Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Aspen Insurance Holdings Limited (NYSE:AHL)

Q2 2013 Earnings Conference Call

July 25, 2013 9:00 am ET

Executives

Kerry Calaiaro - Senior Vice President, Investor Relations

Christopher O'Kane - Chief Executive Officer, Director

John Worth - Chief Financial Officer

Analysts

Mike Zaremski – Credit Suisse

Amit Kumar – Macquarie Capital

Max Zormelo – Evercore

Josh Shanker – Deutsche Bank

Dan Farrell - Sterne, Agee

Operator

Good morning. My name is Cassandra and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

(Operator Instructions)

At this time, I would like to turn the call over to Kerry Calaiaro. You may begin.

Kerry Calaiaro

Thank you and good morning. The presenters on today’s call are Chris O’Kane, Chief Executive Officer; and John Worth, Chief Financial Officer of Aspen Insurance Holdings.

Last night, we issued our press release announcing Aspen’s financial results for the second quarter of 2013. This press release, as well as corresponding supplementary financial information, can be found on our website at www.aspen.co. This presentation contains and Aspen may make, from time to time, written or oral forward-looking statements within the meaning under and pursuant to the Safe Harbor provisions of the U.S. Federal Securities laws.

All forward-looking statements will have a number of assumptions concerning future events that are subject to a number of uncertainties and other factors. For more detailed descriptions of these uncertainties and other factors, please see the Risk Factors section in Aspen’s Annual Report on Form 10-K filed with the SEC and on our website.

This presentation contains non-GAAP financial measures, which we believe are meaningful in evaluating the company’s performance. For a detailed disclosure on non-GAAP financials, please refer to the supplementary financial data posted on Aspen’s website.

I’ll now turn the call over to Chris O’Kane.

Chris O’Kane

Thank you, Cassandra and good morning everyone.

In the second quarter of 2013, Aspen delivered solid operating results in and above average catastrophe quarter. The accident year ex-cat combined ratio was 91.2% down from 92.9% in the second quarter 2012 as a result of the improvement in the loss ratio.

Delivered book value per share ended the quarter $38.87 done 4.4% from March 2013 primarily due to the impact of widening credit spreads and interest rate movements on the unrealized investment portfolio gains.

We delivered an annualized operating ROE of 8.6% through the first half of 2013. Previously, we outlined three initiatives that underlie our expectation of achieving a 10% operating return in equity in 2014. The first initiative is business portfolio optimization. We remain sharply focused on the profitability and risk profile of each of our major lines of business.

Second, is the efficient capital management, in other words ensuring that the capital we hold properly sized given the risk to our business. And third, enhancing investment returns. We are focused on optimizing investment income corresponding rapidly to changing dynamics of the global investment markets.

We continue to make progress on all three initiatives in the second quarter. Our efforts to optimize a business portfolio have focused on reducing volatility in our insurance segment. In February, we set out a plan to reduce the capital attached to our U.S. E&S open market within the (inaudible) exposed property account.

We have done exactly what we said we are going to do and have now released $70 million of capital thus far. As we told you before, we are not withdrawing from U.S. property insurance but we will continue to release capital and reduce volatility from this line partly to increase use of reinsurance.

Our views have not changed and we are still working towards realizing capital hedged to this account totaling $140 million over the next two years and ultimately the release of $200 million. In addition, we are looking ways of optimizing our ceded reinsurance and ceded as in other way to improve ROE.

The second lever to drive improvement in ROE is managing our capital in the most efficient way. We previously announced that we expect to repurchase $300 million of equity in 2013. We have been very active so far in 2013 and repurchased over $240 million of shares through July 22.

The third lever to drive increased returns is our investment portfolio. As you heard me say before we are first and foremost an underwriting led company. That said, we have been evaluating various strategies to increase investment returns with an excess (inaudible). We increased our allocation to equities by $200 million in the first half of the year to $413 million.

In our fixed income portfolio, we added $65 million BB rated loans and $24 million in short duration that will be high yield debt. We will continue to evaluate other potential investment opportunities in line with our risk appetite.

In summary, we are executing on a strategy we previously set-out and neededly visible and enables to continue to see our operating return on equity improve.

