Aspen Insurance Holdings Ltd (AHL) 2007 Q1 法說會逐字稿

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Aspen Insurance Holdings first quarter 2007 earnings call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Noah Fields. Sir, you may begin your conference.

Thank you, and good morning. The presenters on this morning's call are Chris O'Kane, Chief Executive Officer of Aspen Insurance Holdings, and Julian Cusack, former Chief Financial Officer of Aspen Insurance Holdings, and currently Chairman and Chief Executive Officer of Aspen Insurance Limited, Aspen's Bermuda subsidiary.

Before we get underway, I'd like to make the following remarks. Yesterday afternoon, we issued our press release announcing Aspen's financial results for the quarter ended March 31st, 2007. This press release, as well as corresponding supplementary financial information, can be found at our website at www.Aspen.bm.

I would also like to draw your attention to the fact that we have posted a short slide presentation on our website to accompany this call. 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 US 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 10K, filed with the SEC and on our website.

Finally, this presentation will contain 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 on our earnings -- and our earnings slide presentation posted to the Aspen website.

Now I'll turn the call over to Chris O'Kane.

Thanks, Noah. Good morning, and thank you for joining us. We're extremely pleased with our results for the first quarter, and believe this is a good indication of the type of performance our diversified platform is capable of achieving.

For the first quarter 2007, we reported net income of $122 million, an increase of 97% versus the same quarter last year, and net written premiums of $555 million, which is 22% higher than the first quarter of 2006.

This equates to an operating annualized return on average equity for the quarter of 22.7%. Our combined ratio for the quarter was 79.4%. You can see further detail on our results on slides three and four.

I'm now going to review our premium rate experienced during the most recent renewals, and provide you with some observations on market conditions for the year so far.

As I mentioned on previous calls, we measure rate relativities on a premium weighted average basis on renewal business. Beginning with our casualty reinsurance business, rates are flat compared to the January, 2006 renewals, and we've written just over half our expected gross written premium in this segment for the year.

In our international casualty reinsurance account, we recorded an average decline in rate adequacy across our portfolio of 2%, which is better than we had planned for.

In our US casualty reinsurance account, most renewals are showing small rate reductions, although on average, we've achieved a 1% increase across the book because of one large renewal with a 10% increase.

In our property reinsurance segment, we have seen stronger pricing than that achieved in the first quarter of 2006. However, rates have fallen somewhat from the highs recorded in June and July of last year. We achieved average price increases of 16% versus the first quarter of 2006, but estimate that rates have fallen approximately 10% to 15% compared to last June or July.

US property cat pricing remains extremely favorable, but European rates have been a little disappointing. The decrease in US property cat pricing since the peak of last year reflects both increased capacity available in the market from capital raising and record earnings achieved by some [P&C] companies, as well as a reduction in cat buying demand following the market reforms in Florida earlier this year.

Pricing in our risk excess business was softer than for cat risks, and as a result, we declined to renew a number of programs in April.

April 1st is a major renewal period for Japanese risks, and we wrote approximately $22 million of premium, which is about 8% less than last year. Rates for Japanese wind and quake fell approximately 5% to 10%, and in some cases, did not meet our hurdle rates for this type business. We like the geographic diversity which Japanese business provides. However, when we see declines in pricing below technically adequate levels, we write less business.

In our specialty lines division, we've seen wide variation in rates by class, and recorded an average increase of 1% on our renewal portfolio. Rate declines were steepest in aviation. We saw rates falling by 5%, although terms and conditions are holding up well.

There was relatively little renewal activity in aviation in the first quarter. We expect the rating environment to remain challenging for the remainder of this year. [Inaudible] physical damage insurance is still seeing strong rates for Gulf of Mexico exposed account, despite 2% rate decreases for this year so far. Remember, however, that this is business which experienced increases of 2 to 3 times or more following KRW.

