Aspen warns on potential Q4 2016 loss as underwriting quality drops


Aspen Insurance Holdings has released a preliminary view of its underwriting results ahead of the release of its results for the fourth quarter of 2016, noting that it might make a loss in the quarter.

Aspen said that the Group expects a loss ratio of approximately 63 percent and an expense ratio of approximately 44 percent in the fourth quarter of 2016. If correct, this would take the combined ratio to 107 percent.

Aspen’s reinsurance segment is expected to record underwriting income of approximately $10 million in the fourth quarter of 2016. Results for the quarter reflect an increase of approximately $15 million in catastrophe losses, and an increase of approximately $25 million in energy and property-related losses compared with the fourth quarter of 2015, and one-time commission-related adjustments of approximately $10 million in the fourth quarter of 2016.

The company also pointed out that the financial markets were impacted by movements in the yield curve in the fourth quarter of 2016 and that as a result the adverse mark-to-market impact on Aspen’s investment portfolio was approximately $190 million.

The company said that in late 2015, its insurance leadership team commenced a project to improve the loss ratio and reduce volatility in Aspen Insurance’s underwriting performance. As a consequence, Aspen has significantly reduced its appetite for programs business and primary casualty.

The insurance review also resulted in a restructure of Aspen’s ceded reinsurance arrangements which is expected to reduce volatility and, over time, benefit the expense ratio. In addition, Aspen purchased some run-off reinsurance in the fourth quarter. As a result of these actions, together with loss activity in lines that are being exited or re-positioned, Aspen Insurance is expected to record an underwriting loss of approximately $30 million in the fourth quarter of 2016.

In a statement Chris O’Kane, group CEO, said: “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, UK 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.

“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.”

Aspen will release its full fourth quarter 2016 financial results on Wednesday, February 8, 2017.

Aspen Insurance, Results, Chris O’Kane, Bermuda

Bermuda Re