Aspen Reports Results for Quarter Ended September 30, 2018

Business Wire 24-Oct-2018 4:15 PM

Annualized Operating Return on Equity of 5.2% for the Third Quarter 2018 and 7.6% for First Nine Months 2018

Annualized Net Income Return on Equity of (4.0)% for the Third Quarter 2018 and (1.2)% for First Nine Months 2018

Aspen Insurance Holdings Limited ("Aspen") (NYSE:AHL) reported today a net loss after tax of $(15.1) million, or $(0.38) per diluted ordinary share, and operating income after tax of $36.9 million, or $0.49 per diluted ordinary share, for the third quarter of 2018.

Chris O'Kane, Chief Executive Officer, commented: "Aspen delivered solid results in the third quarter. Our priority is to continue to enhance our financial and operational performance and maintain our sharp focus on providing our clients and business partners with outstanding service.

"We are excited about the next chapter in our history with a partner that understands our strengths, culture and customer-centric philosophy. The transaction remains on track to close in the first half of 2019."⁽¹⁾

As previously announced on August 28, 2018, Aspen entered into a definitive agreement to be acquired by certain investment funds affiliated with Apollo Global Management, LLC ("Apollo") in an all-cash transaction valued at approximately $2.6 billion. The closing of the transaction is subject to closing conditions including approval by Aspen's shareholders and receipt of certain insurance and other regulatory approvals, as well as the maintenance of certain financial strength ratings by Aspen.⁽¹⁾