In marine hull insurance, we averaged rate increases of 8% on our renewed business. Our specialty liability also saw average rate increases of 6% in the first quarter.

In our insurance business, rate renewal experienced has been bifurcated, with the UK seeing significant rate decreases, while the US has seen gentle single-digit percentage declines. In the UK, rate relativities in our commercial property, liability, and international property facultative businesses are down 6%, 13%, and 14% respectively, due to increased competition.

In summary, rates remain generally attractive as they're coming off historical highs in many lines. US peak zone property cat reinsurance, Gulf of Mexico exposed energy physical damage insurance, and specialty liability do remain attractively priced, although they are below the levels reached last year.

In almost all of our other lines, however, rates are trending downwards, with rate pressure particularly acute in the UK primary market and in aviation.

In short, we've written less business in the first quarter than we had planned, reflecting current pricing environments, but the business we wrote was at better rates than our planning assumptions.

Our biggest loss in the quarter was a European wind storm named Kyrill. Some interesting inference can be made about this loss, as we believe our actual loss is much less than that implied by our premium market share. We currently estimate that we have approximately 2% of the European wind exposed property reinsurance premium, but we tend to write with a bias towards the UK, where we regard rate levels as relatively firm, and against Germany, which we tend to see as less well-rated.

It is difficult to get good market data on European cat losses, but the best evidence we currently have would suggest a market loss in the range of $5.25 billion. Our current reserves for Kyrill are $24 million in total, of which $19 million emanates from property reinsurance accounts. From this, you can see that whereas we're about 2% of the catastrophe market, we only have 0.4% of the loss, which we think evidences our heightened awareness of the catastrophe risk post-KRW.

As we approach the US hurricane season, I wanted to update you on exposures to US hurricanes following the portfolio repositioning we conducted last year. It is difficult to model the combined effect of our insurance company clients reducing their own exposures with our revised underwriting approach. Our tentative findings are that our losses for property catastrophe excessive loss for an event similar to Katrina would be reduced by about 1/3. The reductions in loss we expect in our risk excess, pro rata treaty, and insurance operations are greater still.

With that, I'll hand you over to Julian.

Thank you, Chris, and good morning. Our underwriting results for the quarter again demonstrate the continuing success of our diversification strategy, with strong contributions from all business segments, and an overall combined ratio of 79.4%.

Let me first draw your attention to what is happening to gross and net written premiums. These are moving in different directions compared to Q1 2006. Gross premiums are down by 6%, while net written premiums have increased by 22%. This is principally a result of our strategy of reducing reliance on property retrocessional reinsurance in favor of managing our unchanged catastrophe risk [balances] by cutting gross exposures instead of exporting risk to reinsursers.

This is why, in the property reinsurance segment, you will see reinsurance falling by over $100 million year on year, while gross written premiums, which we held back in Q1 last year in anticipation that rates would rise later in the year, have gone up by $24 million.

Having said that, we will report additional reinsurance ceded of some $25 million in Q2 in the property reinsurance segment, following our recently announced cat bond and ILW reinsurance programs. We will also continue to monitor the retro market. We will make additional purchases if we see value for our shareholders.

Cat losses in the quarter were $24 million, equivalent to 5.5 points of combined ratio. These were entirely related to Kyrill, and at the lower end of our previously announced range.

I am pleased to say there's been no change in our KRW claims estimates this quarter. The only other single major loss of note in the quarter was caused by a failed satellite launch in the Indian Ocean, for which we picked up losses of $7.4 million.

On the other hand, we are reporting net prior year reserve releases of $26 million, with the result that our [ex cat] accident year combined ratio was an excellent 80%.

I will now discuss the performance of our four business segments, as summarized on slide number five. Property reinsurance produced an underwriting profit in the quarter of $43.5 million, after charges of $18.9 million for Kyrill, and additions to prior year reserves of $10.1 million.

The accident quarter combined ratio was 64%, including cats, and 51% excluding cats. These are very good results, but still held back to an extent by some underperforming proportional contracts that have not been renewed, but are still running off.

