Aspen Insurance - Earnings Call - Q2 2025
August 8, 2025
Transcript
Speaker 7
Hello and welcome to Aspen Insurance Holdings Limited's second quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be an opportunity to ask questions. Please note, this call is being recorded. I will now turn the call over to Mariza Costa, Head of Investor Relations. Mariza, please go ahead.
Speaker 3
Thank you. Good morning, everyone, and welcome to the Aspen Insurance Holdings Limited second quarter 2025 earnings conference call. Our earnings press release and financial supplement were published last night and can be found on the Investor Relations section of our website at investor.aspen.co. The Aspen executives leading today's call are Mark Cloutier, Executive Chairman and Group Chief Executive Officer, Christian Dunleavy, Group President and Chief Executive Officer of Aspen Bermuda Limited, and Mark Pickering, Group Chief Financial Officer and Treasurer. Before we begin, I'll start the comments by noting that today's call will include forward-looking statements. Actual results may differ materially from what we share today, and we undertake no obligation to publicly update forward-looking statements. Management comments regarding estimates, projections, and similar are subject to the risks, uncertainties, and assumptions as noted in Aspen's SEC filing. Management may also refer to certain non-GAAP financial measures.
Available explanations and reconciliations to GAAP can be found in our earnings release and financial supplement on the Investor Relations section of our website at investor.aspen.co. With that, I will turn the call over to Mark Cloutier. Mark.
Speaker 0
Thank you. Hello, everyone, and thank you for joining us today. I'm excited that you're joining us for Aspen's first earnings call since we listed on the New York Stock Exchange in May of this year. Because this may be the first time that some of you are hearing our story, I will begin by introducing our business. Christian will then pick up with updates for the quarter, and Mark will round off our prepared remarks with financial updates. Aspen is an international specialty insurer and reinsurer with a dynamic, multi-platform approach and differentiated value creation model. We seek to be a top-quartile specialty risk insurer and reinsurer across market cycles, targeting mid-teens operating returns on equity. We are focused on total value creation through profitable underwriting and investment performance. The underwriting performance of our segments is also supported by fee income generated by our Aspen Capital Markets business.
Aspen has over 20 years of experience in underwriting risk, though our recent history began with Apollo's acquisition in 2019, which marked the start of a strategic transformation. Our approach centered on disciplined and expert underwriting, reduced volatility, better operational efficiency, and developing a positive and customer-focused culture. During this period, we strategically exited 12 insurance and 5 reinsurance lines to focus on lines and classes of business where Aspen has historically performed very well through multiple cycles. We improved operational efficiency by significantly rationalizing our operating footprint, and we are continuously investing in initiatives that enhance our underwriting systems and data analytics capabilities, amongst others. Finally, led by an experienced management team, we have implemented a culture where our values are aligned to our mission, and our decision-makers are empowered to bring to bear their expertise for our clients. The results have been notable.
Over the past five years, our adjusted combined ratio improved by over 20 percentage points, and we have generated cumulative operating income returns totaling over $1.2 billion. At the heart of our success lies our multi-platform strategy, which sets us apart in the industry. Geographically, we operate seamlessly across U.S. admitted and excess and surplus property markets, Lloyd's, Bermuda, and the UK company market. Our underwriting is focused on niche specialty classes while also providing bespoke solutions for our customers across a well-diversified portfolio of more than 40 insurance and reinsurance classes. Through Aspen Capital Markets, we are able to bring in external third-party capital, providing additional optionality to manage risk, access capital, and enhance returns through fee income.
We bring these platforms together through our one Aspen approach, which, as its name suggests, describes how we take a single view of risk to identify the most attractive risk versus return opportunities. Our specialty focus and expertise further distinguish us in the market. We've developed deep underwriting expertise in complex niche lines with high barriers to entry that return favorable combined ratios across the cycle. Similarly, in reinsurance, we take a nimble approach that capitalizes on market dislocations and specialty opportunities that command sizable premiums. Another cornerstone of our competitive advantage is our Aspen Capital Markets platform. Unlike most of our competitors who primarily focus on property catastrophe reinsurance, ACM has built a more diversified product offering, with more than 80% of fee income in 2024 coming from non-catastrophe lines of business.