Operating highlights for the quarter ended September 30, 2018

• Gross written premiums of $873.2 million in the third quarter of 2018, an increase of 2.4% compared with $852.5 million in the third quarter of 2017
  • Insurance: Gross written premiums of $476.8 million, an increase of 13.3% compared with $421.0 million in the third quarter of 2017 due to growth in Financial and Professional Lines and Property and Casualty sub-segments, partially offset by a decrease in the Marine, Aviation and Energy sub-segment
  • Reinsurance: Gross written premiums of $396.4 million, a decrease of 8.1% compared with $431.5 million in the third quarter of 2017 due primarily to a decrease in the Property Catastrophe sub-segment
• Net written premiums of $578.9 million in the third quarter of 2018, a decrease of 4.7% compared with $607.4 million in the third quarter of 2017 due to the impact of increased quota share reinsurance attaching during 2018. The retention ratio in the third quarter of 2018 was 66.3% compared with 71.2% in the third quarter of 2017
  • Insurance: Net written premiums of $222.5 million, a decrease of 8.7% compared with $243.8 million in the third quarter of 2017 due primarily to the increased use of quota share reinsurance. The retention ratio in the third quarter of 2018 was 46.7% compared with 57.9% in the third quarter of 2017
  • Reinsurance: Net written premiums of $356.4 million, a decrease of 2.0% compared with $363.6 million in the third quarter of 2017
• Loss ratio of 69.2% in the third quarter of 2018 compared with 119.0% in the third quarter of 2017. The loss ratio included pre-tax catastrophe losses of $56.4 million, or 9.4 percentage points, net of reinsurance recoveries and $4.8 million of reinstatement premiums, in the third quarter of 2018 compared with $360.3 million, or 55.9 percentage points, net of reinsurance recoveries and $12.5 million of reinstatement premiums, in the third quarter of 2017
  • Insurance: Loss ratio of 63.7% compared with 101.3% in the third quarter of 2017. The loss ratio included pre-tax catastrophe losses of $8.0 million, or 3.4 percentage points, net of reinsurance recoveries, in the third quarter of 2018 primarily as a result of Hurricane Florence in the U.S. In the third quarter of 2017, pre-tax catastrophe losses totaled $84.0 million, or 30.3 percentage points, net of reinsurance recoveries and $(7.4) million of reinstatement premiums
  • Reinsurance: Loss ratio of 72.5% compared with 131.5% in the third quarter of 2017. The loss ratio included pre-tax catastrophe losses of $48.4 million, or 13.0 percentage points, net of reinsurance recoveries and $4.8 million of reinstatement premiums, in the third quarter of 2018 primarily as a result of Typhoon Jebi in Japan, Hurricane Florence in the U.S. and various other weather-related events in the U.S. and Asia. In the third quarter of 2017, pre-tax catastrophe losses totaled $276.3 million, or 74.6 percentage points, net of reinsurance recoveries and $19.9 million of reinstatement premiums
• Net favorable development on prior year loss reserves of $19.5 million benefited the loss ratio by 3.2 percentage points in the third quarter of 2018. Prior year net favorable reserve development of $17.9 million benefited the loss ratio by 2.8 loss ratio points in the third quarter of 2017
  • Insurance: Prior year net favorable reserve development of $11.9 million benefited the loss ratio by 5.1 percentage points in the third quarter of 2018. Prior year net favorable development of $0.7 million benefited the loss ratio by 0.3 percentage points in the third quarter of 2017
  • Reinsurance: Prior year net favorable reserve development of $7.6 million benefited the loss ratio by 2.0 percentage points in the third quarter of 2018. Prior year net favorable development of $17.2 million benefited the loss ratio by 4.8 percentage points in the third quarter of 2017
• Accident year loss ratio excluding catastrophes was 63.0% in the third quarter of 2018 compared with 65.9% in the third quarter of 2017. The ratio was impacted by business mix, particularly crop reinsurance. Excluding the impact of the crop reinsurance business, the accident year loss ratio excluding catastrophes in the third quarter of 2018 was 56.7%
  • Insurance: Accident year loss ratio excluding catastrophes was 65.4% in the third quarter of 2018 compared with 71.3% in the third quarter of 2017. The third quarter of 2018 ratio included $15.1 million of fire-related losses in the U.K.
  • Reinsurance: Accident year loss ratio excluding catastrophes was 61.5% in the third quarter of 2018 compared with 61.7% in the third quarter of 2017. Excluding the impact of the crop reinsurance business, the accident year loss ratio excluding catastrophes in the third quarter of 2018 was 49.0%
• Total expense ratio of 41.9% and total expense ratio (excluding amortization and non-recurring expenses) of 33.8% in the third quarter of 2018 compared with 33.2% and 32.4%, respectively, in the third quarter of 2017
  • Amortization and non-recurring expenses in the third quarter of 2018 included $11.1 million of expenses related to the operational effectiveness and efficiency program and $38.6 million of advisor fees relating to the transaction with Apollo
  • The policy acquisition expense ratio was 16.2% in the third quarter of 2018 in line with the third quarter of 2017
  • General and administrative expenses (excluding amortization and non-recurring expenses) were $109.4 million in the third quarter of 2018 compared with $105.7 million in the third quarter of 2017 as variable compensation in the third quarter of 2017 was impacted by losses during that quarter. The general and administrative expense ratio (excluding amortization and non-recurring expenses) increased to 17.6% from 16.2% in the third quarter of 2017
• Net (loss) after tax of $(15.1) million, or $(0.38) per diluted ordinary share, in the third quarter of 2018 compared with net (loss) of $(253.8) million, or $(4.48) per diluted ordinary share, in the third quarter of 2017
  • The income tax credit for the three months ended September 30, 2018 included $12.5 million related to the successful conclusion of a U.K. tax inquiry.
  • Net (loss) in the third quarter of 2018 included $(0.9) million of net realized and unrealized investment losses and $(2.3) million of net realized and unrealized foreign exchange (losses) compared with $17.5 million of net realized and unrealized investment gains and $12.9 million gain of net realized and unrealized foreign exchange (losses) in the third quarter of 2017
• Operating income after tax of $36.9 million, or $0.49 per diluted ordinary share, in the third quarter of 2018 compared with operating (loss) of $(276.6) million, or $(4.78) per diluted ordinary share, in the third quarter of 2017
• Annualized net income return on average equity of (4.0)% and annualized operating return on average equity of 5.2% for the quarter ended September 30, 2018 compared with (37.6)% and (40.0)%, respectively, for the third quarter of 2017

