Aspen Insurance has released its financial results for the three and nine months ending Sept. 30, showcasing significant developments in underwriting and investment performance during this period.
For the three months ending Sept. 30, Aspen reported a net income increase of $245 million, reaching $73 million. This rise was attributed to enhanced underwriting results, higher investment income, and a decrease in net realized and unrealized investment and foreign exchange gains/losses.
Operating income for the quarter rose to $79 million, achieving an annual operating return on average equity of 17.6%. Underwriting income saw an increase to $48 million, improving the combined ratio by 17.6 percentage points to 92.7%. Additionally, adjusted underwriting income climbed to $55 million, leading to a 14.3 percentage point improvement in the adjusted combined ratio to 91.7%.
However, Aspen's decision to reduce writing certain programs, balanced by strong new business activity in ongoing lines and rate increases, resulted in $128 million less in gross written premiums. Increased investment income was a consequence of higher interest rates and reinvesting maturing assets into higher-yielding core fixed income assets.
In the nine months ending Sept. 30, net income for common shareholders significantly increased to $269 million. This improvement was driven by similar factors to the three-month period, with operating income rising to $270 million. The annualized operating return on average equity for this period was 20.7%. Underwriting income for the nine months increased to $256 million, improving the combined ratio by 8.9 percentage points to 86.8%. Adjusted underwriting income grew to $251 million, enhancing the adjusted combined ratio by 8.5 percentage points to 87.1%.
Capital sourced by Aspen Capital Markets reached $1.5 billion as of Sept. 30, resulting in a 25% increase in fee income to $92 million. Corporate and other expenses rose by $15 million due to higher letter of credit fees and non-recurring project costs related to operational model improvements, offset by favorable general and administrative expenses allocated to underwriting activities.
Interest expenses increased by $18 million in the period, largely due to costs on the funds withheld account on the Loss Portfolio Transfer contract with Enstar Group Limited. Tax expenses also rose by $31 million to $41 million in this period, driven by higher pre-tax profits in taxable jurisdictions.
In the insurance segment for Q3 2023, underwriting income improved by $63 million to $(5) million, while adjusted underwriting income increased by $36 million to $32 million. Gross written premiums rose by $14 million or 2%, primarily due to robust new business activity within financial and professional lines, though this was partially offset by the decision to reduce writing certain programs within casualty and liability insurance portfolios.
The adjusted loss ratio improved by 5.2 percentage points, driven by reduced catastrophe losses and a decrease in adverse development on prior years’ losses, offset by increased provisions in the current accident year loss ratios. The adverse impact of the LPT contract was $37 million. Increased cessions to Aspen Capital Markets and the exit from programs with higher acquisition cost ratios led to a 3.1 percentage point reduction in the insurance segment’s acquisition cost ratio to 10.7%.
For the 9M period in the insurance segment, underwriting income increased by $42 million to $93 million, and adjusted underwriting income grew by $15 million to $117 million. The strategy to reduce property exposure in this segment limited the impact of industry catastrophe events during 2023, reducing the loss ratio by 2.6 percentage points. This was partially offset by increased provisions in the current accident year loss ratios, changes in business mix, and an increase in estimated claims handling costs.
In the reinsurance segment for Q3, underwriting income increased by $55 million to $53 million, and adjusted underwriting income grew by $60 million to $22 million. Repositioning of the portfolio into higher attachment points and significant rate increases helped reduce the loss ratio by 18.5 percentage points compared with the prior year. The favorable impact of the LPT contract was $30 million. Management’s initiatives to reduce exposure resulted in lower gross written premiums, primarily related to reductions in mortgage and property pro rata business, as well as exits from space, aviation, and bloodstock. These reductions were partially offset by strong rate increases.
For 9M in the reinsurance segment, underwriting income increased by $128 million to $163 million, and adjusted underwriting income rose by $147 million to $134 million. Net catastrophe exposure was further reduced through increased cessions to Aspen Capital Markets on property reinsurance lines.
The catastrophe loss ratio improved by 14.4 percentage points due to lower catastrophe losses in the period, primarily impacted by Hurricane Ian. The acquisition cost ratio improved by 1.4 percentage points, partially offset by an increase in profit commissions due to favorable loss performance.
“Our objective is to drive continuous improvement in all aspects of our business,” said Mark Cloutier, ASpen executive chairman and group CEO. “It is encouraging to see our third quarter results add to the positive trends of the first half of 2023, achieving an adjusted combined ratio of 87.1% and annualized operating return on average equity of 20.7% for the nine months ended September 30, 2023. As we move into 2024, we anticipate that market conditions will remain favorable in most of our classes. Aspen’s strong capital position, well-balanced portfolio, and healthy team culture position us well to continue to provide meaningful capacity, services and solutions to our customers and trading partners, while earning top quartile returns for our shareholders.”
Elsewhere for the insurance group, Aspen recently announced the appointment of Edward Hart as international head of cyber.
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