The platform also maintains strong alignment with Aspen's core business, focusing on building sustainable long-term relationships with sophisticated investors rather than pursuing short-term opportunities. ACM's contribution to Aspen's financial performance is meaningful and continuing to grow significantly, with fee income flowing through our underwriting P&Ls as an offset to net acquisition expenses. The success in longer-tail lines brings greater stability to our fee income and underwriting results, as these arrangements typically involve multi-year structures with stable capital commitments. Across both our earnings engines, aligned with ACM's source capital, our one Aspen approach has yielded strong results. Since 2018, we've successfully reduced our P&L exposure from 32% to less than 10% of shareholders' equity. Our low catastrophe exposure, combined with the strategic use of reinsurance and third-party capital, has enabled us to demonstrate resilient performance during recent catastrophic events, including the California wildfires.
Our second quarter 2025 results also demonstrate the value of our approach. It is pleasing to see that Aspen's consistent performance, lower earnings volatility, and improved capital position was recognized by S&P in May of this year with an upgrade of our ratings outlook to positive from stable. Finally, last month, we announced that John Welch was promoted to Group CEO from Reinsurance CEO. John has extensive market expertise and is the perfect fit to lead our underwriting teams and coordinate our one Aspen appetite. I will now hand it over to Christian to dive deeper into the results, the specific components of the business, and current market conditions.
Speaker 9
Thank you, Mark, and welcome to our second quarter earnings call. Aspen delivered excellent results for the second quarter of 2025. Both of our earnings engines performed well as we were able to create value through profitable underwriting and investment performance. Adjusted underwriting income increased 12.8% compared to the prior period. Adjusted combined ratio improved 2.4 percentage points year over year. ACM fee income grew 53.5%, and we delivered a 17.2% annualized operating return on equity. Our fixed income portfolio continues to deliver strong returns with a book yield of 4.4% in the quarter. We continue to benefit from a strong market presence, and our one Aspen strategy focuses on effective risk selection and being the partner of choice for our customers. This remains the driving force for our overall results.
The current market environment remains attractive, with almost all lines priced adequate, providing opportunities amidst a range of challenges from a heightened economic and geopolitical environment, a transitioning market cycle, ongoing social inflation, and ample capacity. After years of compounded rate increases in most classes, risk-adjusted rates are showing softening in some lines, while terms and conditions are broadly holding. Almost all of the classes we participate in remain price adequate, and we continue our long-standing focus on building a profitable portfolio through disciplined risk selection and customer engagement to defend and enhance our portfolio's return profile. Our insurance portfolio is focused on underwriting niche, complex lines of business, where we have long-standing deep underwriting expertise.
In recent years, we have narrowed our focus to underwrite a more select product offering, and we are also going deeper with key customers and growing our market share when appropriate through the expansion of our lines and share. During the second quarter, we saw mixed market conditions after years of compounded rate hardening, with rate softening particularly in excess and surplus property lines. Some larger shared layered accounts were restructured with increased market capacity in primary and excess layers. However, opportunities in smaller and middle market property remain attractive where less competition is present. Similarly, our crisis management business continues to see strong growth in profitability, while U.S. Professional liability business continues to offer opportunities for growth given our market relevance in this space. In casualty, particularly excess casualty, the market remains disciplined with further rate increases and stable terms and conditions.
In primary casualty, we are seeing improved conditions, however, additional rate increases are required to catch up and keep pace with loss trends. In fin pro, we are seeing early signs of a correction in certain lines while rates are starting to rebound, notably commercial D&O. Since 2021, we have reduced our exposure to commercial D&O as a result of significant rate erosion. However, we will assess new opportunities that meet our return hurdles. We are also seeing evidence of firming rates in transactional liability and expect to see this trend continue. Our cyber business has been a strong performer. While rate competition has increased, we have been proactive in diversifying and positioning our portfolio against emerging risks.