I will now turn the call over to John to comment on the financial results and later I will close with some thoughts on the market.

John Worth

Thank you, Chris.

I will now provide an overview of the results of the quarter. Gross written premiums rose 3% from Q2 of 2012. The reinsurance segment was relatively unchanged while the insurance segments improved 6%.

The group’s combined rate here for the second quarter was 97.1% with 10.9 of catastrophe losses. Reserve releases were $27.4 million or 5 points resulting in an accident year ex-cat combined ratio of 91.2% compared with 92.9% on the same basis a year ago.

The ex-cat loss ratio was 50% compared with 51.1% in Q2 2012, while the accident year ex-cat loss ratio was 55.1% compared with 56.7% a year ago. Total group expenses were $195 million or 35.8% of net earned premium with modest improvement in both the acquisition and the G&A expense ratios.

Now I will provide some more detail on the reinsurance and insurance segments for the second quarter. The reinsurance business produced an underwriting income of $30 million down from $59 million from the prior year mainly as a result of cat losses. The combined ratio was 88.9% with $51.8 million or 19.3% combined ratio points of cat losses in the second quarter of 2013. Prior year reserve releases were $24.1 million or 8.7% combined ratio points and the experience net favorable development in both short-tail and long-tail lines.

The resulting accident year ex-cats combined ratio was 78.4% a near 6 point improvement from the 84% a year ago. While the accident year ex-cat loss ratio was 46.2% an improvement of 6.2 percentage points from the second quarter of 2012. This is a good result and reflects our continued focus on underwriting discipline.

Gross written premiums of $298 million were relatively unchanged from a year ago. This reflects good growth in other property mainly pro-rata business in a favorable rate environment. Property cat premiums declined 9% reflecting lower rates as well as exchange rate moment primarily the weakening Yen at April 1, Japan renewals.

Specialty reinsurance is flat as we maintained a disciplined approach. Casualty reinsurance gross written premium was down 5% from year ago. Excluding the premium adjustments our book is stable and should begin to benefit from the rate improvements that we are seeing in the primary market.

Underwriting income for the insurance business of $1 million compared with $18 million in Q2 2012. The combined ratio was 99.8% with $6.9 million or 2.6% combined ratio points of cat losses in the second quarter of 2013. Prior year reserve releases for the second quarter were $3.3 million or $1.2 combined ratio points compared with $14.5 million or 6.3% combined ratio points for the second quarter of 2012.

The resulting accident year ex-cats combined ratio was 98.5% in line with the year ago. The accident year ex-cat loss ratio increased to 2.1 percentage points to 63.9% primarily the results of a few mid-size attritional losses in the international property and marine liability portfolio. The expense ratio improved 2.1 percentage points as we continue to gain scale in the U.S.

Gross written premiums increased 6% to $388 million. The growth was led by marine, energy and construction liability and global casualty primarily as a result of a favorable rating environment for these classes.

In the U.S., growth is led by the U.S. casualty team which benefited from improved rates. Both of our international and U.S. insurance businesses recorded positive underwriting income for both the quarter and the year-to-date.

I will now move on investments, our additional investments in BB securities is predominantly in bank loans and to-date we have added $65 million in this portfolio and we will continue to selectively increase the position. Investment income was $46 million in the second quarter of 2013 down 13% from the equivalent quarter a year ago. Since May, we have seen an uptick in rate and with about 20% of our investment portfolio maturing each year. If rate stay at this level, we should see a modest benefit from these higher rates in 2013 with increasing benefits in 2014 and beyond.

Total investment return for the quarter was negative 1.2% compared with a total return of 1% for the second quarter of 2012. Fixed income book yields for Q2 2013 was 2.71% down from 3.19% in Q2 in 2012. The duration of the portfolio increased slightly for March and is currently 3.4 years including the effect of our interest rate swaps, the duration is 3 years.

Our equity portfolio totaled $413 million at June 30, 2013 up from a $187 million a year ago reflecting our strategy of tactically diversifying our investment portfolio by investing in high quality global equity income strategies. The equity portfolio generated gain of 8.3% year-to-date including a loss of 0.3% in the quarter.

The tax rate for the first half of the year was 5%. Fully diluted book value per share was $38.80 at June 30, 2013 down 4.4% from the first quarter. Policy contributions from underwriting and the buyback program were more than offset by the negative investment returns.