Casualty reinsurance continues to contribute strongly to underwriting and investment profits, with a combined ratio of 85% this quarter, and reserves of over $1 billion, which produce investment income of around $50 million per annum.

The reserves continue to develop well, with the release this quarter of $23 million. While this is significant in relation to the quarter's results, it is only 2.3% of the year end reserves. These remain well towards the upper end of the ranges estimated by our internal and external actuaries.

The accident quarter combined ratio, based on total reported and net earned premiums, is over 100%, but this reflects downward adjustments of $9 million to prior period [premium] estimates. Adjusting for this gives an accident quarter run rate combined ratio of 97.1%, which we regard as entirely satisfactory for this segment.

Our specialty lines have also performed extremely well, producing an underwriting profit of $20.4 million in the quarter, with a combined ratio of 81.6%. This includes 3.4 points of cat losses, and 6.7 points from the [sea launch] satellite loss, partially offset by [4.0] points of prior year releases.

This segment contains a diversified range of products, with combined ratios, excluding cats, ranging from 60% for energy to 92% for aviation.

I am pleased to say that the property components of the insurance segment has made a positive contribution this quarter, with a combined ratio of 93%, which includes cat losses of 3.4 points and a benefit of 1.7 points from prior year releases. About half the GWP in this sub-segment is US surplus lines, which is down $5.5 million from the first quarter of last year as a result of our decision to reposition the business.

Of the remainder, about 25% is international facultative business, while the rest is UK commercial property insurance business, which continues to face severe competition, and has continued strength.

Casualty insurance has a combined ratio for the quarter of 82%, also reflecting prior year releases of $9.5 million, or 20 points. As previously reported, the UK liability business is also strengthening in response to what is now a very soft market. We continue to see good claims developments from the business booked in previous accident years, while adopting a cautious approach to the reserving of the current accident year.

US surplus lines casualty GWP is now about 50% total in this sub-segment. That's performing well, although also in an increasingly challenging market.

Net investment income for the quarter is $67.5 million, an increase of 51.7% over the last year. This includes $9.9 million from funds [of] hedge funds, equivalent to an annualized average return on those funds of 16%. This is a good result for the quarter from funds of hedge funds, but unlikely to be reflective of average returns achievable over longer periods.

We made a further $150 million investment into hedge funds on February 1st this year, which brings our total allocations to alternative investments to 6.4% of the total portfolio.

During the quarter, the book yield on our fixed income portfolio increased 25 basis points, from 4.52% to 4.77%. And the portfolio duration increased from 3 years to 3.3 years. Slide number six reflects the improvements in our investment yields since fourth quarter of 2004.

During Q1, there was much talk in the market concerning exposure of insurance companies' portfolios to the sub-prime mortgage market. Aspen took an early view on this sector of the MDS market, and exited the minimal direct exposure we had at the beginning of March, 2007. We also reduced our exposure to corporate names with sub-prime exposure.

Slide seven provides a summary of our current investment portfolio allocations.

At March 31st, our gross reserves for losses and loss adjustment expenses were approximately $2.78 billion, of which 52.3% represented estimates for losses incurred but not reported. This is up from 48.7% at December 31st, 2006. Excluding current reserves, the IBNR percentage is 60.2%. The remaining IBNR for Katrina, Rita, and Wilma is $110 million, part of total gross KRW unpaid reserves of $546 million.

We've adjusted the fair value of our Katrina recovery [under the cat swap] down to $21 million and $25 million this quarter, as yet again, the PCS survey results remain unchanged. This charge is reflected in other expenses.

In 2006, the Board authorized a share buyback program of up to $300 million. The first phase of this program, involving the buyback of $200 million ordinary shares funded through the issuance of $200 million of preference shares was completed in Q4.

We are aiming to undertake the second stage, involving a further repurchase of $100 million ordinary shares during the course of 2007.

