Attached files
| file | filename |
|---|---|
| 8-K - 8-K - ASPEN INSURANCE HOLDINGS LTD | form8-kq32016.htm |
| EX-99.2 - EXHIBIT 99.2 - ASPEN INSURANCE HOLDINGS LTD | a992-ahlq316.htm |
| EX-99.1 - EXHIBIT 99.1 - ASPEN INSURANCE HOLDINGS LTD | a991-ahlq316.htm |
Aspen Insurance Holdings Limited
INVESTOR PRESENTATION
THIRD QUARTER 2016
Exhibit 99.3
AHL: NYSE 2
This slide presentation is for information purposes only. It should be read in conjunction with our financial supplement posted on our website on the Investor Relations page and with other documents filed or to be
filed shortly by Aspen Insurance Holdings Limited (the “Company” or “Aspen”) with the United States Securities and Exchange Commission (the "SEC").
Non-GAAP Financial Measures: In presenting Aspen's results, management has included and discussed certain “non-GAAP financial measures” as such term is defined in Regulation G. Management believes that
these non-GAAP financial measures, which may be defined differently by other companies, better explain Aspen's results of operations in a manner that allows for a more complete understanding of the underlying
trends in Aspen's business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such non-GAAP financial measures to their
respective most directly comparable GAAP financial measures is included herein or in the financial supplement, as applicable, which can be obtained from the Investor Relations section of Aspen's website at
www.aspen.co.
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995: This presentation contains written or oral "forward-looking statements" within the meaning of the U.S. federal securities
laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical
or current facts, and can be identified by the use of words such as “expect,” “assume,” “objective,” “intend,” “plan,” “believe,” “do not believe,” “aim,” “project,” “anticipate,” “seek,” “will,” “likely,” “estimate,” “may,”
“continue,” “guidance,” “outlook,” “trends,” “future,” “could,” “would,” “should,” “target,” "on track" and similar expressions of a future or forward-looking nature. All forward-looking statements address matters that
involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aspen believes these factors include, but
are not limited to: our ability to successfully implement steps to further optimize the business portfolio, ensure capital efficiency and enhance investment returns; the possibility of greater frequency or severity of
claims and loss activity, including as a result of natural or man-made (including economic and political risks) catastrophic or material loss events, than our underwriting, reserving, reinsurance purchasing or
investment practices have anticipated; the assumptions and uncertainties underlying reserve levels that may be impacted by future payments for settlements of claims and expenses or by other factors causing
adverse or favorable development, including our assumptions on inflation costs associated with long-tail casualty business which could differ materially from actual experience; the impact of the vote and resulting
negotiations as a result of the vote by the U.K. electorate in favor of a U.K. exit from the European Union in a recent referendum; the reliability of, and changes in assumptions to, natural and man-made catastrophe
pricing, accumulation and estimated loss models; decreased demand for our insurance or reinsurance products and cyclical changes in the insurance and reinsurance industry; the models we use to assess our
exposure to losses from future natural catastrophes contain inherent uncertainties and our actual losses may differ significantly from expectations; our capital models may provide materially different indications than
actual results; increased competition from existing insurers and reinsurers and from alternative capital providers and insurance linked funds and collateralized special purpose insurers on the basis of pricing,
capacity, coverage terms, new capital, binding authorities to brokers or other factors and the related demand and supply dynamics as contracts come up for renewal; 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; our acquisition strategy; changes in market conditions in the agriculture industry,
which may vary depending upon demand for agricultural products, weather, commodity prices, natural disasters, and changes in legislation and policies related to agricultural products and producers; termination of,
or changes in, the terms of the U.S. Federal Multiple Peril Crop Insurance Program or the U.S. Farm Bill, including modifications to the Standard Reinsurance Agreement put in place by the Risk Management
Agency of the U.S. Department of Agriculture; the recent consolidation in the (re)insurance industry; loss of one or more of our senior underwriters or key personnel; changes in our ability to exercise capital
management initiatives (including our share repurchase program) or to arrange banking facilities as a result of prevailing market conditions or changes in our financial position; changes in the availability, cost or
quality of reinsurance or retrocessional coverage; changes in general economic conditions, including inflation, deflation, foreign currency exchange rates, interest rates and other factors that could affect our financial
results; the risk of a material decline in the value or liquidity of all or parts of our investment portfolio; the risks associated with the management of capital on behalf of investors; evolving issues with respect to
