Aspen Capital Markets, the third-party and alternative reinsurance capital management unit of global re/insurer Aspen, is benefiting from the increased assets under management (AUM) the unit had raised last year, with its fee income for the first-half rising by roughly 30%.
The Aspen Capital Markets unit is on-track to eclipse the fee income it earned in the prior year, with the first six months of 2023 seeing these earnings rise considerably for the unit, increasing their contribution to the overall Aspen results.
The unit had a successful year in 2022 and grew its assets under management by 42%, to reach $1.3 billion.
The AUM figure remains flat at the middle of 2023, so is now up by $300 million year-on-year, from the $1 billion managed at the end of June 2022.
But it’s clear the higher AUM being managed for third-party investors is now reaping dividends in terms of fees, with Aspen reporting that its Capital Markets unit earned an impressive $61 million of fee income for the first-half of 2023, up roughly 30% from $47 million a year earlier.
Mark Cloutier, Group Executive Chairman and Chief Executive Officer of Aspen, commented on the performance of the Capital Markets unit.
He explained that, “Aspen Capital Markets continues to be an important differentiator, enabling us to offer a broader range of solutions while also generating attractive fee income.
“In the first half of the year, it generated total fee income of $61 million (June 30, 2022: $47 million), which is recorded within the underwriting result as a decrease to acquisition expenses, driven by further growth in assets under management to $1.3 billion (June 30, 2022: $1.0 billion).”
Fee income from the Aspen Capital Markets unit is primarily allocated to specific ceded line of business helping to reduce acquisition expenses for that line.
Overall, Aspen said that the higher fee income earned from the Capital Markets unit helped to reduce the firm-wide acquisition cost to 15% of net earned premium, down from 16% a year earlier.
Aspen has carved out a bit of a niche for itself in its third-party reinsurance capital activities, with a focus on areas outside of property catastrophe risk.
The unit has developed a name for itself, in being able to transfer primary and non-cat risks, in classes of business including longer-tailed lines such as casualty, to its third-party investors, which is now clearly delivering dividends in the fee income it can earn.
Aspen Capital Markets is just one of the dedicated insurance-linked securities (ILS) fund managers, and reinsurers offering ILS-style investment opportunities, listed in our Insurance-Linked Securities Investment Managers & Funds Directory.