30,
|
|
|
June 30,
|
|
Hedging Instruments Under FAS 133
|
|
Location of Gain/(Loss) Recognized in Income
|
|
2009
|
|
|
2008
|
|
|
|
|
|
($ millions)
|
|
|
Credit Insurance Contract
|
|
Change in Fair Value of Derivatives
|
|
$
|
1.9
|
|
|
$
|
1.6
|
|
Foreign Exchange Contract
|
|
Change in Fair Value of Derivatives
|
|
$
|
|
|
|
$
|
1.4
|
|
Credit insurance contract. On
November 28, 2006, the Company entered into a credit
insurance contract which, subject to its terms, insures the
Company against losses due to the inability of one or more of
our reinsurance counterparties to meet their financial
obligations to the Company.
The Company considers that under Accounting for
Derivative Instruments and Hedging Activities, as
amended (FAS 133), this contract is a financial
guarantee insurance contract that does not qualify for exemption
from treatment for accounting purposes as a derivative. This is
because it provides for the
26
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
final settlement, expected to take place two years after expiry
of cover, to include an amount attributable to outstanding and
IBNR claims which may not at that point in time be due and
payable to the Company.
As a result of the application of derivative accounting rules
under FAS 133, the contract is treated as an asset or a
liability and measured at the directors estimate of its
fair value. Changes in the estimated fair value from time to
time will be included in the consolidated statement of
operations.
The contract is for a maximum of five years and provides 90%
cover for a named panel of reinsurers up to individual defined
sub-limits. The contract does allow, subject to certain
conditions, for substitution and replacement of panel members if
the Companys panel of reinsurers changes. Payments are
made on a quarterly basis throughout the period of the contract
based on the aggregate limit, which was set initially at
$477 million but is subject to adjustment. The carrying
value of the derivative is the Companys maximum exposure
to loss.
Foreign exchange contract. The Company uses
forward exchange contracts to manage foreign currency risk. A
forward foreign currency exchange contract involves an
obligation to purchase or sell a specified currency at a future
date at a price set at the time of the contract. Foreign
currency exchange contracts will not eliminate fluctuations in
the value of our assets and liabilities denominated in foreign
currencies but rather allow us to establish a rate of exchange
for a future point in time. The foreign currency contracts are
recorded as derivatives at fair value with changes recorded as a
realized gain or loss in the Companys statement of
operations.
8. Reserves
for Losses and Adjustment Expenses
The following table represents a reconciliation of beginning and
ending consolidated loss and loss adjustment expenses
(LAE) reserves:
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in millions)
|
|
|
Provision for losses and LAE at start of year
|
|
$
|
3,070.3
|
|
|
$
|
2,946.0
|
|
Less reinsurance recoverable
|
|
|
(283.3
|
)
|
|
|
(304.7
|
)
|
|
|
|
|
|
|
|
|
|
Net loss and LAE at start of year
|
|
|
2,787.0
|
|
|
|
2,641.3
|
|
|
|
|
|
|
|
|
|
|
Net loss and LAE expenses disposed of
|
|
|
(9.0
|
)
|
|
|
(15.4
|
)
|
|
|
|
|
|
|
|
|
|
Provision for losses and LAE for claims incurred:
|
|
|
|
|
|
|
|
|
Current year
|
|
|
512.3
|
|
|
|
1,203.0
|
|
Prior years
|
|
|
(26.8
|
)
|
|
|
(83.5
|
)
|
|
|
|
|
|
|
|
|
|
Total incurred
|
|
|
485.5
|
|
|
|
1,119.5
|
|
|
|
|
|
|
|
|
|
|
Losses and LAE payments for claims incurred:
|
|
|
|
|
|
|
|
|
Current year
|
|
|
(42.5
|
)
|
|
|
(205.2
|
)
|
Prior years
|
|
|
(355.4
|
)
|
|
|
(534.2
|
)
|
|
|
|
|
|
|
|
|
|
Total paid
|
|
|
(397.9
|
)
|
|
|
(739.4
|
)
|
|
|
|
|
|
|
|
|
|
Foreign exchange losses (gains)
|
|
|
73.2
|
|
|
|
(219.0
|
)
|
|
|
|
|
|
|
|
|
|
Net losses and LAE reserves at period end
|
|
|
2,938.8
|
|
|
|
2,787.0
|
|
Plus reinsurance recoverable on unpaid losses at period end
|
|
|
326.3
|
|
|
|
283.3
|
|
|
|
|
|
|
|
|
|
|
Loss and LAE reserves at June 30, 2009 and
December 31, 2008
|
|
$
|
3,265.1
|
|
|
$
|
3,070.3
|
|
|
|
|
|
|
|
|
|
|
For the six months ended June 30, 2009, there were reserve
releases of $26.8 million compared to $80.0 million
for the six months ended June 30, 2008 in our estimate of
the ultimate claims to be paid in respect of prior accident
years.
27
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
The net loss and loss expenses disposed of represents reductions
in reserves for several Lloyds syndicates which we
originally assumed under reinsurance to close arrangements
accounted for by the syndicates prior to 2007 (2008
2006).
The following table provides a summary of the Companys
authorized and issued share capital at June 30, 2009 and
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
As at December 31, 2008
|
|
|
|
|
|
|
$ in
|
|
|
|
|
|
$ in
|
|
|
|
Number
|
|
|
Thousands
|
|
|
Number
|
|
|
Thousands
|
|
|
Authorized Share Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares 0.15144558¢ per share
|
|
|
969,629,030
|
|
|
$
|
1,469
|
|
|
|
969,629,030
|
|
|
|
1,469
|
|
Non-Voting shares 0.15144558¢ per share
|
|
|
6,787,880
|
|
|
|
10
|
|
|
|
6,787,880
|
|
|
|
10
|
|
Preference shares 0.15144558¢ per share
|
|
|
100,000,000
|
|
|
|
152
|
|
|
|
100,000,000
|
|
|
|
152
|
|
Issued Share Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued ordinary shares of 0.15144558¢ per share
|
|
|
83,021,860
|
|
|
|
125
|
|
|
|
81,506,503
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued preference shares of 0.15144558¢ each with a
liquidation preference of $50 per share
|
|
|
4,600,000
|
|
|
|
7
|
|
|
|
4,600,000
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued preference shares of 0.15144558¢ each with a
liquidation preference of $25 per share
|
|
|
5,327,500
|
|
|
|
8
|
|
|
|
8,000,000
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total issued share capital
|
|
|
|
|
|
|
140
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital ($ in millions)
|
|
|
|
|
|
$
|
1,754.1
|
|
|
|
|
|
|
|
1,754.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital includes the aggregate liquidation
preferences of our preference shares of $363.2 million
(2008 $430.0 million) less issue costs of
$9.6 million (2008 $10.8 million).
Purchase of preference shares. On
March 31, 2009, we purchased 2,672,500 of our 7.401%
$25 liquidation price preference shares (NYSE : AHL-PA) at
a price of $12.50 per share. Under EITF
D-42,
for earnings per share purposes, the purchase resulted in a
second quarter gain of approximately $31.5 million, net of
a non-cash charge of $1.2 million reflecting the write off
of the pro-rata portion of the original issuance costs of the
7.401% preference shares.
Ordinary Shares. The following table
summarizes transactions in our ordinary shares during the six
month period ended June 30, 2009.
|
|
|
|
|
|
|
Number of
|
|
|
|
Shares
|
|
|
Shares in issue at December 31, 2008
|
|
|
81,506,503
|
|
Share transactions in the six months ended June 30,
2009:
|
|
|
|
|
Shares issued to the Names trust upon exercise of investor
options
|
|
|
1,709
|
|
Shares issued to employees under the share incentive plan
|
|
|
293,648
|
|
Shares issued through registered public offerings
|
|
|
1,220,000
|
|
|
|
|
|
|
Shares in issue at June 30, 2009
|
|
|
83,021,860
|
|
|
|
|
|
|
28
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
10. Share
Based Payments
The Company has issued options and other equity incentives under
four arrangements: investor options, employee awards,
non-employee director awards and the Employee Share Purchase
Plans. When options are exercised or other equity awards have
vested, new shares are issued as the Company does not currently
hold treasury shares. Until January 1, 2006, the employee
stock option grants were measured and recognized according to
the fair value recognition provisions of FAS No. 123
Accounting For Stock Based Compensation.
Effective January 1, 2006, the Company adopted the
provisions of FAS 123R Share Based Payments
which requires all entities to apply a fair-value based
measurement method and an estimate of future forfeitures in the
calculation of the compensation costs of stock options and
restricted share units.
Investor Options. The investor options were
issued on June 21, 2002 to Wellington Investment Holdings
(Jersey) Limited (Wellington Investment) and members
of Syndicate 2020 who were not corporate members of Syndicate
2020. The options conferred to the members of Syndicate 2020 are
held for their benefit by Appleby Services (Bermuda) Ltd.
(formerly Appleby Trust (Bermuda) Limited) (Names
Trustee). The subscription price payable under the options
is initially £10 and increases by 5% per annum, less any
dividends paid. Option holders are not entitled to participate
in any dividends prior to exercise and would not rank as a
creditor in the event of liquidation. If not exercised, the
options will expire after a period of ten years. Wellington
Investment exercised all of its options on March 28, 2007.
During the three and six months ended June 30, 2009, the
Names Trustee exercised no options and 3,842 options on a
cash and cashless basis, respectively (2008 2,464
and 14,253, respectively).
Employee and Non-Executive Director
awards. Employee options and other awards are
granted under the Aspen 2003 Share Incentive Plan and
non-executive director awards are granted under the 2006 Stock
Option Plan for Non-Employee Directors.
Stock options are granted with an exercise price equivalent to
the fair value of the share on the grant date. The weighted
average value at grant date is determined using the
Black-Scholes option pricing model. Stock options typically vest
over a three-year period with a ten-year contract period (except
for options granted in 2007 which have a
7-year
exercise period) with vesting dependent on time and performance
conditions established at the time of grant. No options were
granted during 2009. However, 58,459 options were exercised in
the three and six months ended June 30, 2009. Compensation
costs charged against income in respect of employee options for
the three and six months ended June 30, 2009 were
$0.5 million and $1.1 million, respectively (2008 -
$1.0 million and $2.0 million).
Restricted share units (RSUs) to employees
vest equally over a two or three-year period. Some of the grants
vest at year-end, while some other grants vest on the
anniversary of the date of grant. The fair value of the
restricted share units is based on the closing price on the date
of the grant. The fair value is expensed through the income
statement evenly over the vesting period. During the three and
six months ended June 30, 2009, the Company granted 2,915
and 42,291 restricted share units, respectively. In the case of
non-employee directors (other than the Chairman whose RSUs
vest annually over a three-year period), one-twelfth of the
RSUs vest on each one month anniversary of the date of
grant, with 100% of the RSUs becoming vested on the first
anniversary of the date of grant. On April 29, 2009, the
Board of Directors approved a total of 25,316 RSUs for the
non-employee directors and 8,439 RSUs to the Chairman.
Compensation costs charged against income in respect of
restricted share units for the three and six months ended
June 30, 2009 were $0.8 million and 1.4 million,
respectively (2008 $0.7 million and
$1.1 million).
The fair value of performance share awards is based on the value
of the average of the high and low of the share price on the
date of the grant less a deduction for expected dividends which
would not
29
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
accrue during the vesting period. Performance shares vest over a
three or four-year period with vesting dependent on the
achievement of performance targets at the end of specified
periods as established at the time of grant. For the three and
six months ended June 30, 2009, the Company granted
912,919 performance shares. Compensation costs charged against
income in the three and six months ended June 30, 2009 in
respect of performance shares were $3.2 million and
$6.4 million, respectively, (2008
$2.0 million and $4.3 million) in the three and six
months ended June 30, 2009.
Employee Share Purchase Plans. On
April 30, 2008, the shareholders of the Company approved
the Employee Share Purchase Plan (the ESPP), the
U.K. Sharesave Plan and the international plan, which are
implemented by a series of consecutive offering periods as
determined by the Board. In respect of the ESPP, employees can
save up to $500 per month over a two-year period, at the end of
which they will be eligible to purchase Company shares at a
discounted price. In respect of the U.K. Sharesave Plan,
employees can save up to £250 per month over a three-year
period, at the end of which they will be eligible to purchase
Company shares at a discounted price. The purchase price will be
eighty-five percent (85%) of the fair market value of a share on
the offering date which may be adjusted upon changes in
capitalization of the Company. No shares were issued under the
plan during 2009.
|
|
11.
|
Commitments
and Contingencies
|
We are obliged by the terms of our contractual obligations to
U.S. policyholders and by undertakings to certain
regulatory authorities to facilitate the issue of letters of
credit or maintain certain balances in trust funds for the
benefit of policyholders.
The following table shows the forms of collateral or other
security provided to policyholders as at June 30, 2009 and
December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
As at June 31,
|
|
|
As at December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in millions, except percentages)
|
|
|
Assets held in multi-beneficiary trusts
|
|
$
|
1,356.1
|
|
|
$
|
1,345.6
|
|
Assets held in single beneficiary trusts
|
|
|
54.8
|
|
|
|
54.0
|
|
Letters of credit issued under our revolving credit
facilities (1)
|
|
|
65.0
|
|
|
|
84.6
|
|
Secured letters of credit (2)
|
|
|
416.2
|
|
|
|
422.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,892.1
|
|
|
$
|
1,906.6
|
|
|
|
|
|
|
|
|
|
|
Total as % of cash and invested assets
|
|
|
31.5
|
%
|
|
|
33.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These letters of credit are not
secured by cash or securities, though we have the ability to
issue secured letters of credit under the revolving credit
facility
|
|
(2)
|
|
As of June 30, 2009, the
Company had funds on deposit of $579.4 million and
£25.4 million (December 31, 2008
$604.6 million and £25.3 million) as collateral
for the secured letters of credit.
|
Funds at Lloyds. AUL operates in
Lloyds as the corporate member for Syndicate 4711.
Lloyds agrees Syndicate 4711s required capital
principally through the syndicates annual business plan.
Such capital, called Funds at Lloyds, comprises: cash,
investments and a fully collateralized letter of credit. The
amounts of cash, investments and letter of credit at
June 30, 2009 amount to $212.4 million
(December 31, 2008 $200.3 million).
30
ASPEN
INSURANCE HOLDINGS LIMITED
NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS Continued
Amounts outstanding under operating leases as of June 30,
2009 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Later
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Years
|
|
|
Total
|
|
|
|
($ in millions)
|
|
|
Operating Lease Obligations
|
|
|
4.6
|
|
|
|
7.8
|
|
|
|
7.5
|
|
|
|
6.6
|
|
|
|
6.5
|
|
|
|
27.8
|
|
|
|
60.8
|
|
|
|
(c)
|
Variable
interest entities
|
Ajax Re. As disclosed in Note 6, we
entered into a reinsurance agreement with Ajax Re that provided
the Company with $100 million of aggregate indemnity
protection for certain losses from individual earthquakes in
California occurring between August 18, 2007 and
May 1, 2009.
Ajax Re was a special purpose Cayman Islands exempted company
licensed as a restricted Class B reinsurer in the Cayman
Islands and formed solely for the purpose of entering into
certain reinsurance agreements and other risk transfer
agreements with subsidiaries of Aspen to provide up to
$1 billion of reinsurance protection covering various
perils, subject to Ajax Res ability to raise the necessary
capital.
The Company has determined that Ajax Re had the characteristics
of a variable interest entity that are addressed by FASB
Interpretation No. 46R Consolidation of Variable
Interest Entities(FIN 46R). In accordance
with FIN 46R, Ajax Re was not consolidated because the majority
of the expected losses and expected residual returns will not be
absorbed by the Company but rather by the bond holders of Ajax
Re.
Cartesian Iris 2009A L.P. As disclosed in
Note 5, on May 19, 2009, Aspen Holdings invested
$25 million in Cartesian Iris 2009A L.P. through its wholly
owned subsidiary, Acorn Limited. Cartesian Iris 2009A L.P. is a
Delaware Limited Partnership formed to provide capital to Iris
Re, a newly formed Class 3 Bermudian reinsurer focusing on
insurance linked securities. In addition to the investment in
Cartesian Iris 2009A L.P., Aspen will provide certain
underwriting and actuarial services in return for a percentage
of profits. In the three and six months ended June 30,
2009, no fee was paid or payable to the Company. The
Companys investment in Cartesian Iris 2009A L.P.
represents 31.25% of the equity invested in the partnership.
The Company has determined that Cartesian Iris 2009A L.P. has
the characteristics of a variable interest entity that are
addressed in FIN 46R. In accordance with FIN 46R, Cartesian Iris
2009A L.P. is not consolidated because the majority of the
expected losses and expected residual returns will not be
absorbed by the Company. The Company has no decision-making
power, those powers having been reserved for the general partner.
The Companys involvement with Cartesian Iris 2009A L.P. is
limited to its investment in the partnership and it is not
committed to making further investments in Cartesian Iris 2009A
L.P.; accordingly, the carrying value of the investment
represents the Companys maximum exposure to a loss as a
result of its involvement with the partnership at each balance
sheet date.
The Company has considered subsequent events through
August 4, 2009, the date of filing of this report.
As at July 31, 2009, the Company received $267.3 million,
representing 86% of the receivable for securities sold related
to the redemption of the Companys investment in the funds
of hedge funds. The outstanding balance is scheduled to be
received by October 31, 2009.
31
Item 2.