Operating highlights for the nine months ended September 30, 2018

• Gross written premiums increased by 6.4% to $2,843.8 million in the first nine months of 2018 compared with $2,672.6 million in the first nine months of 2017
• Net written premiums decreased by 9.2% to $1,700.4 million in the first nine months of 2018 compared with $1,872.3 million in the first nine months of 2017. The retention ratio in the first nine months of 2018 was 59.8% compared with 70.1% in the first nine months of 2017
• Loss ratio of 62.7% for the first nine months of 2018 compared with 80.8% for the first nine months of 2017. The loss ratio included $98.8 million, or 6.0 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries and $4.8 million of reinstatement premiums, in the first nine months of 2018. This compared with $424.3 million, or 23.9 percentage points, of pre-tax catastrophe losses, net of reinsurance recoveries and $12.5 million of reinstatement premiums, in the first nine months of 2017
• Net favorable development on prior year loss reserves of $99.7 million benefited the loss ratio by 6.0 percentage points in the first nine months of 2018. In the first nine months of 2017, net favorable development of $92.8 million benefited the loss ratio by 5.2 percentage points
• Accident year loss ratio excluding catastrophes of 62.7% for the first nine months of 2018 compared with 62.1% for the first nine months of 2017
• Total expense ratio of 40.0% and total expense ratio (excluding amortization and non-recurring expenses) of 35.7% for the first nine months of 2018 compared with 37.2% and 36.7%, respectively, for the first nine months of 2017, primarily due to a decrease in the policy acquisition expense ratio
  • Amortization and non-recurring expenses in the first nine months of 2018 included $31.5 million of expenses related to the operational effectiveness and efficiency program and $38.6 million of advisor fees relating to the transaction with Apollo
• Net income after tax of $1.0 million or $(0.37) per diluted ordinary share (adjusted for preference shares dividends and non-controlling interest) for the nine months ended September 30, 2018 compared with net (loss) of $(81.5) million, or $(1.99) per diluted ordinary share, for the nine months ended September 30, 2017. Net income in the first nine months of 2018 included $(59.3) million of net realized and unrealized investment (losses) and $(24.4) million of net realized and unrealized foreign exchange (losses) compared with net realized and unrealized investment gains of $105.7 million and $4.1 million of net realized and unrealized foreign exchange gains in the first nine months of 2017. Net income in the first nine months of 2018 also included an $8.6 million make-whole payment associated with the partial redemption of Aspen's 6.00% Senior Notes due 2020
• Operating income after tax of $156.2 million, or $2.20 per diluted ordinary share, for the nine months ended September 30, 2018 compared with operating (loss) of $(177.6) million, or $(3.46) per diluted ordinary share, for the nine months ended September 30, 2017
• Annualized net income return on average equity of (1.2)% and annualized operating return on average equity of 7.6% for the first nine months of 2018 compared with (5.5)% and (9.6)%, respectively, for the first nine months of 2017

Investment performance

• Investment income of $48.0 million in the third quarter of 2018 compared with $46.4 million in the third quarter of 2017
• The total return on Aspen's aggregate investment portfolio was 0.32% for the three months ended September 30, 2018 and reflects net realized and unrealized gains and losses mainly in the fixed income portfolio
• Aspen's investment portfolio is comprised primarily of high quality fixed income securities with an average credit quality of "AA-". The average duration of the fixed income portfolio was 3.7 years as at September 30, 2018
• Book yield on the fixed income portfolio as at September 30, 2018 was 2.67% compared with 2.56% as at December 31, 2017

Capital and Debt

• Total shareholders' equity was $2.8 billion as at September 30, 2018
• Diluted book value per share was $37.46 as at September 30, 2018, a 6.6% decrease from December 31, 2017 primarily due to retained losses and unrealized investment losses on the available for sale portfolio in the first nine months of 2018

Earnings materialsThe earnings press release and a detailed financial supplement will be published on Aspen's website at www.aspen.co.

About Aspen Insurance Holdings Limited

Aspen provides reinsurance and insurance coverage to clients in various domestic and global markets through wholly-owned subsidiaries and offices in Australia, Bermuda, Canada, Ireland, Singapore, Switzerland, the United Arab Emirates, the United Kingdom and the United States. For the year ended December 31, 2017, Aspen reported $12.9 billion in total assets, $6.7 billion in gross reserves, $2.9 billion in total shareholders' equity and $3.4 billion in gross written premiums. Its operating subsidiaries have been assigned a rating of "A" by Standard & Poor's Financial Services LLC ("S&P"), an "A" ("Excellent") by A.M. Best Company Inc. ("A.M. Best") and an "A2" by Moody's Investors Service, Inc. ("Moody's").

