ASPEN INSURANCE HOLDINGS LTDAHL-PD
ASPEN INSURANCE HOLDINGS LTD Segments Disclosure
Segment Reporting
The Company is organized into two business segments, namely Aspen Re and Aspen Insurance. The Company has determined its reportable segments, Aspen Re and Aspen Insurance, by taking into account the manner in which management makes operating decisions and assesses operating performance. Profit or loss for each of the Company’s business segments is measured by underwriting profit or loss. Underwriting profit is the excess of net earned premiums over the sum of losses and loss expenses, amortization of deferred policy acquisition costs and general and administrative expenses. Underwriting profit or loss provides a basis for management to evaluate the segment’s underwriting performance.
Reinsurance Segment. The reinsurance segment consists of property catastrophe reinsurance, other property reinsurance, casualty reinsurance and specialty reinsurance. In addition, Aspen Capital Markets forms part of property catastrophe reinsurance as it focuses primarily on property catastrophe business through the use of alternative capital. Aspen Capital Markets leverages the Company’s underwriting and analytical expertise and earns management and performance fees from the Company and other third party investors primarily through the management of ILS funds. For a more detailed description of this business segment, refer to Part I, Item 1, “Business — Business Segments — Reinsurance” above.
Insurance Segment. The insurance segment consists of property and casualty insurance, marine, aviation and energy insurance and financial and professional lines insurance. For a more detailed description of this segment, refer to Part I, Item 1 “Business — Business Segments — Insurance” above.
Non-underwriting Disclosures. The Company provides additional disclosures for corporate and other (non-operating) income and expenses. Corporate and other income and expenses include net investment income, net realized and unrealized investment gains or losses, expenses associated with managing the Aspen Group, certain strategic and non-recurring costs, changes in fair value of derivatives or the loan notes issued by variable interest entities, interest expenses, net realized and unrealized foreign exchange gains or losses, and income taxes, none of which are allocated to the business segments. Corporate expenses are not allocated to the Company’s business segments as they typically do not fluctuate with the levels of premiums written and are not directly related to the Company’s business segment operations. The Company does not allocate its assets by business segment as it evaluates underwriting results of each business segment separately from the results of the Company’s investment portfolio.
The Company uses underwriting ratios as measures of performance. The loss ratio is the ratio of losses and loss adjustment expenses to net earned premiums. The policy acquisition expense ratio is the ratio of amortization of deferred policy acquisition costs to net earned premiums. The general and administrative expense ratio is the ratio of general, administrative and corporate expenses to net earned premiums. The combined ratio is the sum of the loss ratio, the policy acquisition expense ratio and the general and administrative expense ratio.
The following tables provide a summary of gross and net written and earned premiums, underwriting results, ratios and reserves for each of the Company’s business segments for the twelve months ended December 31, 2018, 2017 and 2016:
Twelve Months Ended December 31, 2018 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting Revenues | ||||||||||||
Gross written premiums | $ | 1,495.7 | $ | 1,951.2 | $ | 3,446.9 | ||||||
Net written premiums | 1,182.9 | 899.1 | 2,082.0 | |||||||||
Gross earned premiums | 1,593.9 | 1,940.5 | 3,534.4 | |||||||||
