Aspen Insurance Holdings Limited — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed April 1, 2024. This is an annual report, not a standalone fourth-quarter earnings filing. Aspen is a Bermuda-based specialty insurer and reinsurer with Insurance and Reinsurance segments. Its ordinary shares were wholly owned by an Apollo-affiliated parent at year-end; preference shares and depositary shares trade on the NYSE.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $2,966.1 million | $2,890.0 million |
| Net earned premiums | $2,614.5 million | $2,688.7 million |
| Underwriting income | $326.8 million | $190.4 million |
| Combined ratio | 87.5% | 93.0% |
| Adjusted combined ratio | 86.4% | 92.4% |
| Net income | $534.7 million | $51.1 million |
| Net income available to ordinary shareholders | $484.8 million | $6.5 million |
| Net investment income | $275.7 million | $188.1 million |
| Cash flow from operations | $324.7 million | ($55.0 million) |
| Total shareholders’ equity | $2,908.5 million | $2,358.0 million |
- Gross written premiums fell 8.6% to $3,967.6 million: Reinsurance declined 15.8% and Insurance 3.4%. Management cited deliberate portfolio and exposure reductions, partly offset by strong renewal pricing.
- Reinsurance produced $214.2 million of underwriting income and an 81.4% combined ratio; Insurance produced $112.6 million and a 92.3% ratio.
- Operating income, a non-GAAP measure, was $367.6 million, and operating return on average equity was 20.2%, versus $202.3 million and 11.9% in 2022. Basic and diluted earnings per ordinary share were $8.03 versus $0.11.
- Net investment income increased 46.6%. The fixed-income portfolio’s book yield rose to 3.8% from 3.2%; net realized and unrealized investment gains were $14.5 million versus a $177.6 million loss in 2022. Total pre-tax investment return was 5.7%, compared with negative 5.1%.
- Year-end cash and cash equivalents were $1,028.1 million; investments were $6,412.4 million. Total investable assets, including accrued interest and securities settlement balances, were $7,479.1 million. Aspen Holdings, the parent company, held $87.1 million of cash, cash equivalents and investments and had about $724 million of availability under revolving credit and letter-of-credit facilities.
- Net loss and loss-adjustment-expense reserves were $3,232.8 million, compared with $2,813.2 million. Gross reserves were $7,810.6 million and related reinsurance recoverables were $4,577.8 million. IBNR represented 60.1% of gross reserves.
- Debt was $300 million at year-end, due November 2026, following a refinancing of the $300 million 2023 Senior Notes. Debt was 9.4% of total capital; debt plus preference shares was 32.8% of total capital.
Changes, outlook and significant items
- Underwriting results improved year over year as catastrophe losses fell to $120.1 million from $306.8 million and expense ratios improved. However, current-year losses excluding catastrophe losses rose to 52.5% of net earned premiums from 50.0%, and post-LPT prior-year reserve development was adverse by $32.3 million versus $13.0 million.
- The reported $534.7 million net income included a $201.1 million deferred tax benefit recognized following Bermuda’s enactment of a 15% corporate income tax for qualifying groups, effective for fiscal years beginning in 2025. Aspen expects increased Bermuda taxes from 2025. The 2022 result included a $94.1 million U.S. deferred tax benefit from reversal of a valuation allowance.
- Aspen Capital Partners’ fee income rose to $135.5 million from $103.9 million; third-party capital increased to $1,662.6 million from $1,252.7 million. These fees reduce acquisition expenses.
- Management said pricing conditions remained favorable and expected insurance pricing to remain favorable, citing catastrophe activity, inflation and tighter capacity. It also expected higher investment income and anticipated that unrealized bond losses would reverse as securities mature. These are expectations, not quantified earnings guidance.
- The Enstar loss portfolio transfer (LPT), covering 2019 and prior losses, had approximately $420 million of remaining limit at year-end. It supports protection against reserve volatility, but Aspen retains exposure to the transaction’s terms, claims administration and Enstar counterparty performance.
- Worldwide modeled natural-catastrophe net PML was $229.9 million for a 1-in-100-year event and $335.7 million for a 1-in-250-year event as of January 1, 2024, compared with $219 million and $294 million a year earlier. Management cautions that modeled losses may differ materially from actual losses.
- Management identified social and economic inflation, claims severity, long-tail reserving, catastrophe events, climate change, reinsurance recoverability, investment-market volatility, private-asset liquidity and broker concentration as material risks. Three brokers accounted for 70.3% of Reinsurance gross written premiums in 2023.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at December 31, 2023. The continuing material weakness concerns processes and controls over reinsurance premiums payable and reinsurance receivables. Remediation measures were implemented, but testing was expected to continue through the first half of 2024. The auditor gave an unqualified opinion on the financial statements but did not audit or opine on internal-control effectiveness.
- Management did not expect pending or threatened litigation and arbitration, considered individually, to have a material effect overall. A Brazilian competition authority proceeding involving aviation insurance allegations remained ongoing.
- A proposed ordinary-share IPO had been filed for registration but was not effective or assured of completion. Aspen declared $49.9 million of preference dividends and paid $40.3 million of ordinary dividends to its parent in 2023.
Most important facts for investors to verify
- Whether the reinsurance-control material weakness was remediated after the planned first-half 2024 testing, and whether any restatement or further control issue followed.
- How much of the sharp increase in net income reflects recurring underwriting and investment performance versus the $201.1 million deferred tax benefit.
- Subsequent reserve development, especially in casualty and liability insurance and property reinsurance, and the adequacy and remaining protection of the Enstar LPT.
- Whether premium reductions and portfolio changes preserve profitability as pricing and capacity conditions evolve; compare segment combined ratios and renewal pricing.
- The realizability and liquidity of private investments, the effect of interest-rate or credit-spread changes, and the amount of assets restricted in trusts or pledged as collateral.
- The timing and terms of the proposed IPO, future ordinary and preference dividends, and the impact of Bermuda’s 2025 corporate tax regime.