Our philosophy is to actively manage our exposures, growing when the market is attractive and retracting when the risks don't meet our profitability expectations, and this is demonstrated in our results this quarter. Our focus remains on protecting the integrity of our portfolio to deliver strong results through any market condition and have a good pipeline of opportunities for profitable growth. Aspen's reinsurance segment is a nimble platform strategically positioned to capitalize on market dislocations while maintaining disciplined risk management. The strength of this segment lies in its long-standing relationships with cedents, where approximately 80% of premiums are written with cedents who have maintained a relationship with us for over 10 years, a testament to our reliability and expertise as a reinsurance partner. Market conditions for PropertyCat and property reinsurance are softening, however, the pace has decreased after loss activity in the first quarter.
With stable terms and conditions, ample capital, and strong retained earnings, we expect that PropertyCat reinsurance will continue to deliver attractive risk-adjusted returns. We have reduced our non-cat property reinsurance portfolio while keeping our property cash flow in line with the prior year. In casualty, pricing exceeds loss trend. However, we remain watchful of trends in the market, including social inflation, particularly the frequency of nuclear verdicts, and the impact of litigation financing. Offsetting these concerns are the robust underlying rate environment and the underwriting actions taken by insurers in recent years. Our growth in casualty reinsurance lines so far in 2025 demonstrates our willingness to grow lines when pricing improves. We grew in certain U.S. casualty businesses where the market continues to show rates staying ahead of loss trend.
Going forward, casualty rates need to continue to rise in step with this increase in loss trend to maintain rate adequacy. We also took advantage of opportunities in international casualty reinsurance, where limited severity loss allows for good geographic diversification. Going forward, all reinsurance lines are expected to continue to produce returns higher than our long-term hurdle rate. I am pleased to say that our results this quarter demonstrate that our reinsurance platform can quickly adapt to market opportunities while positioning the portfolio for lower volatility in our results. Aspen Capital Markets offers investors a broad product offering that provides direct, fully aligned participation to risk underwritten by Aspen's primary specialty insurance and reinsurance portfolios, including actively managed fund products and sidecars. This strategy also allows us to manage our net risk appetite and enhance our returns through fee income.
ACM is a key enabler for our two segments in bringing the right sources of capital to the risks, allowing Aspen to be a dynamic capital allocator. ACM fee income continues to grow as our longer-tail sidecars earn in. We anticipate this growth to outpace GWP growth into 2026, when it will then more closely track our GWP growth. As we evaluate new classes and new portfolios of risk, we look to optimize these portfolios into our capital structure, including our third-party capital partners, with fully aligned quota shares consistent with our current structures. Aspen's underwriting teams are experienced and well-positioned to operate in this market through active portfolio and cycle management.
Our specialty-focused multi-platform capabilities across insurance and reinsurance, supported by Aspen Capital Markets through our one Aspen approach, identifying the most attractive risk versus return opportunity, gives us the confidence that we will continue to deliver on our mid-teens operating ROE goal. We remain focused on supporting our customers while protecting the profitability and lower volatility of our underwriting portfolio. Our book of business remains well-positioned to profit from market opportunities through the cycle. We will remain good stewards of capital and maintain a disciplined approach to current market conditions. We have the flexibility and expertise to effectively and successfully manage the current market environment to deliver strong results for our shareholders. I'll now pass it over to Mark Pickering to provide more detail about the quarter's financial results.
