Aspen Insurance Holdings Limited
July 27, 2007
Q2 2007 Earnings Conference Call
AHL:NYSE
AHL: NYSE
Exhibit 99.1
Safe Harbor Disclosure
This slide presentation is for information purposes only. It should be read in conjunction with our financial supplement posted on our website on the Investor Relations page and with other documents filed or to be filed shortly by Aspen Insurance Holdings Limited (the “Company” or “Aspen”) with the U.S. Securities and Exchange Commission.
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 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 in accordance with Regulation G is included herein or in the financial supplement, as applicable, which can be obtained from the Investor Relations section of Aspen's website at www.aspen.bm.
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
This presentation contains, and Aspen's earnings conference call will contain, 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," "intend," "plan," "believe," "project," "anticipate," "seek," "will," "estimate," "may," "continue," and similar expressions of a future or forward-looking nature.
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 relating to the UK floods, there can be no assurance that Aspen's ultimate losses associated with these floods will remain within the stated amount.
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: changes in the total industry losses resulting from the UK and Australian floods and Hurricanes Katrina, Rita and Wilma and the actual number of Aspen's insureds incurring losses from these events; with respect to the UK and Australian floods and Hurricanes Katrina, Rita and Wilma, Aspen’s reliance on loss reports received from cedants and loss adjustors, Aspen's reliance on industry loss estimates and those generated by modeling techniques, the impact of these events on Aspen's reinsurers, any changes in Aspen's reinsurers' credit quality, the amount and timing of reinsurance recoverables and reimbursements actually received by Aspen from its reinsurers and the overall level of competition and the related demand and supply dynamics as contracts come up for renewal; the impact that our future operating results, capital position and rating agency and other considerations have on the execution of any capital management initiatives; the impact of any capital management activities on our financial condition; 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 catastrophic events than our underwriting, reserving or investment practices have anticipated; evolving interpretive issues with respect to coverage as a result of Hurricanes Katrina, Rita and Wilma and any other events such as the UK floods; the level of inflation in repair costs due to limited availability of labor and materials after catastrophes; the effectiveness of Aspen's loss limitation methods; changes in the availability, cost or quality of reinsurance or retrocessional coverage, which may affect our decision to purchase such coverage; the reliability of, and changes in assumptions to, catastrophe pricing, accumulation and estimated loss models; loss of key personnel; a decline in our operating subsidiaries' ratings with Standard & Poor's, A.M. Best Company or Moody's Investors Service; changes in general economic conditions including inflation, foreign currency exchange rates, interest rates and other factors that could affect our investment portfolio; the number and type of insurance and reinsurance contracts that we wrote at the January 1st and other renewal periods in 2007 and the premium rates available at the time of such renewals within our targeted business lines; increased competition on the basis of pricing, capacity, coverage terms or other factors; decreased demand for Aspen’s insurance or reinsurance products and cyclical downturn of the industry; changes in governmental regulations, interpretations or tax laws in jurisdictions where Aspen conducts business; proposed and future changes to insurance laws and regulations, including with respect to U.S. state- and other government-sponsored reinsurance funds and primary insurers; Aspen or its Bermudian subsidiary becoming subject to income taxes in the United States or the United Kingdom; the effect on insurance markets, business practices and relationships of ongoing litigation, investigations and regulatory activity by the New York State Attorney General's office and other authorities concerning contingent commission arrangements with brokers and bid solicitation activities. For a more detailed description of these uncertainties and other factors, please see the "Risk Factors" section in Aspen's Annual Reports on Form 10-K as filed with the U.S. Securities and Exchange Commission on February 22, 2007. 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.
