Aspen CEO 'disappointed' as merger and restructuring cost drive huge losses in 2019

Bermuda-based Aspen Insurance Holdings suffered losses largely due to the impact of Apollo merger related costs, restructuring charges, reserve strengthening and unrealised investment losses in what its CEO described as a "challenging and transitional" year for the group.

CEO Mark Cloutier admitted that results in the financial year 2019 were "disappointing" as the company absorbed the costs relating to the acquisition of the company by Apollo Global Management, and conducted a major overhaul of its operating structure and global footprint.

The re/insurer's posted a net loss after tax of $241.7 million in 2019, compared with a net loss after tax of $145.8 million for 2018.

The gross written premiums was broadly in line with the previous year, at $3.44 billion for 2019. Aspen stated that despite significant reshaping of the underwriting portfolio with around $700 million of business not meeting its profitability requirements or risk appetite, the group maintained its strong market position.

The company posted a combined ratio, excluding non-operating expenses, of 108.5 percent, which was impacted by 5.8 percentage points from legacy and US agriculture business. In 2018, it posted a combined ratio of 106.5 percent.

"2019 was both a challenging and transitional year for our Group," said Cloutier. "Since completion of the merger transaction early in the year we have undertaken a number of initiatives targeted at protecting the financial strength of the company, while also driving change geared at improving performance over the medium and longer term - all with a focus on long term total value creation. These actions include refocusing the products we underwrite, strengthening our balance sheet, enhancing our management team, and simplifying our global footprint and operating structure."

He added: "While our financial results for 2019 are disappointing, given the impact of deal related costs, restructuring charges and specific actions taken to improve underwriting performance and strengthen reserves, it is rewarding to see that underlying trends in our forward trading businesses are showing significant improvement. I am confident that the decisive actions we have taken are the right ones and will see us realize our objective of becoming a top quartile specialty (re)insurer in the near term.

In 2019, Aspen added a number of senior appointments to the leadership team, including Jonathan Ritz as president of Aspen Insurance Holdings, Mo Kang as chief people officer, Andrew Kudera as group chief actuary and Crystal Ottaviano as group chief risk officer. The company has also hired former Admiral CFO Kevin Chidwick as new group chief financial officer, effective May 1.

Additionally, the re/insurer revamped its underwriting portfolio to focus on core products, and wound down those that do not meet long-term performance criteria, including international marine and energy liability, accident & health, credit and surety reinsurance, international excess casualty, and UK regional P&C.

Aspen also streamlined its global footprint including branch closures in Dubai, Miami, Dublin, and Aspen Risk Management Limited (ARML) branches in the UK, and repositioned its investment portfolio to enhance risk-adjusted returns.

Cloutier explained: "During 2019, we saw sustained improvement to wider insurance market conditions, including reduced capacity and limits in a number of our core product lines, which has contributed to improving rates, terms, and conditions. Within reinsurance, we also saw pockets of corrections over 2018, which extended to improvements in rate across the majority of classes and regions throughout 2019. We have seen these trends continue into 2020.

"These trends are indeed positive but we continue to take a cautious and selective approach to growth as evidenced in our year-over-year gross written premium numbers."

Cloutier concluded: "I continue to be impressed by the quality and expertise of our people and the depth of our trading relationships across the multiple markets we serve. While we have more work to do, I firmly believe we are building a strong platform for future success.”