Speaker 8
Thank you, Christian. Good morning, everyone, and welcome to our second quarter earnings call. Aspen had a very strong quarter, and our results reaffirm our commitment to preserving the quality of our portfolio, managing volatility, and maintaining underwriting discipline while growing in lines that meet our profitability targets. Our operating income grew 13.6% year over year to $111 million, or $1.22 per common share, producing a 17.2% annualized operating return on common equity, which aligns with our strategy of targeting mid-teens operating ROE across market cycles. We reported a very strong combined ratio of 85.1%, which was 3.6 points better than a year ago. Our combined ratio adjusted for the LPT impact was 84.3% compared with 86.7% in the second quarter of 2024. Aspen Capital Markets reported total fee income of $53.4 million, an increase of 53.5% compared to $34.8 million in the second quarter of 2024.
Total capital reported for Aspen Capital Markets at the end of the quarter was $2.4 billion compared with $1.9 billion a year ago, representing a 26.9% year-over-year growth. In line with our strategy, we have positioned our business to provide our underwriting expertise to third-party capital investors to manage our net exposures and control for volatility within our portfolio while generating stable fee income. Book value per share of $28.81 as of June 30, 2025, grew 23.6% over the past 12 months. As of June 30, 2025, our book value, excluding AOCI, was $31.40, up 12.4% compared to June 30, 2024. Let me move now to our underwriting results. For the second quarter, Aspen generated $1.24 billion in gross written premiums, representing a slight decrease versus the prior year quarter, driven by a decrease in our reinsurance segment partially offset by growth in our insurance business.
Net written premium was $716 million compared with $811 million a year ago, as we ceded more long-tail business to our third-party capital investors, coupled with a decrease in certain lines of business with limited ceded quota share arrangements. Net written premium to gross written premium is 58%, and we expect this retention ratio to be approximately 60% over the long term based on our planned ceded placements to manage our overall volatility. Our adjusted combined ratio, excluding the impact of the LPT, was 84.3%, and our Aspen year loss ratio ex-cat was 53.4% compared with 51.9% a year ago. The increase over the prior year Aspen year loss ratio was primarily a result of changes in the mix of the portfolio. We reported $10.2 million in favorable development for the quarter, or 1.5 combined ratio points.
In line with our plan, we completed a deep dive on approximately a quarter of our portfolios across our insurance and reinsurance segments. Our insurance segment had net favorable development of $0.5 million, with favorable development in our specialty subsegment partially offset by strengthening in our casualty portfolio. Our reinsurance segment had net favorable development of $9.7 million, mostly in our property reinsurance, specialty reinsurance, and property cat subsegments, partially offset by our casualty reinsurance portfolio. A favorable prior year development is indicative of the line of business and geographic diversification embedded within the portfolio despite pressure from social inflation. Cat losses for the quarter were $23.6 million, or 3.5 loss ratio points, an improvement from the prior year cat losses of $48 million due to benign catastrophe experience during the current quarter. The group expense ratio improved to 28.9% compared with 29.1% a year ago.
Our acquisition cost ratio in the second quarter was 13.3% compared with 15% a year ago due to a higher proportion of fee income earned from our third-party capital arrangements. Our G&A expense ratio was 15.6% versus 14.1% in the second quarter of 2024, driven by continued investment in process excellence, data, and analytics, as well as a lower denominator for earned premium from ceding more business to our third-party capital investors in 2025. Turning to our insurance segment, gross written premium of $694 million increased by 1.4% compared with a year ago, driven by growth in fin pro and other insurance, partially offset by reductions in casualty and first party. Our net written premium of $390 million decreased 8.2% versus last year's second quarter due to increased ceded premium and non-renewal of certain large contracts in fin pro.
The insurance adjusted combined ratio of 87.9% includes 2.9 points of catastrophe losses. Aspen year loss ratio ex-cat of 56.8% represented an improvement of 3.9 points from a year ago, driven by better loss experience. Looking into our reinsurance segment, gross written premium of $545 million declined 3.7% compared with a year ago, mainly driven by premium adjustments related to rate decreases in our property reinsurance portfolio during 2025 after experiencing significant rate increases in the second quarter of 2024, partially offset by continued opportunities in casualty reinsurance. Our net written premium of $325 million was down 15.7% compared with the second quarter of 2024. The decrease was driven by our property reinsurance portfolio, as well as an increase in premium ceded to our ACM third-party capital providers across several lines of business. The reinsurance adjusted combined ratio of 79.2% includes 4.4 points of catastrophe losses.