I will now turn the call back to Chris.

Chris O’Kane

Thank you, John.

For the first half of 2013, we achieved an average rate increase of 4% renewals across our entire book within an overall average of flat in reinsurance and 7% increase in insurance. Specifically in the reinsurance for the first half of 2013, our property catastrophe reinsurance had no change in rating levels. For the market, the pricing environment (jumped) dramatically by line in geography.

The majority, alternative capital that is ventured into the space is focused on U.S. peak zone exposures particularly retro and the Florida reinsurance market. U.S. cat renewals have reflected the tradition to buy with average rate changes in 2013 deteriorating month by month through the first half of the year.

In January, there was a slight increase in rates percent in the single-digit range and in April we saw reductions averaging about 5% with Sandy affected to cancel large new plant. As we got to June, which is Florida focused we saw rates down 15% or more and then in July which is more nationwide rates and the market were down between 10% and 15%. Meanwhile, the more commoditized hire less world has seen much larger reductions particularly cat bumps were rates have fallen 30% or more.

Aspen is below weight in domestic charge to reinsurance. We are cautious about attachment points state (inaudible) or the leverage levels many of the buyers and of the political environment, our Florida exposure comes mainly long-term partners such as nationwide and super regional buyers supplemented by a small number of high quality Florid insurers.

We are often selling more than one products to customer, which allows us to build strong relationship with the buyers and confidence in our underwriting and claim adjusting practices. Our U.S., other property reinsurance book achieved an average rate increase of 2% per (inaudible). The Beretta book achieved 5% rate increase in the first half of the year reflecting improved market conditions in the U.S. family business.

Following largely benign year for losses outside the U.S. creating international -- of the reinsurance markets are generally flat or slightly down with many reinsurance keen to increase penetration.

April is a major renewal date for the Japanese market as expected the market continues to benefit from post (inaudible) pricing levels. You may recall that after the earthquake we managed our Japanese books that we renewed half year earthquake limits but maintained premium volume.

This year we maintained rate integrity and renewed majority of the book. Despite an increase level of capital in the market most renewals remain stable, although premiums and dollars are down due to weakening Yen.

For casualty reinsurance we achieved direct increase of 1% in the first half of the year. The rate environment continues to vary based on line in geography. In past, our casualty segment, we are seeing an improving market especially U.S. E&S general liability and on that professional lines.

Our current portfolio continues to see stable loss cost trends. For specialty reinsurance, rates across the portfolio were flat in our region with continued rate movement in marine on the back of high loss activity. Conversely, our absence of loss activity has led to (inaudible) pressure on aviation prices.

European credit reinsurance saw rates fall 1% in average for the first half of the year as competition is high following the several profitable years.

Now, we will move on the insurance segment. As I said, earlier our insurance book for the first of 2013 achieved a blended rate increase of 7%. Our property insurance book across the U.S. and the UK we have achieved average rate increase of 2%. In our programs business, we also achieved rate increases at 3% for the six months as the market responded Sandy losses.

In our UK property business, the market remains crowded but the rating environment appears to have stabilized and we continue to focus on our strict underwriting discipline which has to produce excellent results.

Casualty insurance renewed rate increases of 5% through the first half of 2013. We continue to see positive momentum in the U.S. family casualty market we achieved average rate increases of 11% from the first half and the outlook continues to be favorable.

The global excess casualty portfolio is showing signs of momentum too with continued rate improvements. In our marine, energy and transportation insurance business, we achieved an overall rate increase of 12% for the first six months. The rating environment in financial and professional lines business is mixed achieving a 1% increase in average for the first six months of the year.

Financial institutions continues to achieve rate increases with an average of 8%, professional liability rates in the U.S. was 2% on average in six months. This is very encouraging and this is the first positive rate movement in many years. Technology liability is up 2% on average.

Let’s now spend a few minutes looking at the broader market dynamics that’s affecting both insurance and reinsurance. As you know, (inaudible) we formed Aspen Capital Markets. We are leveraging Aspen’s existing franchise in underwriting expertise to offer investors excess to diversity products. We made good progress so far in executing our plan. We have set of asset managers (inaudible) and I look forward it to building the good track record.