Overhang from our founder shareholders has reduced again this quarter, with the exercise on a cashless basis of founder options by Wellington Underwriting, resulting in the issuance and sale into the market of 500 -- of 426,000 shares.

In February, we confirmed our initial guidance of 2007 given in November. So now to slide eight. After reviewing all the information we now have, including the April [reals] and the first quarter's results, we've concluded that there's now more downside risk to our GWP forecast of $1.9 million [than before]. We therefore reduced the guidance to $1.8 million, plus or minus 5%.

Guidance for the full year ceded ratio remains at 6% to 8% of gross written premiums. And the guidance of 83% to 88% for the combined ratio, absent major losses, also remains unchanged.

Following good investment results for Q1 and further repositioning of the fixed income portfolio, we are increasing our guidance for investment income to a range of $250 million to $270 million for the full year. This was previously $230 million to $250 million.

Tax rate guidance for the year remains at 16% to 19%, although we booked 17.2% for the first quarter. ROE guidance, taking into account all of the above, remains in the range of 16% to 20%, absent major losses.

In February, we offered some initial guidance on our cat budget for 2007. This was based on modeling in RMS 6, version 6, of the distribution of annual aggregate cat losses, based on our anticipated exposures and short-term US hurricane frequency forecasts. On this basis, we estimated that in an average year, we should experience approximately $135 million of cat losses, although there is, of course, a very wide range of possible outcomes in any one year.

We have, on the same basis, re-estimated average aggregate cat losses for the remainder of the year at $115 million.

We would also remind you that our peak zone modeled post-tax loss [currents] for single events with a frequency greater than [inaudible] of one in 100 years is 17.5% of total shareholders' equity, or approximately $440 million. At the one in 250 years [return period], this increases to 25% of equity.

In closing, I would simply say that in my opinion, the balance of volatility risk from cat exposures versus [reward potential] from our business model is now in a much better state than in 2005. As I hand over the role of CFO to Richard Houghton, I remain optimistic about the future prospects of the Aspen Group as it tackles new risks and opportunities.

I now turn the call back over to Chris.

Thanks, Julian. Before we open the lines for Q&A, I'd like to spend a few moments on the recent changes and additions to our management team. This last month has seen the conclusion of a lengthy process, during which we have focused on building out and strengthening our management lineup.

I've been working now with Glyn Jones in his capacity as our new Chairman for just over two weeks, and I believe Glyn's going to make a really positive difference to our business going forward.

Richard Houghton, our new CFO, is a first-class act. Richard was with the Royal Bank of Scotland for the last nine years, and has a track record of success in a number of financial and operating positions. He brings to Aspen an execution orientation and a problem-solving mindset, which is exactly what we need to further our goals in improving returns while continuing to tighten our execution.

Nathan Warde, who's just joined us in March, is in my view one of the outstanding talents in the excess and surplus lines business. He has a terrific track record of making good profits across the cycle. I believe under his leadership, our US business will rapidly gather momentum and show improved profitability.

Last but not least, Matt Yeldham will be joining us when his non-compete expires in October. Matt worked with Julian and me in Wellington Underwriting for nine years, up until 2002, where he was one of the most talented underwriters. He's developed since then into a highly charismatic business leader, and I expect Matt will be a powerful magnet for drawing underwriting talent to Aspen.

In conclusion, though, I'd like to thank Julian for the tremendous contribution he's made to Aspen in his role of CFO. Julian and I have been working together since January, 1993, and Aspen owes its existence in large part to a plan that Julian and I created in the summer of 2001. He's been an outstanding CFO and a great colleague during our five years together at Aspen. I am now going to dedicate myself to keeping him even busier and more productive in his new role as Chairman of Bermuda and in strategic group initiatives.

With that, I'm going to turn the call over to your questions.

[Operator Instructions] Your first question comes from Kevin O'Donoghue of Banc of America.

