Aspen goes to market, less for cash, more to sell transformation story
Global re/insurance group Aspen is walking itself to a planned IPO with little in mind beyond getting itself listed for the sake of future funding opportunities, pre-IPO offer documentation suggested.
Management did not make the planned capital increase sound overly sizeable, justifying the market move more on securing future financial flexibility than capturing current market opportunity.
The top listed goal is “to increase our financial flexibility, create a public market for our ordinary shares, enhance our capitalisation and facilitate our future access to the capital markets.”
Target issue sizes, prices and dates have all yet to be set in the deal. Management pencilled in space for new and existing shares in the deal.
Moneys eventually garnered will be put to “general corporate purposes” which may include working capital, OPEX, CAPEX “as well as” helping re/insurance units “continue to take advantage of ongoing favourable market conditions.”
Aspen is selling itself to investors on a story of a “comprehensive transformation of the business since our acquisition by Apollo in February 2019.”
That left a nimble machine capable of pivoting quick to capture market opportunity in primary specialty insurance and “opportunistic” reinsurance, all supported by fee generating capital markets capabilities.
Aspen brags it exited twelve insurance and five reinsurance lines of business since the acquisition by Apollo in 2019, representing approximately $911 million of 2018 gross written premium.
To wit: aviation, space and bloodstock reinsurance came out of the offer in 2023 “as we did not see medium-term returns meeting our targets” and mortgage reinsurance was also trimmed, management said to brag of its “nimble” hand. Likewise in insurance, Aspen claims to have “actively managed down” from 2023 growth plans in selected US management and professional liability lines of business as rates soured.
Along the way, Aspen claims to have taken “extensive action to reduce volatility” in its books. Aspen cut its property catastrophe 1-in-250 probable maximum loss by about 69% versus the start of 2018. Prior year developments were protected by an LPT deal with Enstar.
By mid-year 2023, that showed the group still cutting revenue but pumping underwriting profits.
For the first six months of 2023, Aspen admitted to a 9.6% decline in GWP to $2.13 billion “primarily due to management’s decision to optimise the portfolio and reduce exposure, offset by rate increases.”
But H1 underwriting income was up 33% to take 4.4 points off the combined ratio to 83.8%, including 4.1 points from cat losses versus 7 points in H1 2022.
The message to investors: annualised operating return on average equity was 22.2% for the six months ended June 30, 2023 compared with 14.0% in the six months ended June 30, 2022.
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