Mark Cloutier, Group Executive Chairman and Chief Executive Officer, commented: “COVID-19 meant that 2020 was a year more challenging than many of us can remember with both profound human and economic consequences. While the vaccine program gives cause for optimism, there can be no doubts that the pandemic will have a deep and lasting impact on business and society. I am very proud of the way our team at Aspen responded to the events of last year; we stood by our clients to pay valid claims, continued to selectively write new business to give our trading partners support and confidence, and saw our people demonstrate admirable commitment, determination and expertise in what were extremely trying circumstances for many. I am also proud of and humbled by the generosity and care displayed by so many Aspen team members in their response to the needs of those less fortunate and more severely impacted by the pandemic.
“Although we are reporting a combined ratio of 107.3%, reflecting losses experienced due to COVID-19 and a significant catastrophe year, our underlying performance gives me great encouragement around the progress we are making as a business including successfully reducing our catastrophe exposure. Alongside this, our focus on underwriting discipline can be seen in our operating combined ratio, which improved significantly to an impressive 91.8%, and our accident year ex-catastrophe* loss ratio, which improved to 58.5% compared to 64.3% in 2019. This performance was achieved through a reshaping of our book which saw us dispose of, or non-renew, business that no longer matches our underwriting strategy. Additionally, we increased gross written premiums to $3.7 billion, up from $3.4 billion in 2019, as we continue to see improving trading conditions.
“During 2020, we continued our journey to transform the business. This includes refocusing on insurance and reinsurance lines and classes of business where we have the expertise, product set and market presence to generate underwriting profits across market cycles; expanding our capital markets capabilities; and implementing a strategic asset allocation aimed at improving yields in our investment portfolio. In our capital markets business, total capital grew to just over $800 million while fee income arising from Aspen Capital Markets (“ACM”) operations increased $16.9 million year over year to $32.6 million. In addition to providing additional income, ACM has played an important role in our efforts to manage down earnings volatility. We view our capital markets business and investors as key partners in our future growth and innovation efforts.
The results of our efforts to simplify the business model and pursue greater efficiency began to emerge in 2020 with our operating expense ratio improving by 2.4% to 14.9% compared to 17.3% for the prior year.
In October, 2020, sister companies of our shareholder successfully raised $500.0 million through a bond issuance contributing $268.0 million to Aspen. This equity contribution strengthens Aspen’s position as a major market participant, providing incremental capital that enhances our ability to write new insurance in a favorable market environment where pricing and terms continue to improve. This capital contribution is a strong statement of confidence in Aspen, the trajectory we are on and our successful progress in reshaping the business.
At the same time, we are working hard to create a culture at Aspen that can attract and retain the very best talent. As part of this we continue to build an inclusive environment that encourages and empowers a diverse group of people, while also taking steps to consider how we can best manage our impact on the environment and positively affect the communities we serve.
“As we look ahead to 2021, we are well-positioned in a market that we believe will continue to see rate momentum. We experienced a positive January renewal period and our capital position, multiple platforms, healthy relationship with our distribution partners, and reputation for technical expertise mean we are well placed to achieve our objective of becoming a top quartile specialty (re)insurer in the near term.
I would like to thank our people for what they have helped us achieve in a uniquely difficult year, and I am pleased to be able to look to the future with confidence and optimism.”