Hi. Thanks. Good morning. A couple of quick questions for you. First of all, I think you said you saw no adverse development on the 2005 storms, so I'm wondering if you could tell us real quick where the development in your property reinsurance segment did come from.

Sure, Kevin. There was a number of smaller items comprising that. The larger two components were an increase in our loss [estimate] for the [Ameren dam] loss of $3.5 million, and an increase in our estimate for the 2005 Indian flood losses of $1 million.

Okay. Great. And then secondly, also on reserve development, the $22 million in favorable development that you experienced in your casualty division, could you tell us what years those are from? I think most of your competitors have kind of taken the position that they're not going to -- that they're not comfortable yet releasing casualty reserves. And I'm wondering what gives you confidence that it's okay to go ahead and do that now.

Well, I think the best way for me to address that question is first of all to divide it between the US and our international book. About $18 million of the release is from our US book, and $4 million is from our international book. In the US book, the largest part of that comes from professional indemnity, excessive loss treaties, and the accident years concerned are 2003, 2004 principally. Another $2 million is from workers' comp [clash] business, which is essentially a short-tail account. And there's a miscellaneous contribution from some other lines.

In the international business, it is from the earlier accident years that we are allowing some gentle release at this stage.

Okay. Thank you very much.

Your next question comes from Alain Karaoglan of Deutsche Bank.

Good morning. Could you speak to your ceded reinsurance for the rest of the year? You mentioned that $25 million may come through in the property reinsurance. If I recall correctly --

Alain?

Yes.

Alain, I'm sorry. It's Chris. I'm just going to ask you to pause because we've got a technical glitch here, which I think we're going to sort out in a few seconds. Can you just hold on, please?

Sure.

[Pause]

Alain, really sorry about that. I think we're okay to go again. Please, if you could just start at the beginning, because we couldn't hear you.

No problem. Could you tell us a little bit more about your ceded reinsurance expectations? You mentioned another $25 million from property reinsurance. Last year, your ceded premium was $282 million. You were expecting significant decreases in this year. Was that weighted a little bit more towards the first quarter, so that -- in the $81 million? So maybe if you could tell us how would you expect the ceded premium to work out for the rest of the year.

Yes, Alain. The major reduction was in our purchases of property retro reinsurance. And last year, most of that [inaudible] first of January, so it would have been booked in the written line in the first quarter of last year. Our annual budget for property retro this year, as we've previously advised, is $50 million. So -- and that will be partly taken up by the $25 million I mentioned in connection with the second quarter cat bond and ILWs. And depending on what we see in the marketplace, there may be some further purchases.

On the other, second [or seconds], the pattern of reinsurance buying is not significantly different from last year, although we are expecting to spend less on both our specialty lines reinsurance program and on our insurance, property insurance reinsurance program, compared to 2006.

Okay. The next question is on the property book that improved to a 93% combined ratio. That's still probably higher than where it should be for a property book. When would you expect to be able to get off completely on some of the business that you elected not to renew last year?

Let me make a stab at that, and I'll -- Chris can comment further. But I think, Alain, that the -- there's a difference between our UK result and international, and our US results. So as we said, in the UK, our commercial property account is suffering very soft market conditions, and on a reduced base, we are still seeing eroded margins in that area.

But the main area we had a difficulty in 2006 was in the US surplus lines account, where we had a significant peak in fire losses in a particular sub-segment of the book. Most of that particular sub-segment business has now run off and not been renewed. But we have written a different [style], different business mix, in the US surplus lines account this year, with a greater weighting towards non-cat exposed fire business, and less weighting towards cat business, which means that the attrition loss ratio expectation will be normally higher.

Chris, I don't know whether you want to add more to that.

The other thing I would say about that, particularly in the US [side of that], is to consider not just the combined, but the expense side and the loss ratio side. I'd say if you look at loss ratios on an accident year basis, [in other words] looking on a going forward basis, the loss ratios look pretty good. It seems to me that book is now [sorted].

