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Aspen Insurance Beats Earnings on Higher Premiums

MRH PTP AWH AHL

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Aspen Insurance Holdings Ltd. (AHL - Snapshot Report) reported third-quarter 2013 operating net income of $1.05 per share, which surpassed the Zacks Consensus Estimate of 80 cents by 31.2%. However, the results lagged the year-ago quarter number by 21.6%.

The outperformance of Aspen Insurance came on the back of higher-than-expected net earned premiums at the Insurance segment.

Including net realized investment gains, Aspen Insurance’s net income came in at $1.43 per share, down 1.4% year over year. Increase in total underwriting expenses was responsible for the decline in net income.

Operational Update

Gross premiums written increased 4.2% during the quarter to $581.6 million. Higher gross written premiums in the Insurance segment drove the overall improvement, which was however, partially offset by weak results in the Reinsurance segment.

Net investment income amounted to $45 million, down 7.4% year over year.

Total underwriting expenses of Aspen Insurance stood at $499.6 million in the third quarter, reflecting a year-over-year hike of 11.3%. The increase was attributable to  higher losses and loss adjustment expenses (up 13.8% year over year), policy acquisition expenses (up 7.2%) and general, administrative and corporate expenses (up 9%).

The underwriting income of Aspen Insurance declined 27.2% year over year to $59.5 million.

Combined ratio deteriorated 480 basis points (bps) year over year to 91.8%, the downturn stemming from higher catastrophe losses.

Segment Update

Reinsurance:  Gross written premiums of $219.5 million declined 15.4% year over year due to higher commutations and previous year premium adjustments.

Underwriting income of $49.8 million plunged 32% from the prior-year quarter results. Lower premiums along with higher losses and loss adjustment expenses induced the decline.

Combined ratio of the segment also deteriorated 670 bps year from the prior-year quarter owing to higher catastrophe losses and $17.1 million of non-catastrophe losses.

Insurance: Gross written premiums of $362.1 million improved 21.1% year over year due to growth in Casualty and Financial and Professional lines of business.

Underwriting income improved 14.1% year over year to $9.7 million, driven by higher net earned premiums.

Combined ratio deteriorated 30 bps from the year-ago quarter to 96.7%.

Financial Update

Aspen Insurance exited the third quarter with total assets of $10.3 billion, almost in line with the 2012-end level.

As of Sep 30, total cash and cash equivalents amounted to $1.2 billion, decreasing 18.1% from the end of 2012.

Aspen insurance’s long term debt of $499.2 million as of Sep 30 was in line with the 2012-end level.

Total shareholders’ equity amounted to approximately $3.3 billion, sliding 6.2% from the end of 2012.

Share Repurchase and Dividend Update

During the third quarter, Aspen Insurance spent $54.8 million to buy back 1.5 million shares. Subsequent to the third quarter, through Oct 30, the company spent another $2.8 million to repurchase shares, bringing the year-to-date tally to $295.8 million spent to buy back 8.1 million shares. Aspen Insurance is left with $236 million under its share repurchase authorization

On Oct 30, the board of directors of Aspen Insurance approved a quarterly cash dividend of 18 cents per share, which will be paid on Nov 27, 2013 to shareholders of record as on Nov 13, 2013.

Guidance

Assuming normal loss experience, current interest rate environment, and pre-tax catastrophe loss of $190 million per annum, Aspen Insurance expects its operating return on equity to be 10% in 2014.

Performances by Other Property and Casualty Insurers

Allied World Assurance Company Holdings, AG (AWH - Snapshot Report) reported its third-quarter 2013 operating net income of $2.93 per share, surpassing the Zacks Consensus Estimate by 37.5% and the prior-year figure by 35.6%.

Montpelier Re Holdings Ltd. (MRH - Analyst Report) reported third-quarter 2013 operating net income of $1.38 per share, beating the Zacks Consensus Estimate significantly by 86%. Earnings also surged 62% year over year.

Platinum Underwriters Holdings Ltd. (PTP - Snapshot Report) reported its third-quarter 2013 net earnings of $1.32 per share, which beat the Zacks Consensus Estimate of $1.00. However, the results declined 48% from the year-ago quarter number.

Zacks Rank

Aspen Insurance presently holds a Zacks Rank #2 (Buy).
 

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