MANAGEMENTS
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, 2009 and 2008. 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, 2008, as well
as the discussions of critical accounting policies, contained in
our Financial Statements in our 2008 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 risk 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
2008 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.
Recent
Developments
As at July 31, 2009, we received $267.3 million,
representing the majority of proceeds due through the redemption
from our funds of hedge funds investments.
Overview
We are a Bermuda holding company. We write insurance and
reinsurance business through our wholly-owned subsidiaries in
three major jurisdictions: Aspen U.K. and AUL, corporate member
of Syndicate 4711 at Lloyds of London (United Kingdom),
Aspen Bermuda (Bermuda) and Aspen Specialty (United States).
Aspen U.K. also has branches in Paris, France, Zurich,
Switzerland, Dublin, Ireland, Singapore, Australia and Canada.
We operate in the global markets for property and casualty
insurance and reinsurance.
The most significant features of our results for the three and
six months ended June 30, 2009 were:
|
|
|
|
|
Tangible book value per ordinary share at June 30, 2009 was
$31.45, an increase of 5.4% compared to $29.84 at June 30,
20081;
|
|
|
|
Net income after tax for the three months ended June 30,
2009 of $110.4 million, compared with a net profit after
tax of $126.9 million for the second quarter of 2008. For
the six months ended June 30, 2009, net income after tax
was $201.8 million compared to $208.1 for the same period
last year.
|
|
|
|
A combined ratio of 87.7% for the three months ended
June 30, 2009 versus 78.2% for the three months ended
June 30, 2008;
|
|
|
|
Second quarter net investment income of $72.2 million, up
2.4% over the same quarter last year and up 22.0% over the first
quarter of 2009;
|
|
|
|
Other-than-temporary impairment charges of $2.9 million for
the quarter compared with $Nil charge in the second quarter of
2008;
|
1 Tangible book value per ordinary share is based on total
shareholders equity, less intangible assets and preference
shares (liquidation preference less issue expenses), divided by
the number of ordinary shares in issue at the end of the period.
32
|
|
|
|
|
Diluted earnings per ordinary share after preference share
dividends of $1.22 for the three months ended June 30, 2009
reduced by 12.2% over the comparative period in 2008. Diluted
earnings per ordinary share after preference share dividends was
$2.61 for the six months ended June 30, 2009, an increase
of 16.5% compared to the same period last year.
|
Shareholders equity and ordinary shares in issue as at
June 30, 2009 and June 30, 2008 were:
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
|
($ in millions, except for share amounts)
|
|
|
Total shareholders equity
|
|
$
|
2,972.5
|
|
|
$
|
2,853.9
|
|
Intangible assets
|
|
|
(8.2
|
)
|
|
|
(8.2
|
)
|
Preference shares less issue expenses
|
|
|
(353.6
|
)
|
|
|
(419.2
|
)
|
|
|
|
|
|
|
|
|
|
Net tangible assets attributable to ordinary shareholders
|
|
$
|
2,610.7
|
|
|
$
|
2,426.5
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
|
|
|
83,021,860
|
|
|
|
81,321,201
|
|
Diluted ordinary shares
|
|
|
85,985,112
|
|
|
|
83,691,242
|
|
The following overview of our results for the three months ended
June 30, 2009 and 2008 and of our financial condition at
June 30, 2009, is intended to identify important trends and
should be read in conjunction with the more detailed discussion
further below.
Gross written premiums. Total gross written
premiums increased by 1.0% in the second quarter of 2009
compared to 2008. The table below shows our gross written
premiums for each segment for the three months ended
June 30, 2009 and 2008, and the percentage change in gross
written premiums for each segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
Property reinsurance
|
|
$
|
180.0
|
|
|
|
5.6
|
%
|
|
$
|
170.5
|
|
Casualty reinsurance
|
|
|
59.0
|
|
|
|
3.9
|
|
|
|
56.8
|
|
International insurance
|
|
|
238.7
|
|
|
|
(7.8
|
)
|
|
|
258.9
|
|
U.S. insurance
|
|
|
56.6
|
|
|
|
32.9
|
|
|
|
42.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
534.3
|
|
|
|
1.0
|
%
|
|
$
|
528.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums for the quarter have increased to
$534.3 million from $528.8 million in the second
quarter of 2008 due mainly to favorable contribution from our
U.S. insurance and property reinsurance segments. Our
U.S. insurance segment has experienced significant growth
in the property line due to new business opportunities and
increased prices for catastrophe exposed business. The property
reinsurance segment has benefited from favorable market
conditions, increased line sizes and an $8.3 million
contribution from the newly established credit and surety
business line. Gross written premiums in the international
insurance segment have decreased by 7.8% to $238.7 million
when compared to the second quarter of 2008 as we have adjusted
our underwriting appetite in line with market conditions.
Reinsurance. Total reinsurance ceded for the
quarter of $49.6 million has increased by
$26.8 million from the second quarter of 2008. The increase
in ceded written premiums in the quarter is due to reinstatement
premiums in our aviation business line related to the Air France
disaster and our financial institutions book resulting from
reserve strengthening in the quarter. In addition, ceded written
premiums of $22.8 million in the second quarter of 2008,
were unusually low as a number of multi-year industry loss
warranties (ILW) were purchased in 2007 covering the
2008 wind season. The ceded written premium was recognized in
2007 and earned through 2008 when these covers expired.
33
Loss ratio. We monitor the ratio of losses and
loss adjustment expenses to net earned premium (the loss
ratio) as a measure of relative underwriting performance
where a lower ratio represents a better result than a higher
ratio. The loss ratios for our four business segments for the
three months ended June 30, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
Property reinsurance
|
|
|
15.6
|
%
|
|
|
31.0
|
%
|
Casualty reinsurance
|
|
|
68.2
|
%
|
|
|
63.3
|
%
|
International insurance
|
|
|
68.9
|
%
|
|
|
51.3
|
%
|
U.S. insurance
|
|
|
110.7
|
%
|
|
|
48.4
|
%
|
|
|
|
|
|
|
|
|
|
Total Loss Ratio
|
|
|
54.8
|
%
|
|
|
47.4
|
%
|
|
|
|
|
|
|
|
|
|
The loss ratio for the quarter of 54.8% has increased by
7.4 percentage points compared to the second quarter of
2008 mainly as a result of loss increases in both the
international insurance and U.S. insurance segments, offset
by an improvement in property reinsurance. The international
insurance segment has been impacted by a $12.5 million
loss, including reinstatement premiums, from the Air France
aviation disaster, in addition to $5.0 million of prior
year reserve strengthening in our lines exposed to the global
financial crisis. A review of our U.S. insurance segment
during the quarter has resulted in a $6.9 million reserve
strengthening in our excess and surplus casualty insurance line.
Although not a material strengthening, relative to the small
amount of earned premium, this resulted in a
27.4 percentage point increase in the U.S. insurance
segments loss ratio for the quarter. The main driver for
the improvement in the property reinsurance loss ratio was
$20.9 million of favorable loss development in the period,
an increase of $18.3 million over the second quarter of
2008. The increase in prior year reserve releases in the quarter
for the property reinsurance segment is attributable mainly to a
reduction in loss expectations for Hurricane Ike. The casualty
reinsurance loss ratio has increased mainly as a result of a
reduction in reserve releases from $24.0 million in the
second quarter of 2008 to $6.0 million in the second
quarter of 2009.
Reserve releases. The loss ratios take into
account changes in our assessments of reserves for unpaid claims
and loss adjustment expenses arising from earlier years. In the
three months ended June 30, 2009 and 2008, we recorded a
reduction in the level of reserves for prior years. The amounts
of these reductions and their effect on the loss ratio in each
period are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
Reserve releases ($ in millions)
|
|
$
|
16.9
|
|
|
$
|
40.5
|
|
% of net premiums earned
|
|
|
3.9
|
%
|
|
|
10.2
|
%
|
Reserve releases in the quarter decreased by $23.6 million
from the second quarter in 2008 mainly as a result of a
reduction in releases in casualty reinsurance and reserve
strengthening in the international insurance and
U.S. insurance segments. These have been partially offset
by reserve releases in the property reinsurance segment which
increased by $18.3 million to $20.9 million,
attributable mainly to a reduction in loss expectations for
Hurricane Ike. Casualty reinsurance reserve releases decreased
by $18.0 million to $6.0 million mainly as a result of
less favorable loss experience for motor and general liability
products in the international casualty reinsurance line of
business and smaller reserve releases from our U.S. treaty
business line. The international insurance segment has seen net
reserve strengthening of $1.7 million compared to reserve
releases of $11.2 million in the second quarter of 2008,
with the second quarter of 2009 being impacted by
$5.0 million of reserve strengthening in respect of our
lines exposed to the global financial crisis and
$5.0 million of reserve strengthening in our marine, energy
and construction liability line. A review of our
U.S. insurance segment during the quarter has resulted in a
$6.9 million reserve strengthening in our excess and
surplus casualty insurance line where greater than expected
incurred claims development has caused us to revise our
estimates of ultimate
34
claims. Further information relating to the movement of prior
year reserves can be found below under Reserves for Loss
and Loss Adjustment Expenses.
Expense ratio. We monitor the ratio of
expenses to net earned premium (the expense ratio)
as a measure of the cost effectiveness of our policy
acquisition, operating and administrative processes. The table
below presents the contribution of the policy acquisition
expenses and operating and administrative expenses to the
expense ratio and the total expense ratios for each of the three
months ended June 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
Policy acquisition expenses
|
|
|
18.9
|
%
|
|
|
16.4
|
%
|
Operating and administrative expenses
|
|
|
14.0
|
%
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
Expense ratio
|
|
|
32.9
|
%
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
The main driver for the increase in the policy acquisition
expense ratio to 18.9% for the quarter, compared with 16.4% in
the second quarter of 2008, is the impact of increased
reinsurance costs impacting net earned premiums. In addition,
the policy acquisition expense ratio has been impacted by the
mix of business with the property reinsurance segment accounting
for a larger percentage of business in the quarter when compared
to the second quarter of 2008.
The improvement in the operating and administrative expense
ratio was due to a combination of disciplined cost management,
higher net earned premiums and favorable movements in the
exchange rate between the British Pound and the U.S. Dollar.
Net investment income. In the second quarter
of 2009, we generated net investment income of
$72.2 million (2008 $70.5 million). The
increase in net investment income was due primarily to gains of
$16.2 million from our investment in funds of hedge funds
compared to $10.8 million of gains in the comparative
period in 2008. Investment income from fixed maturities
decreased by $3.7 million to $56.0 million compared to
June 30, 2008 as a result of lower bond yields.
Change in fair value of derivatives. In the
three months ended June 30, 2009, we recorded a reduction
of $1.9 million (2008 $1.6 million credit
insurance contract; $1.4 million foreign exchange) in the
estimated fair value of our credit insurance contract including
an interest expense charge of $0.2 million
(2008 $0.3 million). Further information on
these contracts can be found in Note 7 to the financial
statements.
Other revenues and expenses. Other revenues
and expenses in the three months ended June 30, 2009
included $3.1 million of foreign currency exchange gains
(2008 $5.0 million loss) and $4.8 million
of realized and unrealized investment gains (2008
$0.8 million gain). The realized investment gains in 2009
include a charge of $2.9 million for investments we believe
to be other-than-temporarily impaired (2008 $Nil).
Other-than-temporary impairments. We review
all of our investments in fixed maturities designated available
for sale for potential impairment each quarter based on criteria
including issuer-specific circumstances, credit ratings actions
and general macro-economic conditions. The process of
determining whether a decline in value is
other-than-temporary requires considerable judgment.
As part of the assessment process we evaluate whether it is more
likely than not that we will sell any fixed maturity security in
an unrealized loss position until its market value recovers to
amortized cost. Once a security has been identified as
other-than-temporarily impaired, the amount of any impairment
included in net income is determined by reference to the portion
of the unrealized loss that is considered credit-related.
Non-credit related unrealized losses are included in other
comprehensive income. Other-than-temporary impairment losses of
$2.9 million for the quarter are credit related and
therefore are included in the income statement.
Taxes. The estimated effective rate of tax for
the period is 15.1% (2008 14.9%). This is subject to
revision in future periods if circumstances change and in
particular, depending on the relative claims
35
experience of those parts of business conducted in Bermuda where
the rate of tax on corporate profits is zero while the U.K.
corporate tax rate is 28%.
Dividends. The dividend has been maintained at
$0.15 per ordinary share for the quarter.
Dividends paid on our preference shares in the three months
ended June 30, 2009 were $5.8 million
(2008 $7.0 million). The reduction between the
two periods is due to the purchase on March 31, 2009 of
2,672,500 of our 7.401% $25 liquidation preference shares.
Shareholders equity and financial
leverage. Total shareholders equity
increased by $140.1 million to $2,972.5 million for
the three months ended June 30, 2009. The most significant
movements were:
|
|
|
|
|
net retained income after tax for the period of
$92.3 million; and
|
|
|
|
unrealized appreciation on investments, net of taxes of
$37.4 million.
|
As at June 30, 2009, total ordinary shareholders
equity was $2,618.9 million compared to
$2,359.9 million at December 31, 2008. The remainder
of our total shareholders equity, as at June 30,
2009, was funded by two classes of preference shares with a
total value as measured by their respective liquidation
preferences of $353.6 million net of share issuance costs
(December 31, 2008 $419.2 million).
The amounts outstanding under our senior notes, less
amortization of expenses, of $249.6 million
(December 31, 2008 $249.5 million) were
the only material debt that we had outstanding as of
June 30, 2009 and December 31, 2008.
Management monitors the ratio of debt to total capital, with
total capital being defined as shareholders equity plus
outstanding debt. At June 30, 2009, this ratio was 7.7%
(December 31, 2008 8.2%).
Our preference shares are classified in our balance sheet as
equity but may receive a different treatment in some cases under
the capital adequacy assessments made by certain rating
agencies. Such securities are often referred to as
hybrids as they have certain attributes of both debt
and equity. We also monitor the ratio of the total of debt and
hybrids to total capital which was 18.7% as of June 30,
2009 (December 31, 2008 22.1%).
Capital Management. On March 31, 2009, we
purchased 2,672,500 of our 7.401% $25 liquidation value
preference shares (NYSE: AHL-PA) at a price of $12.50 per share.
Under EITF D-42, the purchase resulted in a gain attributable to
ordinary shareholders of $31.5 million for the first
quarter of 2009, which is not recognized in the income statement
but is included in the calculation of earnings per share for the
quarter.
Liquidity. Management monitors the liquidity
of Aspen Holdings and of each of its Insurance Subsidiaries.
With respect to Aspen Holdings, management monitors its ability
to service debt, to finance dividend payments and to provide
financial support to the Insurance Subsidiaries. As at
June 30, 2009, Aspen Holdings held $25.0 million in
cash and cash equivalents which, taken together with dividends
declared or expected to be declared by subsidiary companies and
our credit facilities, management considered sufficient to
provide Aspen Holdings liquidity at such time.
At June 30, 2009, our subsidiaries held $693.3 million
in cash and cash equivalents that are readily realizable
securities. Management monitors the value, currency and duration
of the cash and investments within its Insurance Subsidiaries to
ensure that they are able to meet their insurance and other
liabilities as they become due and was satisfied that there was
a comfortable margin of liquidity as at June 30, 2009 and
for the foreseeable future.
As of June 30, 2009, we had in issue $441.1 million
and £24.2 million in letters of credit to cedants, for
which $579.4 million and £25.4 million were held
as collateral for the secured letters of credit. Further
information relating to letters of credit is found below under
Liquidity.
36
Outlook
and Trends
Overall. Late last year it was widely assumed
in our industry that following Hurricanes Gustav and Ike and
widespread investment losses, we would see a very hard market in
catastrophe-exposed property lines with modest hardening in
other property business in the first quarter of 2009 followed by
firming in the casualty markets in the third quarter. Our view
at the time was less optimistic than many of our peers and has
proven to be more accurate. There has been no across the board
rate hardening, although we have seen good increases in certain
specific lines usually following market loss activity in those
lines.
At the time we reported our results for the first quarter of
2009, we had commented that lines such as catastrophe-exposed
property, especially in the U.S., particularly on the
reinsurance side, and other specialty lines such as
energy-related liability, marine hull and to a lesser extent
aviation had seen some price improvement. That trend has
continued into the second quarter with renewal rates in those
lines generally outpacing other areas. We are seeing few rate
increases in casualty lines although some risks are now being
renewed at the expiring price and the majority are showing much
smaller rate reductions than in the recent past.
Property Reinsurance. Our property reinsurance
renewals in the second quarter are dominated by
U.S. business. Pricing for international property business
is satisfactory and remains relatively stable showing few signs
of meaningful price increases. U.S. property reinsurance
renewals at this time of year are dominated by hurricane risk,
particularly in Florida. Pricing achieved for hurricane risk in
the quarter has been highly satisfactory with pricing on average
increased by 17%. There was some moderation of the level of
price increase in June 2009 following the decision by the Texas
Windstorm Insurance Association not to purchase private market
reinsurance. Progress of our relatively new platforms in Zurich
and Singapore is ahead of expectations at this early stage.
Casualty Reinsurance. The casualty reinsurance
segment has seen rate improvements although pricing is still
under pressure with industry price reductions currently around
5% whereas reductions had previously been in the 10% to 15%
range. In our international casualty business we recorded an
average rate increase of 5% with significant variations within
this line of business. Strong pricing increases of approximately
30% have been observed on financial institutions and Canadian
business, and 5% to 10% rate increases in professional lines and
Australian business. In U.S. casualty reinsurance,
competition remains strong with average rate decreases of
approximately 2%. More moderate average rate increases have been
seen on workers compensation, auto liability, general
liability and umbrella products.