The Aspen year loss ratio ex-cat of 48.5% represented an increase of 6.9 points from a year ago, driven by a larger proportion of casualty business. Turning to our investment portfolio contribution, our net investment income was $80.5 million versus $82.5 million in relation to the same quarter last year. A slight decrease in the quarter was due to the performance from our real estate funds and lower yields in floating rate assets, partially offset by longer duration portfolio trades that increased the book yield of our core fixed income portfolio. We remain focused on delivering stable investment income while maintaining appropriate portfolio liquidity and strong credit quality. As of June 30, 2025, our $6.3 billion fixed income portfolio had a duration of 3.2 years, an average credit rating of A+, and an attractive book yield of 4.4%.
Our balance sheet strength is supported by managing our volatility and growing our capital position. As of June 30, 2025, our 2019 and prior LPT has $295 million of limit remaining, representing a 25% buffer to carried reserves. During the second quarter, we performed a deep dive on the casualty insurance segment and strengthened the reserves accordingly. Our shareholders' equity is $3.35 billion in the second quarter of 2025, paired with $3.19 billion in the first quarter of 2025, driven by positive operating performance as well as an increase in accumulated other comprehensive income. The increase in AOCI is a result of the rally in U.S. Treasury rates, tightening of credit spreads, as well as the weakening of the U.S. dollar during the quarter that improved the value of our available for sale investment portfolio. Our capital ratios remain strong and well above our various capital requirements.
On June 10, Aspen successfully priced an underwritten public bond offering of $300 million of 5.75% senior notes due July 1, 2030. The net proceeds from the offering were used to repay the $300 million term loan credit agreement outstandings. Finally, I am pleased to echo Mark Cloutier's comments on S&P's decision to revise Aspen's outlook to positive from stable and reaffirming our A-minus financial strength rating. S&P's decision recognizes the strength and stability of Aspen's operating performance and confidence in our strong capital base, competitive strength, and diversified portfolio, recognizing the lower earnings volatility model Aspen has employed. This concludes the discussion on our financials. We will now open the call to questions.
Speaker 7
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question and one follow-up. Your first question today comes from the line of Charles William Lederer from BMO Capital Markets. Your line is open.
Speaker 4
Hey, thanks. Good morning. Christian, you shared some good color on the pricing environment, you know, still being rate adequate, but the marketplace sounds pretty dynamic with a lot of moving pieces. Can you talk about how you're thinking about the pace of growth in the back half of the year and how the underlying loss ratio in both segments may run from here? Thanks.
Speaker 9
Thanks, Charlie. Yeah, it's definitely a transitioning market. One of the interesting things that we've been focusing on the last couple of years is really trying to manage these individual product kind of mini cycles. That's not necessarily a new feature of, I would say, this year. Even when the market was experiencing a broad hardening, there were still some classes underneath that that were softening as well. That's not necessarily a new phenomenon. The mix for the book, which will have some bearing on underlying loss ratios because we're holding property cat in particular stable. We're okay with the pricing, but we're not really looking to onboard more nat cat risk. We'll hold pretty stable and then we're really looking at some of the casualty areas and some of the other specialty classes for a little more growth, which is a little more long tail.
I think the mix, I don't think is going to change dramatically, but I would expect longer tail lines to outgrow property and the real short tail lines in the near term.
Speaker 4
Thanks. For my follow-up, you made some comments that felt somewhat pointed around opportunities in transaction liability and D&O, and the capital market effectivity seems picking up. Should we infer that Aspen is leaning in there or considering it?