interpretation of coverage after major loss events; our ability to adequately model and price the effects of climate cycles and climate change; any intervening legislative or governmental action and changing judicial
interpretation and judgments on insurers’ liability to various risks; the risks related to litigation; the effectiveness of our risk management loss limitation methods, including our reinsurance purchasing; changes in the
total industry losses, or our share of total industry losses, resulting from past events and, with respect to such events, our reliance on loss reports received from cedants and loss adjustors, our reliance on industry
loss estimates and those generated by modeling techniques, changes in rulings on flood damage or other exclusions as a result of prevailing lawsuits and case law; the impact of one or more large losses from
events other than natural catastrophes or by an unexpected accumulation of attritional losses and deterioration with loss estimates; the impact of acts of terrorism, acts of war and related legislation; any changes in
our reinsurers’ credit quality and the amount and timing of reinsurance recoverables; the continuing and uncertain impact of the current depressed lower growth economic environment in many of the countries in
which we operate; our reliance on information and technology and third-party service providers for our operations and systems; the level of inflation in repair costs due to limited availability of labor and materials after
catastrophes; a decline in our operating subsidiaries’ ratings with Standard & Poor's Financial Services LLC (“S&P”), A.M. Best Company Inc. (“A.M. Best”) or Moody's Investors Service, Inc. (“Moody’s”); the failure
of our reinsurers, policyholders, brokers or other intermediaries to honor their payment obligations; our reliance on the assessment and pricing of individual risks by third parties; our dependence on a few brokers for
a large portion of our revenues; the persistence of heightened financial risks, including excess sovereign debt, the banking system and the Eurozone crisis; changes in government regulations or tax laws in
jurisdictions where we conduct business; changes in accounting principles or policies or in the application of such accounting principles or policies; increased counterparty risk due to the credit impairment of financial
institutions; and Aspen or Aspen Bermuda Limited becoming subject to income taxes in the United States or the United Kingdom. For a more detailed description of these uncertainties and other factors, please see
the “Risk Factors” section in Aspen's Annual Report on Form 10-K as filed with the SEC on February 19, 2016. Aspen undertakes no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.
In addition, any estimates relating to loss events involve the exercise of considerable judgment and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market
intelligence, initial tentative loss reports and other sources. The actuarial range of reserves and management's best estimate represents a distribution from our internal capital model for reserving risk based on our
then current state of knowledge and explicit and implicit assumptions relating to the incurred pattern of claims, the expected ultimate settlement amount, inflation and dependencies between lines of business. Due to
the complexity of factors contributing to the losses and the preliminary nature of the information used to prepare these estimates, there can be no assurance that Aspen's ultimate losses will remain within the stated
amount.
SAFE HARBOR DISCLOSURE
AHL: NYSE 3
Specialty
Other
Property
Casualty
Property Cat
35%
23%
22%
20%
Property
and
Casualty
Financial
and
Professional
Lines
Marine,
Aviation and
Energy
50%
27%
23%
Reinsurance
Insurance
44%
56%
ASPEN OVERVIEW
• Global specialty insurer and reinsurer with long-term
track record of shareholder value creation
• $3.2bn gross written premiums for the last twelve
months ended September 30, 2016
• Underwriting focused company with industry-leading
underwriting expertise and collaborative culture
• Well-run, risk aware business building value in a
controlled way
• Clear strategy to create superior value through well-
balanced business portfolio, enhancing investment
returns and capital efficiency
• Proven management team, disciplined risk
management and balance sheet strength
• Ratings/Outlook of A / Stable (S&P), A2 / Stable
(Moody’s) and A Excellent/ Stable (A.M. Best) for
Aspen’s operating subsidiaries
Q3 2016 LTM (1) INSURANCE BUSINESS LINES
Q3 2016 LTM (1) COMPANY BUSINESS MIX
(1) LTM: Last Twelve Months through September 30, 2016
Q3 2016 LTM (1) REINSURANCE BUSINESS LINES
AHL: NYSE 4
Diluted Book Value Per Share Accumulated Dividends per Ordinary Share
Q3 2006 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2016
21.41 $21.83
$27.08 $28.19
$34.14
$38.90 $38.21 $40.65
$40.90
$45.13 $46.00
$50.49
$1.17 $1.32
$1.92 $2.52
$3.12
$3.72 $4.32
$4.98 $5.70
$6.50
$7.34
$7.99
STRONG TRACK RECORD OF CAPITAL RETURNED TO SHAREHOLDERS
CAGR 10.0
%(2)
• Built a diversified specialty
insurer and reinsurer with
strong track record
• Average 10 year
Operating ROE of
10.9%(1)
• Investment in growing the
business profitably is key
priority
• Will return capital to
shareholders when that is
financially more attractive
than deploying elsewhere
• Returned over $2bn to
shareholders through
ordinary dividends and share
repurchases from inception
through Q3 2016
(1) Average of annualized quarterly Operating ROE from 9/30/2006 through 9/30/2016.