International Insurance. Across the
international insurance segment, average rate increases of
approximately 14% have been achieved, which was better than our
expectations. This was driven mainly by strong increases in the
energy physical damage and marine, energy and construction
liability lines, with an improving rate environment in aviation
and financial lines. Pricing and deductible levels in the energy
insurance market for hurricane cover in the Gulf of Mexico have
also improved significantly. We believe that the effective rate
on exposure for Gulf of Mexico risks is more than double last
year. However, many clients faced with the increased pricing
chose to buy less cover or even to retain the risk altogether.
We also declined a number of risks that did not meet our
underwriting criteria. As a result, we have written
significantly less accounts exposed to Gulf of Mexico hurricane
risk with the premium we received more or less the same,
therefore the rate on exposure has improved by just over 100%.
Rate increases of approximately 9% on renewal business have also
been experienced in our aviation account with rates hardening
following the recent airline crashes in the first half of the
year. We expect rates to continue to firm for the remainder of
the year in this line. In marine, energy and construction
liability, we experienced rate increases of approximately 32%,
while rate increases of approximately 2% in the financial and
political risk line have been more modest. Notwithstanding the
modest rate increases in the financial and political risk line,
we have written less business than anticipated due to continued
contraction in bank lending in the first half of the year and
economic weakness in a number of key markets. We are also seeing
continued improvement in pricing for our financial lines
business and expect more marked rate improvements at the turn of
the year.
37
U.S. Insurance. In our
U.S. insurance business, rate improvements of approximately
6% on catastrophe-exposed property lines have been experienced.
The excess and surplus lines casualty insurance market continues
to decrease with rates decreasing 5% on average, though rates
may be firming in the umbrella and excess markets, with rates
continuing to fall in primary layers.
Application
of Critical Accounting Policies
Our condensed consolidated financial statements are based on the
selection of accounting policies and the application of
significant accounting estimates, which require management to
make significant estimates and assumptions. We believe that some
of the more critical judgments in the areas of accounting
estimates and assumptions that affect our financial condition
and results of operations are related to reserves for property
and liability losses, premiums receivable in respect of assumed
reinsurance, the fair value of derivatives and the value of
investments, including the extent of any other-than-temporary
impairment. For a detailed discussion of our critical accounting
policies please refer to our 2008 Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission
and the notes to the financial statements contained in this
report. The material changes in the application of our critical
accounting estimates subsequent to the 2008 Annual Report are
the application of FAS 159 The Fair Value Option
for Financial Assets and Financial Liabilities in
respect of a portfolio of fixed income investments purchased in
the first quarter of 2009 as shown as fixed income maturities,
trading and short-term investments, trading on the balance
sheet. In addition, we have adopted FSP
FAS 157-3
Determining Whether a Market Is Not Active and a
Transaction Is Not Distressed, Statement
No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB statement
133 (FAS 161), Statement No. 163,
Accounting For Financial Guarantee Insurance Contracts
an interpretation of FASB Statement No. 60
(FAS 163), FSP
FAS 157-4
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly
(FSP
FAS 157-4),
Staff Position
FAS 107-1
and Accounting Principles Board (APB) Opinion
No. 28-1,
Interim Disclosures about Fair Value of Financial
Instruments (FSP
FAS 107-1
and APB
28-1),
Statement No. 165 Subsequent Events
(FAS 165) and FSP
FAS 115-2
and
FAS 124-2,
Recognition and Presentation of Other-Than-Temporary
Impairments as disclosed in the notes to the unaudited
condensed consolidated financial statements.
We have discussed the application of these critical accounting
estimates with our Board of Directors and Audit Committee.
Results
of Operations for the Three Months Ended June 30, 2009
Compared to the Three Months Ended June 30, 2008
The following is a discussion and analysis of our consolidated
results of operations for the three months ended June 30,
2009 and 2008 starting with a discussion of segmental results
and then summarizing our consolidated results under Total
Income Statement Second Quarter below.
Underwriting
Results by Operating Segments
The Company is currently organized into four business segments:
Property Reinsurance, Casualty Reinsurance, International
Insurance, and U.S. Insurance. These segments form the
basis of how the Company monitors the performance of its
operations.
Management measures segment results on the basis of the combined
ratio, which is obtained by dividing the sum of the losses and
loss expenses, acquisition expenses and operating and
administrative expenses by net premiums earned. Indirect
operating and administrative expenses are allocated to segments
based on each segments proportional share of gross earned
premiums. As a relatively new company, our historical combined
ratio may not be indicative of future underwriting performance.
We do not manage our assets by segment; accordingly, investment
income and total assets are not allocated to the individual
segments. Please refer to the tables in Note 4 in our
unaudited financial statements of this report for a summary of
gross and net written and earned premiums, underwriting results
and combined
38
ratios and reserves for each of our four business segments for
the three months ended June 30, 2009 and 2008.
The contributions of each segment to gross written premiums in
the three months ended June 30, 2009 and 2008 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
% of total gross written premiums
|
|
|
Property reinsurance
|
|
|
33.7
|
%
|
|
|
32.2
|
%
|
Casualty reinsurance
|
|
|
11.0
|
%
|
|
|
10.7
|
%
|
International insurance
|
|
|
44.7
|
%
|
|
|
49.0
|
%
|
U.S. insurance
|
|
|
10.6
|
%
|
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
Property reinsurance
|
|
$
|
180.0
|
|
|
$
|
170.5
|
|
Casualty reinsurance
|
|
|
59.0
|
|
|
|
56.8
|
|
International insurance
|
|
|
238.7
|
|
|
|
258.9
|
|
U.S. insurance
|
|
|
56.6
|
|
|
|
42.6
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
534.3
|
|
|
$
|
528.8
|
|
|
|
|
|
|
|
|
|
|
Property
Reinsurance
Our property reinsurance segment is mainly written on a treaty
basis and includes catastrophe, risk excess, and proportional
treaty risks. We also write U.S. and international property
facultative risks. Our property reinsurance business is written
out of Bermuda, London, the U.S., Paris, Zurich and Singapore.
Aspen U.K.s Paris branch writes property facultative
business in continental Europe and the Zurich branch writes
property and casualty reinsurance in Europe. We also write some
structured risks out of Aspen Bermuda. These contracts are
tailored to the individual client circumstances and although
written by a single team are accounted for within the business
segment to which the contract most closely relates. We also
include within this segment credit, surety and political risk
reinsurance contracts written by the Zurich branch of Aspen U.K.
This portfolio is written principally on a treaty basis.
Gross written premiums. Gross written premiums
in our property reinsurance segment increased by 5.6% compared
to the three months ended June 30, 2008. This increase is
attributed mainly to new premiums from the credit and surety
line of business which began writing business in 2009 in
addition to favorable market conditions in our property treaty
pro rata business.
39
The table below shows our gross written premiums for each line
of business for the three months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
Treaty catastrophe
|
|
$
|
78.4
|
|
|
|
(1.0
|
)%
|
|
$
|
79.2
|
|
Treaty risk excess
|
|
|
37.2
|
|
|
|
(7.0
|
)
|
|
|
40.0
|
|
Treaty pro rata
|
|
|
44.5
|
|
|
|
21.9
|
|
|
|
36.5
|
|
Property facultative
|
|
|
11.6
|
|
|
|
(21.6
|
)
|
|
|
14.8
|
|
Credit, surety and political risk reinsurance
|
|
|
8.3
|
|
|
|
Nm*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
180.0
|
|
|
|
5.6
|
%
|
|
$
|
170.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not meaningful This
line of business was not operational at June 30, 2008.
|
Losses and loss adjustment expenses. The net
loss ratio for the three months ended June 30, 2009 was
15.6% compared to 31.0% in 2008. An absence of significant
losses in the quarter and an increase in prior year reserve
releases are the main drivers for the reduction in the net loss
ratio. Reserve releases in the quarter were $20.9 million,
up from $2.6 million in the second quarter of 2008 due
mainly to favorable development on 2008 hurricane losses.
Further information relating to the movement of prior year
reserves is found below under Reserves for Losses and Loss
Adjustment Expenses.
Policy acquisition, operating and administrative
expenses. Total expenses were $43.0 million
equivalent to 32.5% of net premiums earned for the three months
ended June 30, 2009 compared with $42.0 million or
34.0% of net premiums earned for the three months ended
June 30, 2008. Although policy acquisition expenses have
increased by $4.3 million when compared to the second
quarter of 2008, the policy acquisition ratio has increased by
only 2.0 percentage points as a result of the higher earned
premium. The decrease in the operating and administrative
expenses of $3.3 million from the second quarter of 2008 is
attributable mainly to continued cost management and favorable
exchange rate movements between the U.S. Dollar and British
Pound applied to Sterling denominated expenses.
Casualty
Reinsurance
Our casualty reinsurance segment is written mainly on a treaty
basis with a small proportion of facultative risks. Casualty
treaty reinsurance is primarily written on an excess of loss
basis and includes coverage for claims arising from automobile
accidents, employers liability, professional indemnity and
other third party liabilities. It is written in respect of
cedants located mainly in the United States, the United Kingdom,
Europe and Australia. We also write some structured reinsurance
contracts out of Aspen Bermuda.
Gross written premiums. Gross written premium
increased by 3.9% to $59.0 million due mainly to the
international treaty business line. Gross written premiums for
the international treaty line were unusually low in the second
quarter of 2008 as this line was impacted by $7.9 million
of adverse premium adjustments. The decrease in gross written
premiums for the U.S treaty and casualty facultative lines is
attributable mainly to increased competition and pressure on
pricing.
40
The table below shows our gross written premiums for each line
of business for the three months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
U.S. treaty
|
|
$
|
43.7
|
|
|
|
(6.8
|
)%
|
|
$
|
46.9
|
|
International treaty
|
|
|
12.5
|
|
|
|
119.3
|
|
|
|
5.7
|
|
Casualty facultative
|
|
|
2.8
|
|
|
|
(33.3
|
)
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
59.0
|
|
|
|
3.9
|
%
|
|
$
|
56.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses. Losses
and loss adjustment expenses for the second quarter of 2009
increased by $14.7 million when compared to the second
quarter of 2008. The increase is attributable mainly to a
reduction in reserve releases which were $24.0 million in
the second quarter of 2008 compared to $6.0 million for the
same period in 2009. The reduction in reserve releases is
attributable mainly to the U.S. treaty line of business
which benefited from $16.3 million of reserve releases in
the second quarter of 2008 compared with $7.7 million of
releases in the current quarter. In addition, the international
treaty line experienced $2.2 million of reserve
strengthening in the quarter due to adverse development on our
auto and general liability product lines compared with reserve
releases of $6.2 million in the second quarter of 2008.
Prior year reserve releases are further discussed below under
Reserves for Losses and Loss Expenses.
Policy acquisition, operating and administrative
expenses. Total expenses were $31.1 million
for the three months ended June 30, 2009 equivalent to
30.8% of net premiums earned (2008 28.2%). Policy
acquisition expenses have increased from $11.7 million in
the second quarter of 2008 to $20.0 million in the same
period in 2009. Policy acquisition expenses in the second
quarter of 2008 were unusually low as a result of a commutation
adjustment that impacted both earned premium and policy
acquisition expenses. The current quarter has been impacted by
the recognition of $1.4 million of additional profit
commissions when compared to the second quarter of 2008.
Operating and administrative expenses have decreased to
$11.1 million from $12.5 million for the three months
ended June 30, 2008 mainly due to favorable movements in
the exchange rate between the U.S. Dollar and British Pound.
International
Insurance
Our international insurance segment comprises marine hull,
marine, energy and construction liability, energy property
damage, non-marine and transportation liability, aviation,
professional liability, excess casualty, financial institutions,
financial and political risk, specie, management and technology
liability, U.K. commercial property (including construction) and
U.K. commercial liability insurance. The commercial liability
line of business consists of U.K. employers and public
liability insurance. Our specialty reinsurance lines of business
include aviation, marine and other specialty reinsurance.
Gross written premiums. Overall premiums have
decreased by $20.2 million compared to the equivalent
period in 2008. The decrease in gross written premium is
attributable to our reduced underwriting appetite in a number of
lines in addition to changes in market conditions such as those
in the financial and political risk line where continued
contraction in bank lending in the first half of the year and
economic weakness has impacted a number of key markets. These
have been offset by improving conditions in several lines most
significantly our marine, energy and construction line. Gross
written premiums in our U.K. commercial property and liability
lines have been adversely impacted by exchange rate movements as
premiums are written in British Pounds which has weakened
against the U.S. Dollar during the period.
41
The table below shows our gross written premiums for each line
of business for the three months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
Marine, energy and construction liability
|
|
$
|
70.2
|
|
|
|
48.1
|
%
|
|
$
|
47.4
|
|
Energy property insurance
|
|
|
41.0
|
|
|
|
(1.7
|
)
|
|
|
41.7
|
|
Marine hull
|
|
|
14.8
|
|
|
|
(15.4
|
)
|
|
|
17.5
|
|
Aviation insurance
|
|
|
21.6
|
|
|
|
(6.3
|
)
|
|
|
23.1
|
|
U.K. commercial property
|
|
|
16.2
|
|
|
|
(28.6
|
)
|
|
|
22.7
|
|
U.K. commercial liability
|
|
|
11.8
|
|
|
|
(30.8
|
)
|
|
|
17.1
|
|
Non-marine and transportation liability
|
|
|
12.4
|
|
|
|
(13.3
|
)
|
|
|
14.3
|
|
Professional liability
|
|
|
9.7
|
|
|
|
30.7
|
|
|
|
7.4
|
|
Excess casualty
|
|
|
6.8
|
|
|
|
8.3
|
|
|
|
6.3
|
|
Financial institutions
|
|
|
3.7
|
|
|
|
(59.8
|
)
|
|
|
9.2
|
|
Financial and political risk
|
|
|
3.6
|
|
|
|
(83.1
|
)
|
|
|
21.3
|
|
U.K. commercial property construction
|
|
|
4.0
|
|
|
|
(11.1
|
)
|
|
|
4.5
|
|
Management and technology liability
|
|
|
2.7
|
|
|
|
Nm*
|
|
|
|
|
|
Specie
|
|
|
1.8
|
|
|
|
Nm*
|
|
|
|
|
|
Specialty reinsurance
|
|
|
18.4
|
|
|
|
(30.3
|
)
|
|
|
26.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
238.7
|
|
|
|
(7.8
|
)%
|
|
$
|
258.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not meaningful This
line of business was not operational at June 30, 2008.
|
Losses and loss adjustment expenses. The loss
ratio for the quarter was 68.9% compared to 51.3% for the three
months ended June 30, 2008, an increase of
17.6 percentage points. The segment has been impacted by a
$10.6 million net loss following the Air France disaster in
addition to $1.7 million of prior year reserve
strengthening compared to an $11.2 million reserve release
in the second quarter of 2008. The reserve strengthening in the
current quarter is mainly due to $5.0 million of reserve
strengthening in our financial institutions line and
$5.0 million reserve increase in marine, energy and
construction liability.
Policy acquisition, operating and administrative
expenses. Acquisition expenses for the second
quarter of 2009 were $29.9 million compared with
$26.0 million in the second quarter of 2008 mainly due to a
$2.4 million increase in accruals for profit related
commissions. The increase in operating and administrative
expenses to $22.8 million in the second quarter of 2009
from $19.2 million for the comparative period in 2008
relates to direct costs for the new teams established in 2008
and additional infrastructure costs associated with our
Lloyds operations. These additional costs have been partly
offset by favorable movements in the exchange rates between the
U.S. Dollar and the British Pound.
U.S.
Insurance
We write both U.S. property and casualty insurance on an
excess and surplus lines basis.
Gross written premiums. Gross written premiums
increased by 32.9% compared to the second quarter of 2008 due
primarily to a $13.6 million increase in property premiums
as a result of new business opportunities and increased prices
for catastrophe exposed business.
42
The table below shows our gross written premiums for each line
of business for the three months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
U.S. property
|
|
$
|
34.7
|
|
|
|
64.5
|
%
|
|
$
|
21.1
|
|
U.S. casualty
|
|
|
21.9
|
|
|
|
1.9
|
|
|
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
56.6
|
|
|
|
32.9
|
%
|
|
$
|
42.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses. The loss
ratio has increased from 48.4% for the second quarter of 2008 to
110.7% for the same period in 2009 mainly as a result of adverse
development in our casualty account. The segment benefited from
reserve releases of $2.7 million in the second quarter of
2008 compared with $8.3 million of reserve strengthening
for the same period in 2009 due to additional incurred
development from the casualty line.
Policy acquisition, operating and administrative
expenses. Policy acquisition expenses have
decreased to $3.0 million in the current period from
$3.7 million for the equivalent period in 2008 due to lower
accruals for profit commissions, increases in ceding commissions
receivable and changes in the business mix. Operating and
administrative expenses have increased to $10.9 million in
2009 from $7.0 million in 2008 due to costs associated with
the move of certain functions from Boston to Rocky Hill,
Connecticut in addition to $1.1 million of receivable
impairment charges resulting from the bankruptcy of an insured.
Total
Income Statement Second Quarter
Our statements of operations consolidates the underwriting
results of our four segments and includes certain other revenue
and expense items that are not allocated to the business
segments.
