Bermuda domiciled insurer and reinsurer Aspen Insurance Holdings Limited (Aspen) has provided an update on its fourth-quarter 2016 insurance and reinsurance segments, suggesting that the Group will report an unprofitable three months.
Aspen today issued an update on its business operations in the fourth-quarter of last year, stating that overall, the Group expects to record a loss ratio of roughly 63% and an expense ratio of approximately 44%. This suggests that for the final quarter of 2016 the re/insurer is expecting to report a combined ratio of approximately 107%, making the firm’s Q4 performance across its insurance and reinsurance operations unprofitable.
According to a statement from the firm its reinsurance segment is expected to record underwriting income of $10 million in Q4, which reflects increased catastrophe losses of $15 million and an increase of roughly $25 million in energy and property losses, when compared with Q4 2015.
Furthermore, Aspen’s reinsurance division expects one-time commission-related adjustments of roughly $10 million in Q4, 2016.
Turning to the Bermuda-based company’s insurance segment, Aspen announced today that it expects to report an underwriting loss of approximately $30 million in the fourth-quarter of 2016.
The company attributes the expected underwriting loss within its insurance unit to increased loss activity in business lines that are being exited or re-positioned, the restructuring of its ceded reinsurance agreements, which was driven by its Insurance review, and the purchase of some run-off reinsurance in Q4.
“Our new Insurance leadership team has conducted a thorough review of our Insurance portfolio and identified the best opportunities for long-term profitable growth. We expect to see continuing good performance and increased growth in areas such as Professional Lines, U.K. Property and Casualty, Crisis Management, and Surety.
“We have exited lines where the level of volatility is too high and where the returns are not expected to meet our requirements. The fourth quarter has consequently been negatively impacted by these items but this is not a reflection of the results of the underlying business. Going forward, we expect these actions to drive improved growth and profitability,” said Chris O’Kane, Aspen Group Chief Executive Officer (CEO).
Towards the end of 2015 Aspen’s Insurance leadership department started work on a project that aimed to improve the loss ratio and contribute to a decline in volatility in the company’s insurance underwriting performance. The result of this, says the firm, is a substantial reduction in its appetite for Programs business and Primary Casualty.
“Our business is now on course for its next stage of profitable growth. We are confident in the quality of our book of business and the strength of our balance sheet. Our Insurance and Reinsurance leadership teams are focused and energized about the future and will continue to drive growth and profitability by partnering with clients to provide them with deep underwriting expertise and understanding of their needs and risks,” continued O’Kane.
The re/insurer also said that movements in the yield curve during Q4 2016 also impacted financial markets, which resulted in adverse market-to-market impact on the firm’s investment portfolio, of roughly $190 million. The company expects to report a diluted book value per share of roughly $46.70, as at 31st December, 2016.
