A.M. Best Revises Outlook to Positive for Aspen and Its Subsidiaries

November 19, 2015

A.M. Besthas revised the outlook for the issuer credit ratings (ICR) to positive from stable and affirmed the financial strength rating (FSR) of “A” (Excellent) and the ICRs of “a” of Aspen Insurance UK Ltd., Aspen Bermuda Ltd., Aspen American Insurance Co. (based in Dallas) and Aspen Specialty Insurance Co. (based in Bismarck, ND). The outlook for the FSR remains stable.

At the same time, A.M. Best has affirmed the ICR of “bbb” and the issue ratings of Bermuda-headquartered Aspen Insurance Holdings Ltd., the non-operating holding company of the Aspen group of companies. The outlook for the ICR and the issue ratings has been revised to positive from stable.

The ratings reflect A.M. Best’s expectation that Aspen Insurance Holdings’ consolidated risk-adjusted capitalization will remain at an excellent level, despite the company’s ongoing program of share repurchases, the ratings agency said.

“Projected growth in premium volumes, which is mainly targeted within the U.S. insurance market, is expected to be supported by internal capital generation,” A.M. Best said.

Additionally, the company’s four subsidiaries are expected to maintain strong stand-alone risk-adjusted capitalization, the ratings agency said.

Aspen Insurance UK is the “main earnings contributor of the Aspen group,” while Aspen Bermuda Ltd. “remains important to Aspen’s capital management strategy, as it provides internal reinsurance to the other Aspen group companies and access to third-party business written in Bermuda.”

Aspen’s U.S. companies, Aspen American Insurance Co. and Aspen Specialty Insurance Co. “provide business diversification for the group and benefit from extensive reinsurance support” from Aspen Bermuda Limited.

“The revision of the ICR outlook to positive from stable reflects this continuing financial strength, the group’s recent record of excellent operating performance and its increasingly strong business profile,” A.M. Best said.

“Over the past five years (2010-2014), Aspen has compiled a record of generally strong operating performances, despite the losses from the unprecedented series of natural catastrophes in 2011,” it continued.

For the last two full years, and for the first nine months of 2015, A.M. Best said, Aspen’s underwriting performance has been excellent, with combined ratios below 93.

“Aspen’s operating performance for 2015 is expected to remain at an excellent level, assuming normal catastrophe activity for the remainder of the year,” A.M. Best affirmed.

“A pre-tax profit of $214 million was reported in the first three quarters of 2015, a reduction from $300 million at the same point in 2014, reflecting in part an increase in attritional losses, including $30 million from the Tianjin explosion, and significant investment and currency exchange losses.”

The performance of Aspen’s U.S. subsidiaries has been a negative rating factor in the past, largely as a result of their “high start-up costs relative to net earned premiums,” A.M. Best said, noting that these subsidiaries are now making a positive contribution to the group’s profits despite challenging market conditions

“Aspen has an increasingly strong business profile in its core markets, supported by its diversified portfolio of property/casualty and specialty insurance and reinsurance business,” A.M. Best said.

“Diversification has improved significantly in recent years through growth in insurance lines and increased geographical spread. Aspen’s access to business is enhanced by its U.S. subsidiaries and network of branches in Europe, Canada, Singapore and Australia,” the ratings agency concluded.

Source: A.M. Best Company

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