Gross written premiums. Gross written premiums
for the second quarter of 2009 have increased by 1.0% to
$534.3 million when compared to the second quarter of 2008
due mainly to favorable market conditions particularly in
property reinsurance and U.S. property insurance. Gross
written premiums in the international insurance segment have
decreased when compared to the second quarter of 2008 as we have
adjusted our underwriting appetite in certain lines of business
in line with market conditions.
Reinsurance ceded. Total reinsurance ceded for
the three months ended June 30, 2009 of $49.6 million
increased by $26.8 million from the second quarter of 2008.
The increase in ceded written premiums in the quarter is due to
reinstatement premiums in our aviation business line related to
the Air France disaster and our financial institutions book
resulting from reserve strengthening in the quarter. In the
second quarter of 2008, ceded reinsurance premium was unusually
low as a number of multi-year industry loss warranties were
purchased in 2007 covering the 2008 wind season. The ceded
written premium for these ILWs was recognized in 2007 and earned
through 2008 when these covers expired.
Gross premiums earned. Gross premiums earned
reflect the portion of gross premiums written which are recorded
as revenues over the policy periods of the risks we write. The
earned premium recorded in any year includes premium from
policies incepting in prior years and excludes premium to be
earned subsequent to the reporting date. Gross premiums earned
in the second quarter of 2009 increased by 11.6% compared to the
second quarter of 2008 reflecting the earning of the newer
business lines written in the second half of 2008.
Net premiums earned. Net premiums earned have
increased by $31.3 million or 7.9% in the second quarter of
2009 compared to 2008 which is consistent with the increase in
gross earned premiums. The increase in gross earned premiums has
been partially offset by an increase in ceded earned premiums
resulting from the increases in reinsurance purchased and
additional reinstatement premiums in our aviation and financial
institutions lines.
43
Losses and loss adjustment expenses. The
increase in losses and loss adjustment expenses resulted from
lower prior year reserve releases in the second quarter of 2009
when compared with the same period in 2008. Reserve releases
were lower in the current quarter in response to the economic
crisis where we have increased reserves in lines exposed to the
global financial crisis in addition to increased provisions in
our U.S. casualty insurance business line. Current year
losses have been impacted by a $10.6 million net loss
following the Air France disaster and an increase in losses
expectations in the international insurance segment for those
lines exposed to the global financial crisis. Both quarters in
2008 and 2009 had limited natural catastrophe losses.
The underlying changes in accident year loss ratios by segment
are shown in the table below. The prior year adjustment in the
table below reflects claims development and excludes premium
adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident Year Loss
|
|
|
|
Total Loss
|
|
|
Prior Year
|
|
|
Ratio Excluding
|
|
For the Three Months Ended June 30, 2009
|
|
Ratio
|
|
|
Adjustment
|
|
|
Prior Year Adjustments
|
|
|
Property reinsurance
|
|
|
15.6
|
%
|
|
|
15.8
|
%
|
|
|
31.4
|
%
|
Casualty reinsurance
|
|
|
68.2
|
%
|
|
|
5.9
|
%
|
|
|
74.1
|
%
|
International insurance
|
|
|
68.9
|
%
|
|
|
(1.0
|
)%
|
|
|
67.9
|
%
|
U.S. insurance
|
|
|
110.7
|
%
|
|
|
(32.9
|
)%
|
|
|
77.8
|
%
|
Total
|
|
|
54.8
|
%
|
|
|
3.9
|
%
|
|
|
58.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident Year Loss
|
|
|
|
Total Loss
|
|
|
Prior Year
|
|
|
Ratio Excluding
|
|
For the Three Months Ended June 30, 2008
|
|
Ratio
|
|
|
Adjustment
|
|
|
Prior Year Adjustments
|
|
|
Property reinsurance
|
|
|
31.0
|
%
|
|
|
2.1
|
%
|
|
|
33.1
|
%
|
Casualty reinsurance
|
|
|
63.3
|
%
|
|
|
28.0
|
%
|
|
|
91.3
|
%
|
International insurance
|
|
|
51.3
|
%
|
|
|
6.9
|
%
|
|
|
58.2
|
%
|
U.S. insurance
|
|
|
48.4
|
%
|
|
|
10.8
|
%
|
|
|
59.2
|
%
|
Total
|
|
|
47.4
|
%
|
|
|
10.2
|
%
|
|
|
57.6
|
%
|
Expenses. We monitor the ratio of expenses to
gross earned premium (the gross expense ratio) as a
measure of the cost effectiveness of our policy acquisition,
operating and administrative processes. The table below presents
the contribution of the policy acquisition expenses and
operating and administrative expenses to the expense ratio and
the total expense ratios for the three months ended
June 30, 2009 and 2008. We also show the effect of
reinsurance which impacts on the reported net expense ratio by
expressing the expenses as a proportion of net earned premiums.
|
|
|
|
|
|
|
|
|
|
|
Expense Ratios
|
|
|
|
For the Three Months
|
|
|
For the Three Months
|
|
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
Policy acquisition expenses
|
|
|
16.4
|
%
|
|
|
14.8
|
%
|
Operating and administrative expenses
|
|
|
12.2
|
%
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
Gross expense ratio
|
|
|
28.6
|
%
|
|
|
27.8
|
%
|
Effect of reinsurance
|
|
|
4.3
|
%
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
Total net expense ratio
|
|
|
32.9
|
%
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
44
Changes in the acquisition and operating and administrative
ratios to gross earned premiums and the impact of reinsurance on
net earned premiums by segment for each of the three months
ended June 30, 2009 and 2008 are shown in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, 2009
|
|
|
For the Three Months Ended June 30, 2008
|
|
Ratios Based on Gross
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
Earned Premium
|
|
Insurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Total
|
|
|
Insurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Total
|
|
|
Policy acquisition expense ratio
|
|
|
19.2
|
|
|
|
19.7
|
|
|
|
14.3
|
|
|
|
8.5
|
|
|
|
16.4
|
%
|
|
|
16.3
|
|
|
|
13.3
|
|
|
|
14.6
|
|
|
|
12.5
|
|
|
|
14.8
|
%
|
Operating and administrative expense ratio
|
|
|
10.4
|
|
|
|
11.0
|
|
|
|
10.9
|
|
|
|
30.7
|
|
|
|
12.2
|
%
|
|
|
12.7
|
|
|
|
14.3
|
|
|
|
10.8
|
|
|
|
23.6
|
|
|
|
13.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expense ratio
|
|
|
29.6
|
|
|
|
30.7
|
|
|
|
25.2
|
|
|
|
39.2
|
|
|
|
28.6
|
%
|
|
|
29.0
|
|
|
|
27.6
|
|
|
|
25.4
|
|
|
|
36.1
|
|
|
|
27.8
|
%
|
Effect of reinsurance
|
|
|
2.9
|
|
|
|
0.1
|
|
|
|
5.8
|
|
|
|
16.0
|
|
|
|
4.3
|
%
|
|
|
5.0
|
|
|
|
0.6
|
|
|
|
2.5
|
|
|
|
6.5
|
|
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net expense ratio
|
|
|
32.5
|
|
|
|
30.8
|
|
|
|
31.0
|
|
|
|
55.2
|
|
|
|
32.9
|
%
|
|
|
34.0
|
|
|
|
28.2
|
|
|
|
27.9
|
|
|
|
42.6
|
|
|
|
30.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The policy acquisition ratio, gross of the effect of
reinsurance, has increased to 16.4% for the three months ended
June 30, 2009 from 14.8% for the comparative period in
2008. The increase is driven mainly by a $3.8 million
increase in profit commissions specifically in the property
reinsurance, casualty reinsurance and international insurance
segments and the change in business mix in the international
insurance segment as the teams new to the Company in 2008 are
now fully established.
Between the two periods we have experienced a $2.8 million
increase in our operating and administrative expenses. The
increase is due mainly to costs associated with the new
U.K. construction, specie, management and technology
liability, and credit and surety teams, Lloyds costs for
the entire period and restructuring costs which includes set up
costs for new teams and offices.
Net investment income. Net investment income
consists of interest on fixed income securities, equity in net
income of other investments and investment management expenses.
In the second quarter of 2009, we generated net investment
income of $72.2 million (2008
$70.5 million). The $1.7 million increase in
investment income was primarily due to gains from our investment
in funds of hedge funds which contributed $16.2 million
compared with a gain of $10.8 million in the second quarter
of 2008. During the quarter, the book yield on our fixed income
portfolio increased by 1 basis point from 4.42% to 4.43%
and the portfolio duration increased from 2.9 years to
3.2 years. The average credit quality of our fixed income
portfolio is AA+, with 76% of the portfolio being
graded AA or higher.
Change in fair value of derivatives. In the
three months ended June 30, 2009, we recorded a reduction
of $2.0 million (2008 $2.2 million) in the
estimated fair value of our credit insurance contract including
$0.2 million (2008 $0.3 million) of
interest expense. Further information on these contracts can be
found in Note 7 to the financial statements.
Other-than-temporary impairments. We review
all of our fixed maturities for potential impairment each
quarter based on criteria including issuer-specific
circumstances, credit ratings actions and general macro-economic
conditions. The process of determining whether a decline in
value is other-than-temporary requires considerable
judgment. As part of the assessment process we also evaluate
whether it is more likely than not that we will sell any fixed
maturity security in an unrealized loss position until its
market value recovers to amortized cost. Once a security has
been identified as other-than-temporarily impaired, the amount
of any impairment included in net income is determined by
reference to the portion of the unrealized loss that is
considered credit-related. Non-credit related unrealized losses
are included in other comprehensive income. The realized
investments losses in the second quarter of 2009 include a
$2.9 million charge for investments we believe to be
other-than-temporarily impaired. No other-than-temporary
impairment charge was included in the second quarter of 2008.
Other-than-temporary impairment losses of $2.9 million for
the quarter were credit related and therefore are included in
the income statement.
Income before tax. In the second quarter of
2009, income before tax was $130.0 million and comprised
$53.2 million of underwriting profit, $72.2 million in
net investment income, $7.9 million of
45
net foreign exchange and investment gains and $4.0 million
of interest expense. In the second quarter of 2008, income
before tax was $149.2 million and comprised
$86.9 million of underwriting profit, $70.5 million in
net investment income, $4.2 million of net foreign exchange
and investment losses and $4.0 million of interest expense.
Our lower underwriting profit in the quarter compared to the
prior period was mainly due to a reduction in prior year reserve
releases and an increase in expenses, partially offset by higher
earned premium. Our higher net investment income in the quarter
was due to improved performance from our funds of hedge funds.
Income tax expense. Income tax expense for the
three months ended June 30, 2009 was $19.6 million.
Our effective consolidated tax rate for the three months ended
June 30, 2009 was 15.1% (2008 14.9%). As
required by FASB statement No. 109 Accounting for
Income Taxes (FAS 109) and APB Opinion No.
28, Interim Financial Reporting, the charge represents an
estimate of the tax rate which will apply to our pre-tax income
for 2009. As discussed in the Overview above, the
effective tax rate may be subject to revision.
Net income after tax. Net income after tax for
the three months ended June 30, 2009 was
$110.4 million, equivalent to $1.26 basic earnings per
ordinary share adjusted for the $5.8 million preference
share dividends and $1.22 fully diluted earnings per ordinary
share adjusted for the preference share dividends on the basis
of the weighted average number of ordinary shares in issue
during the three months ended June 30, 2009. The net income
for the three months ended June 30, 2008 was
$126.9 million equivalent to basic earnings per ordinary
share of $1.44 and fully diluted earnings per share of $1.39.
Results
of Operations for the Six Months Ended June 30, 2009
Compared to the Six Months Ended June 30, 2008
The following is a discussion and analysis of our consolidated
results of operations for the six months ended June 30,
2009 and 2008 starting with a discussion of segmental results
and then summarizing our consolidated results under Total
Income Statement Half Year below.
Underwriting
Results by Operating Segments
Please refer to the tables in Note 4 in our unaudited
financial statements of this report for a summary of gross and
net written and earned premiums, underwriting results and
combined ratios and reserves for each of our four business
segments for the six months ended June 30, 2009 and 2008.
The contributions of each segment to gross written premiums in
the six months ended June 30, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
% of total gross written premiums
|
|
|
Property reinsurance
|
|
|
34.2
|
%
|
|
|
31.5
|
%
|
Casualty reinsurance
|
|
|
21.0
|
%
|
|
|
21.3
|
%
|
International insurance
|
|
|
37.0
|
%
|
|
|
40.7
|
%
|
U.S. insurance
|
|
|
7.8
|
%
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Business Segment
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
Property reinsurance
|
|
$
|
400.5
|
|
|
$
|
354.7
|
|
Casualty reinsurance
|
|
|
245.8
|
|
|
|
238.9
|
|
International insurance
|
|
|
433.4
|
|
|
|
458.2
|
|
U.S. insurance
|
|
|
91.4
|
|
|
|
73.2
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,171.1
|
|
|
$
|
1,125.0
|
|
|
|
|
|
|
|
|
|
|
Property
Reinsurance
For a description of our property reinsurance segment, refer to
Results of Operations for the Three Months Ended
June 30, 2009 Compared to the Three Months Ended
June 30, 2008 Property Reinsurance, above.
Gross written premiums. Gross written premiums
in our property reinsurance segment increased by 12.9% compared
to the six months ended June 30, 2008. This increase is due
to the $15.6 million contribution from our new credit and
surety team and favorable market conditions.
The table below shows our gross written premiums for each line
of business for the six months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Written Premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/
|
|
|
($ in millions)
|
|
|
|
|
|
|
(decrease)
|
|
|
|
|
|
Treaty catastrophe
|
|
$
|
195.1
|
|
|
|
2.3
|
|
|
$
|
190.8
|
|
Treaty risk excess
|
|
|
68.5
|
|
|
|
(2.0
|
)
|
|
|
69.9
|
|
Treaty pro rata
|
|
|
92.7
|
|
|
|
34.0
|
|
|
|
69.2
|
|
Property facultative
|
|
|
28.6
|
|
|
|
15.5
|
|
|
|
24.8
|
|
Credit, surety and political risk reinsurance
|
|
|
15.6
|
|
|
|
Nm*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
400.5
|
|
|
|
12.9
|
%
|
|
$
|
354.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not meaningful This
line of business was not operational at June 30, 2008.
|
Losses and loss adjustment expenses. The net
loss ratio for the six months ended June 30, 2009 was 22.4%
compared to 30.4% in 2008 due to a lower incidence of losses in
2009 and an $11.3 million increase in prior year reserve
releases compared to the prior period. The loss ratio in 2008
was adversely affected by a high incidence of risk losses during
the period, in particular in the first quarter but no
significant losses in the second quarter except for
approximately $10.0 million of exposure related to the
U.S. Midwest floods and storms. Further information
relating to the movement of prior year reserves is found below
under Reserves for Losses and Loss Adjustment
Expenses.
Policy acquisition, operating and administrative
expenses. Total expenses were $83.0 million
for the six months ended June 30, 2009 equivalent to 30.6%
of net premiums earned (2008 33.8%). Policy
acquisition expenses have increased from $49.5 million in
2008 to $52.7 million in 2009, mainly as a result of an
increase in gross earned premium. The reduction in the operating
and administrative expenses to $30.3 million from
$35.0 million for the comparative period in 2008 is
attributable to continued cost management and favorable movement
in the exchange rate between the U.S. Dollar and British
Pounds between the two periods.
47
Casualty
Reinsurance
For a description of our casualty reinsurance segment, refer to
Results of Operations for the Three Months Ended
June 30, 2009 Compared to the Three Months Ended
June 30, 2008 Casualty Reinsurance.
Gross written premiums. The 2.9% increase in
gross written premiums for the segment was due mainly to an
increased contribution from our U.S.-based U.S. treaty
business unit. The comparative period in 2008 was also impacted
by $24.4 million of negative prior year premium adjustments
compared to a negative adjustment of $1.8 million in the
current period. The table below shows our gross written premiums
for each line of business for the six months ended June 30,
2009 and 2008, and the percentage change in gross written
premiums for each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/ (decrease)
|
|
|
($ in millions)
|
|
|
U.S. treaty
|
|
$
|
150.0
|
|
|
|
9.9
|
%
|
|
$
|
136.5
|
|
International. treaty
|
|
|
89.5
|
|
|
|
6.0
|
|
|
|
95.2
|
|
Casualty facultative
|
|
|
6.3
|
|
|
|
(12.9
|
)
|
|
|
7.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
245.8
|
|
|
|
(2.9
|
)%
|
|
$
|
238.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses. Losses
and loss adjustment expenses increased by $25.4 million in
2009 compared to the equivalent period in 2008, due to a
$29.2 million decrease in prior year reserve releases. The
change in reserve releases is mainly due to the international
casualty treaty line which experienced a reserve strengthening
of $5.6 million in the period compared to an
$11.4 million release in the six months ended June 30,
2008, in addition to a reduction in the reserve releases from
our U.K.-based U.S. casualty treaty business line. The
reserve strengthening for international casualty was due to
adverse development on our auto and general liability accounts.
Prior year reserve movements are further discussed below under
Reserves for Losses and Loss Expenses.
Policy acquisition, operating and administrative
expenses. Total expenses were $62.0 million
for the six months ended June 30, 2009 equivalent to 29.4%
of net premiums earned (2008 29.2%). The policy
acquisition expense ratio has increased to 19.9% in 2009 from
16.3% in 2008 driven mainly by a $4.8 million increase in
profit commissions. This has been offset by a decrease in the
operating and administrative expense ratio from 12.9% in 2008 to
9.5% in the current year due to cost management and favorable
movement in the exchange rate between the U.S. Dollar and
British Pound between the two periods.