Speaker 9
I would say that we are ready to lean in. We are starting to see certainly a floor on D&O pricing. I wouldn't say that it's necessarily going up again or accelerating, but the negative downward trend seems to be moderating and a floor appearing, so that's helpful. We have been expecting the transactional liability market to harden probably for about the last 18 months. We think it's somewhat overdue, and that's an area where we are real experts in and have very long-standing portfolios there that we underwrite. When that turn happens and there are signs that it's starting to happen, we will lean into it. We'll see what happens. I'm not a great prognosticator of exactly when these things will happen, but the timing, it does appear that the downward trend has been reversing and the loss activity warrants a change in pricing dynamic there.
Speaker 7
Our next question comes from the line of Matthew G. Heimermann from Citigroup Inc. Your line is open. Matthew, your line is open. We'll move on to the next question from Jon Paul Newsome from Piper Sandler & Co. Your line is open.
Speaker 6
Good morning. Thanks for the call. Just a little bit of a follow-up on the potential for the long tail to grow faster than the short tail. Does that naturally imply, and I think it does, a little bit of an incremental uptick in the loss ratio just because the long tail tends to have a higher loss ratio? Just to make sure we have that out.
Speaker 8
Yeah, thanks, Paul. It's Mark Pickering here. That's correct. The slight uptick in the reinsurance loss ratio Aspen year ex-cat is a result of the mix, portfolio mix. As we add more casualty reinsurance to the book and we've come off on property non-cat, you'll see a slight uptick in that loss ratio. For the three months, we reported 48.5%, and that's largely what we expect.
Speaker 6
Right. Maybe a little bit of further thoughts about the demand that you may be seeing from the alternative capital folks. I think one of the themes of the quarter so far has been MGA competition, for example, but a lot of that seems to be backed by a demand for more alternative, by more alternative capital to be in the business. Are you seeing that incrementally as well, or is it a fairly stable demand? I'm just thinking about the ultimate supply of alternative capital and how that may be changing incrementally.
Speaker 9
Yeah, thanks for the question, Paul. I would say that there is continuing interest from, you know, third-party capital and alternative capital in longer-tail lines in particular. I think that is going to be more structural going forward. That's going to be a permanent feature of the market. We're really well positioned in that. We were a first mover. We were quite early in helping design a lot of those structures and bring them to not just casualty lines, but also some of our fin pro lines and insurance and reinsurance. There's a good pipeline there. We don't onboard it just for the sake of it. We want to make sure that we have the right risks to seed over to that and that we have really strong alignment, which is one of the good selling features that we've had with those investors over time.
Yes, I think that's going to be present for the foreseeable future.
Speaker 7
Our next question comes from the line of Matthew G. Heimermann from Citigroup Inc. Your line is open.
Speaker 8
Hi, good morning, everybody. A couple of quick questions. One was just, can you maybe talk about the lines that you don't think are price adequate, just on the back of your comment saying almost all are?
Speaker 9
Sure. Primary casualty is one in particular that needs some rate in order to kind of return. There has been rate coming in, but I would suggest that more is needed. It's very difficult to really understand what price adequate is on that line. Our view is that there needs to be some continued strong rate growth into that area. We've organized our book to really have smaller line sizes going forward. We think that really helps with some of the volatility as well. Property non-cat is kind of right on the, I would say, on the brink of price adequacy. There's been quite a lot of loss activity there over the last few years, but there's been continued downward trend in rate. That's one that we've meaningfully reduced our exposure to.
We do think if this is driven not by cat activity, but by large losses on the non-cat side, we should see some rate coming through. Nothing is significantly below price adequate, I would say. Maybe barring D&O and primary casualty in particular, need quite a bit of work still, I think. The signs are better, but there's more room to run.
Speaker 8
Thanks for that. I'd just be curious, just since you write political risk, if some of the tensions we've witnessed in the last several months are changing loss content or your perceptions of loss content in that line of business.