For more information about Aspen, please visit www.aspen.co.

(1) Forward-looking Statements Safe Harbor

This press release contains written, and Aspen's earnings conference call will contain oral, "forward-looking statements" within the meaning of the U.S. federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "expect," "intend," "plan," "believe," "do not believe," "aim," "project," "anticipate," "seek," "will," "likely," "assume," "estimate," "may," "continue," "guidance," "objective," "outlook," "trends," "future," "could," "would," "should," "target," "on track" and similar expressions of a future or forward-looking nature.

All forward-looking statements rely on a number of assumptions, estimates and data concerning future results and events and are subject to a number of uncertainties and other factors, many of which are outside Aspen's control that could cause actual results to differ materially from such statements. Aspen believes these factors include, but are not limited to: Aspen's and Apollo's ability to consummate the proposed transaction; the occurrence of any event, change or other circumstance that could give rise to the termination of the proposed transaction; required governmental approvals for the proposed transaction may not be obtained or may not be obtained on terms expected or on the anticipated schedule, and adverse regulatory conditions may be imposed in connection with any such governmental approvals; Aspen's shareholders may fail to approve the proposed transaction; Apollo or Aspen may fail to satisfy other conditions required for the completion of the proposed transaction; operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, reinsurers or suppliers) may be greater than expected following the announcement of the proposed transaction; the amount of the costs, fees, expenses and other charges related to the proposed transaction may be greater than expected; the outcome of any legal proceedings, to the extent initiated against Aspen or others following the announcement of the proposed transaction; the actual development of losses and expenses impacting estimates for Typhoon Jebi and Hurricane Florence that occurred in the third quarter of 2018, the Northern and Southern California wildfires that occurred in the fourth quarter of 2017 and Hurricanes Harvey, Irma and Maria and the earthquakes in Mexico that occurred in the third quarter of 2017; the impact of complex and unique causation and coverage issues associated with the attribution of losses to wind or flood damage or other perils such as fire or business interruption relating to such events; potential uncertainties relating to reinsurance recoveries, reinstatement premiums and other factors inherent in loss estimation; our ability to successfully develop and execute our operating effectiveness and efficiency program; our ability to successfully implement steps to further optimize the business portfolio, ensure capital efficiency and enhance investment returns; the possibility of greater frequency or severity of claims and loss activity, including as a result of natural or man-made (including economic and political risks) catastrophic or material loss events, than our underwriting, reserving, reinsurance purchasing or investment practices have anticipated; the assumptions and uncertainties underlying reserve levels that may be impacted by future payments for settlements of claims and expenses or by other factors causing adverse or favorable development, including our assumptions on inflation costs associated with long-tail casualty business which could differ materially from actual experience; the United Kingdom's decision to withdraw from the European Union; a decline in our operating subsidiaries' ratings with S&P, A.M. Best or Moody's; the reliability of, and changes in assumptions to, natural and man-made catastrophe pricing, accumulation and estimated loss models; decreased demand for our insurance or reinsurance products; cyclical changes in the insurance and reinsurance industry; the models we use to assess our exposure to losses from future catastrophes contain inherent uncertainties and our actual losses may differ significantly from expectations; our capital models may provide materially different indications than actual results; increased competition from existing (re)insurers and from alternative capital providers and insurance-linked funds and collateralized special purpose insurers on the basis of pricing, capacity, coverage terms, new capital, binding authorities to brokers or other factors and the related demand and supply dynamics as contracts come up for renewal; our ability to execute our business plan to enter new markets, introduce new products and teams and develop new distribution channels, including their integration into our existing operations; our acquisition strategy; changes in market conditions in the agriculture industry, which may vary