(2) Compound Annual Growth Rate calculated to reflect total equity and accumulated dividends per ordinary share from 9/30/2006 through 9/30/2016.
AHL: NYSE 5
ASPEN RE – AN ESTABLISHED INDUSTRY LEADER
(1) LTM: Last Twelve Months through September 30, 2016
(2) 2015 premiums from APAC, LatAM and MENA
(3) See " Safe Harbor Disclosure" slide 2
Q3 2016 LTM (1) GWP $1.40 billion
BY BUSINESS LINE
• Deep and enduring relationships with well-chosen
clients, significant industry expertise and excellent
track record of performance
• Innovative and thoughtful solutions; utilizing multi-
line capabilities and Aspen Capital Markets to
leverage third-party capital
• Increasingly diversified portfolio across four sub-
segments
• Regional structure to meet increasing demand for
local market solutions
• Significant long-term growth prospects in emerging
markets, which accounted for 19% of total
Reinsurance premiums in 2015(2) (3)
• Continued focus on research and development of
new products, bringing innovation, deep expertise
and fresh thinking to our markets and operations
• Successful mid-year renewals and new business
opportunities reaffirm Aspen’s relevance, strategy
and broad reach in a difficult market
Specialty
Other
Property
Casualty
Property
Cat
35%
23%
22%
20%
Aspen Re is a powerful contributor to Operating ROE and has strong future prospects (3)
SPECIALTY OTHER PROPERTY
• Credit & Surety • Treaty Risk Excess
• Agriculture • Treaty Pro Rata
• Other Specialty including Aviation,
Energy and Marine • Global Property Facultative
CASUALTY PROPERTY CATASTROPHE
• U.S. Casualty Treaty • Treaty Catastrophe
• International Casualty Treaty
• Global Casualty Facultative
AHL: NYSE 6
Corn
Soybeans
Wheat
Cotton
Grain
Sorghum
All Other
32%
17%11%
7%
4%
29%
ASPEN RE GROWTH & DIVERSIFICATION - AGRILOGIC ACQUISITION
• U.S. crop insurance business and agricultural consultancy within the Specialty Re sub-segment
• High quality, diversifying business for Aspen, excellent long-term growth opportunity(1)
• Significant intellectual capital, strong analytical tools and capabilities
• Enhanced marketing, combined with larger Aspen balance sheet, offers excellent growth
opportunity(1)
• Limited integration risk(1) - Aspen Re has a long relationship with AgriLogic
• Expected to be a double digit ROE business when fully ramped up(1)
• Transaction expected to be broadly neutral to operating ROE in 2016 and accretive to operating
ROE in 2017(1)
(1) See " Safe Harbor Disclosure" slide 2
California
Illinois
Kansas
Texas
Missouri
All Other
22%
18%
17%
13%
6%
24%
2015 GWP $185 million
BY CROP
2015 GWP $185 million
BY STATE
AHL: NYSE 7
Property
and
Casualty
Financial
and
Professional
Lines
Marine,
Aviation and
Energy
50%
27%
23%
ASPEN INSURANCE – LEADING SPECIALTY INSURER
PROPERTY & CASUALTY FINANCIAL & PROFESSIONAL LINES MARINE, AVIATION AND ENERGY
• U.K. Property & Construction • Accident & Health • Aviation
• U.S. Property • Crisis Management • Energy
• U.K. Regional Property & Liability • Credit and Political Risk • Marine & Energy Liability
• Global Excess Casualty • Professional Liability (Indemnity) • Marine Hull
• U.K. Casualty • Management Liability / Directors & Officers • Specie & Fine Art
• U.S. Casualty • Technology Liability & Data Protection Indemnity • U.S. Marine Energy & Construction
• Environmental Liability • U.S. Surety
• U.S. Programs • Financial Institutions
• Railroad
(1) LTM: Last Twelve Months through September 30, 2016
(2) See "Safe Harbor Disclosure" slide 2
Q3 2016 LTM (1) GWP $1.77 billion
BY BUSINESS LINE
• A growing force in global specialty insurance offering
creative, customized solutions to complex risks, deep local
knowledge and expertise, integrated claims and underwriting
teams and select distribution.