We mentioned to you before that we value our diversified model. Even if some of our reinsurance lines experienced downward pricing pressure, we are seeing some positive signs in our insurance lines as a result of increasing insurance rates in some economic improvement. For example there is a lot of momentum in (inaudible) volumes.

We are also excited about the prospects of our technology liability account. The IT industry have focused growing globally giving us the opportunity to deploy the technology value outside its traditional stronghold in the U.S. and Western Europe.

We are now an established leader in this marketplace and I’m prod to say what it produces and the uses of technology. As technology advances and takes our new roles in commercial and personal life it creates new risks. We can’t be sure who will turn up next. But we will continue to innovate and (fight) for discipline manner.

As you may recall we strengthened our energy capabilities in the U.S. earlier this year and the team has received very encouraging welcome from both brokers and clients and its making excellent progress at this early stage.

So, we are seeing both positive and negative trends opportunities in market. With some of the trends in the pricing ground we have just discussed today, we will create additional headwind. Pricing has been pressured by the increasing new capital and property catastrophe market and the effect of displaced property reinsurance capital moving to casualty reinsurance elsewhere.

Also we believe that the increasing number of binding priority is given to the major brokers which ultimately increases pressure on pricing. Nevertheless, we are actively managing the business in the light of these challenges and have strengthened our efforts across our three ROE leaders optimization to business portfolio, capital efficiency and enhancing investment returns.

Taking all these considerations into the balance, we continue to expect that we will achieve a 10% operating ROE for 2014. But we do acknowledge that this is now more demanding goal than it appeared earlier in the year and that we required additional action on our part to achieve it. Amongst these actions will be a a rigorous look at our ceded reinsurance needs and practices with view towards retaining the greatest share of profitable risks.

Thank you very much for listening to us. John and I would now be happy to take any questions you may have.

Kerry Calaiaro

Any questions?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Mike Zaremski from Credit Suisse.

Mike Zaremski – Credit Suisse

Hi, thanks, good morning.

I have a couple of questions about the primary insurance segments, your loss ratio ex-cats track – kind of well above the last 12 month levels. And so I was curious if there are any large attritional losses in the segment impacting the number?

And then secondly the expense ratio, I was tracking a couple points below 2012 levels, I was wondering if that’s the trend we should expect to continue? And then I have a follow up thanks

John Worth

Okay, Mike. Thank you. It’s John here. In terms of the first part of your question, the accident year loss ratio is in insurance. As I said in earlier, we have got a two point movement in that and that’s on an NAP of $300 million. So, it’s about $5 million. And what that reflects is, taking action against a few contracts in response to what we see industries wide loss events specifically in energy liability.

And on the army expenses side, the expense of the reduction in the expense rates here which is the overall leading to a combined ratio for the insurance factor which is flat compared with last year is due to the bill (inaudible) much of anything go of the U.S. and as we continue to build out the U.S., so we would expect to see the expense ratio for the insurance segment continuing to benefit.

Mike Zaremski – Credit Suisse

Okay, got it. Also next question. There’s been some media reports citing of personnel departures within at least 2 to 3 teams at Aspen, it appear right kind of somewhat sizable premium levels. I guess you comment on whether competition for talent appears to be heating up and whether we should expect a top line impact or bottom line impact as a result over the next 12 months?

Chris O’Kane

Yes, Mike. I would say competition of talent has heated up. You have a couple of displacements in the marketplace, people move from one place to another place, and they are hiring, well, they are hiring and firing. And I guess in a way we should be flattered that Aspen talent has been approached progressively and forcibly.

So we lost some people and evitably when you lose people you regret it, some of the guys we lost are particularly good others are fairly replaced. Thus far we have been able to promote within and promoting from within is a great thing to be able to do.

We don’t talk much about talent management recruitment and retention on this calls, but actually its one of the things that right from the point I started this company 11 years ago, I put a very, very high premium on. And so we have a lot of great underwriters at the top. We have got a lot of underwriters waiting in the wings.

We are sorry to see good people go. Will they take business with them, we don’t think so, we think that the relationships today are institutional, we think the guys who are moving into new positions have the same kind of client and broker knowledge, we had before. And clearly we are working very hard to maintain it.

