Aspen’s profits soar as volatility reduction takes hold

Aspen Group’s focus on disciplined underwriting paid off in the first half of the year as the re/insurer quadrupled its net income despite a fall in gross written premiums.

The Bermuda-based re/insurer recorded a net profit of $219 million, up 352% on the first six months of 2022, while underwriting income rose 33% to $208 million and its combined ratio improved to 83.8% from 88.2%.

Gross written premium fell from $2.35 billion to $2.16 billion in the period and net earned premiums fell from $1.33 billion to $1.29 billion.

Net investment income rose to $129 million from $89 million. Net realised and unrealised gains were $18 million compared to net realised and unrealised losses of $126.4 million in the first half of 2022.

Mark Cloutier, chief executive officer, said: “We are pleased to report a strong set of results for the first half of 2023, which saw our operating income and net income continue to increase, by 47% to $191 million and by 352% to $219 million, respectively.”

He added: “We are particularly encouraged to report another period of improved underwriting performance, with our reported combined ratio improving to 83.8% and underwriting income of $208 million. This result reflects the sustained impact of our highly disciplined approach and the benefits of the well-diversified portfolio we have deliberately constructed.”

Cloutier said the decline in gross written premium was due to “our continuing effort to use current favourable trading conditions to further reduce exposure and manage volatility, while holding our discipline in certain classes where pricing and terms do not meet our return objectives, as demonstrated by our improved underwriting income.

He added: “While broadly trading conditions are strong, resulting in a 12% rate increase across our whole portfolio, our focus remains on rate adequacy, terms and conditions rather than just rate change.

“Growing and maintaining our profitability as conditions shift will always be our first priority.”

In the company’s insurance segment, gross written premiums fell four per cent to $1.25 billion compared to $1.3 billion.

“This as due to our decision to reduce writing certain programmes which did not meet our profitability expectations, actively managing down premiums within financial and professional lines, offset by favourable market conditions in first party and specialty lines,” the company said.

Net written premiums rose three per cent to $746 million as the company reduced its premiums ceded to reinsurers from 45% to 40%, as a result of changes in business mix and “the decision to restructure a portion of our outwards reinsurance renewals”.

Losses, excluding catastrophe losses, rose to $411 million from $395 million largely due to “proactive reserving actions” to take account of social and economic inflationary trends. Catastrophe losses edged down to $18 million from $20 million.

In the reinsurance segment, gross written premiums dropped 16% to $786 million, “driven by management’s planned initiatives to reduce exposure to certain more volatile lines of business with inadequate terms as part of our continued portfolio optimisation, partially offset by strong rate increases”.

Premiums ceded to reinsurers as a percentage of gross written premiums rose to 31% compared to 25%, primarily in property reinsurance to reduce catastrophe exposure.

For reinsurance, accident year losses, excluding catastrophe losses, fell to $260 million from $287 million, while catastrophe losses more than halved from $73 million to $35 million.

Shareholders’ equity rose $191 million to $2.55 billion while annualised operating return on average equity rose to 22% compared to 14%.