ASPEN INSURANCE HOLDINGS LTD (AHL-PC)·Q2 2018 Earnings Summary

Executive Summary

• Aspen reported Q2 2018 operating EPS of $0.80 with annualized operating ROE of 8.4%, while GAAP diluted EPS was $(0.38) driven by $(20.7)M investment losses and $(40.9)M FX losses; underwriting improved YoY with a 97.4% combined ratio vs 100.0% in Q2 2017 .
• Insurance delivered a second consecutive record quarter in gross written premium ($527.8M, +8.5% YoY); Reinsurance showed solid results but was affected by large single-risk losses; total catastrophe losses were modest at $18.2M (3.5 pts) vs $37.4M (6.7 pts) last year .
• Expense discipline continued: total expense ratio fell to 37.7% (36.0% ex amortization/non-recurring) vs 38.4% (38.1%) in Q2 2017; OPEX program costs were $8.6M in Q2 .
• No formal quantitative guidance disclosed in the press release/supplement; consensus (S&P Global) unavailable in our dataset for this ticker, so beat/miss vs Street cannot be assessed .

What Went Well and What Went Wrong

• What Went Well

  • Record Insurance GWP: Insurance GWP rose to $527.8M (+8.5% YoY) with growth across all sub‑segments; Insurance loss ratio improved to 62.2% from 66.9% YoY .
  • Expense ratio improvement: Group expense ratio dropped to 37.7% (36.0% ex amortization/non‑recurring) vs 38.4% (38.1%) in Q2 2017, with G&A (ex amortization/non‑recurring) down to $101.1M from $117.8M .
  • Reserve releases and lower cats: Net favorable prior‑year development of $42.5M (benefit 8.2 pts) and lower cat losses of $18.2M vs $37.4M improved the loss ratio to 59.7% from 61.6% YoY .
  • Management tone: “Ongoing execution of our plan to enhance performance… continued successful repositioning of Aspen Insurance… solid results and pricing discipline at Aspen Re” (CEO Chris O’Kane) .

• What Went Wrong

  • GAAP loss: GAAP net loss $(14.7)M (diluted EPS $(0.38)) driven by $(20.7)M net realized/unrealized investment losses and $(40.9)M FX losses; also included $8.6M make‑whole on debt redemption .
  • Higher accident‑year ex‑cat: Group AY ex‑cat loss ratio rose to 64.4% vs 63.6% YoY; Insurance AY ex‑cat net was 63.5% (up from 63.1% YoY); Reinsurance AY ex‑cat net 65.2% including 4.6 pts from a dam collapse and fire .
  • Lower retention and net written premiums: Increased use of cessions cut the retention ratio to 56.9% (70.4% last year), with net written premiums down 16% YoY to $486.0M; Insurance net written fell 25.3% on more quota share .

Financial Results

Quarterly progression and YoY comparisons

Segment breakdown (Q2 2018 vs Q2 2017)

• Reinsurance

• Insurance

Key KPIs and drivers

Balance sheet and capital

• Diluted book value/share fell to $38.21 at 6/30/18 (from $40.10 at 12/31/17) largely on investment losses; total shareholders’ equity $2.8B .
• Partial redemption: $125M of 6.0% 2020 notes with $8.6M make‑whole expense in Q2 .

Guidance Changes

Earnings Call Themes & Trends

Note: We could not locate a Q2 2018 transcript in our document set; themes below synthesize Q4’17 and Q1’18 press releases and the Q2’18 press release/supplement.

Management Commentary

• CEO Chris O’Kane: “Aspen’s second quarter results demonstrate ongoing execution of our plan to enhance performance… continued successful repositioning of Aspen Insurance… solid results and pricing discipline at Aspen Re… significant progress in the implementation of our Operational Effectiveness and Efficiency program. In addition, we reduced debt leverage through the partial redemption of our senior notes.”
• Q1 framing: “Both segments generated underwriting profits, we improved our total expense ratio and we continue to implement our operational effectiveness and efficiency program.”

Q&A Highlights

• We were unable to locate a Q2 2018 earnings call transcript in our document corpus; as a result, Q&A highlights and any management clarifications are unavailable from primary sources in this cycle.

Estimates Context

• S&P Global Wall Street consensus for Q2 2018 (EPS and revenue) was not retrievable for this ticker in our dataset due to a mapping gap; therefore, we cannot assess beat/miss versus Street for this quarter. Values would normally be sourced from S&P Global consensus.

Key Takeaways for Investors

• Underwriting recovery continued: combined ratio improved to 97.4% (from 100.0% YoY) with Insurance driving record GWP and better segment profitability; Reinsurance remained sub‑90s combined despite isolated large losses .
• Earnings quality skewed to operating: positive operating EPS ($0.80) and 8.4% operating ROE contrasted with GAAP loss on unfavorable marks in investments/FX; monitor sensitivity to market and currency swings .
• Volatility management via cessions: retention at 56.9% (vs 70%+ a year ago) supported steadier underwriting but depressed net written premiums; watch revenue optics versus net volatility reduction benefits .
• Expense trajectory improving: total expense ratio down to 37.7% (36.0% ex amort/non‑recurring) with additional program savings expected; operating leverage should aid medium‑term ROE if loss ratios hold .
• Reserve and cat backdrop favorable: $42.5M net favorable prior‑year development and lighter cats vs last year supported results; sustainability of reserve releases remains a key monitoring area .
• Capital actions: $125M note redemption reduces leverage but adds near‑term expense; book value per share diluted to $38.21 on market losses—future investment/FX normalization would help BVPS .
• Strategy lens: Momentum in Insurance growth and Reinsurance discipline aligns with management’s repositioning narrative; continued execution on OPEX and underwriting mix are likely stock catalysts in absence of formal guidance .

Citations:
All data and quotations are sourced from Aspen’s Q2 2018 8‑K press release and financial supplement , Q1 2018 8‑K , and Q4 2017 8‑K .