We are also trying to grow the business elsewhere. So we have to monitor that one but at this stage we are not necessarily saying there is loss of forward momentum of the company.

Mike Zaremski – Credit Suisse

Okay. One last one if I may. At the end of your prepared remarks you made some kind of comment about I am probably getting this wrong, giving increasing business to the brokers which could cause pressure on pricing. I think I didn’t complete follow you, if you can flush that comment out?

Chris O’Kane

Sure. More of this year than ever before we seen the major brokers that’s the top three brokers creating arrangements with carriers or groups of carriers to give them blocks of business. There seems to be view that if there any given line of business up to about 20% cannot be transacted in the open market which can be done under some kind of cover or buy any properties something like that.

That means before the brokers starts placing the risk, let’s say, he is got 20% in facility he doesn’t have to place a 100% and he only has to place 80% that’s in time that’s more capital more competition makes the brokers life easier and I believe it will force prices down that generally a negative for the special insurance marketplace.

Mike Zaremski – Credit Suisse

Thank you.

Chris O’Kane

Okay Mike.

Operator

Your next question comes from the line of Amit Kumar from Macquarie Capital.

Amit Kumar – Macquarie Capital

Good morning. I guess two or three questions. First of all, just under discussion on the three levers in terms of hitting the 10% ROE, it seems that I guess your less sure of hitting that versus what we have talked about in the past. And you are mentioning looking at ceded reinsurance, what about buyback, I mean, you are at 240, your target was 300, clearly you are ahead, maybe we just talk about the levers a bit more, maybe in a bit little detail and how do you expect to get to the 10% based under the right color, you gave in the call?

John Worth

Amit, thank you.

I think what we are seeing is that we are also confident about achieving 10%. But more recently there have been some additional headwinds to that. Chris mentioned one of the sets that we think we can take in order to offset those headwinds which is on the insurance side.

I would say that’s not the only one and we are seeing opportunities in terms of further focus on expenses and additional investment opportunities as well.

Chris O’Kane

Yes, Amit. It would be one of things (inaudible) there is one simple step. You got to squeeze everywhere so on capital efficiency we have reported to you the share buybacks so far we are going to keep that running forward through the summer, through the rest of the year given the way we see the market, if the market changes, we may need to change that. But so far we are pretty confident at the undertakings we made about capital reduction beginning of the year are going to be achieved.

In sense of investment income opportunities perhaps coming now in emerging markets that maybe some more for equities in the portfolio. We have taken some steps already, we will take some more. Nothing to racy, nothing to exciting, but just something that keeps that portfolio moving the right way. And of course an uptick in interest rate, negative for the book value side because positive for income.

And then finally, business optimization, I think all our underwriting leaders are completely clear that they are here to write the best risks and so we keep -- we squeezing and saying where is the more award, where is the more return, nobody in Aspen feels that they have to renew business. They only feel, they have to write profitable business and we just keep on emphasizing that. The final point I think, I said was on, I was reinsured. We used to give you a guidance that are ceded spend was across entire company like 8% to 12% and 12% later on.

In insurance, the taxing now crept up to more like the 25% to 30% range. So, I think what we’re doing is giving a lot of good business away. And one, looking at now we’re seeing how we retain that good business. It’s diversifying business so the capital indications are not serious but we actually just improve our premium leverage retaining more of a retail business, we’re going to squeeze more out of the ROE and that’s one of the things we’ll be looking at a lot in the second part of this year and I think I will report you in detail that in six months’ time, three months’ time now to be in the signing stage, so it will be six months from we’ve done, what we’ve done, that we will talk about it more.

So, that, I think you are right to say the world looking easier place like Beretta we were very, very, very highly confident indeed of beating 10. Today, we’re so pretty confident beating 10 but we’re just saying to some negative happened in May and the cat market did, we weren’t actually anticipating. I hope that helps.

Amit Kumar – Macquarie Capital

And, so yes, that’s very helpful actually, but no change in the buyback thought process right or we still sticking to the goal or is there a possibility we could exceed that?

Chris O’Kane

There is always the possibility we could succeed it, but all I think we want to say to you this morning is, we are sticking to the plan and we’re going to complete the plan.

