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Q4 combined ratio up 14.9 points at Aspen


February 9, 2017   by Canadian Underwriter


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Wildfires in Tennessee, an earthquake in New Zealand, Hurricane Matthew and energy-related losses all contributed to a 20.2-point deterioration in the fourth-quarter loss ratio in reinsurance for Aspen Insurance Holdings Ltd., while in primary insurance, Aspen reported a combined ratio of 109.1% in Q4 as net premiums written in marine, aviation and energy dropped more than 40% year over year.

Hamilton, Bermuda-based Aspen, whose British subsidiary has a branch office in Canada, released Wednesday its financial results for the final quarter and full year of 2016. The combined ratio deteriorated 6.2 points, from 91.9% in 2015 to 98.1% last year. The loss ratio in 2016 was 59.8%, up 4.6 points from 55.2% in 2015.

Incorporated in 2002, Aspen’s principal operating subsidiaries are Aspen U.K., Aspen Underwriting Ltd., Aspen Specialty and Aspen American Insurance Company. AUL provides capital for Lloyd’s Syndicate 4711. Aspen U.K. has branches in Canada, Germany, Ireland and Switzerland, among other nations.

During the most recent quarter, Aspen reported a combined ratio of 106.7%, up 14.9 points from 91.8% in 2015. The loss ratio increased 10.2 points, from 53% in Q4 2015 to 63.2% in the latest quarter.

Aspen reported net premiums written of $2.59 billion last year, down 2.1% from $2.646 billion in 2015. All figures are in U.S. dollars.

Loss and loss adjustment expenses increased from $1.4 billion in 2015 to $1.6 billion in 2016. Aspen reported an underwriting loss of $41.5 million in the latest quarter, compared to underwriting income of $51.6 million in Q4 2015.

Also in the latest quarter, Aspen reported a combined ratio in insurance of 109.1%, up 9.6 points from 99.5% in Q4 2015. The loss ratio in insurance deteriorated 4.4 points, from 65.1% in Q4 2015 to 68.5% in the three months ending Dec. 31, 2016.

“Pre-tax catastrophe losses, net of reinsurance recoveries, of $17.0 million, totaled 5.2 percentage points in the fourth quarter of 2016 primarily related to Hurricane Matthew and other weather-related events in the U.S.,” Aspen said Wednesday in a filing with the U.S. Securities and Exchange Commission. “Pre-tax catastrophe losses net of reinsurance recoveries in the fourth quarter of 2015 totaled $23.3 million, or 6.5 percentage points. The loss ratio in the fourth quarter of 2016 also reflected a higher level of loss activity in lines that are being exited or re-positioned compared with the fourth quarter of 2015.”

Aspen reported earlier it had “significantly reduced its appetite for Programs business and Primary Casualty.”

For Q4 2016, in its primary insurance business, Aspen reported net premiums written of $85.2 million in property and casualty (down 39% from $185.2 million in Q4 2015), $54.9 million in marine, aviation and energy (down 45% from $99.7 million in Q4 2015) and $92.3 million in financial and professional lines (down 25% from $123.4 million in Q4 2015).

In financial and professional lines, Aspen writes financial institutions coverage both on a primary and excess of loss basis, the company said in its annual report for 2015. Financial lines includes “professional liability, crime insurance and D&O cover, with the largest exposure comprising risks headquartered in the U.K., followed by Australia, the U.S. and Canada,” Aspen said at the time.

Aspen U.K.’s primary coverages include professional liability – for lawyers, accountants, architects, engineers, doctors and medical technicians, among others – in the U.S., Britain, Australia and Canada.

In reinsurance, Aspen reported a combined ratio of 95.9% in the latest quarter, up 21.8 points from 74.1% in Q4 2015. The loss ratio was 57.2% in Q4 2016, up 20.2 points from 37% during the last three months of 2015.

The 57.2% loss ratio in the most recent quarter “included pre-tax catastrophe losses, net of reinsurance recoveries, of $37.6 million, or 13.2 percentage points, in the fourth quarter of 2016, primarily as a result of Hurricane Matthew and the Tennessee wildfires in the U.S., and an earthquake in New Zealand,” Aspen stated in its SEC filing. “Pre-tax catastrophe losses, net of reinsurance recoveries, totaled $22.6 million, or 8.4 percentage points, in the fourth quarter of 2015. The loss ratio in the fourth quarter of 2016 also reflected an increase of approximately $25 million in energy and property-related losses compared with the fourth quarter of 2015.”

Aspen reported net income after tax of $203.4 million on gross premiums written of $3.147 billion in 2016. In 2015, Aspen reported $323.1 million in net income after tax on gross premiums written of $2.997 billion.

During the latest quarter, Aspen had a net loss after tax of $71.5 million on gross premiums written of $606.1 million, compared to net income after tax of $117.9 million on gross premiums written of $634.8 million in Q4 2015.

Of net premiums written of $430.8 million in Q4 2016, $198.4 million was in reinsurance (up from $178.5 million in Q4 2015) and $232.4 million was in insurance (down from $408.3 million in Q4 2015).