• Built on two main specialty insurance platforms:
• U.S. - Growing specialty insurance business;
diversified portfolio with broadening range of product
offerings; expanding network of U.S. offices
• International - Highly respected lead expertise in niche
lines; impressive variety of specialty products with
business predominantly originating in Lloyd's and the
London market; hubs in Bermuda, Dublin, Singapore
and Zurich
Aspen Insurance continues to diversify and expand its global product offering(2)
AHL: NYSE 8
ASPEN INSURANCE: ENHANCING A LEADING GLOBAL SPECIALTY INSURANCE
FRANCHISE
• Track record of investing for profitable organic growth, e.g. U.S. Insurance platform
• Aspen Insurance infrastructure was built to be leveraged for greater scale
• Strategies to accelerate the growth and profitability of Aspen Insurance:
• Aligned business structure more closely with clients and product distribution
▪ For globally traded risks, business organized into 13 product lines
▪ For regionally traded risks (e.g. UK and U.S.), local management and responsibilities
• Enriched targeted areas of underwriting expertise:
▪ Hired David Cohen, a best in class specialty underwriting leader with a successful history of running
a global specialty business
▪ Promoted internally and hired seasoned global underwriting leaders to manage global lines; hired
select underwriting experts and upgraded underwriting talent in key lines
• Expected strategy outcomes:
• Short term: Decrease volatility in Insurance business by evaluating line size, exposure profile, reinsurance
arrangements, and business mix under new global leadership, positive GWP impact expected in 2017 and
beyond(1)
• Medium and long term: Lower loss ratio driven by less volatility(1)
(1) See " Safe Harbor Disclosure" slide 2
Anticipate larger, more profitable business, more stable outcomes and better loss ratios(1)
AHL: NYSE 9
Property
Casualty
Professional
Lines
60%25%
15%
Programs
Property
Professional
Liability
Marine
Energy
Casualty
Environmental
Liability
Management
Liability
Surety
24%
17%
15%
5%
7%
15%
8%
4% 5%
BUILT A DIVERSIFIED U.S. SPECIALTY INSURANCE PORTFOLIO
2010 U.S. INSURANCE TEAMS GWP: $167m Q3 2016 LTM (1) U.S. INSURANCE TEAMS GWP: $891m
• Diversified portfolio with broadening range of product offerings focused on delivering strong premium
growth and solid underwriting margins
• Over $250m of net operating losses carried forward; can be applied against future U.S. Insurance
profits(2)
(1) LTM: Last Twelve Months through September 30, 2016
(2) See "Safe Harbor Disclosure" slide 2
AHL: NYSE 10
BUILT A DIVERSIFIED INTERNATIONAL INSURANCE PORTFOLIO
Lloyd's
UK
Bermuda
54%
44%
2%
Energy
Physical
Damage
Aviation
Credit and
Political Risks
Marine and
Energy Liability
Global Excess
Casualty
Financial and
Corporate
Risks
Professional
and
Management
Liability
Marine Hull
Specie & Fine
Art
Crisis
Management
12%
14%
3%
19%
3%
14%
15%
8%
3%
9%
Q3 2016 LTM (1) LLOYD'S
GWP: $481m
Q3 2016 LTM (1) INTERNATIONAL INSURANCE TEAM
GWP: $874m
• International Insurance teams diversified by platform and line
• With more volatile rate environment than the U.S.
• Teams remain disciplined and focused on better rated opportunities
• Some international lines downsized in response to changing market conditions
(1) LTM: Last Twelve Months through September 30, 2016
AHL: NYSE 11
CAPITAL EFFICIENCY:
SUSTAINED RECORD OF PROACTIVE MANAGEMENT OF CAPITAL
• Continued focus on responsible capital stewardship: hold more than regulatory and risk capital
models suggest; return capital to shareholders when it is financially more attractive to do so than
deploying elsewhere
• Aspen has generated approximately $4.6bn of capital since inception
• Returned over $2bn of cumulative repurchases and ordinary dividends to shareholders through
September 30, 2016, including all ordinary shareholder funds raised at our Initial Public and
Secondary Offerings
• 9% dividend increase over the last five years
• Returned a cumulative 68% of operating income to shareholders since inception through Q3 2016
($m)
Cumulative Repurchases Cumulative Dividends
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q3 2016
$8 $56
$313 $467
$617 $667
$1,122 $1,172 $1,282
$1,639
$1,870 $2,005
$2,095
>$2bn of Total Capital Returned
through Q3 2016
AHL: NYSE 12
CAREFUL INVESTMENT MANAGEMENT AND CONSISTENT INVESTMENT
RETURNS
39% IG Credit
13% US
Treasury
12% Cash &
Short-Term
14% Agency
MBS
9% Equities
7% Sovereign
3% Non US
Agency
2% US Agency
1% ABS
1% Non US Govt
Guaranteed
0.2% CMBS
0.4% Munis
PORTFOLIO ALLOCATIONS
As at September 30, 2016
100% = 8.9 billion(1)
• Stable investment income and total return
through all market cycles
• Since 2011 have tactically built the risk
asset portfolio and dynamically managed
the positions
• 13.1% of the portfolio invested in risk
assets (including 9.0% in equities, and
3.7% in BBB emerging market debt)
• Fixed income portfolio duration: 3.64 years
(1) Excludes amounts attributable to variable interest entities; may not add to 100% due to rounding
AHL: NYSE 13
CONCLUSION:
FOCUSED ON SHAREHOLDER VALUE
• Deep underwriting expertise and understanding of client needs and risks
• Pursuing selective, profitable growth in exposures we understand, subject to market
conditions(1)
• Diversified platform allows us to focus on better rated opportunities as they arise,
including:
• Reinsurance
▪ Cyber, Engineering, Bond, Terrorism, Marine
• Insurance
▪ Enhance our global product offering in areas such as Accident and Health,
Environmental, Professional Liability, Technology Liability & Data Protection Indemnity,
Marine, and Crisis Management
(1) See “Safe Harbor Disclosure” slide 2
Aim to deliver growth in Operating ROE and Diluted Book Value Per Share over time(1)
APPENDIX
AHL: NYSE 15
UNDERWRITING EXPERTISE: ASPEN’S NATURAL CATASTROPHE
EXPOSURES IN MAJOR PERIL ZONES AS AT OCTOBER 1, 2016
100 YEAR RETURN PERIOD AS % OF TOTAL
SHAREHOLDERS’ EQUITY AND IN $ MILLIONS(1)
1 in 100 year tolerance:
17.5% of total shareholders’ equity
1 in 250 year tolerance:
25.0% of total shareholders’ equity
(1) Based on Shareholders' equity of $3,661.5 million (excluding non-controlling interest and net proceeds of $241.3 million from the issuance of the 5.625% Perpetual Non-
Cumulative Preference Shares) as at September 30, 2016. The estimates reflect Aspen's view of the modelled maximum losses at the return periods shown which include
input from various third party vendor models, Aspen's proprietary adjustments to these models, and planned reinsurance purchases. The U.S. regional WS PMLs reflect the
outward reinsurance structures in place. Catastrophe loss experience may materially differ from the modelled PMLs due to limitations in one or more of the models or
uncertainties in the application of policy terms and limits.
$0 $100 $200 $300 $400 $500 $600
250 year return period as $m of Total Shareholder Equity
U.S. Eastern Quake
Cascadia EQ
Japan All Perils
European Wind
Northeast and MidAtlantic WS
Texas and Gulf WS
Florida and Southeast WS
California EQ
$300
$241
$165
$289
$403
$432
$485
$449
• Probable Maximum Losses (“PMLs”) are net of reinsurance and Aspen Capital Markets' third-party capital
$0 $100 $200 $300 $400
100 year return period as $m of Total Shareholder Equity
U.S. Eastern Quake
Cascadia EQ
Japan All Perils
European Wind
Northeast and MidAtlantic WS
Texas and Gulf WS
Florida and Southeast WS
California EQ
$58
$101
$133
$198
$217
$273
$330
$363
1.6% 8.2%
2.8%
3.6%
6.6%
5.4%
4.5%
5.9%
7.9%
7.5%
11.0%
9.0%
9.9% 12.3%
11.8%
13.2%
250 YEAR RETURN PERIOD AS % OF TOTAL
SHAREHOLDERS’ EQUITY AND IN $ MILLIONS(1)
Aspen Insurance Holdings Limited
INVESTOR PRESENTATION
THIRD QUARTER 2016