Net earned premiums | 1,256.4 | 958.3 | 2,214.7 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss adjustment expenses | 927.0 | 646.0 | 1,573.0 | |||||||||
Amortization of deferred policy acquisition costs | 260.9 | 110.7 | 371.6 | |||||||||
General and administrative expenses | 118.5 | 239.2 | 357.7 | |||||||||
Underwriting (loss) | (50.0 | ) | (37.6 | ) | (87.6 | ) | ||||||
Corporate expenses | (56.8 | ) | ||||||||||
Non-operating expenses | (77.2 | ) | (1) | |||||||||
Net investment income | 198.2 | |||||||||||
Realized and unrealized investment gains | 110.0 | |||||||||||
Realized and unrealized investment losses | (174.7 | ) | ||||||||||
Realized loss on debt extinguishment | (8.6 | ) | ||||||||||
Change in fair value of loan notes issued by variable interest entities | (4.4 | ) | ||||||||||
Change in fair value of derivatives | (31.8 | ) | ||||||||||
Interest expense on long term debt | (25.9 | ) | ||||||||||
Net realized and unrealized foreign exchange (losses) | (3.5 | ) | ||||||||||
Other income | 9.0 | |||||||||||
Other expenses | (2.7 | ) | ||||||||||
(Loss) before tax | (156.0 | ) | ||||||||||
Income tax benefit | 10.2 | |||||||||||
Net (loss) | $ | (145.8 | ) | |||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,843.6 | $ | 2,153.0 | $ | 4,996.6 | ||||||
Ratios | ||||||||||||
Loss ratio | 73.8 | % | 67.4 | % | 71.0 | % | ||||||
Policy acquisition expense ratio | 20.8 | 11.6 | 16.8 | |||||||||
General and administrative expense ratio | 9.4 | 25.0 | 22.2 | (2) | ||||||||
Expense ratio | 30.2 | 36.6 | 39.0 | |||||||||
Combined ratio | 104.0 | % | 104.0 | % | 110.0 | % | ||||||
_______________
(1) | Non-operating expenses includes $37.5 million of expenses related to the Company’s operating effectiveness and efficiency program (the “Effectiveness and Efficiency Program”), $39.0 million of advisor fees related to the Merger and $11.3 million of retention costs, partially offset by the write back of a $14.1 million buy out provision. |
(2) | The general and administrative expense ratio in the total column includes corporate and non-operating expenses. |
Twelve Months Ended December 31, 2017 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
( $ in millions) | ||||||||||||
Underwriting Revenues | ||||||||||||
Gross written premiums | $ | 1,548.5 | $ | 1,812.4 | $ | 3,360.9 | ||||||
Net written premiums | 1,250.0 | 962.5 | 2,212.5 | |||||||||
Gross earned premiums | 1,451.8 | 1,757.4 | 3,209.2 | |||||||||
Net earned premiums | 1,206.1 | 1,100.5 | 2,306.6 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss adjustment expenses | 1,116.4 | 878.3 | 1,994.7 | |||||||||
Amortization of deferred policy acquisition costs | 235.5 | 165.0 | 400.5 | |||||||||
General and administrative expenses | 157.3 | 253.9 | 411.2 | |||||||||
Underwriting (loss) | (303.1 | ) | (196.7 | ) | (499.8 | ) | ||||||
Corporate expenses | (58.3 | ) | ||||||||||
Non-operating expenses | (32.7 | ) | (1) | |||||||||
Net investment income | 189.0 | |||||||||||
Realized and unrealized investment gains | 148.9 | |||||||||||
Realized and unrealized investment losses | (28.4 | ) | ||||||||||
Change in fair value of loan notes issued by variable interest entities | 21.2 | |||||||||||
Change in fair value of derivatives | 27.7 | |||||||||||
Interest expense on long term debt | (29.5 | ) | ||||||||||
Net realized and unrealized foreign exchange (losses) | (23.9 | ) | ||||||||||
Other income | 8.9 | |||||||||||
Other expenses | (4.9 | ) | ||||||||||
(Loss) before tax | (281.8 | ) | ||||||||||
Income tax benefit | 15.4 | |||||||||||
Net (loss) | $ | (266.4 | ) | |||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,917.1 | $ | 2,317.2 | $ | 5,234.3 | ||||||
Ratios | ||||||||||||
Loss ratio | 92.6 | % | 79.8 | % | 86.5 | % | ||||||
Policy acquisition expense ratio | 19.5 | 15.0 | 17.4 | |||||||||
General and administrative expense ratio | 13.0 | 23.1 | 21.8 | (2) | ||||||||
Expense ratio | 32.5 | 38.1 | 39.2 | |||||||||
Combined ratio | 125.1 | % | 117.9 | % | 125.7 | % | ||||||
