Aspen Insurance Holdings Ltd. Earnings Analysis: 2015 By the Numbers

Aspen Insurance Holdings Ltd. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Aspen Insurance Holdings Ltd. – Endurance Specialty Holdings Ltd., XL Group Plc, RenaissanceRe Holdings Ltd., Everest RE Group, Ltd., Validus Holdings, Ltd., Axis Capital Holdings Limited and Astellas Pharma Inc Unsponsored ADR (ENH-US, XL-US, RNR-US, RE-US, VR-US, AXS-US and ALPMY-US) that have also reported for this period.

Highlights

  • Year-on-year change in operating cash flow of -5.47% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Year-on-year earnings up despite decline in operating margins after interest and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 2158.2 2313.3 2396.7 2626.5 2670.9
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -110 280.6 322.7 355 322.3
Earnings Growth (YOY) -135.18 355.09 15 10.01 -9.21
Net Margin -5.1 12.13 13.46 13.52 12.07
EPS -1.88 3.38 4.14 4.82 4.54
Return on Equity -4.15 7.51 8.46 9.44 8.32
Return on Assets -1.2 2.83 3.13 3.38 3.03

Access our Ratings and Scores for Aspen Insurance Holdings Ltd.

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s earnings decline year-on-year has been influenced by its underwriting policies. Its loss ratio went from 54.36% to 55.24%. This decline in earnings would have been worse but for the fact that the company showed improvement in premiums earned as a percent of total revenues, from 91.58% to 92.60%. For comparison, premiums earned as a percent of revenues were 91.58% and the loss ratio 54.36% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

AHL-US‘s change in operating cash flow of -5.47% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

Despite a decline in operating margins after interest and a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Aspen Insurance Holdings Ltd.

Company Profile

Aspen Insurance Holdings Ltd. engages in the provision of insurance and reinsurance services. It operates through the Insurance and Reinsurance segments. The Insurance segment consists of property and casualty insurance; marine, aviation, and energy insurance; and financial and professional lines insurance. The Reinsurance segment includes property catastrophe insurance; other property insurance such as risk excess, pro rata, and facultative or single risk reinsurance; casualty insurance such as U.S. treaty, international treaty, and global facultative; and specialty insurance such as credit and surety, agriculture, marine, aviation, engineering, and other specialty. The company was founded by Christopher O’Kane and Julian M. Cusack on May 23, 2002 and is headquartered in Hamilton, Bermuda.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of AHL-US.

Leave a Comment