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Aspen reports H1 net loss from underwriting, expense movements

16th August 2019 - Author: Luke Gallin

Aspen Insurance Holdings Limited has reported a net loss of $37.3 million for the first-half of 2019 compared with net income of $16.1 million in the same period last year, driven by expense and underwriting movements.

AspenThe insurer and reinsurer’s reported net loss for the period includes $99.2 million of net investment income, compared with $97.7 million in H1 2018.

Aspen notes that this was more than offset by a number of factors in the six month period, including $58.2 million of net realised and unrealised investment losses largely driven by net realised and unrealised gains and losses from interest rate swaps entered into in 2019.

The $37.3 million net loss also includes $27 million of net realised and unrealised foreign exchange losses.

The Bermudian re/insurer also highlights some expense and underwriting movements in the period which also impacted its result. Overall, the firm recorded an expense ratio of 43.7%, up from 38.8% in H1 2018. Non-operating expenses increased from $21.2 million in H1 2018 to $61.9 million in H1 2019.

Aspen explains that this included $43.9 million of expenses related to or triggered by Aspen’s transaction with funds affiliated with Apollo Global Management, $6 million of expenses related to the operational effectiveness and efficiency programme, and $12 million related to severance, amortisation and other non-recurring costs.

The company’s loss ratio also increased in H1 2019 from 58.9% to 60.7%, which includes $29.7 million of pre-tax catastrophe losses, net of reinsurance. This is a reduction from the $42.4 million recorded in the first-half of 2018.

Net favourable development on prior year reserves, at $9.1 million, benefited Aspen less in 2019 than in the same period in 2018, when the firm recorded net favourable reserve development of more than $80 million.

Gross written premiums (GWP) fell by nearly 6% in H1 2019 to $1.9 billion, while net written premiums increased by 7.6% to $1.2 billion.

Overall, Aspen’s operating income after-tax declined from $119.3 million in H1 2018 to $101.8 million in H1 2019. For the first-half of 2019, Aspen has reported a combined ratio of 104.4%, compared with 97.7% in H1 2018.

Mark Cloutier, Chief Executive Officer (CEO) of Aspen, said: “We continue to see improvement in our underwriting performance as a result of our focus on underwriting discipline and active management of the underwriting portfolio, which have been underpinned by improving market conditions.

“We have seen good results across both our insurance and reinsurance businesses and we are particularly encouraged by the strong improvement in the ex-cat accident year loss ratio from our continuing insurance lines at 55.4% compared to 64.5% from our total insurance book during the six months ended June 30, 2018.

“While we are seeing rate and terms improving in some classes, particularly where there has been substantial withdrawal of capacity, we will continue to approach a number of the specialty classes cautiously as evidenced in the 5.9% reduction in gross written premium year on year.”

By segment, and Aspen’s reinsurance division recorded a decline in GWP to $881.8 million, due to reductions in property catastrophe reinsurance, specialty, and casualty reinsurance. Net written premiums fell by 1.1% to $684.6 million.

At 59.2%, Aspen’s loss ratio increased slightly and included $20 million of pre-tax catastrophe losses, as a result of weather-related events. The reinsurance unit recorded an underwriting result of $39 million in the first-half of 2019, and a combined ratio of 92.9%.

Aspen’s insurance unit saw its GWP fall by 4.7% to $972.6 million, driven by reductions in property and casualty insurance and marine, aviation and energy, somewhat offset by growth in financial and professional lines. Net written premiums grew to $522.3 million as a result of changes to Aspen’s ceded reinsurance programme, which led to a lower volume of business ceded on financial and professional lines.

The loss ratio increased to 62.5% and included catastrophe losses of $9.7 million, or 2 percentage points. The insurance segment recorded underwriting income of $3.1 million in H1 2019, and a combined ratio of 99.4%.

“In my short period of time with Aspen I have come to appreciate the depth of talent and experience in the group and firmly believe we can show the right combination of entrepreneurialism and discipline the current market conditions and trends demand of us in order to build a successful business into the future,” said Cloutier.

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