Aspen Insurance Holdings Ltd Valuation – March 2018 $AHL

Company Profile (obtained from Marketwatch): Aspen Insurance Holdings Ltd. engages in the provision of insurance and reinsurance services. It operates through the Reinsurance and Insurance business segments. The Reinsurance segment includes property catastrophe insurance; other property insurance such as risk excess, pro rata, and facultative or single risk reinsurance; casualty insurance such as U.S. treaty, international treaty, and global facultative; and specialty insurance and reinsurance such as credit and surety, mortgage, agriculture, marine, aviation, terrorism, engineering, and other specialty lines. The Insurance segment consists of property and casualty insurance; marine, aviation, and energy insurance; and financial and professional lines insurance. The company was founded by Christopher O’Kane and Julian M. Cusack on May 23, 2002 and is headquartered in Hamilton, Bermuda.

AHL Chart

AHL data by YCharts


Downloadable PDF version of this valuation:

ModernGraham Valuation of AHL – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,453,521,940 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -91.33% Fail
5. Moderate PEmg Ratio PEmg < 20 36.23 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail


Stage 2: Determination of Intrinsic Value

EPSmg $1.14
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $16.53
MG Value based on 0% Growth $9.69
Market Implied Growth Rate 13.86%
Current Price $41.30
% of Intrinsic Value N/A

Aspen Insurance Holdings Limited does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.38 in 2014 to an estimated $1.14 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.86% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Aspen Insurance Holdings Limited revealed the company was trading below its Graham Number of $59.98. The company pays a dividend of $0.94 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 36.23, which was above the industry average of 22.76.

Aspen Insurance Holdings Limited receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $59.98
PEmg 36.23
PB Ratio 0.84
Dividend Yield 2.28%
TTM Dividend $0.94
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $593,700,000
Total Assets $12,906,400,000
Intangible Assets $27,900,000
Total Liabilities $9,980,600,000
Shares Outstanding (Diluted Average) 59,428,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.25
Dec2017 -$5.22
Dec2016 $2.61
Dec2015 $4.54
Dec2014 $4.82
Dec2013 $4.14
Dec2012 $3.39
Dec2011 -$1.88
Dec2010 $3.62
Dec2009 $5.64
Dec2008 $0.92
Dec2007 $5.25
Dec2006 $3.75
Dec2005 -$2.40
Dec2004 $2.74
Dec2003 $2.56
Dec2002 $0.89

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.14
Dec2017 $0.78
Dec2016 $3.82
Dec2015 $3.95
Dec2014 $3.38
Dec2013 $2.77
Dec2012 $2.17
Dec2011 $1.94
Dec2010 $3.84
Dec2009 $3.52
Dec2008 $2.32
Dec2007 $2.81
Dec2006 $1.56
Dec2005 $0.56
Dec2004 $1.77
Dec2003 $1.09
Dec2002 $0.30

Recommended Reading:

Other ModernGraham posts about the company

10 Undervalued Stocks for the Enterprising Investor – August 2017
10 Undervalued Stocks for the Enterprising Investor – July 2017
Best Stocks Below Their Graham Number – March 2017
10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017
Best Stocks Below Their Graham Number – February 2017

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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