But there is a reinsurance cost, which was something we bought based on last year's exposures, which contributes quite a lot to the expense side. And I guess we've also -- we took the top line down a bit as we decreased in the account, and that's also considered contributing to high expense ratio. That's going to take a few months to work through the system.

The other thing that's happening there now is Nathan Warde and a number of others have joined this operation. I have a lot of confidence in what they're going to do, and the account is sort of building the top line again, which will tame the expense ratio problem. And I guess you're going to have to look towards the end of this year and early next year to really see the kind of performance that it's capable of on a combined basis.

But on a loss basis, I think you're going to see it from this day onwards.

Okay. And the last two questions are on guidance. And Chris, maybe if you could comment on your expectations in Florida in terms of demand there. But on guidance, you haven't changed your implied ROE guidance, which has a range of 16, 20. But you did raise your investment income by $20 million. That's around maybe 7 points on the return on equity. You had a 22% return on equity in the first quarter, so you're off to a good start. Would it be fair to say that you're probably more comfortable going up from the lower end of the guidance? And then maybe, Chris, your comments on the Florida market.

Alain, I really don't think that I want to answer the ROE guidance by indicating a particular point within that range. There are -- [we've seen a lot of] years go and a wide range of variations, even if you exclude catastrophe losses within the loss ratio, and other factors. So I think I'd just rather leave it at 16 to 20.

Okay, Alain. If I take up the other -- your question about Florida, it's all happening now. This is the month when it really gets going. And it's a little bit early to comment [inaudible] sense. I'd say first there's still a lot of demand from the international reinsurance market for Florida cat. Yes, there's less demand than there would have been if the reforms hadn't taken place. But it's still pretty significant.

Companies are tending to retain more, so the reinsurance is attaching a bit higher, which is not a bad thing, if it eliminates some attritional loss potential. Rates [on line], tending downwards maybe at 5% to 10% on renewals. But it's early days, and that could change.

A lot of sort of the further activity is [financing in] Florida. A lot of people are looking to buy a kind of backup to or a financial guarantee for non-payment by the hurricane cat fund. That's probably something they're talking to bankers more than reinsurers about. But it tells you that there is still, on the part of a buyer, a degree of nervousness and a degree of concern.

The final thing, and we watch it all the time, is the -- how the forecast is and where the El Nino effect is likely to be. Current views are that that's tending to make this hurricane season look a little bit worse. As you remember, last year, we were protected by the weather phenomenon -- the storms. There were plenty of storms last year. They simply didn't come near the US mainland. Probably they shifted a bit towards [inaudible]. And I think that's going to be reflected in the pricing.

The last four years in Florida, what we've seen is pricing increase in the May, June period, as the hurricane season gets closer. There's a sense of panic, and that forces prices up. And I actually wouldn't rule that out this year. But that's about as much as I can tell you from that.

Great. Thank you very much.

Thank you.

[Operator Instructions] Your next question comes from Vinay Misquith of Credit Suisse.

Hi. Good morning. Could you add some color to your thought on the property reinsurance line? I think you already talked about it. I think Julian already talked about it, that -- but my understanding was that you would reduce the top line slightly so that you could keep more net, and therefore manage your exposures. And so I'm just trying to reconcile that with the top line growing about 15% this quarter versus last year.

Okay, Vinay. I think that's a [jolly] good question. First thing is that of the $187 million property reinsurance, GWP, this year, $4 million relates to hurricane -- sorry -- wind storm Kyrill, by way of [Greenwood's] reinstatement premiums.

The -- I think the way to reconcile the remaining increase is it mainly relates to two factors. First of all, the rates are higher on the US peak zone property business, at least, than they were at Q1 2006. And secondly, you may recall that last year, we definitely held back in terms of writing peak zone exposures in the first quarter in anticipation that prices would rise. I think this year you're seeing more of a return to more normal seasonalization patterns.