International
Insurance
For a description of our international insurance segment, refer
to Results of Operations for the Three Months Ended
June 30, 2009 Compared to the Three Months Ended
June 30, 2008 International Insurance.
Gross written premiums. Overall premiums have
reduced by $24.8 million in the period compared to the six
months ended June 30, 2008, mainly due to our response to
market conditions in certain lines of business and adverse
exchange rate movements for our U.K. property and liability
business lines. The contribution from our professional liability
and excess casualty business lines has increased as these new
lines were still being established in the first half of 2008.
Marine, energy and construction liability has also benefited
from additional premiums from loss affected contracts. Even
though rates for Gulf of Mexico energy risks have improved
significantly, some clients chose to buy less insurance or
retain the risk altogether. We also declined a number of risks
that did not meet our underwriting criteria.
48
The table below shows our gross written premiums for each line
of business for the six months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/(decrease)
|
|
|
($ in millions)
|
|
|
Marine, energy and construction liability
|
|
$
|
121.0
|
|
|
|
18.4
|
%
|
|
$
|
102.2
|
|
Energy property insurance
|
|
|
57.4
|
|
|
|
(11.9
|
)
|
|
|
65.1
|
|
Marine hull
|
|
|
31.3
|
|
|
|
(13.4
|
)
|
|
|
36.1
|
|
Aviation insurance
|
|
|
32.0
|
|
|
|
(6.6
|
)
|
|
|
34.3
|
|
U.K. commercial property
|
|
|
23.6
|
|
|
|
(26.5
|
)
|
|
|
32.1
|
|
U.K. commercial liability
|
|
|
20.9
|
|
|
|
(43.7
|
)
|
|
|
37.2
|
|
Non-marine and transportation liability
|
|
|
20.3
|
|
|
|
(5.0
|
)
|
|
|
21.4
|
|
Professional liability
|
|
|
17.4
|
|
|
|
16.4
|
|
|
|
15.0
|
|
Excess casualty
|
|
|
11.6
|
|
|
|
39.4
|
|
|
|
8.3
|
|
Financial institutions
|
|
|
7.4
|
|
|
|
(39.0
|
)
|
|
|
12.1
|
|
Financial and political risk
|
|
|
12.8
|
|
|
|
(50.1
|
)
|
|
|
25.8
|
|
U.K. commercial property construction
|
|
|
7.5
|
|
|
|
66.7
|
|
|
|
4.5
|
|
Management and technology liability
|
|
|
4.5
|
|
|
|
Nm*
|
|
|
|
|
|
Specie
|
|
|
1.8
|
|
|
|
Nm*
|
|
|
|
|
|
Specialty reinsurance
|
|
|
63.9
|
|
|
|
(0.2
|
)
|
|
|
64.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
433.4
|
|
|
|
(5.4
|
)%
|
|
$
|
458.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Not Meaningful These
lines of business were not operational at June 30, 2008.
|
Losses and loss adjustment expenses. The net
loss ratio for the six months ended June 30, 2009 was 70.7%
compared to 57.9% in 2008. The deterioration in the loss ratio
is due in part to a $3.7 million prior year reserve
strengthening in the current year compared to an
$18.1 million reserve release in 2008. The reserve
strengthening is predominately due to increased loss provisions
associated with those lines affected by the global financial
crisis and to adverse development on our marine, energy and
construction liability and non-marine and transportation
liability business lines. Current year loss provisions have
increased in some lines in response to an increase in
expectations of loss and in our aviation and specialty
reinsurance lines which have suffered from a $10.6 million
net loss associated with the Air France disaster. In the first
half of 2008, the segment suffered from a $6.4 million
satellite loss, a $15.9 million pollution loss in France
and a $3.4 million airline loss although these losses
required no additional reserves to be established. Prior year
reserve releases are further discussed under Reserves for
Losses and Loss Expenses.
Policy acquisition, operating and administrative
expenses. Total expenses were $99.3 million
for the six months ended June 30, 2009 equivalent to 28.8%
of net premiums earned (2008 29.2%). The acquisition
expense ratio has reduced by 0.5 percentage points in the
period due to the recognition of $1.9 million of ceding
commission, a reduction in accrued profit-related commissions
and changes in the relative contributions from the business
lines.
Operating and administrative expenses have increased by
$4.3 million compared to the six months ended June 30,
2008 mainly due to increases in personnel costs associated with
the establishment of our Dublin branch, direct costs of the new
underwriting teams, salary increases for existing teams, costs
associated with the Lloyds syndicate and additional
infrastructure costs associated with setting up the new teams.
49
U.S.
Insurance
We write both U.S. property and casualty insurance on an
excess and surplus lines basis.
Gross written premiums. Gross written premiums
increased by 24.9% compared to the prior period of 2008. The
written premium increase is the result of new business written
as the property account has been reshaped and increased prices
for catastrophe exposed business.
The table below shows our gross written premiums for each line
of business for the six months ended June 30, 2009 and
2008, and the percentage change in gross written premiums for
each such line:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
Lines of Business
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
|
($ in millions)
|
|
|
% increase/(decrease)
|
|
|
($ in millions)
|
|
|
U.S. property
|
|
$
|
49.1
|
|
|
|
55.4
|
%
|
|
$
|
31.6
|
|
U.S. casualty
|
|
|
42.3
|
|
|
|
1.8
|
|
|
|
41.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
91.4
|
|
|
|
24.9
|
%
|
|
$
|
73.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses. Losses
for the period have increased by $17.2 million when
compared to the prior period predominately due to a
$6.1 million reserve strengthening in the current period
compared to a $7.4 million reserve release from the
comparable period in 2008. This strengthening is attributable to
adverse loss development on our casualty line where incurred
development has been greater than expected.
Policy acquisition, operating and administrative
expenses. Policy acquisition expenses have
decreased by $1.6 million due to increases in ceding
commissions receivable, lower accruals for profit commissions
and changes in the mix of property business between program and
open market contracts. Operating and administrative expenses
have increased from $12.6 million in 2008 to
$16.6 million in 2009 due primarily to the reorganization
costs. The expense ratio continues to be adversely impacted in
the short-term as a result of the investment we have made to
rebuild the account and reshape our U.S. operations.
Total
Income Statement Half Year
Our statements of operations consolidates the underwriting
results of our four segments and includes certain other revenue
and expense items that are not allocated to the business
segments.
Gross written premiums. Written premiums
increased in the first half of 2009 by 4.1% compared to the
corresponding period in 2008 as a result of a number of factors
including favorable market conditions in some lines of business,
such as property reinsurance, casualty reinsurance and U.S.
property insurance and additional premiums from our new lines of
business in international insurance.
Reinsurance ceded. Our reinsurance spend of
$179.8 million is 80.9% higher than the corresponding
period of 2008, because in 2007 we had taken the opportunity to
purchase property covers at favorable prices for two wind
seasons. We have experienced a general increase in price for
reinsurance in 2009, an increase due to the purchase of
reinsurance for our newer lines and due to reinstatement costs
following losses from our financial institutions and aviation
insurance business lines.
Gross premiums earned. Gross premiums earned
in the first half year of 2009 increased by 13.5% compared to
the first half of 2008 primarily from the new lines of business
which have now earned premium through a full year and also as a
result of the favorable market conditions particularly in
property reinsurance.
Net premiums earned. Net premiums earned have
increased by 11.0% in the first half of 2009 compared to the
first half of 2008 due to additional premiums from our new lines
of business in international insurance being partially offset by
additional reinsurance costs.
50
Losses and loss adjustment expenses. Net
losses have increased by $90.0 million in the first half of
2009 compared to the first half of 2008 due primarily to a
$53.2 million reduction in prior year reserve releases.
Further information relating to movements in prior year reserves
can be found below under Reserves for Loss and Loss
Adjustment Expenses.
The underlying changes in loss ratios by segment are shown in
the table below. The prior year adjustment in the table below
reflects claims development and does not reflect the impact of
prior year premium adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
|
|
|
|
|
|
|
Ratio Excluding
|
|
|
|
|
|
|
Prior Year
|
|
|
Prior Year
|
|
|
|
Total Loss
|
|
|
Claims
|
|
|
Reserve
|
|
For the Six Months Ended June 30, 2009
|
|
Ratio
|
|
|
Adjustment
|
|
|
Adjustments
|
|
|
Property reinsurance
|
|
|
22.4
|
%
|
|
|
10.1
|
%
|
|
|
32.5
|
%
|
Casualty reinsurance
|
|
|
67.0
|
%
|
|
|
4.3
|
%
|
|
|
71.3
|
%
|
International insurance
|
|
|
70.7
|
%
|
|
|
(1.1
|
)%
|
|
|
69.6
|
%
|
U.S. insurance
|
|
|
80.4
|
%
|
|
|
(12.5
|
)%
|
|
|
67.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
55.4
|
%
|
|
|
3.1
|
%
|
|
|
58.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
|
|
|
|
|
|
|
|
|
|
Ratio Excluding
|
|
|
|
|
|
|
Prior Year
|
|
|
Prior Year
|
|
|
|
Total Loss
|
|
|
Claims
|
|
|
Reserve
|
|
For the Six Months Ended June 30, 2008
|
|
Ratio
|
|
|
Adjustment
|
|
|
Adjustments
|
|
|
Property reinsurance
|
|
|
30.4
|
%
|
|
|
6.5
|
%
|
|
|
36.9
|
%
|
Casualty reinsurance
|
|
|
64.2
|
%
|
|
|
21.2
|
%
|
|
|
85.4
|
%
|
International insurance
|
|
|
57.9
|
%
|
|
|
5.8
|
%
|
|
|
63.7
|
%
|
U.S. insurance
|
|
|
49.4
|
%
|
|
|
16.6
|
%
|
|
|
66.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50.1
|
%
|
|
|
10.1
|
%
|
|
|
60.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses. We monitor the ratio of expenses to
gross earned premium (the gross expense ratio) as a
measure of the cost effectiveness of our policy acquisition,
operating and administrative processes. The table below presents
the contribution of the policy acquisition expenses and
operating and administrative expenses to the expense ratio and
the total expense ratios for the six months ended June 30,
2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
Expense Ratios
|
|
|
|
For the Six Months
|
|
|
For the Six Months
|
|
|
|
Ended June 30, 2009
|
|
|
Ended June 30, 2008
|
|
|
Policy acquisition expenses
|
|
|
16.2
|
%
|
|
|
16.3
|
%
|
Operating and administrative expenses
|
|
|
11.0
|
%
|
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
Gross expense ratio
|
|
|
27.2
|
%
|
|
|
28.7
|
%
|
Effect of reinsurance
|
|
|
3.4
|
%
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
Total net expense ratio
|
|
|
30.6
|
%
|
|
|
31.6
|
%
|
|
|
|
|
|
|
|
|
|
We also show the effect of reinsurance which impacts on the
reported net expense ratio by expressing the expenses as a
proportion of net earned premiums. Changes in the acquisition
and operating and administrative ratios to gross earned premiums
and the impact of reinsurance on net earned
51
premiums by segment for each of the six months ended
June 30, 2009 and 2008 are shown in the following table
(ratios shown as percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, 2009
|
|
|
For the Six Months Ended June 30, 2008
|
|
Ratios based on
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
|
Property
|
|
|
Casualty
|
|
|
International
|
|
|
U.S.
|
|
|
|
|
Gross Earned Premium
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Total
|
|
|
Reinsurance
|
|
|
Reinsurance
|
|
|
Insurance
|
|
|
Insurance
|
|
|
Total
|
|
|
Policy acquisition expense ratio
|
|
|
17.8
|
|
|
|
19.8
|
|
|
|
14.2
|
|
|
|
10.0
|
|
|
|
16.2
|
|
|
|
17.4
|
|
|
|
16.0
|
|
|
|
15.7
|
|
|
|
15.3
|
|
|
|
16.3
|
|
Operating and administrative expense ratio
|
|
|
10.2
|
|
|
|
9.5
|
|
|
|
10.1
|
|
|
|
24.1
|
|
|
|
11.0
|
|
|
|
12.3
|
|
|
|
12.6
|
|
|
|
10.8
|
|
|
|
22.7
|
|
|
|
12.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross expense ratio
|
|
|
28.0
|
|
|
|
29.3
|
|
|
|
24.3
|
|
|
|
34.1
|
|
|
|
27.2
|
|
|
|
29.7
|
|
|
|
28.6
|
|
|
|
26.5
|
|
|
|
38.0
|
|
|
|
28.7
|
|
Effect of reinsurance
|
|
|
2.6
|
|
|
|
0.1
|
|
|
|
4.5
|
|
|
|
13.9
|
|
|
|
3.4
|
|
|
|
4.1
|
|
|
|
0.6
|
|
|
|
2.7
|
|
|
|
9.2
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net expense ratio
|
|
|
30.6
|
|
|
|
29.4
|
|
|
|
28.8
|
|
|
|
48.0
|
|
|
|
30.6
|
|
|
|
33.8
|
|
|
|
29.2
|
|
|
|
29.2
|
|
|
|
47.2
|
|
|
|
31.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The policy acquisition ratio, gross of the effect of
reinsurance, has reduced marginally to 16.2% for the six months
ended June 30, 2009 from 16.3% for the comparative period
in 2008. The operating and administrative expense ratio has
improved to 12.4% in 2009 from 13.7% in 2008 driven by increased
earned premium, cost management initiatives and favorable
movements in the exchange rate between the U.S. dollar and
British Pound between the two periods.
Net investment income. Net investment income
consists of interest on fixed income securities and the change
in value of other investments less investment management fees.
In the first half year of 2009, we generated net investment
income of $131.4 million (2008
$109.6 million). The $21.8 million increase in
investment income was primarily due to $20.2 million of
gains from our investment in funds of hedge funds compared to
$6.1 million of losses in the comparable period of 2008.
The contribution from fixed income investments and cash has
reduced by $4.5 million as during the period, the book
yield on our fixed income portfolio has decreased from 4.84% to
4.43%. During the same period, the fixed income portfolio
duration has decreased from 3.6 years to 3.2 years.
Change in fair value of derivatives. In the
six months ended June 30, 2009, we recorded a reduction of
$3.9 million (2008 $3.8 million credit
insurance contract; $1.4 million foreign exchange contract)
in the estimated fair value of our credit insurance contract
including $0.4 million (2008 $0.6 million)
of interest expense. In the first quarter of 2009, we held
foreign currency derivative contracts to purchase
$18.8 million of foreign currencies. The foreign currency
contracts are recorded as derivatives at fair value with the
gain or loss recorded in net foreign exchange gains and losses.
For the six months ended June 30, 2009, the impact of
foreign currency contracts on net income was a charge of
$1.8 million (2008 $1.4 million). Further
information on these contracts can be found in Notes 6 and
7 to the financial statements.
Other-than-temporary impairments. We review
all of our fixed maturities for potential impairment each
quarter based on criteria including issuer-specific
circumstances, credit ratings actions and general macro-economic
conditions. The process of determining whether a decline in
value is other-than-temporary requires considerable
judgment. As part of the assessment process we also evaluate
whether it is more likely than not that we will sell any fixed
maturity security in an unrealized loss position until its
market value recovers to amortized cost. Once a security has
been identified as other-than-temporarily impaired, the amount
of any impairment included in net income is determined by
reference to the portion of the unrealized loss that is
considered credit-related. Non-credit related unrealized losses
are included in other comprehensive income. The realized
investments losses in the six months to June 30, 2009
include an $18.1 million charge for investments we believe
to be other-than-temporarily impaired. No other-than-temporary
impairment charge was included in the first half of 2008.
Other-than-temporary impairment losses of $18.1 million for
the six-month period are credit related and therefore are
included in the income statement.
Income before tax. In the first half year of
2009, income before tax was $237.5 million and comprised
$122.6 million of underwriting profit, $131.4 million
in net investment income, $6.6 million of net foreign
exchange and investment losses, $7.9 million of interest
expense and $2.0 million of other
52
expenses. In the first half year of 2008, income before tax was
$244.7 million and comprised $144.1 million of
underwriting profit, $109.6 million in net investment
income, $1.1 million of net foreign exchange and investment
gains, $7.9 million of interest expense and
$2.2 million of other expenses. The reduction in
underwriting profit was due primarily to a $53.2 million
reduction in prior year reserve releases. Our higher investment
income in the first half of 2009 compared to the prior period
was mainly due to a positive contribution from our fund of hedge
fund investments.
Income tax expense. Income tax expense for the
six months ended June 30, 2009 was $35.7 million. Our
consolidated tax rate for the six months ended June 30,
2009 was 15.0% (2008 15.0%). As required by
FAS 109 and APB 28, the charge represents an estimate of
the tax rate which will apply to our pre-tax income for 2009. As
discussed in the Overview above, the effective tax
rate may be subject to revision.
Net income after tax. Net income after tax for
the six months ended June 30, 2009 was $201.8 million,
equivalent to $2.68 basic earnings per ordinary share adjusted
for the $12.7 million preference share dividends and $2.61
fully diluted earnings per ordinary share adjusted for the
preference share dividends on the basis of the weighted average
number of ordinary shares in issue during the six months ended
June 30, 2009. The net income for the six months ended
June 30, 2008 was $208.1 million equivalent to basic
earnings per ordinary share of $2.31 and fully diluted earnings
per share of $2.24.
