Editor's Note: This story has been corrected. A previous version misreported that Aspen Insurance Holdings planned to exit the U.S. property market. PC360 regrets the error.
Aspen Insurance Holdings' chief executive says the insurer is reducing its earthquake and wind exposure in the U.S. property insurance market due to the volatility of catastrophe risks.
During a conference call with financial analysts on Friday, Aspen CEO Chris O'Kane said that while the company has taken measures to eliminate unprofitable lines of business, the current pricing and economic environment requires additional measures to improve the bottom line.
O'Kane said the company plans “a significant and controlled reduction” in its U.S. wind and earthquake exposure over the next two years. He expects the move to free up $140 million in capital, which would be applied to the company's $500 million share buy-back program, announced earlier in the call, “unless other very compelling opportunities emerge.”
There is no change of strategy for the Aspen Insurance U.S. Marine or Programs units and within Aspen's reinsurance segment, Aspen's risk appetite for catastrophe-related risk is unchanged.
O'Kane said the rest of Aspen's U.S. book remains highly profitable.
Aspen also plans to improve its investment portfolio with high-yield investment securities, said O'Kane.
The Hamilton, Bermuda-based company reported fourth-quarter net income after tax of $2 million, down 84 percent, or $10 million, from Q4 2011. Gross-written premiums increased 26 percent, or by $118 million, to $576 million. The combined ratio in the quarter dropped 6.3 points to 108.
Insurance and reinsurance catastrophe losses in the quarter totaled $170 million, and include the effects of Superstorm Sandy.
For the year, Aspen reported net income of $280 million, compared to net loss of $110 million in 2011. During the call, O'Kane said rates are increasing in the mid-single-digit-percentage range. One exception was property exposure in the Northeast regions affected by Sandy, where 5-to-25 percent increases are expected by mid-year with tighter terms and conditions.
“We are seeing many of our teams enjoy the benefit of rating tailwinds rather than the headwinds of recent times,” said O'Kane. “We have a very exciting plan and are energized about executing it.”
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