Aspen CEO O’Kane: Insurance Division ‘The Source of Considerable Poor Performance’

February 8, 2018 by Mark Hollmer

Aspen Insurance Holdings lost nearly $185 million in the 2017 fourth quarter, or $3.25 per diluted share. The struggling Bermuda-based insurer and reinsurer also saw its consolidated combined ratio hit 152.6.

While California wildfire catastrophe costs contributed greatly to Aspen’s Q4 results, Chief Executive Officer Chris O’Kane also blamed his still-struggling Insurance division.

“That business has been the source of considerable poor performance,” O’Kane said during the insurer’s Feb. 8 conference call.

The Q4 2017 losses are significant compared to the same period a year ago, when Aspen produced a consolidated $71.5 million loss, or $1.41 per diluted share, and a 107.2 consolidated combined ratio.

During the call, O’Kane was candid about the company’s overall results.

“We’re not here today to make excuses,” O’Kane said. “We’re here to explain what happened, why it happened, and what we’re doing [moving] forward … so it does not happen again.”

Moving Away From Some Major Property Accounts

One of those actions appears to have been the abrupt departure of former Aspen Insurance CEO Stephen Postlewhite, whose exit was announced on Jan. 26 with little explanation. David Cohen, president and chief underwriting officer of Aspen Insurance, was named to replace him.

Another action taken involves Aspen Insurance “moving away from major property accounts that contain considerable catastrophe exposure,” O’Kane said during the call.

In January, Aspen disclosed its $245 million underwriting loss for Q4 that it blamed in part on California wildfire losses, but also “an increased frequency of mid-sized and attritional losses primarily in Aspen’s Insurance segment.” Those losses range from property and fire-related U.K. and U.S. losses, a bump in surety loss and also cyber losses.

Don’t Blame David Cohen

O’Kane, during the investor call, was quick to mention Cohen’s performance so far, and to absolve him of any issues with Aspen Insurance’s performance thus far.

Cohen “has brought about a profound repositioning of our Insurance business,” O’Kane said. “It is extremely important to know and understand that the overwhelming negative issues in 2017 predate [his] arrival.”

In the 2017 third quarter, Aspen reported a whopping $253.8 million net loss, which O’Kane blamed at the time primarily on the fall’s cluster of natural disasters.

O’Kane promised investors that Aspen was doubling down overall on reducing volatility and boosting profitability, noting that most of the carrier’s non-natural catastrophe losses were within a limited number of lines within Aspen Insurance.

“We are actively reviewing these lines, and our focus is on taking all actions necessary to mitigate our residual exposure and deliver value to our shareholders,” O’Kane said in a statement issued on Feb. 7. “Our loss reserves are strong and we continue to focus on achieving appropriate loss ratios and realizing the benefits to our expense ratio from the successful implementation of our operational effectiveness and efficiency program.”

That program, announced in October 2017, is a $160 million cost-cutting effort that is expected to include job cuts.

Here are highlights of Aspen’s Q4 results:

For the year, Aspen lost $266.4 million, or negative $5.22 per diluted share, versus $203.4 million, or $2.61 per diluted share for 2016.

Source: Aspen Insurance Holdings