depending upon demand for agricultural products, weather, commodity prices, natural disasters, and changes in legislation and policies related to agricultural products and producers; termination of, or changes in, the terms of the U.S. Federal Multiple Peril Crop Insurance Program or the U.S. Farm Bill, including modifications to the Standard Reinsurance Agreement put in place by the Risk Management Agency of the U.S. Department of Agriculture; the recent consolidation in the (re)insurance industry; loss of one or more of our senior underwriters or key personnel; our ability to exercise capital management initiatives, including capital available to pursue our share repurchase program at various levels or to declare dividends, or to arrange banking facilities as a result of prevailing market conditions, the level of catastrophes or other losses or changes in our financial results; changes in general economic conditions, including inflation, deflation, foreign currency exchange rates, interest rates and other factors that could affect our financial results; changes in general economic conditions, including inflation, deflation, foreign currency exchange rates, interest rates and other factors that could affect our financial results; the risk of a material decline in the value or liquidity of all or parts of our investment portfolio; the risks associated with the management of capital on behalf of investors; a failure in our operational systems or infrastructure or those of third parties, including those caused by security breaches or cyber attacks; evolving issues with respect to interpretation of coverage after major loss events; our ability to adequately model and price the effects of climate cycles and climate change; any intervening legislative or governmental action and changing judicial interpretation and judgments on insurers' liability to various risks; the risks related to litigation; the effectiveness of our risk management loss limitation methods, including our reinsurance purchasing; changes in the availability, cost or quality of reinsurance or retrocessional coverage; changes in the total industry losses or our share of total industry losses resulting from events, such as catastrophes, that have occurred in prior years or may occur and, with respect to such events, our reliance on loss reports received from cedants and loss adjustors, our reliance on industry loss estimates and those generated by modeling techniques, changes in rulings on flood damage or other exclusions as a result of prevailing lawsuits and case law; the impact of one or more large losses from events other than catastrophes or by an unexpected accumulation of attritional losses and deterioration in loss estimates; the impact of acts of terrorism, acts of war and related legislation; any changes in our reinsurers' credit quality and the amount and timing of reinsurance recoverables; the continuing and uncertain impact of the current depressed lower growth economic environment in many of the countries in which we operate; our reliance on information and technology and third-party service providers for our operations and systems; the level of inflation in repair costs due to limited availability of labor and materials after catastrophes; the failure of our reinsurers, policyholders, brokers or other intermediaries to honor their payment obligations; our reliance on the assessment and pricing of individual risks by third parties; our dependence on a few brokers for a large portion of our revenues; changes in the U.S. federal income tax laws or regulations applicable to insurance companies and the manner in which such laws and regulations are interpreted; the impact of U.S. tax reform on Aspen's business, investments, results and assets, including (i) changes to the valuation of deferred tax assets and liabilities, (ii) the impact on intra-group reinsurance transactions, (iii) that the costs associated with U.S. tax reform may be greater than initially expected, and (iv) the risk that technical corrections, regulations and supplemental legislation and future interpretations or applications thereof or other changes may be issued in the future, including the rules affecting the valuation of deferred tax assets; changes in government regulations or tax laws in jurisdictions where we conduct business; changes in accounting principles or policies or in the application of such accounting principles or policies; increased counterparty risk due to the credit impairment of financial institutions; and Aspen or Aspen Bermuda Limited becoming subject to income taxes in the United States or the United Kingdom. For a more detailed description of these uncertainties and other factors, please see the "Risk Factors" section in Aspen's Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the U.S. Securities and Exchange Commission (the "SEC"). Aspen undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.