Reserves
for Losses and Loss Expenses
As of June 30, 2009, we had total net loss and loss
adjustment expense reserves of $2,938.8 million
(December 31, 2008 $2,787.0 million). This
amount represented our best estimate of the ultimate liability
for payment of losses and loss adjustment expenses. Of the total
gross reserves for unpaid losses of $3,265.1 million at the
balance sheet date of June 30, 2009, a total of
$1,960.1 million or 60.0% represented IBNR claims
(December 31, 2008 $3,070.3 million and
58.3%, respectively). The following tables analyze gross and net
loss and loss adjustment expense reserves by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
|
|
|
|
Reinsurance
|
|
|
|
|
Business Segment
|
|
Gross
|
|
|
Recoverable
|
|
|
Net
|
|
|
|
($ in millions)
|
|
|
Property reinsurance
|
|
$
|
417.9
|
|
|
$
|
(43.0
|
)
|
|
$
|
374.9
|
|
Casualty reinsurance
|
|
|
1,427.0
|
|
|
|
(6.5
|
)
|
|
|
1,420.5
|
|
International insurance
|
|
|
1,225.3
|
|
|
|
(243.4
|
)
|
|
|
981.9
|
|
U.S. insurance
|
|
|
194.9
|
|
|
|
(33.4
|
)
|
|
|
161.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total losses and loss expense reserves
|
|
$
|
3,265.1
|
|
|
$
|
(326.3
|
)
|
|
$
|
2,938.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at December 31, 2008
|
|
|
|
|
|
|
Reinsurance
|
|
|
|
|
Business Segment
|
|
Gross
|
|
|
Recoverable(1)
|
|
|
Net
|
|
|
|
($ in millions)
|
|
|
Property reinsurance
|
|
$
|
488.5
|
|
|
$
|
(37.9
|
)
|
|
$
|
450.6
|
|
Casualty reinsurance
|
|
|
1,311.1
|
|
|
|
(5.9
|
)
|
|
|
1,305.2
|
|
International insurance
|
|
|
1,117.4
|
|
|
|
(210.9
|
)
|
|
|
906.5
|
|
U.S. insurance
|
|
|
153.3
|
|
|
|
(28.6
|
)
|
|
|
124.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total losses and loss expense reserves
|
|
$
|
3,070.3
|
|
|
$
|
(283.3
|
)
|
|
$
|
2,787.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The 2008 net reserve position
for each of our segments has been revised with no overall effect
on the total. As a result of a re-allocation of reinsurance
recoverables among the segments, the net reserve position for
property reinsurance increased by $69.9 million from
$380.7 million to $450.6 million, for casualty
reinsurance decreased by $3.6 million from
$1,308.8 million to $1,305.2 million, for
international
|
53
|
|
|
|
|
insurance decreased by
$97.2 million from $1,003.7 million to
$906.5 million and for U.S. insurance increased by
$30.9 million from $93.8 million to
$124.7 million.
|
The increase in reinsurance recoverables in 2009 is due to
increased recoveries in our international insurance segment
related mainly to Hurricane Ike, the Air France disaster and the
global financial crisis. This has been offset by the continued
settlement of losses associated with Hurricanes Katrina, Rita
and Wilma.
For the six months ended June 30, 2009, there was a
reduction of our estimate of the ultimate net claims to be paid
in respect of prior accident years of $26.8 million. An
analysis of this reduction by line of business is as follows for
each of the three and six months ended June 30, 2009 and
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
Business Segment
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
|
($ in millions)
|
|
|
|
|
|
($ in millions)
|
|
|
|
|
|
Property reinsurance
|
|
$
|
20.9
|
|
|
$
|
2.6
|
|
|
$
|
27.5
|
|
|
$
|
16.2
|
|
Casualty reinsurance
|
|
|
6.0
|
|
|
|
24.0
|
|
|
|
9.1
|
|
|
|
38.3
|
|
International insurance
|
|
|
(1.7
|
)
|
|
|
11.2
|
|
|
|
(3.7
|
)
|
|
|
18.1
|
|
U.S. insurance
|
|
|
(8.3
|
)
|
|
|
2.7
|
|
|
|
(6.1
|
)
|
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Losses and loss expense reserves reductions
|
|
$
|
16.9
|
|
|
$
|
40.5
|
|
|
$
|
26.8
|
|
|
$
|
80.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The key elements which gave rise to the net favorable
development during the three months ended June 30, 2009
were as follows:
Property Reinsurance: The increase in reserve
releases in the quarter is due mainly to reduced loss
expectations for Hurricane Ike. In addition to the reduction in
Hurricane Ike losses, property catastrophe, risk excess and
facultative lines had better than expected loss experience,
which was offset by a small adverse development in property pro
rata.
Casualty Reinsurance: The U.S. casualty
line had better than expected experience including favorable
commutations, offset by increases in the international treaty
line reflecting positive prior premium development.
International Insurance: The segment had a
deterioration of $1.7 million in the quarter. We increased
reserves on the financial institutions line in response to the
ongoing global financial crisis by $5.0 million, and
strengthened reserves by $5.0 million in marine, energy and
construction liability in relation to losses from the 2007
underwriting year. Those were partially offset by releases in
U.K. commercial property and casualty lines of
$2.4 million, specialty reinsurance of $0.6 million
and other classes of $0.3 million.
U.S. Insurance: The $8.3 million deterioration
this quarter is $6.9 million from casualty insurance and
$1.4 million from property insurance. The casualty
insurance deterioration is in response to worse than expected
experience. The property insurance deterioration was a result of
a prior year reduction in reinsurance recoveries.
We did not make any significant changes in assumptions used in
our reserving process. However, because the period of time we
have been in operation is relatively short, for longer tail
lines in particular, our loss experience is limited and reliable
evidence of changes in trends of numbers of claims incurred,
average settlement amounts, numbers of claims outstanding and
average losses per claim will necessarily take years to develop.
For a more detailed description see Managements
Discussion and Analysis Critical Accounting
Policies and Managements Discussion and
Analysis Reserves for Losses and Loss Adjustment
Expenses, included in our 2008 Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission.
54
Balance
Sheet
Total
cash and investments
At June 30, 2009 and December 31, 2008, total cash and
investments, including accrued interest receivable, were
$6.4 billion and $6.0 billion, respectively. The
composition of our investment portfolio is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at June 30, 2009
|
|
|
As at December 31, 2008
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
Percentage
|
|
|
|
Estimated
|
|
|
of Fixed
|
|
|
Estimated
|
|
|
of Fixed
|
|
|
|
Fair
|
|
|
Income
|
|
|
Fair
|
|
|
Income
|
|
|
|
Value
|
|
|
Portfolio
|
|
|
Value
|
|
|
Portfolio
|
|
|
Marketable Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Securities
|
|
$
|
615.0
|
|
|
|
9.6
|
%
|
|
$
|
650.7
|
|
|
|
10.9
|
%
|
U.S. Agency Securities
|
|
|
430.2
|
|
|
|
6.7
|
%
|
|
|
393.1
|
|
|
|
6.6
|
%
|
Municipal Securities
|
|
|
7.8
|
|
|
|
0.1
|
%
|
|
|
8.0
|
|
|
|
0.1
|
%
|
Corporate Securities
|
|
|
1,914.1
|
|
|
|
30.0
|
%
|
|
|
1,424.5
|
|
|
|
23.8
|
%
|
Foreign Government
|
|
|
400.2
|
|
|
|
6.3
|
%
|
|
|
384.5
|
|
|
|
6.4
|
%
|
Asset-backed Securities
|
|
|
156.4
|
|
|
|
2.5
|
%
|
|
|
205.5
|
|
|
|
3.4
|
%
|
Mortgage-backed Securities
|
|
|
1,243.2
|
|
|
|
19.5
|
%
|
|
|
1,366.8
|
|
|
|
22.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fixed Income Available for Sale
|
|
|
4,766.9
|
|
|
|
74.7
|
%
|
|
|
4,433.1
|
|
|
|
74.1
|
%
|
Marketable Securities Trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Securities
|
|
|
170.6
|
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
Municipal Securities
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Securities
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Government
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fixed Income Trading
|
|
|
177.0
|
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
Total Other Investments
|
|
|
24.7
|
|
|
|
0.4
|
%
|
|
|
286.9
|
|
|
|
4.9
|
%
|
Total Short-term Investments Available for Sale
|
|
|
311.3
|
|
|
|
4.9
|
%
|
|
|
224.9
|
|
|
|
3.8
|
%
|
Total Short-term Investments Trading
|
|
|
4.4
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
Total Cash and Cash Equivalents
|
|
|
718.3
|
|
|
|
11.3
|
%
|
|
|
809.1
|
|
|
|
13.5
|
%
|
Total Receivable for Securities Sold
|
|
|
324.3
|
|
|
|
5.1
|
%
|
|
|
177.2
|
|
|
|
3.0
|
%
|
Total Accrued Interest Receivable
|
|
|
48.0
|
|
|
|
0.8
|
%
|
|
|
43.7
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cash and Investments
|
|
$
|
6,374.9
|
|
|
|
100.0
|
%
|
|
$
|
5,974.9
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities. At June 30, 2009, the
average credit quality of our fixed income book is
AA+, with 97% of the portfolio being graded
A or higher. At December 31, 2008, the average
credit quality of our fixed income book is AAA, with
92% of the portfolio being graded A or higher. Our
fixed income portfolio duration increased marginally from
3.1 years as at December 31, 2008 to 3.2 years as
at June 30, 2009.
Other investments. Other investments as at
June 30, 2009 and December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
($ in millions)
|
|
|
Investment funds
|
|
$
|
|
|
|
$
|
|
|
|
$
|
311.3
|
|
|
$
|
286.9
|
|
Cartesian Iris 2009A L.P.
|
|
|
25.0
|
|
|
|
24.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other investments
|
|
$
|
25.0
|
|
|
$
|
24.7
|
|
|
$
|
311.3
|
|
|
$
|
286.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
Investment funds. Investment funds represented
our investments in funds of hedge funds which were recorded
using the equity method of accounting. Adjustments to the
carrying value of these investments were made based on the net
asset values reported by the fund managers, resulting in a
carrying value that approximates fair value. Realized and
unrealized gains of $16.2 million (2008
$10.8 million) and $20.2 million (2008
loss of $6.1 million) have been recognized through the
statement of operations in the three and six months ended
June 30, 2009, respectively. We invested
$150.0 million in the share capital of two funds in 2006, a
further $247.5 million in one of these funds and
$112.5 million in the share capital of a third fund in
2007. In 2008, we sold share capital in the funds that cost
$198.6 million for proceeds of $177.2 million
realizing a loss of $21.4 million. In February 2009, we
gave notice to redeem the balance of the funds in June 2009. As
a result, we recognized proceeds from the redemption of funds of
$307.1 million at June 30, 2009.
Our involvement with the funds ceased at June 30, 2009. The
carrying value of the receivables represents our maximum
exposure to loss at the balance sheet date. All proceeds from
the redemption of the funds of hedge fund investments are
scheduled to be received by October 31, 2009. Refer to Note
12, for further information related to receivable for securities
sold.
Cartesian Iris 2009A L.P. On May 19,
2009, we invested $25 million with Cartesian Iris 2009A
L.P. through its wholly owned subsidiary, Acorn Limited.
Cartesian Iris 2009A L.P. is a Delaware Limited Partnership
formed to provide capital to Iris Re, a newly formed Class 3
Bermuda reinsurer focusing on insurance linked securities. In
addition to returns on our investment, we will receive a fee for
providing advice on risk selection, pricing and portfolio
design. In the three and six months ended June 30, 2009, no
fee was paid or payable to the Company.
The following tables summaries the fair value of our
mortgage-backed securities (MBS) by rating and class
at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA
|
|
|
AA and Below
|
|
|
Total
|
|
|
Agency
|
|
$
|
974.1
|
|
|
|
|
|
|
$
|
974.1
|
|
Non-agency Commercial
|
|
|
216.5
|
|
|
|
|
|
|
|
216.5
|
|
Non-agency Residential
|
|
|
22.1
|
|
|
|
30.5
|
|
|
|
52.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mortgage-backed Securities
|
|
$
|
1,212.7
|
|
|
$
|
30.5
|
|
|
$
|
1,243.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our mortgage-backed portfolio is supported by loans diversified
across a number of geographic and economic sectors.
Alternative- A securities. We define
Alternative-A (alt-A) mortgages as those considered
less risky than sub-prime mortgages, but with lower credit
quality than prime mortgages. At June 30, 2009, we have
$14.0 million invested in alt-A securities
(December 31, 2008 $8.7 million).
Sub-prime securities. We define sub-prime
related investments as those supported by, or contain, sub-prime
collateral based on creditworthiness. We do not invest directly
in sub-prime related securities.
Valuation
of Investments
Valuation of Fixed Income and Short Term Available for Sale
Investments and Fixed Income and Short Term Trading
Investments. All of the fixed income securities
are traded on the over the counter market, based on prices
provided by one or more market makers in each security. In
addition, there are readily observable market value indicators.
We use a variety of pricing sources to value our fixed income
securities including those securities that have prepayment
features such as mortgage-backed securities and asset-backed
securities in order to ensure fair and accurate pricing. The
fair value estimates of the securities in our portfolio are not
sensitive to significant unobservable inputs or modeling
techniques.
Valuation of Other Investments. The value of
our investments in funds of hedge funds are based upon monthly
net asset values reported by the underlying funds to our funds
of hedge funds managers. The financial statements of our funds
of hedge funds are subject to annual audits evaluating the net
asset
56
positions of the underlying investments. We periodically review
the performance of our funds of hedge funds and evaluate the
reasonableness of the valuations.
The value of our investment in Cartesian Iris 2009A L.P. is
based on our shares of the capital position of the partnership
which includes income and expenses reported by the limited
partnership as provided in their quarterly management accounts.
Cartesian Iris 2009A L.P. is subject to annual audit evaluating
the financial statements of the partnership. We periodically
review the management accounts of Cartesian Iris 2009A L.P. and
evaluate the reasonableness of the valuation of our investment.
Other-than-temporary impairment. We review all
of our fixed maturities for potential impairment each quarter
based on criteria including issuer-specific circumstances,
credit ratings actions and general macro-economic conditions.
The process of determining whether a decline in value is
other-than-temporary requires considerable judgment.
As part of the assessment process we also evaluate whether it is
more likely than not that we will sell any fixed maturity
security in an unrealized loss position until its market value
recovers to amortized cost. Once a security has been identified
as other-than-temporarily impaired, the amount of any impairment
included in net income is determined by reference to that
portion of the unrealized loss that is considered to be credit
related. Non-credit related unrealized losses are included in
other comprehensive income. Other-than-temporary impairment is
discussed further in Notes 2 and 5 of the unaudited condensed
consolidated financial statements.
Capital
Management
On March 31, 2009, we purchased 2,672,500 of our 7.401% $25
liquidation value preference shares (NYSE : AHL-PA) at a price
of $12.50 per share. The repurchase resulted in a first quarter
gain attributable to ordinary shareholders of approximately
$31.5 million.
The following table shows our capital structure at June 30,
2009 compared to December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
($ in millions)
|
|
|
Share capital, additional paid-in capital and retained income
and accumulated other comprehensive income attributable to
ordinary shareholders
|
|
$
|
2,618.9
|
|
|
$
|
2,359.9
|
|
Preference shares (liquidation preference less issue expenses)
|
|
|
353.6
|
|
|
|
419.2
|
|
Long-term debt
|
|
|
249.6
|
|
|
|
249.5
|
|
|
|
|
|
|
|
|
|
|
Total capital
|
|
$
|
3,222.1
|
|
|
$
|
3,028.6
|
|
|
|
|
|
|
|
|
|
|
Management monitors the ratio of debt to total capital, with
total capital being defined as shareholders equity plus
outstanding debt. At June 30, 2009, this ratio was 7.7%
(December 31, 2008 8.2%).
Our preference shares are classified in our balance sheet as
equity but may receive a different treatment in some cases under
the capital adequacy assessments made by certain rating
agencies. Such securities are often referred to as
hybrids as they have certain attributes of both debt
and equity. We also monitor the ratio of the total of debt and
hybrids to total capital which was 18.7% as of June 30,
2009 (December 31, 2008 22.1%).
Access to capital. Our business operations are
in part dependent on our financial strength and the
markets perception thereof, as measured by
shareholders equity, which was $2,972.5 million at
June 30, 2009 (December 31, 2008
$2,779.1 million). We believe our financial strength
provides us with the flexibility and capacity to obtain funds
through debt or equity financing. Our continuing ability to
access the capital markets is dependent on, among other things,
our operating results, market conditions and our perceived
financial strength. We continuously monitor our capital and
financial position, as well as investment and security market
conditions, both in general and with respect to Aspen
Holdings securities. Our ordinary shares and all our
preference shares are listed on the New York Stock Exchange.
57
Liquidity
Liquidity is a measure of a companys ability to generate
cash flows sufficient to meet short-term and long-term cash
requirements of its business operations. Management monitors the
liquidity of Aspen Holdings and of each of its Insurance
Subsidiaries and arranges credit facilities to enhance
short-term liquidity resources on a stand-by basis.
Holding company. We monitor the ability of
Aspen Holdings to service debt, to finance dividend payments to
ordinary and preference shareholders and to provide financial
support to the Insurance Subsidiaries.
As at June 30, 2009, Aspen Holdings held $25.0 million
(December 31, 2008 $32.4 million) in cash
and cash equivalents which management considers sufficient to
provide Aspen Holdings liquidity at such time. Holding company
liquidity depends on dividends, capital distributions and
interest payments from our Insurance Subsidiaries.
