Aspen sees profits surge despite Q4 decline in gross premiums

Aspen Insurance Group, which has filed an initial public offering registration, saw a significant surge in profits on improved underwriting, investment income and reduction in property exposures. However, the group's top line decreased 2%, and its combined ratio deteriorated by 4.7 points during the fourth quarter of 2023.

The Bermuda-based company saw its profit jump 41% to $215.6 million in the fourth quarter of 2023 as its net investment income improved by 47%. Its annual net profit rocketed to $484.8 million from $6.5 million a year earlier.

The company's adjusted combined ratio for the quarter increased to 84.3% from 82.9% while it improved to 86.4% from 92.4% for the year.  

Gross written premiums for the quarter decreased 2% to $859.7 million from $876.9 million. For the full year, GWP reduced to $3.97 billion, compared with $4.34 billion in the prior year.

Mark Cloutier (pictured), executive chairman and group chief executive officer, said: “We are pleased to report an excellent set of results for 2023. Aspen’s continued focus on underwriting discipline and operating excellence resulted in our adjusted combined ratio improving to 86.4%, our net income available to ordinary shareholders increasing to $485 million and an annualised operating return on average equity of 20.2%, all significant improvements over the prior year."

He added: "In addition to improved underwriting performance, investment income of $276 million represents a 47% increase year over year. For the full year 2023, Aspen Capital Markets generated $136 million in total fee income from capital sourced across multiple lines and classes in both our insurance and reinsurance segments.

"It is pleasing to note the quality of earnings we are now generating, with meaningful contributions from each of our core earning engines, underwriting, investments and capital markets fees. We believe we have reached a state where we are able to sustain strong ROEs across cycles through the very healthy mix in the sources of our earnings.

"The combination of our 'One Aspen Approach,' balance sheet strength, and capital markets capabilities, positions us with a distinct advantage in the specialty (re)insurance sector, with the scale being an important source of capacity to our customers while still maintaining the ability to be nimble, decisive, and opportunistic in response to changes in trading conditions and market opportunities."

Cloutier said the company had provided it could operate across varying market cycles.

"In a year that again saw our sector challenged by climate, geopolitical events, and socio-economic challenges, this fourth consecutive year of improved results gives us confidence we have the talent, strategy, platforms, and brand to continue to perform at the top of our class, delivering strong returns for our shareholders through changing market cycles and across a wide range of industry loss event scenarios,” he said.

For the quarter, the company's adjusted underwriting income fell 9.8% to $104.8 million, as gross written premium fell 2% to $859.7 million. Net investment income rose from $51.7 million to $68.4 million as a result of rising interest rates while the company experienced net realised and unrealised losses of $1.7 million compared to a gain of $10.5 million.

For the year, adjusted underwriting income rose 72.9% from $205.5 million to $355.5 million while gross written premium fell 8.6% from $4.3 billion to $3.9 billion. Net investment income rose from $188.1 million to $275.7 million while the company recorded realised and unrealised gains of $14.5 million compared to a loss of $177.6 million in 2022.  

Aspen recorded a deferred tax benefit of $2.1 million in relation to the Bermuda Corporate income Tax which takes effect in 2025.

The company's insurance segment generated adjusted underwriting income for the quarter of $44.5 million compared to $50.8 million in the same period in 2022, while gross written premiums dropped 6.9% to $581 million. The combined ratio increased from 85.4% to 94.9%.  

For the year, adjusted underwriting income rose from $153.1 million to $161.3 million and the adjusted combined ratio improved from 89.3% to 89%. GWP fell 3.4% to $2.44 billion.

"Our strategy to reduce property exposure in our insurance segment helped to limit the impact of industry catastrophe events during 2023, contributing to a reduction in the CAT loss ratio by 2.0 percentage points compared with the prior year, which was also impacted by Hurricane Ian," the company said of the year's results.  

"This has been offset by increased provisions in our current accident year ex-CAT losses to proactively recognise the potential impact of higher economic uncertainty and economic and social inflation, the impact of business mix changes and an increase in estimated claims handling costs."  

The company's reinsurance segment saw adjusted underwriting income fall from $65.5 million to $60.3 million in the quarter as gross written premiums rose 10.4% from $251.7 million to $277.8 million. The adjusted combined ratio improved from 79.5% to 79.3%.

"Management's planned initiatives to reduce exposure as well as respond to concerns about market conditions in certain lines led to a decrease in gross written premiums of $386 million, primarily related to a reduction in mortgage and property pro rata business as well as our previously announced exit from space, aviation and bloodstock, the company said of the year for reinsurance. "These reductions were partially offset by strong rate increases during the year in continuing lines of business."

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