AM Best reduces Aspen outlook due to volatility

Rating agency AM Best has revised the Issuer Credit Rating (ICR) Outlook to Stable for Aspen Insurance Holdings and its subsidiaries.

The revised outlooks on the Long-Term ICRs of the Aspen group companies reflect AM Best’s view that an upgrade of the Long-Term ICRs is unlikely in the near term, taking into account the volatility in Aspen’s technical performance and the increasingly challenging environment in which the group operates.

Aspen’s balance sheet strength is underpinned by risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), a prudent reserving philosophy and a low-risk investment portfolio. Additionally, the group benefits from an effective capital management policy and good financial flexibility, according to the agency.

Aspen has a good performance record, albeit subject to volatility due to exposure to catastrophe events. For the first nine months of 2017, the group reported a net loss of $81.5 million compared with a net profit of $274.9 million reported for the same prior year period. The results were affected by an increase in the loss ratio to 80.8 percent (nine months 2016: 58.7 percent), due to losses from a series of natural catastrophe events including hurricanes Harvey, Irma and Maria, and the earthquakes in Mexico, which combined amounted to $424.3 million on a net basis. AM Best will closely monitor the impact of Aspen’s recent initiatives, including a cost efficiency programme and revisions to net loss exposures across the portfolio, on the group’s technical performance.

Aspen’s business profile is supported by a well-diversified portfolio of property/casualty and specialty insurance and reinsurance business, as well as a good geographical footprint. Whilst the group is viewed as having a good competitive position in some of its key markets, its ability to successfully defend its market position has become increasingly difficult due to the challenging operating environment characterised by abundant capacity and intense competitive pressures from both traditional and alternative markets.

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