AM Best Revises Outlooks to Negative and Affirms Credit Ratings of Aspen Insurance Holdings Limited and Its Rated Subsidiaries

LONDON--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of Aspen Insurance UK Limited (AIUK) (United Kingdom), Aspen Bermuda Limited (ABL) (Bermuda), Aspen American Insurance Company (AAIC) (Austin, TX) and Aspen Specialty Insurance Company (ASIC) (Bismarck, ND). Concurrently, AM Best has revised the outlooks to negative from stable and affirmed the Long-Term ICR of “bbb” of Aspen Insurance Holdings Limited (Aspen) (Bermuda), the non-operating holding company of the Aspen group of companies, and the Long-Term Issue Credit Ratings (Long-Term IRs) on the debt instruments and preference shares of Aspen. (Please see below for a detailed listing of the Long-Term IRs.)

The ratings of Aspen reflect the group’s very strong consolidated balance sheet strength, adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings of AIUK, ABL, AAIC and ASIC reflect their integration with and strategic importance to Aspen.

The negative outlooks reflect pressure on Aspen’s operating performance assessment, following losses reported in the last three years, which have contributed to an erosion of capital. The group has taken remedial actions to improve performance, but these have had a limited impact on financial results to date. AM Best will continue to monitor the impact of these actions, and the improvement plan adopted by the new management team appointed in 2019, on the group’s underwriting results. Failure to improve operating performance could lead to further negative rating action.

In spite of the reduction in its capital base, the group’s risk-adjusted capitalisation has remained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), due to steps taken by the management to limit exposure to catastrophe losses and the adverse development of legacy business. In March 2020, Aspen entered into an adverse development cover for all years up until 31 December 2019. Management continues to include a prudent margin in reserves above its actuarial best estimate. Aspen’s balance sheet strength assessment benefits from a conservative investment portfolio. Aspen decreased its reliance on reinsurance in 2019, as part of its plan to increase retention of non-catastrophe-exposed lines, whilst maintaining its catastrophe and tail event protections.

Aspen’s recent operating performance has been below AM Best’s expectations due to the impact of catastrophe losses and weaker-than-expected results for certain lines of business, and demonstrated by a five-year weighted average combined ratio of 107.5% (2015-2019). In 2019, reserve strengthening on legacy business and one-off restructuring costs contributed to a net loss after tax of USD 242 million. Corrective actions, such as exiting poorly performing lines of business, enhancing underwriting risk selection and reducing operating expenses, should have a positive impact on prospective performance, but are subject to execution risk.

Aspen’s business profile benefits from the company’s well-diversified portfolio of property/casualty and specialty insurance and reinsurance business, as well as a good geographical footprint. The group’s ERM is developed and aligned appropriately with its relatively high-risk profile.

The following Long-Term IRs have been affirmed, with the outlook revised to negative from stable:

Aspen Insurance Holdings Limited—
-- “bbb” on USD 300 million 4.65% senior unsecured notes, due 2023
-- “bb+” on USD 275 million 5.95% fixed-to-floating rate perpetual non-cumulative preference shares
-- “bb+” on USD 250 million 5.625% perpetual non-cumulative preference shares
-- “bb+” on USD 250 million 5.625% perpetual non-cumulative preference shares

The following indicative Long-Term IRs under the universal shelf registration have been affirmed, with the outlook revised to negative from stable:

Aspen Insurance Holdings Limited—
-- “bbb” on senior unsecured debt
-- “bbb-” on senior subordinated debt
-- “bb+” on junior subordinated debt
-- “bb+” on preferred stock

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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