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AHL: NYSE
Financial Highlights – Q2 2007
* Annualised
¹ Reconciliation of Average Equity to closing shareholders’ equity and operating income to net income is provided in our quarterly financial supplements available in the Financial Results section of the Investor Relations page of Aspen’s website at www.aspen.bm
3
AHL: NYSE
(US$ in millions, except per share data)
Quarter Ended June 30
2007
2006
% Change
Gross Written Premiums
503.5
522.4
(3.6)
Net Written Premiums
418.5
500.1
(16.3)
Net Earned Premiums
451.2
429.0
5.2
Underwriting Income
52.4
79.0
(33.7)
Net Investment Income
78.8
49.9
57.9
Net Income after tax
$114.7
$101.8
12.7%
GAAP Ratios:
Loss Ratio
60.5%
52.2%
Expense Ratio
27.9%
29.4%
Combined Ratio
88.4%
81.6%
Full Year ROAE ¹
20.4%*
20.4%*
Diluted Income Per Ordinary Share:
Net Income
$1.19
$1.01
17.8%
Operating Income ¹
$1.14
$0.98
16.3%
Financial Highlights – Half Year 2007
* Annualised
¹ Reconciliation of Average Equity to closing shareholders’ equity and operating income to net income is provided in our quarterly financial supplements available in the Financial Results section of the Investor Relations page of Aspen’s website at www.aspen.bm
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AHL: NYSE
(US$ in millions, except per share data)
Six Months Ended June 30
2007
2006
% Change
Gross Written Premiums
1,140.0
1,201.1
(5.1)
Net Written Premiums
973.6
952.0
2.3
Net Earned Premiums
890.2
831.6
7.0
Underwriting Income
142.9
117.7
21.4
Net Investment Income
146.3
94.4
55.0
Net Income after tax
$236.6
$163.6
44.6%
GAAP Ratios:
Loss Ratio
55.9%
54.8%
Expense Ratio
28.0%
31.0%
Combined Ratio
83.9%
85.8%
Full Year ROAE ¹
21.7%*
15.6%*
Book Value Per Ordinary Share
$24.44
$20.19
21.1%
Diluted Income Per Ordinary Share:
Net Income
$2.46
$1.61
52.8%
Operating Income ¹
$2.40
$1.57
52.9%
Market Conditions
2007 Outlook: Property and Specialty Lines
Pro Rata
Market
Trend
Risk Excess
Treaty
Catastrophe
Treaty
Aspen 1H07
Performance
Market
Conditions
Line
Market
Trend
Specialty
Reinsurance
Marine &
Energy Liability
Offshore
Energy
Physical
Damage
Marine Hull
Aviation
Aspen 1H07
Performance
Market
Conditions
Line
International
Property Fac.
E&S Property
Market
Trend
UK Property
Aspen 1H07
Performance
Market
Conditions
Line
Property Reinsurance
Specialty Lines
Property Insurance
= Absolute rate levels attractive
= Absolute rate levels mixed
= Absolute rate levels very challenging
= 12 month rate trend positive
= 12 month rate trend neutral
= 12 month rate trend slightly downwards
= 12 month rate trend downwards
5
Strong
Good
Improvement Required
Updated July 27, 2007
AHL: NYSE
Market Conditions 2007 Outlook: Casualty Lines
Market
Trend
Casualty
Facultative
US Casualty
International
Casualty
Aspen 1H07
Performance
Market
Conditions
Line
Market
Trend
E&S Casualty
UK Liability
Aspen 1H07
Performance
Market
Conditions
Line
Casualty Reinsurance
Casualty Insurance
= Absolute rate levels attractive
= Absolute rate levels mixed
= Absolute rate levels very challenging
6
Strong
Good
Improvement Required
= 12 month rate trend positive
= 12 month rate trend neutral
= 12 month rate trend slightly downwards
= 12 month rate trend downwards
Updated July 27, 2007
AHL: NYSE
Aspen Share of Recent Cat Losses
7
0.70%
0.30%
0.90%
0.80%
‘As-if’ loss (Gross)***
0.80%
0.50%
1.80%
1.50%
2.30%
1.70%
Actual loss (Gross)
Market share
3.00**
5.52**
89.64
12.95*
10.38*
66.31*
Selected market loss
June
Floods
Kyrill
Total KRW
Wilma
Rita
Katrina
US$ in billions
* Data from Sigma
** Reflects market estimates
*** ‘As-if’ is calculated by modelling the same event through our current portfolio
AHL: NYSE
