The moves to reduce the risk profile, improve earnings and reinforce capital adequacy has factored in the decision of Moody's Investors Service to affirm the A3 financial strength ratings of the insurance businesses of Aspen Insurance Holdings Limited. The ratings are stable.

But Moody's expects the group's net income for the full year 2022 to remain subdued, impacted by hurricane Ian losses as well as unrealised investment losses.

During the first half of 2022 alone, Aspen reported a fall in net income to $48 million (H1 2021: $87 million) as a result of $126 million of net realised and unrealised investment losses, driven largely by rising interest rates.

Moody’s said Aspen’s actions to affect change has included meaningfully reducing its exposure to natural catastrophes, the sale of equity investments, the exit of several business lines and ongoing underwriting and pricing actions based on recent loss experience.

The company delivered weak profitability, as reflected in a -5.0 per cent five-year average return on capital, with accumulated net losses of $681 million eroding Aspen's capital base between 2017-2021.

But Moody’s sees more recent improvements after several initiatives, including an agreement with a subsidiary of Enstar Group Limited for a ground-up loss portfolio transfer of the group's 2019 and prior business, with Enstar assuming net loss reserves of $3.12 billion, subject to a limit of $3.57 billion.

The existing adverse development cover purchase by Aspen from Enstar, which closed in June 2020, has been absorbed into the LPT.

Moody’s reported: “These actions have supported the group's solvency coverage ratio and a marked improvement in the group's profitability over the last 18 months.

“This has positioned Aspen well to continue expanding its premium base and strengthen earnings, further supported by price rises, strong demand for (re)insurance and rising interest rates.

Aspen reported its first profit after tax of $30 million for YE2021, after four consecutive years of losses. During the first six months of 2022, Aspen reported a significant 164 per cent increase in underwriting income to $157 million (H1 2021: $59 million).

Moody’s said: “While recent actions, including the LPT to Enstar, have strengthened Aspen's solvency position, Moody's believes that the group's flexibility to respond to unexpected events will remain somewhat constrained until the group fully restores its earnings power and ability to rebuild capital organically.”

The stable outlook for the rating reflects Moody's view that the steps Aspen has taken to improve its underwriting performance and operating efficiency, along with hardening prices will lead to improving profitability for the business and a return to positive capital generation.

The outlook also anticipates that Aspen will maintain its moderate underwriting and investment risk stance and good levels of economic and regulatory capital.