Amit Kumar – Macquarie Capital

Got it. That’s actually very helpful. The only other question I guess, I have is in Q3, we’ve seen several small losses and I mean you even had one yesterday, do you have an early view how those losses might impact your Q3 numbers?

John Worth

It’s still 90 days, I mean if you say the accident happened of course only yesterday I think they are individually, relatively small losses is just too difficult to tell at this early stage.

Amit Kumar – Macquarie Capital

Okay. And do you, I mean there was a satellite, there was a crash, there was a Canadian thing, if you add all of those, do you think they will be within your cat load or are we talking about maybe just talk about that if you add all of those --

Chris O’Kane

I mean, we can’t really talk about it because we don't know. I mean it really is too early to say. I just, we just, we don't have good data, we don't have a good sense. I mean there is, I mean, what I’m going to say is, the way we are looking at, there is no reason why Q3 shouldn’t be a perfectly reasonable on 10 quarter, nothing will cause to believe that’s not the case but there is a lot, we don't know yet.

Amit Kumar – Macquarie Capital

Got it. Okay. That’s all I have for now. Thanks so much.

Chris O’Kane

Thanks Amit.

Operator

The next question comes from the line of Max Zormelo from Evercore.

Max Zormelo – Evercore

Hi, good morning. I noticed the -- in the reinsurance segment, the accident year loss ratio has catch improved quite meaningfully this quarter, I was wondering if there are anyone time items in that or if this is the trend that we should expect going forward?

John Worth

Max, this, I would say there is no one time, items in that one of your question. I think overall it’s, that are attritional loss experiences. If there was any area particular largely driven by specialty re-outside.

Max Zormelo – Evercore

Okay. That’s helpful. Second question was, I wanted to get your thought on, if you could give us an update on the capital markets business, what products made on that and if you ask me how much capital you have raised so far? Thanks.

Chris O’Kane

At this stage for processing capital markets, we hired some people added another guy to the team. We’ve done a lot of legal work as housing structures asset manager -- new organize, asset manager in Bermuda. We are not actually our capital raising at this stage I think that’s going to come later in the year. What’s likely to happen in the early stages its actually is that some of the existing Aspen re-cat business, we’re going to be looking at moving some of that into new vehicles and using that to sort of start building a track record, still very – isn’t that. But what I will say is by one/one, we fully intend to be up and running. We’re not too worried about upon missing the summer when there is not a lot of activity. So, it’s a move behind scenes working in that.

Max Zormelo – Evercore

Okay. Thank you. It looks like the industry losses for the cost of Concordias seem to be turning up, just the highest salvage cost, wondering if you had any other development on that loss this quarter or if you (inaudible) development because you have already reserved to the limit of the loss?

John Worth

Yes, you’re right. The loss is that the industry is being and formed by the P&I Clubs have increased during the quarter. I think they went up from $750 million as a total loss to $1.1 billion. And in line with that, we’ve increased the amount, so we’re putting aside for cost, cost of Concordia. If anything we’re taking a more prudent approach then those numbers or the industry would suggest.

Max Zormelo – Evercore

And so, what is the current number; I thought I think yours $38.2 million before. What is it now?

John Worth

Yes, the number now Max is about $50 million.

Max Zormelo – Evercore

Okay, that’s helpful. Thank you very much. I think, that’s about it, I’m done, thank you very much.

John Worth

Okay. Thank you.

Chris O’Kane

Okay Max, thank you.

Operator

Your next question comes from the line of Josh Shanker from Deutsche Bank.

Josh Shanker – Deutsche Bank

Good morning everyone. Chris, you and the team have the dubious distinction of being the most skeptical in the market once again. I read the press release and it said that you’re worried about rate declines. I wanted to find out whether that was a rate of change deceleration or price decline that you were quite worried about?

Chris O’Kane

Well, Josh, thank you for the accolade. I do like to tell as it is rather than telling this people might like to hear that it might be. Okay. The rate changes I was referring to chiefly on property cats Florida renewals, well-known, well-talked about. After a couple of years of increasing property cat pricing. You saw really new money in the market being very, very competitive and having an effect on stance lines.