Financial Highlights – Group Summary Q2
Underwriting Revenues
522
22
500
429
504
85
419
451
0
200
400
600
GWP
Premiums
Ceded
NWP
NEP
2006 Q2
2007 Q2
Income
124
127
102
84
129
131
115
95
0
40
80
120
160
200
Operating
Income
Before Tax
Income
Before Tax
Income After
Tax
Retained
Income
2006 Q2
2007 Q2
Underwriting Income
79
52
0
40
80
120
Underwriting Income
2006 Q2
2007 Q2
Underwriting Expenses
224
83
43
350
82
44
399
273
0
200
400
600
Losses &
Loss
Expenses
Acquisition
Exp
General &
Admin
Expenses
Total
Underwriting
Expenses
2006 Q2
2007 Q2
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AHL: NYSE
Financial Highlights – Group Summary - Half Year
Underwriting Revenues
1201
249
952
832
1140
166
974
890
0
200
400
600
800
1,000
1,200
1,400
GWP
Premiums
Ceded
NWP
NEP
2006 H1
2007 H1
Income
202
205
164
128
275
278
237
196
0
40
80
120
160
200
240
280
320
Operating
Income
Before Tax
Income
Before Tax
Income After
Tax
Retained
Income
2006 H1
2007 H1
Underwriting Income
118
143
0
40
80
120
160
Underwriting Income
2006 H1
2007 H1
Underwriting Expenses
456
177
81
714
159
90
747
498
0
200
400
600
800
1000
Losses &
Loss
Expenses
Acquisition
Exp
General &
Admin
Expenses
Total
Underwriting
Expenses
2006 H1
2007 H1
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AHL: NYSE
Results by Business Segment – Q2 2007
GWP
185
80
155
84
0
40
80
120
160
200
240
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
NWP
110
78
152
79
0
40
80
120
160
200
240
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
Underwriting Profit
32
7
8
5
0
20
40
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
Income Contribution
79
52
0
40
80
Net Investment Income
Underwriting Profit
10
AHL: NYSE
Results by Business Segment – Half Year 2007
GWP
372
303
311
154
0
40
80
120
160
200
240
280
320
360
400
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
NWP
287
295
279
113
0
40
80
120
160
200
240
280
320
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
Underwriting Profit
76
23
29
15
0
20
40
60
80
Property Re
Casualty Re
Specialty
Lines
P&C
Insurance
Income Contribution
146
143
0
40
80
120
160
Net Investment Income
Underwriting Profit
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AHL: NYSE
22%
17%
32%
8%
10%
2%
9%
Govt
Agency
AAA
AA+/AA/AA-
A+/A/A-
BBB+/BBB/BBB-
NR
Investment Portfolio
Asset Class Allocation
25%
8%
15%
9%
16%
6%
13%
21%
6%
3%
22%
4%
23%
28%
0%
5%
10%
15%
20%
25%
30%
35%
Govt
Agency
MBS
Corp
ABS
FOHF
Cash/ST
Jun 07
Dec 06
89% of Portfolio ‘A’ or Better
12
AAA
AAA
Overall Fixed Income Rating
AAA
3%
Actual as at
December 31, 2006
AAA
Overall Portfolio Rating
9%
Fund of Hedge Funds
Actual as at
June 30, 2007
Indicator (S&P Ratings)
Portfolio Credit Ratings
(as at June 30, 2007)
AHL: NYSE
Improvement in Investment Yield
3.0%
3.5%
4.0%
4.5%
5.0%
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
Fixed Income portfolio book yield
Aggregate portfolio book yield*
13
(*) including cash and cash equivalents but excluding FoHF - Initial investments in Fund of Hedge Funds were made on April 1, 2006 with subsequent investment on February 1 and June 1, 2007.
AHL: NYSE
2007 Guidance
Full 2007 Year Outlook
$135 million
(full year)
16% to 19%
$250 – $270 million
83% – 88%
6% – 8% of GWP
$1.8 billion + 5%
May 3, 2007
July 27, 2007
February 9, 2007
$135 million
(full year)
16% to 19%
$230 – $250 million
83% – 88%
6% – 8% of GWP
$1.9 billion + 5%
$145 million
(full year)
16% to 19%
$250 – $270 million
83% – 88%
6% – 8% of GWP
$1.8 billion + 5%
Tax Rate
Assumed Average Cat-Load
Investment Income
Combined Ratio
% Premium Ceded
GWP
Implied ROE of 16% - 20%
14
AHL: NYSE