In the six months ended June 30, 2009, Aspen U.K. Holdings
paid Aspen Holdings a dividend of $138.0 million. In the
six months ended June 30, 2008, Aspen Bermuda and Aspen
U.K. Holdings paid Aspen Holdings dividends totaling
$85.0 million. No other dividends were paid to Aspen
Holdings in 2008. Aspen Holdings also received interest of
$18.3 million (2008 $18.3 million) from
Aspen U.K. Holdings in respect of an intercompany loan.
The ability of our Insurance Subsidiaries to pay us dividends or
other distributions is subject to the laws and regulations
applicable to each jurisdiction, as well as the Insurance
Subsidiaries need to maintain capital requirements
adequate to maintain their insurance and reinsurance operations
and their financial strength ratings issued by independent
rating agencies. For a discussion of the various restrictions on
our ability and our Insurance Subsidiaries ability to pay
dividends, see Part I, Item 1
Business Regulatory Matters in our 2008
Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission.
Also for a more detailed discussion of our Insurance
Subsidiaries ability to pay dividends see Note 14 of
our annual financial statements in our 2008 Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission.
Insurance subsidiaries. As of June 30,
2009, the Insurance Subsidiaries held approximately
$693.7 million (December 31, 2008
$777.2 million) in cash and short-term investments that are
readily realizable securities. Management monitors the value,
currency and duration of cash and investments held by its
Insurance Subsidiaries to ensure that they are able to meet
their insurance and other liabilities as they become due and was
satisfied that there was a comfortable margin of liquidity as at
June 30, 2009 and for the foreseeable future.
On an ongoing basis, our Insurance Subsidiaries sources of
funds primarily consist of premiums written, investment income
and proceeds from sales and redemptions of investments.
Cash is used primarily to pay reinsurance premiums, losses and
loss adjustment expenses, brokerage commissions, general and
administrative expenses, taxes, interest and dividends and to
purchase new investments.
The potential for individual large claims and for accumulations
of claims from single events means that substantial and
unpredictable payments may need to be made within relatively
short periods of time.
We manage these risks by making regular forecasts of the timing
and amount of expected cash outflows and ensuring that we
maintain sufficient balances in cash and short-term investments
to meet these estimates. Notwithstanding this policy, if our
cash flow forecast is incorrect, we could be forced to liquidate
investments prior to maturity, potentially at a significant loss.
The liquidity of our Insurance Subsidiaries is also affected by
the terms of our contractual obligations to policyholders and by
undertakings to certain regulatory authorities to facilitate the
issue of letters of credit or maintain certain balances in trust
funds for the benefit of policyholders. The following
58
table shows the forms of collateral or other security provided
to policyholders as at June 30, 2009 and December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
As at June 30,
|
|
|
As at December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
($ in millions except percentages)
|
|
|
Assets held in multi-beneficiary trusts
|
|
$
|
1,356.1
|
|
|
$
|
1,345.6
|
|
Assets held in single beneficiary trusts
|
|
|
54.8
|
|
|
|
54.0
|
|
Letters of credit issued under our revolving credit facilities(1)
|
|
|
65.0
|
|
|
|
84.6
|
|
Secured letters of credit(2)
|
|
|
416.2
|
|
|
|
422.4
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,892.1
|
|
|
$
|
1,906.6
|
|
|
|
|
|
|
|
|
|
|
Total as% of cash and invested assets
|
|
|
31.5
|
%
|
|
|
33.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
These letters of credit are not
secured by cash or securities, though we have the ability to
issue secured letters of credit under the revolving credit
facility.
|
|
(2)
|
|
As of June 30, 2009, the
Company had funds on deposit of $579.4 million and
£25.4 million (December 31, 2008
$604.6 million and £25.3 million) as collateral
for the secured letters of credit.
|
Funds at Lloyds. AUL operates in
Lloyds as the corporate member for Syndicate 4711.
Lloyds agrees Syndicate 4711s required capital
principally through the syndicates annual business plan.
Such capital, called Funds at Lloyds, comprises: cash,
investments and a fully collateralized letter of credit. The
amounts of cash, investments and letter of credit at
June 30, 2009 amount to $212.4 million
(December 31, 2008 $200.3 million).
Further information on these arrangements can be found in our
2008 Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission.
Consolidated cash flows for the six months ended
June 30, 2009. Total net cash flow from
operations from December 31, 2008 through June 30,
2009 was $302.3 million, a reduction of $17.5 million
over the comparative period. The reduction was due mainly to an
increase in net claims settlements. For the six months ended
June 30, 2009, our cash flow from operations provided us
with sufficient liquidity to meet our operating requirements. On
May 28, 2009, we paid a dividend of $0.15 per ordinary
share to shareholders of record on May 13, 2009. On
July 1, 2009, dividends totaling $3.2 million on our
Perpetual Preferred Income Equity Replacement Securities
(Perpetual PIERS) were paid to our dividend
disbursing agent, for payment to our Perpetual PIERS holders of
record on June 15, 2009. On July 1, 2009, dividends
totaling $2.5 million on our Perpetual Non-Cumulative
Preference Shares (Perpetual Preference Shares) were
paid to our dividend disbursing agent, for payment to our
Perpetual Preference Share holders of record on June 15,
2009.
Credit Facility. On August 2, 2005, we
entered into a five-year $400 million revolving credit
facility pursuant to a credit agreement dated as of
August 2, 2005 (the credit facilities) by and
among the Company, certain of our direct and indirect
subsidiaries, including the Insurance Subsidiaries
(collectively, the Borrowers) the lenders party
thereto, Barclays Bank plc, as administrative agent and letter
of credit issuer, Bank of America, N.A. and Calyon, New York
Branch, as co-syndication agents, Credit Suisse, Cayman Islands
Branch and Deutsche Bank AG, New York Branch, as
co-documentation agents and The Bank of New York, as collateral
agent. On September 1, 2006, the aggregate limit available
under the credit facility was increased to $450 million.
The facility can be used by any of the Borrowers to provide
funding for our Insurance Subsidiaries, to finance the working
capital needs of the Company and our subsidiaries and for
general corporate purposes of the Company and our subsidiaries.
The revolving credit facility provides for a $250 million
sub-facility for collateralized letters of credit. The facility
will expire on August 2, 2010. As of June 30, 2009, no
borrowings were outstanding under the credit facilities, though
we had $413.6 million and $65.0 million of outstanding
collateralized and uncollateralized letters of credit,
respectively. The fees
59
and interest rates on the loans and the fees on the letters of
credit payable by the Borrowers increase based on the
consolidated leverage ratio of the Company.
Under the credit facilities, we must maintain at all times a
consolidated tangible net worth of not less than approximately
$1.1 billion plus 50% of consolidated net income and 50% of
aggregate net cash proceeds from the issuance by the Company of
its capital stock, each as accrued from January 1, 2005. On
June 28, 2007, we amended the credit agreement to permit
dividend payments on existing and future hybrid capital
notwithstanding a default or an event of default under the
credit agreement. On April 13, 2006, the agreement was
amended to remove any downward adjustment on maintaining the
Companys consolidated tangible net worth in the event of a
net loss. The Company must also not permit its consolidated
leverage ratio of total consolidated debt to consolidated
tangible net worth to exceed 35%. In addition, the credit
facilities contain other customary affirmative and negative
covenants as well as certain customary events of default,
including with respect to a change in control. The various
affirmative and negative covenants, include, among others,
covenants that, subject to important exceptions, restrict the
ability of the Company and its subsidiaries to: create or permit
liens on assets; engage in mergers or consolidations; dispose of
assets; pay dividends or other distributions, purchase or redeem
the Companys equity securities or those of its
subsidiaries and make other restricted payments; permit the
rating of any insurance subsidiary to fall below A.M. Best
financial strength rating of B++ or Standard &
Poors (S&P) financial strength rating of
A-; make certain investments; agree with others to limit the
ability of the Companys subsidiaries to pay dividends or
other restricted payments or to make loans or transfer assets to
the Company or another of its subsidiaries. The credit
facilities also include covenants that restrict the ability of
our subsidiaries to incur indebtedness and guarantee obligations.
On April 29, 2009, Aspen Bermuda replaced its existing letter of
credit facility with Citibank Europe dated October 29, 2008
in a maximum aggregate amount of up to $450 million with a
new letter of credit facility in a maximum aggregate amount of
up to $550 million.
Contractual
Obligations and Commitments
The following table summarizes our contractual obligations
(other than our obligations to employees, our Perpetual PIERS
and our Perpetual Preference Shares) under long-term debt,
operating leases and reserves relating to insurance and
reinsurance contracts as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Later
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Years
|
|
|
Total
|
|
|
|
($ in millions)
|
|
|
Operating Lease Obligations
|
|
|
4.6
|
|
|
|
7.8
|
|
|
|
7.5
|
|
|
|
6.6
|
|
|
|
6.5
|
|
|
|
27.8
|
|
|
$
|
60.8
|
|
Long-Term Debt Obligations(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250.0
|
|
|
$
|
250.0
|
|
Reserves for Losses and loss adjustment expenses(2)
|
|
$
|
524.7
|
|
|
$
|
769.3
|
|
|
$
|
481.8
|
|
|
$
|
345.4
|
|
|
$
|
259.2
|
|
|
$
|
884.7
|
|
|
$
|
3,265.1
|
|
|
|
|
(1)
|
|
The long-term debt obligations
disclosed above do not include the $15 million annual
interest payments on our outstanding senior notes.
|
|
(2)
|
|
In estimating the time intervals
into which payments of our reserves for losses and loss
adjustment expenses fall, as set out above, we have utilized
actuarially assessed payment patterns. By the nature of the
insurance and reinsurance contracts under which these
liabilities are assumed, there can be no certainty that actual
payments will fall in the periods shown and there could be a
material acceleration or deceleration of claims payments
depending on factors outside our control. This uncertainty is
heightened by the short time in which we have operated, thereby
providing limited Company-specific claims loss payment patterns.
The total amount of payments in respect of our reserves, as well
as the timing of such payments, may differ materially from our
current estimates for the reasons set out above under
Critical Accounting Policies-Reserves for
Losses and Loss Expenses.
|
Further information on operating leases is given in our 2008
Annual Report on
Form 10-K
filed with the United States Securities and Exchange Commission.
60
For a discussion of derivative instruments we have entered into,
please see Note 7 to our unaudited condensed consolidated
financial statements for the three and six months ended
June 30, 2009 included elsewhere in this report.
Off-Balance
Sheet Arrangements
Ajax Re. Ajax Re was a variable interest
entity under the provisions of FASB interpretation
No. 46(R). We had a variable interest in the entity,
however we were not the primary beneficiary of the entity and
therefore we were not required to consolidate its results into
our consolidated financial statements. For further details on
the Ajax Re transactions please see Note 6 to the unaudited
condensed consolidated financial statements for the three and
six months ended June 30, 2009 included elsewhere in this
report.
We are not party to any transaction, agreement or other
contractual arrangement to which an affiliated entity
unconsolidated with us is a party, other than that noted above
with Ajax Re, that management believes is reasonably likely to
have a current or future effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Cartesian Iris 2009A L.P. On May 19, 2009
we invested $25.0 million with Cartesian Iris 2009A L.P.
through our wholly owned subsidiary, Acorn Limited. Cartesian
Iris 2009A L.P. is a Delaware Limited Partnership formed to
provide capital to Iris Re, a newly formed Class 3 Bermuda
reinsurer focusing on insurance linked securities. In addition
to returns on our investment, we will receive a fee for
providing advice on risk selection, pricing and portfolio
design. In the three and six months ended June 30, 2009, no
fee was paid or payable to the Company. For more information
please see Note 5 and 11(c) to the unaudited condensed
consolidated financial statements for the three and six months
ended June 30, 2009 included elsewhere in this report.
Effects
of Inflation
Inflation may have a material effect on our consolidated results
of operations by its effect on interest rates and on the cost of
settling claims. The potential exists, after a catastrophe or
other large property loss, for the development of inflationary
pressures in a local economy as the demand for services such as
construction typically surges. We believe this had an impact on
the cost of claims arising from the 2005 hurricanes. The cost of
settling claims may also be increased by global commodity price
inflation. We seek to take both these factors into account when
setting reserves for any events where we think they may be
material.
Our calculation of reserves for losses and loss expenses in
respect of casualty business includes assumptions about future
payments for settlement of claims and claims-handling expenses,
such as medical treatments and litigation costs. We write
casualty business in the United States, the United Kingdom and
Australia and certain other territories, where claims inflation
has in many years run at higher rates than general inflation. To
the extent inflation causes these costs to increase above
reserves established for these claims, we will be required to
increase our loss reserves with a corresponding reduction in
earnings. The actual effects of inflation on our results cannot
be accurately known until claims are ultimately settled.
In addition to general price inflation we are exposed to a
persisting long-term upwards trend in the cost of judicial
awards for damages. We seek to take this into account in our
pricing and reserving of casualty business.
We also seek to take into account the projected impact of
inflation on the likely actions of central banks in the setting
of short-term interest rates and consequent effects on the
yields and prices of fixed interest securities. As of August
2009, we consider that although inflation is currently low, in
the medium-term there is a risk that inflation, interest rates
and bond yields will rise with the result that the market value
of certain of our fixed interest investments may reduce.
61
Cautionary
Statement Regarding Forward-Looking Statements
This
Form 10-Q
contains, and the Company may from time to time make other
verbal or written, forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended
(the Securities Act), and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve risks
and uncertainties, including statements regarding our capital
needs, business strategy, expectations and intentions.
Statements that use the terms believe, do not
believe, anticipate, expect,
plan, estimate, project,
seek, will, may,
aim, continue, intend,
guidance and similar expressions are intended to
identify forward-looking statements. These statements reflect
our current views with respect to future events and because our
business is subject to numerous risks, uncertainties and other
factors, our actual results could differ materially from those
anticipated in the forward-looking statements. The risks,
uncertainties and other factors set forth in the Companys
2008 Annual Report on
Form 10-K
filed with the Securities and Exchange Commission and other
cautionary statements made in this report, as well as the
following factors, should be read and understood as being
applicable to all related forward-looking statements wherever
they appear in this report.
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. We believe
that these factors include, but are not limited to, the
following:
|
|
|
|
|
the continuing and uncertain impact of the current depressed
credit environment, the banking crises and economic recessions
in many of the countries in which we operate and of the measures
being taken by governments to counter these issues;
|
|
|
|
the risk of a material decline in the value or liquidity of all
or parts of our investment portfolio;
|
|
|
|
changes in insurance and reinsurance market conditions;
|
|
|
|
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;
|
|
|
|
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;
|
|
|
|
increased counterparty risk due to the impairment of financial
institutions;
|
|
|
|
changes in the total industry losses, or our share of total
industry losses, resulting from past events such as Hurricanes
Ike and Gustav 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, any
changes in our reinsurers credit quality and the amount
and timing of reinsurance recoverables;
|
|
|
|
the impact of acts of terrorism and related legislation and acts
of war;
|
|
|
|
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 events,
than our underwriting, reserving, reinsurance purchasing or
investment practices have anticipated;
|
|
|
|
evolving interpretive issues with respect to coverage after
major loss events;
|
|
|
|
the level of inflation in repair costs due to limited
availability of labor and materials after catastrophes;
|
|
|
|
the effectiveness of our loss limitation methods;
|
|
|
|
changes in the availability, cost or quality of reinsurance or
retrocessional coverage;
|
|
|
|
the reliability of, and changes in assumptions to, natural and
man-made catastrophe pricing, accumulation and estimated loss
models;
|
62
|
|
|
|
|
loss of key personnel;
|
|
|
|
a decline in our operating subsidiaries ratings with
S&P, A.M. Best or Moodys Investor Service;
|
|
|
|
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 and the related demand and
supply dynamics as contracts come up for renewal;
|
|
|
|
decreased demand for our insurance or reinsurance products and
cyclical changes in the insurance and reinsurance sectors;
|
|
|
|
changes in government regulations or tax laws in jurisdictions
where we conduct business; and
|
|
|
|
Aspen Holdings or Aspen Bermuda becoming subject to income taxes
in the United States or the United Kingdom.
|
In addition, any estimates relating to loss events involve the
exercise of considerable judgment 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. Due to the complexity of factors contributing to
the losses and the preliminary nature of the information used to
prepare estimates, there can be no assurance that our ultimate
losses will remain within the stated amounts.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with
the other cautionary statements that are included in this
report. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new
information, future developments or otherwise or disclose any
difference between our actual results and those reflected in
such statements.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from what we
projected. Any forward-looking statements you read in this
report reflect our current views with respect to future events
and are subject to these and other risks, uncertainties and
assumptions relating to our operations, results of operations,
growth strategy and liquidity. All subsequent written and oral
forward-looking statements attributable to us or individuals
acting on our behalf are expressly qualified in their entirety
by the points made above. You should specifically consider the
factors identified in this report which could cause actual
results to differ before making an investment decision.
63
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
Interest rate risk. Our investment portfolio
consists primarily of fixed income securities. Accordingly, our
primary market risk exposure is to changes in interest rates.
Fluctuations in interest rates have a direct impact on the
market valuation of these securities. As interest rates rise,
the market value of our fixed-income portfolio falls, and the
converse is also true. Our strategy for managing interest rate
risk includes maintaining a high quality portfolio with a
relatively short duration to reduce the effect of interest rate
changes on book value.