Behind that what we are seeing is a lot of the capital is getting displayed on the property cat sector, if you want to find other homes. We are not finding the fastest growing casualty reinsurer in America is a company most well-known as being a property cat reinsurance company. This is quite new, quite bizarre. So, if you kind of look beyond the surface, you see that is going to have a way in terms of casualty pricing as well having been felt on the quarter. I mean, we report very good numbers for our casualty book and performance in terms of rate business. But, just look what I – might be heading that’s all I’m suggesting that the you and others might like to do.

Josh Shanker - Deutsche Bank

Okay. And so currently right now on the primary level is there any line of business that you see negative pricing?

Chris O’Kane

Trend is overall upwards as I said in the call, I think you have to look very hard to find something where that isn’t true. The range is like flattish for example UK property which is not really moving up. It is flat through to some of the most special at marine energy lines are general liability in the U.S. where you will be close to double-digit increases.

Aviation still is saying while since there has been any major disaster so at a downward pricing there particularly on the airline book perhaps rather than the sort of aviation that Aspen engages in.

Josh Shanker - Deutsche Bank

If you have to look one-year ahead and we are guessing what the distribution of premiums would be for Aspen which between insurance and reinsurance and the percentage of your premiums derived from property cat in the reinsurance section, given where you think pricing are heading. How do you think the distribution fairs 12 months in advance compared to where it is right now?

Chris O’Kane

What we always try and do is follow the money. And I think currently we are seeing more price increases on the insurance side of the house than on the reinsurance. So, I would expect the insurance to grow. But, you wouldn’t be asking me to give guidance on that sort of thing at this early stage which is as a trend I think insurance as a percentage the total grow. And we will all see what happens in the property market, the property cat market but so far I would say property cat pricing is pretty good. It is off its peak. But subjectively speaking a very satisfactory ROE business. So I would expect property just to represent a significant path going forward. But if the prices is down a little then the proportion of the total represented by property will also be down.

Josh Shanker - Deutsche Bank

But you also still have room to increase your PML if you wanted to?

Chris O’Kane

Yeah, but remember if prices go down your question to me was our premium, if prices go down, you are still in exposure. You are going to have yields –

Josh Shanker - Deutsche Bank

That’s 2014.

Chris O’Kane

So the question is about this is mix measured by premium, it all could be done. I’m not saying we would necessarily we will have less property exposure as long it stays above our hurdle rates. And I think its comfortably over our hurdle rates, I think it probably cat will stay above those hurdle rates. It’s just going to be a little less (inaudible) or could be. We are speculating here and we don’t know what the wind is going to do in the next few months. It could be a very different story come October.

Josh Shanker - Deutsche Bank

Well, I appreciate all the color. Thank you.

John Worth

Thank you, Josh.

Operator

Your next question comes from the line of (inaudible) from Sterne, Agee.

Dan Farrell - Sterne, Agee

Hi, good morning it’s actually Dan Farrell. Just another follow-up question on the reinsurance purchase comments you made just a clarification, you mentioned higher return products and you also said that there would be thoroughly non-correlating, so they wouldn’t do that much to exposure. Can you give us examples of some of the lines that you are thinking about?

And then secondly, when we think about modeling from a net to gross perspective, are we talking about a large change in total or is it more keeping more of one line of business maybe buying more of another try to measure that way, any sort of direction, guidance and that would be helpful?

Chris O’Kane

Yes, it would be helpful. But I don’t think I can give you too much more Dan than what I have already said essentially I think was feeding a lot. And said its rising 30% of Aspen Insurance’s premium. I believe a lot of the risk is well-written and well-controlled and diversified.

On an individual line of business base is, it might make sense to see but actually across the whole organization, we could retain more. So, we are going to be looking at is retaining a diversified slice of everything that we bought and seeing if we can improve our premium leverage enhance – improve ROE from the source. I will inform more on that in about 6 months time.

Dan Farrell - Sterne, Agee

We will wait till then. Thank you.

Chris O’Kane

Thanks Dan.

Operator

There are no further questions. Do you have any closing remarks?

Chris O’Kane

No. Thank you very much for your time and attention this morning. Have a good day. Good bye.

John Worth

Thank you.

Operator

This concludes today’s conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Aspen Insurance Holdings Limited (AHL) CEO Discusses Q2 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts