Aspen Insurance Holdings has reported a net loss of $15.1 million for the third-quarter of 2018, which includes impacts from charges related to its transaction with Apollo, expense efficiencies, and higher losses.
As previously announced, Aspen, the global insurer and reinsurer is to be acquired by Apollo Global Management, LLC for $2.6 billion, a deal that’s expected to close in the first-half of 2019.
Aspen today announced its financial results for the third-quarter of 2018, which reveals an increase in amortization and non-recurring expenses of more than 460% to $51 million, when compared with Q2 2018, and an increase from the $5.1 million reported for the same period last year.
The re/insurer explains that the increase is mainly a result of its transaction with Apollo, noting that $38.6 million of the $51 million figure is from advisor fees relating to the Apollo deal. The remaining $11 million, includes expenses related to the operational effectiveness and efficiency program, explains Aspen.
As a result, the firm’s total expense ratio reached 41.9% in the third-quarter, which is the highest it’s been since the fourth-quarter of 2017, which hit 46.1%. However, excluding amortization and non-recurring expenses, Aspen’s expense ratio in Q3 was 33.8%, which, excluding Q3 2017 (32.4%), is the lowest the firm has recorded since the beginning of 2017.
Alongside a higher expense ratio, Aspen’s loss ratio also increased in Q3 2018 to 69.2%, compared with 59.7% in Q2 and 58.1% in Q1.
The firm reported Q3 2018 catastrophe losses of $56.4 million, or 9.4 percentage points, net of reinsurance and $4.8 million of reinstatement premiums. Within the insurance segment, the loss ratio included net pre-tax cat losses of $8 million, primarily as a result of hurricane Florence.
In the reinsurance segment, the loss ratio included net pre-tax cat losses of $48.4 million and $4.8 million of reinstatement premiums, primarily as a result of typhoon Jebi, hurricane Florence, and various other weather-related events in the U.S. and Asia.
Losses and loss adjustment expenses increased to $431.1 million in Q3 2018 when compared with $310 million in both Q1 and Q2, which contributed to total underwriting expenses increasing to $641.5 million. As a result, the firm reported an underwriting loss of $18.3 million in Q3 2018, underlined by a combined ratio of 111.1%, which, improves somewhat to 103% when excluding amortization and non-recurring expenses.
According to Aspen, the $15.1 million net loss includes $0.9 million of net realised and unrealised investment losses, and $2.3 million of net realised and unrealised foreign exchange losses.
Looking at premiums, and Aspen, like some other global re/insurers during the quarter, scaled back on reinsurance, with net written premiums (NWP) declining by 2% year-on-year, to $356.4 million. At the same time, its insurance segment NWP declined by 8.7% to $222.5 million, which Aspen says is due primarily to the increased use of quota share reinsurance.
Year-on-year, the proportion of premiums underwritten that are being ceded out at Aspen increased in Q3, which will be partly due to the attaching quota shares, which could be backed by some alternative, or third-party reinsurance capital.
Commenting on the firm’s Q3 2018 results, Chris O’Kane, Chief Executive Officer (CEO), said: “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.”
