Aspen Insurance (AHL) Takes Steps to Improve Returns and Reduce Volatility in Insurance Unit

Aspen Insurance Holdings Limited (NYSE: AHL) provided an update today on its Insurance segment, and a preliminary view of its underwriting results for the fourth quarter of 2016.

Chris O’Kane, Group Chief Executive Officer, 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, 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.

“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.”

In late 2015, the 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.

The 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.

In total, the Group expects a loss ratio of approximately 63% and an expense ratio of approximately 44% in the fourth quarter of 2016.

Finally, financial markets were impacted by movements in the yield curve in the fourth quarter of 2016. Consequently, the adverse mark-to-market impact on Aspen’s investment portfolio was approximately $190 million. Aspen expects to record a diluted book value per share of approximately $46.70 as at December 31, 2016.

Aspen will release its full fourth quarter 2016 financial results on Wednesday, February 8, 2017 following the close of the New York Stock Exchange. A conference call to discuss the results will follow at 8:00am (ET) on Thursday, February 9, 2017. The conference call can be accessed through a listen-only dial-in number or through a live webcast. To listen to the conference call, please dial +1 (844) 378 6481 or +1 (412) 542 4176, Conference ID# 10098381. The webcast will be available on Aspen’s website located at www.aspen.co. A telephone replay of the conference call will also be available beginning at approximately 11:00am (ET) on February 9, 2017 until February 23, 2017 by dialing +1 (877) 344 7529 or +1 (412) 317 0088, Conference ID# 10098381.

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