________________
(1) | Non-operating expenses includes $15.2 million of expenses related to the Company’s Effectiveness and Efficiency Program. |
(2) | The general and administrative expense ratio in the total column includes corporate and non-operating expenses. |
Twelve Months Ended December 31, 2016 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
($ in millions) | ||||||||||||
Underwriting Revenues | ||||||||||||
Gross written premiums | $ | 1,413.2 | $ | 1,733.8 | $ | 3,147.0 | ||||||
Net written premiums | 1,269.2 | 1,324.5 | 2,593.7 | |||||||||
Gross earned premiums | 1,317.9 | 1,768.4 | 3,086.3 | |||||||||
Net earned premiums | 1,181.9 | 1,455.4 | 2,637.3 | |||||||||
Underwriting Expenses | ||||||||||||
Losses and loss adjustment expenses | 657.9 | 918.2 | 1,576.1 | |||||||||
Amortization of deferred policy acquisition costs | 226.4 | 302.5 | 528.9 | |||||||||
General and administrative expenses | 178.2 | 228.4 | 406.6 | |||||||||
Underwriting income | 119.4 | 6.3 | 125.7 | |||||||||
Corporate expenses | (73.8 | ) | ||||||||||
Non-operating expenses | (9.7 | ) | (1) | |||||||||
Net investment income | 187.1 | |||||||||||
Realized and unrealized investment gains | 108.4 | |||||||||||
Realized and unrealized investment losses | (63.2 | ) | ||||||||||
Change in fair value of loan notes issued by variable interest entities | (17.1 | ) | ||||||||||
Change in fair value of derivatives | (24.6 | ) | ||||||||||
Interest expense on long term debt | (29.5 | ) | ||||||||||
Net realized and unrealized foreign exchange gains | 1.8 | |||||||||||
Other income | 5.7 | |||||||||||
Other expenses | (1.3 | ) | ||||||||||
Income before tax | 209.5 | |||||||||||
Income tax expense | (6.1 | ) | ||||||||||
Net income | $ | 203.4 | ||||||||||
Net reserves for loss and loss adjustment expenses | $ | 2,462.1 | $ | 2,297.1 | $ | 4,759.2 | ||||||
Ratios | ||||||||||||
Loss ratio | 55.7 | % | 63.1 | % | 59.8 | % | ||||||
Policy acquisition expense ratio | 19.2 | 20.8 | 20.1 | |||||||||
General and administrative expense ratio | 15.1 | 15.7 | 18.6 | (2) | ||||||||
Expense ratio | 34.3 | 36.5 | 38.7 | |||||||||
Combined ratio | 90.0 | % | 99.6 | % | 98.5 | % | ||||||
_______________
(1) | Non-operating expenses includes amortization of intangibles acquired from the acquisition of AgriLogic. |
(2) | The general and administrative expense ratio in the total column includes corporate and non-operating expenses. |
Geographical Areas. The following summary presents the Company’s gross written premiums based on the location of the insured risk for the twelve months ended December 31, 2018, 2017 and 2016.
For the Twelve Months Ended | ||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||||||
($ in millions) | ||||||||||||
Australia/Asia | $ | 175.9 | $ | 167.3 | $ | 140.5 | ||||||
Caribbean | 7.7 | 17.6 | 14.3 | |||||||||
Europe | 92.6 | 94.5 | 109.7 | |||||||||
United Kingdom | 290.1 | 258.3 | 231.4 | |||||||||
United States & Canada(1) | 1,875.9 | 1,729.3 | 1,597.0 | |||||||||
Worldwide excluding United States (2) | 70.1 | 88.1 | 90.7 | |||||||||
Worldwide including United States(3) | 775.8 | 868.6 | 837.2 | |||||||||
Others | 158.8 | 137.2 | 126.2 | |||||||||
Total | $ | 3,446.9 | $ | 3,360.9 | $ | 3,147.0 | ||||||
______________
(1) | “United States and Canada” comprises individual policies that insure risks specifically in the United States and/or Canada, but not elsewhere. |
(2) | “Worldwide excluding the United States” comprises individual policies that insure risks wherever they may be across the world but specifically excludes the United States. |
(3) | “Worldwide including the United States” comprises individual policies that insure risks wherever they may be across the world but specifically includes the United States. |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2018 | Feb 13, 2019 | Showing above |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 19, 2016 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.