And just a further observation, Vinay, would be that you should not read into this a change in exposure or a change in risk appetite. We're doing exactly what we've been doing for some time, and there's no change in that. As Julian says, the timing of the premium and indeed the quality of the premium [rate] levels are the drivers here, rather than the exposure change or a change in risk appetite.

Let me just add that two years ago, the GWP and property reinsurance for the first quarter was $300 million. So you can see how far we've come down since then.

Sure. So you can expect some sort of reduction in the top line maybe in the second and third quarters, because you moved more of the aggregate to your first quarter?

It's possible, but there are things going on, for example, in first -- in the April renewals. We dropped some risk excess programs, which will also come into this premium aggregate. So I'm not sure how much of that effect will [necessarily] show up.

All right. And on the alternative investments, you've recently invested some more. Do you plan to keep on increasing your investments, and make it about 5% or 6% of your total investments? Or do you just plan to leave it at the same level right now?

We consider that there is some -- still some room for increasing our allocations in alternative investments. We're not about to move that up very rapidly, but I would say that -- so it's more likely than not that we will go further than the 6% or so that we have at the moment.

And in the investment income guidance, do you -- what sort of yield do you assume on that portfolio?

8% annualized.

8%. Okay. And with respect to capital management, your stock fell down in the first quarter. And that might have been a great opportunity to buy it back then. And I'm curious why no stock repurchases were done then. And also wondering what the rating agencies are saying with respect to you buying back the remaining $100 million worth of stock for the rest of the year.

Okay. I'd say two things. First of all, during this first quarter, our accelerated share repurchase, which we [entered into] in December, was being [paid out] in the market. So effectively, we were benefiting from an average unit pricing on that deal over that period.

On the second part, we clearly are not going to move on any further reduction in our total capital without being absolutely comfortable that that would have no impact on our financial strength ratings. So it's -- at this stage, it's difficult to say when that will be, but we tend to be -- we continue to hope that we can complete this program sooner rather than later.

Will you be able to do some of it before the hurricane season? Or do you think it's more prudent to wait for after hurricane season?

I think from -- the way we look at our capital adequacy, from our point of view, the way we think about it, we think it would be -- [roughly] be prudent and sensible to complete the further [cost] of the program before the hurricane season. So as I said, we need to be absolutely comfortable that all the stakeholders who have an interest in this are comfortable with that.

All right. Thank you. Nice quarter.

Thank you, Vinay.

[Operator Instructions] Your next question comes from Jay Gelb of Lehman Brothers.

Thank you, and good morning. I just wanted to clarify the net impact from Kyrill, first from a -- what was it, again, from a loss perspective? And then what was the net impact to earnings after reinstatement premiums? Thank you.

Okay. Let me give you a full rundown on the Kyrill numbers, Jay. Looking at the claims first, we have $22.5 million in property reinsurance, $3.8 million in specialty insurance, and $0.8 million in property insurance, making a total claims of $27.1 million. And then we have reinstatements, which are in the property reinsurance segment income line, premium line, rather, of $4 million or so, making for -- so it's around the $23 million, $24 million of pre-tax impact on the income statement.

Right. Okay. Was any of that tax affected?

I think it'd be reasonable to apply the average rate of tax, which is 17.2% of that.

Okay. That's all. Well, and if I can ask -- if I can ask, going forward, if you're able to put in your catastrophe losses, that would be helpful for us to analyze, or the underlying run rate. The prior year development data is very helpful, if we could -- if you could also add in the catastrophe losses. What are their -- however you want to characterize that. If it's the large losses or just however you characterize catastrophes. That would be helpful in the supplement.

Okay. I think [that is a good idea]. Thank you.

Thank you very much.

There appears to be no more questions at this time. I will now turn the floor back over to management for any finishing remarks.

Well, thank you for joining our call this morning. Goodbye.

This concludes Aspen Insurance Holding's conference call.