As at June 30, 2009, our fixed income portfolio had an
approximate duration of 3.2 years. The table below depicts
interest rate change scenarios and the effect on our
interest-rate sensitive invested assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Changes in Interest Rates on Portfolio Given a
Parallel Shift in the Yield Curve
|
|
Movement in Rates in Basis Points
|
|
-100
|
|
|
-50
|
|
|
0
|
|
|
50
|
|
|
100
|
|
|
|
($ in millions, except percentages)
|
|
|
Market value $ in millions
|
|
$
|
5,431.1
|
|
|
$
|
5,347.9
|
|
|
$
|
5,259.6
|
|
|
$
|
5,169.3
|
|
|
$
|
5,078.4
|
|
Gain/(loss) $ in millions
|
|
|
171.5
|
|
|
|
88.3
|
|
|
|
0.0
|
|
|
|
(90.3
|
)
|
|
|
(181.2
|
)
|
Percentage of portfolio
|
|
|
3.26
|
%
|
|
|
1.68
|
%
|
|
|
0.00
|
%
|
|
|
(1.72
|
)%
|
|
|
(3.45
|
)%
|
Equity risk. We had invested in two funds of
hedge funds where the underlying hedge funds consisted of
diverse strategies and securities. In February 2009, we gave
notice to redeem our remaining investments in funds of hedge
funds in 2009, which would reduce our exposure to equity risk.
As the notices of redemption have taken effect, we are no longer
exposed to changes in the net asset value of the funds.
Foreign currency risk. Our reporting currency
is the U.S. Dollar. The functional currencies of our
segments are U.S. Dollars, British Pounds, Euros, Swiss
Francs, Australian Dollars and Singaporean Dollars. As of
June 30, 2009, approximately 82% of our cash, cash
equivalents and investments were held in U.S. Dollars,
approximately 10% were in British Pounds and approximately 8%
were in other currencies. For the six months ended June 30,
2009, approximately 17.5% of our gross premiums were written in
currencies other than the U.S. Dollar and the British Pound
and we expect that a similar proportion will be written in
currencies other than the U.S. Dollar and the British Pound
in the remainder of 2009. Other foreign currency amounts are
re-measured to the appropriate functional currency and the
resulting foreign exchange gains or losses are reflected in the
statement of operations. Functional currency amounts of assets
and liabilities are then translated into U.S. Dollars. The
unrealized gain or loss from this translation, net of tax, is
recorded as part of shareholders equity. The change in
unrealized foreign currency translation gain or loss during the
period, net of tax, is a component of comprehensive income. Both
the re-measurement and translation are calculated using current
exchange rates for the balance sheets and average exchange rates
for the statement of operations. We may experience exchange
losses to the extent our foreign currency exposure is not
hedged, which in turn would adversely affect our results of
operations and financial condition. Management estimates that a
10% change in the exchange rate between British Pounds and
U.S. Dollars as at June 30, 2009, would have impacted
reported net comprehensive income by approximately
$16.8 million for the six months ended June 30, 2009.
We manage our foreign currency risk by seeking to match our
liabilities under insurance and reinsurance policies that are
payable in foreign currencies with investments that are
denominated in these currencies. This may involve the use of
forward exchange contracts from time to time. A forward exchange
contract involves an obligation to purchase or sell a specified
currency at a future date at a price set at the time of the
contract. Foreign currency exchange contracts will not eliminate
fluctuations in the value of our assets and liabilities
denominated in foreign currencies, but rather allows us to
establish a rate of exchange for a future point in time. All
realized gains and losses on foreign exchange forward contracts
are recognized in the Statements of Operations. There were no
outstanding contracts at June 30, 2009 or June 30,
2008.
64
Credit risk. We have exposure to credit risk
primarily as a holder of fixed income securities. Our risk
management strategy and investment policy is to invest in debt
instruments of high credit quality issuers and to limit the
amount of credit exposure with respect to particular ratings
categories, business sectors and any one issuer. As at
June 30, 2009 and December 31, 2008, the average
rating of fixed income securities in our investment portfolio
was AA+ and AAA, respectively.
In addition, we are exposed to the credit risk of our insurance
and reinsurance brokers to whom we make claims payments for our
policyholders, as well as to the credit risk of our reinsurers
and retrocessionaires who assume business from us. Other than
fully collateralized reinsurance the substantial majority of our
reinsurers have a rating of A (Excellent), the third
highest of fifteen rating levels, or better by A.M. Best
and the minimum rating of any of our material reinsurers is
A− (Excellent), the fourth highest of fifteen
rating levels, by A.M. Best.
We have also entered into a credit insurance contract which,
subject to its terms, insures us against losses due to the
inability of one or more of our reinsurance counterparties to
meet their financial obligations to the Company. Payments are
made on a quarterly basis throughout the period of the contract
based on the aggregate limit, which was set initially at
$477 million but is subject to adjustment. See Note 7
to the unaudited financial statements for the three months ended
June 30, 2009 above.
The table below shows our reinsurance recoverables as of
June 30, 2009 and December 31, 2008, and our
reinsurers ratings.
|
|
|
|
|
|
|
|
|
|
|
As at
|
|
|
As at
|
|
A.M. Best
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
($ in millions)
|
|
|
($ in millions)
|
|
|
A++
|
|
|
16.4
|
|
|
|
15.9
|
|
A+
|
|
|
31.5
|
|
|
|
69.5
|
|
A
|
|
|
235.4
|
|
|
|
160.8
|
|
A-
|
|
|
33.6
|
|
|
|
28.6
|
|
Other
|
|
|
3.1
|
|
|
|
2.5
|
|
Not rated
|
|
|
6.3
|
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
326.3
|
|
|
|
283.3
|
|
|
|
|
|
|
|
|
|
|
65
|
|
Item 4.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
The Company, under the supervision and with the participation of
the Companys management, including the Companys
Chief Executive Officer and Chief Financial Officer, has
evaluated the design and operation of the Companys
disclosure controls and procedures as of the end of the period
of this report. Our management does not expect that our
disclosure controls or our internal controls will prevent all
errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits
of controls must be considered relative to their costs. As a
result of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the
individual acts of some persons or by collusion of two or more
people. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of
changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. As a result of the
inherent limitations in a cost-effective control system,
misstatement due to error or fraud may occur and not be
detected. Accordingly, our disclosure controls and procedures
are designed to provide reasonable, not absolute, assurance that
the disclosure requirements are met. Based on the evaluation of
the disclosure controls and procedures, the Chief Executive
Officer and Chief Financial Officer have concluded that the
Companys disclosure controls and procedures were effective
in ensuring that information required to be disclosed in the
reports filed or submitted to the Commission under the Exchange
Act by the Company is recorded, processed, summarized and
reported in a timely fashion, and is accumulated and
communicated to management, including the Companys Chief
Executive Officer and Chief Financial Officer, to allow timely
decisions regarding required disclosure.
Changes
in Internal Control over Financial Reporting
The Companys management has performed an evaluation, with
the participation of the Companys Chief Executive Officer
and the Companys Chief Financial Officer, of changes in
the Companys internal control over financial reporting
that occurred during the quarter ended June 30, 2009. Based
upon that evaluation, the Companys management is not aware
of any change in its internal control over financial reporting
that occurred during the quarter ended June 30, 2009 that
has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial
reporting.
66
OTHER
INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
Similar to the rest of the insurance and reinsurance industry,
we are subject to litigation and arbitration in the ordinary
course of business. We are not currently involved in any
material pending litigation or arbitration proceedings.
There have been no significant changes in the Companys
risk factors as discussed in the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008. However, also please
refer to the Cautionary Statement Regarding
Forward-Looking Statements provided elsewhere in this
report.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None.
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
Submissions
of Matters to a Vote of Security Holders
|
(a) Our 2009 Annual General Meeting of Shareholders was
held on April 29, 2009.
(b) Proxies were solicited by our management in connection
with our 2009 Annual General Meeting.
(c) The following matters were voted upon at the Annual
General Meeting with the voting results indicated. Paragraphs
(5) through (11) below relate to matters concerning
the Companys subsidiaries. The Companys Bye-Law 84
provides that if the Company is required or entitled to vote at
a general meeting of any of its subsidiaries organized under the
laws of a jurisdiction outside the United States of America
(each, a
Non-U.S. Subsidiary)
the Board will refer the subject matter of the vote to the
Shareholders of the Company in a general meeting of the Company.
(1) Proposal Regarding Re-Election of Mr. Richard
Houghton, Mr. Glyn Jones, and Mr. Julian Cusack as
Class II Directors, who will serve until our 2012 Annual
General Meeting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes
|
|
Nominee
|
|
Votes For
|
|
|
Against
|
|
|
Richard Houghton
|
|
|
70,007,635
|
|
|
|
3,747,424
|
|
Glyn Jones
|
|
|
66,545,532
|
|
|
|
7,209,527
|
|
Julian Cusack
|
|
|
71,659,209
|
|
|
|
2,095,850
|
|
(2) Proposal Regarding the Appointment of the
Companys Independent Registered Public Accounting Firm.
At the 2009 Annual General Meeting, the Shareholders voted to
approve the appointment of KPMG Audit Plc (KPMG) as
our independent registered public accounting firm for the 2009
fiscal year, and have authorized the Companys Board of
Directors through the Audit Committee to set their remuneration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes
|
|
Votes
|
|
|
Votes For
|
|
Against
|
|
Abstained
|
|
KPMG
|
|
|
73,050,956
|
|
|
|
700,734
|
|
|
|
3,369
|
|
67
(3) Proposal Regarding the Amendment and Restatement
of the Bye-Laws of the Company
At the 2009 Annual General Meeting, the Shareholders voted to
approve the amendment and restatement of the Companys
Bye-Laws.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
72,121,162
|
|
1,592,094
|
|
41,803
|
(4) Proposal Regarding the Amendment of the Memorandum
of Association of the Company
At the 2009 Annual General Meeting, the Shareholders voted to
approve certain amendments to the Companys Memorandum of
Association.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,693,917
|
|
23,965
|
|
37,177
|
(5) Proposals regarding various matters concerning Aspen
Insurance UK Limited (Aspen U.K.), a wholly owned
insurance company organized under the laws of England and Wales
At the 2009 Annual General Meeting, the Shareholders elected
eight nominees as designated company directors who will serve as
AIUK directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Glyn Jones
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Christopher OKane
|
|
|
72,370,674
|
|
|
|
1,384,385
|
|
Richard Houghton
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Ian Cormack
|
|
|
73,031,162
|
|
|
|
723,897
|
|
Richard Bucknall
|
|
|
73,369,915
|
|
|
|
385,144
|
|
Stephen Rose
|
|
|
72,430,487
|
|
|
|
1,324,572
|
|
Oliver Peterken
|
|
|
72,901,864
|
|
|
|
853,195
|
|
Heidi Hutter
|
|
|
73,382,124
|
|
|
|
372,935
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend Aspen U.K.s Articles of Association to modify the
voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that the voting rights of any shares of
the Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,693,844
|
|
21,633
|
|
39,582
|
(6) Proposals regarding various matters concerning Aspen
Insurance UK Services Limited (Aspen Services), a
wholly owned company organized under the laws of England and
Wales
At the 2009 Annual General Meeting, the Shareholders elected
three nominees as designated company directors who will serve as
Aspen Services directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Christopher OKane
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Richard Houghton
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Stephen Rose
|
|
|
73,382,532
|
|
|
|
372,527
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend Aspen Services Articles of Association to modify the
voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that voting rights of any shares of the
Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Abstained
|
|
Votes Against
|
|
72,665,000
|
|
1,050,292
|
|
39,767
|
68
(7) Proposals regarding various matters concerning Aspen
(UK) Holdings Limited (Aspen (UK) Holdings), a
wholly owned company organized under the laws of England and
Wales
At the 2009 Annual General Meeting, the Shareholders elected
three nominees as designated company directors who will serve as
Aspen (UK) Holdings Limited directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Christopher OKane
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Richard Houghton
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Stephen Rose
|
|
|
73,382,532
|
|
|
|
372,527
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend Aspen (UK) Holdings Articles of Association to
modify the voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that voting rights of any shares of the
Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,693,156
|
|
21,695
|
|
40,208
|
(8) Proposals regarding various matters concerning AIUK
Trustees Limited (AIUK Trustees), a wholly owned
company organized under the laws of England and Wales
At the 2009 Annual General Meeting, the Shareholders elected
five nominees as designated company directors who will serve as
AIUK Trustees directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Stephen Rose
|
|
|
73,382,532
|
|
|
|
372,527
|
|
John Henderson
|
|
|
73,144,858
|
|
|
|
610,201
|
|
Christopher Woodman
|
|
|
73,144,658
|
|
|
|
610,401
|
|
Michael Cain
|
|
|
73,144,648
|
|
|
|
610,411
|
|
Katherine Wade
|
|
|
73,150,599
|
|
|
|
604,460
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend AIUK Trustees Articles of Association to modify the
voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that voting rights of any shares of the
Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
72,908,799
|
|
806,863
|
|
39,397
|
(9) Proposals regarding various matters concerning Aspen
Underwriting Limited (AUL), a wholly owned company
organized under the laws of England and Wales
At the 2009 Annual General Meeting, the Shareholders elected two
nominees as designated company directors who will serve as AUL
directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
Votes Against
|
|
Karen Green
|
|
|
72,681,713
|
|
|
|
1,073,346
|
|
Christopher OBrien
|
|
|
72,906,564
|
|
|
|
848,495
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend AULs Articles of Association to modify the voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that voting rights of any shares of the
Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,692,303
|
|
22,546
|
|
40,210
|
69
(10) Proposals regarding various matters concerning Aspen
Managing Agency Limited (AMAL), a wholly owned
company organized under the laws of England and Wales
At the 2009 Annual General Meeting, the Shareholders elected
eight nominees as designated company directors who will serve as
AMAL directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Richard Bucknall
|
|
|
73,382,532
|
|
|
|
372,527
|
|
John Hobbs
|
|
|
73,376,322
|
|
|
|
378,737
|
|
James Ingham Clark
|
|
|
73,144,637
|
|
|
|
610,422
|
|
Robert Long
|
|
|
73,144,748
|
|
|
|
610,311
|
|
Christopher OBrien
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Matthew Yeldham
|
|
|
73,144,748
|
|
|
|
610,311
|
|
Karen Green
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Heidi Hutter
|
|
|
73,382,532
|
|
|
|
372,527
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend AMALs Articles of Association to modify the voting
push-up
provision in Article 28, so that Article 28 is only
applicable in the event that voting rights of any shares of the
Company are adjusted pursuant to Company Bye-Laws
63-67.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
72,908,399
|
|
806,763
|
|
39,897
|
|
|
|
(11)
|
|
Proposals regarding various
matters concerning Aspen Insurance Limited (Aspen
Bermuda), a wholly owned insurance company organized under
the laws of Bermuda
|
At the 2009 Annual General Meeting, the Shareholders elected
seven nominees as designated company directors who will serve as
Aspen Bermuda directors.
|
|
|
|
|
|
|
|
|
Nominee
|
|
Votes For
|
|
|
Votes Against
|
|
|
Christopher OKane
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Julian Cusack
|
|
|
73,382,532
|
|
|
|
372,527
|
|
James Few
|
|
|
73,140,038
|
|
|
|
615,021
|
|
Oliver Peterken
|
|
|
73,382,532
|
|
|
|
372,527
|
|
David Skinner
|
|
|
73,139,938
|
|
|
|
615,121
|
|
Karen Green
|
|
|
73,382,532
|
|
|
|
372,527
|
|
Heather Kitson
|
|
|
73,145,969
|
|
|
|
609,090
|
|
At the 2009 Annual General Meeting, the Shareholders voted to
appoint KPMG as the auditor of Aspen Bermuda for fiscal year
ended December 31, 2009 and to grant authority to the
Companys Board through its Audit Committee to determine
their remuneration, subject to KPMG Audit Plc being appointed as
the Companys independent registered public accounting firm.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,028,593
|
|
711,852
|
|
14,614
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend Aspen Bermudas Bye-Laws.
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
72,909,679
|
|
806,808
|
|
38,572
|
At the 2009 Annual General Meeting, the Shareholders voted to
amend Aspen Bermudas Memorandum of Association.
70
|
|
|
|
|
Votes For
|
|
Votes Against
|
|
Votes Abstained
|
|
73,692,934
|
|
23,240
|
|
38,885
|
|
|
Item 5.
|
Other
Information
|
None.
(a) The following sets forth those exhibits filed pursuant
to Item 601 of
Regulation S-K:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
10
|
.1
|
|
Form of 2009 Performance Share Agreement
|
|
31
|
.1
|
|
Officer Certification of Christopher OKane, Chief
Executive Officer of Aspen Insurance Holdings Limited, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, filed with this report.
|
|
31
|
.2
|
|
Officer Certification of Richard Houghton, Chief Financial
Officer of Aspen Insurance Holdings Limited, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002, filed with
this report.
|
|
32
|
.1
|
|
Officer Certification of Christopher OKane, Chief
Executive Officer of Aspen Insurance Holdings Limited, and
Richard Houghton, Chief Financial Officer of Aspen Insurance
Holdings Limited, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, submitted with this report.
|
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ASPEN INSURANCE HOLDINGS LIMITED
(Registrant)
Date: August 4, 2009
|
|
|
|
By:
|
/s/ Christopher
OKane
|
Christopher OKane
Chief Executive Officer
Date: August 4, 2009
Richard Houghton
Chief Financial Officer
72