Aspen profit falls by a third, but CEO says underwriting 'within plan'
Aspen Insurance reported a 33 percent drop in first quarter net income compared to 2007.
The company released its first quarter figures yesterday, which showed net income after tax was $81.2 million, or $0.85 per share, compared to $121.9 million, or $1.27 per share, during the same period in 2007.
The annualised return on average equity was 12.8 percent, down from 22.9 percent in the first quarter of 2007, and book value per share increased 23.7 percent to $29.22 when compared to the first quarter of 2007.
Chief Executive Officer Chris O'Kane said: "Book value per share at the end of the first quarter was $29.22, which is up 23.7 percent year-over-year and the eighth consecutive quarterly increase in book value. Underwriting results were strong with a combined ratio of 85.4 percent, which is well within our plan.
"As we anticipated, we wrote less business this quarter because of declines in rates. We continue to maintain our underwriting discipline. Cash flow from operating activities also remained strong at $163.5 million for the quarter, up 27 percent. However, net income and EPS were impacted by disappointing returns from our investment in funds of hedge funds."
The company reported gross written premiums of $596.2 million in 2008 compared to $636.5 million in 2007.
Operating income was $76 million compared to $120.6 million in 2007.
The company expects that for the remainder of 2008 pricing will continue to soften but total gross written premium and net earned premium levels will remain within Aspen's original guidance. On the investment side, market volatility and lower interest rates are expected to impact returns. As a result, 2008 guidance on investment income is revised to $250 million to $285 million, with fixed income and short-term investments expected to contribute $240 million to $255 million and funds of hedge funds expected to contribute $10 million to $30 million.
Aspen expects to report an return on average equity in the range of 13.0 percent to 16.0 percent for 2008, assuming normal loss experience, reducing the top and bottom of the range of our original guidance by one percentage point.