In addition, any estimates relating to loss events involve the exercise of considerable judgment and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market intelligence, initial tentative loss reports and other sources. The actuarial range of reserves and management's best estimate represents a distribution from our internal capital model for reserving risk based on our current state of knowledge and explicit and implicit assumptions relating to the incurred pattern of claims, the expected ultimate settlement amount, inflation and dependencies between lines of business. Due to the complexity of factors contributing to losses and the preliminary nature of the information used to prepare estimates, there can be no assurance that Aspen's ultimate losses will remain within the stated amounts.

Non-GAAP Financial Measures

In presenting Aspen's results, management has included and discussed certain "non-GAAP financial measures." Management believes these non-GAAP financial measures, which may be defined differently by other companies, better explain Aspen's results of operations in a manner that allows for a more complete understanding of the underlying trends in Aspen's business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measure is included in the financial supplement or this release. Aspen's financial supplement, which was furnished with the SEC on Form 8-K on October 24, 2018, can be obtained from the Investor Relations section of Aspen's website at www.aspen.co.

Annualized Operating Return on Average Equity ("Operating ROE") is a non-GAAP financial measure. Operating ROE is calculated using operating income, as defined below, and average equity is calculated as the arithmetic average on a monthly basis for the stated periods of shareholders' equity excluding the aggregate value of the liquidation preferences of our preference shares net of issuance costs and the total amount of non-controlling interest. Aspen presents Operating ROE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. Please see page 22 of Aspen's financial supplement for a reconciliation of net income to operating income and page 7 for a reconciliation of average shareholders' equity to average ordinary shareholders' equity.

Operating Income is a non-GAAP financial measure. Operating income is an internal performance measure used by Aspen in the management of its operations and represents after-tax operational results excluding, as applicable, after-tax net realized and unrealized gains or losses, after-tax net foreign exchange gains or losses, including net realized and unrealized gains and losses from foreign exchange contracts, net realized gains or losses on investments, amortization of intangible assets and certain non-recurring income and expenses, including expenses associated with Aspen's operational effectiveness and efficiency program.

Operating income in the third quarter of 2018 also excluded advisor fees relating to the transaction with Apollo. Operating income in the first nine months of 2018 also excluded advisor fees relating to the transaction with Apollo and expenses related to the make-whole payment associated with the partial redemption of Aspen's 6.00% Senior Notes due 2020. Operating income in the third quarter of 2017 also excluded the issue costs associated with the redemption of Aspen's 7.250% Perpetual Non-Cumulative Preference Shares. Operating income in the first nine months of 2017 also excluded the issue costs associated with the redemption of Aspen's 7.250% Perpetual Non-Cumulative Preference Share and 7.401% Perpetual Non-Cumulative Preference Shares.

Aspen excludes the items above from its calculation of operating income because they are either not expected to recur and therefore are not reflective of underlying performance or the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Aspen believes these amounts are largely independent of its business and underwriting process and including them would distort the analysis of trends in its operations. In addition to presenting net income determined in accordance with GAAP, Aspen believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Aspen's results of operations in a manner similar to how management analyzes Aspen's underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. Please see page 22 of Aspen's financial supplement for a reconciliation of net income to operating income.

Diluted Book Value per Ordinary Share is not a non-GAAP financial measure. Aspen has included diluted book value per ordinary share as it illustrates the effect on basic book value per share of dilutive securities thereby providing a better benchmark for comparison with other companies. Diluted book value per share is calculated using the treasury stock method, defined on page 21 of Aspen's financial supplement.

Diluted Operating Earnings per Share and Basic Operating Earnings per Share are non-GAAP financial measures. Aspen believes that the presentation of diluted operating earnings per share and basic operating earnings per share supports meaningful comparison from period to period and the analysis of normal business operations. Diluted operating earnings per share and basic operating earnings per share are calculated by dividing operating income by the diluted or basic weighted average number of shares outstanding for the period. Please see page 22 of Aspen's financial supplement for a reconciliation of basic earnings per share to diluted and basic operating earnings per share.

Accident Year Loss Ratio Excluding Catastrophes is a non-GAAP financial measure. Aspen believes that the presentation of loss ratios excluding catastrophes and prior year reserve movements supports meaningful comparison from period to period of the underlying performance of the business. Accident year gross loss ratios excluding catastrophes are calculated by dividing gross losses excluding catastrophe losses and prior year reserve movements by gross earned premiums excluding catastrophe-related reinstatement premiums. Accident year net loss ratios excluding catastrophes are calculated by dividing net losses excluding catastrophe losses and prior year reserve movements by net earned premiums excluding catastrophe-related reinstatement premiums. Aspen has defined catastrophe losses in the nine months ended September 30, 2018 as losses associated with Hurricane Florence in the U.S., Typhoon Jebi in Japan, Winter Storm Friederike in Europe, U.K. winter storms and other U.S. and Asian weather-related events. Catastrophe losses in the nine months ended September 30, 2017 were defined as losses associated predominantly with Hurricanes Harvey, Irma and Maria, the earthquakes in Mexico, a tornado in Mississippi, Cyclone Debbie in Australia and other weather-related events. Please see pages 11-12 of this release for a reconciliation of loss ratios to accident year loss ratios excluding catastrophes.

Retention Ratio is a non-GAAP financial measure and is calculated by dividing net written premium by gross written premium.

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