Speaker 9
It's a good question. Certainly, on some of the ship activity around attacks on ships, the Houthis and things like that, that has not presented, I would say, a huge amount of loss activity to the market yet, but there have been some events there that have happened. You do have to think through this area quite carefully. This is a book that's performed very well for us over time, and it's one that we actually think we can do well in. The credit and political risk portfolio itself, there's a number of classes inside of that, but there is quite a lot of credit risk in there as well. We also have a traditional terror portfolio. There's an active assailant product and a few other things. It's a real mix, and we try to balance the exposure to the individual classes within that bucket.
Speaker 7
Your next question comes from a line of Cave Mohaghegh Montazeri from Deutsche Bank AG. Your line is open.
Speaker 2
Morning, guys. I was wondering if, you know, on the reinsurance side, if you had a bit of a sweet spot where in the tower you like to write, and then I guess link to that question within Profit Category, like which layer do you see are the most attractive within the tower from a business growth point of view?
Speaker 9
Thanks, Cave. We certainly tend to want to be a little bit away from the frequency, so we are not actively seeking out lower layers in particular. We do participate on some of those layers, but generally, it's when we're looking at an across-the-board participation. The most competitive parts of the programs are definitely the top of programs. Our portfolio and our book tends to be more with national writers as well who tend to carry higher retentions, which is helpful. Tops of programs are definitely more competitive. The bottom of programs has people looking at individual interests there, and we'll write individual sublayers, but retentions have held, which we think is important going forward.
I do think some of the rate activity that we've seen in the last few months has been essentially a bit of a trade-off to hold retentions, giving up a bit of rate by the market. That makes sense to us. Our property play in the company is much more weighted towards property reinsurance, and that's because we can reshape the portfolio faster, and we can also sit above the frequency losses in particular.
Speaker 2
Makes sense. I can pivot to the investment side. Do you have room to maybe increase the duration of your assets a bit more? Also, your portfolio is pretty high quality right now. Is there any room to maybe risk it a bit more from here?
Speaker 8
Yeah, thanks for the question. It's Mark Pickering here. Our investment portfolio, the asset allocation we have today, is largely in line with our strategic asset allocation. We will dial up and dial down certain asset classes based on market conditions. In terms of your question related to duration, our duration as of June 30, 2025, was 3.2 years for the portfolio, and that's slightly below our liability duration. I think as we position the portfolio going forward, you may see a drift up in asset duration to lock in some of those longer fixed income yields. We do have also a sleeve of floating rate securities in the portfolio that allows us to adjust the portfolio as well.
Speaker 7
Your next question comes from a line of Andrew E. Andersen from Jefferies LLC. Your line is open.
Speaker 5
Hey, thanks. Good morning. Within reinsurance, you've been growing the casualty lines for a year or two now, but you seem a bit more cautious on the insurance side. Can you maybe just talk about the difference in opportunities you're seeing in reinsurance that are enabling you to grow versus the primary side?
Speaker 9
Thanks, Andrew, for the question. The reinsurance for the last couple of years, we've seen the opportunities there as more attractive. You're correct. The insurance side, you know, we were kind of allocating more capital there, waiting for insurance casualty pricing to respond. That is what appears to be happening now. Some of that might be loss experience related, but some of it may also be the need to pay for the reinsurance terms that are somewhat driving the original rates again. We are starting to see the movement again, probably started maybe six, nine months ago when we started to feel like we were seeing things on the insurance side start to make more sense, and you know, that team started to lean back in. We have the capital to be able to grow in both sides if we think pricing works.
The way the casualty re-team in particular went about this was a very targeted approach where they sat down with the top clients in the portfolio, the top tier clients, and also some of our larger relationships, and just worked with them specifically to be able to grow that book. That kind of played out exactly as planned. There was meaningful growth there in 2024. There was growth again in 2025. We expect that to continue in the near term. I would also expect the insurance side to start picking up the pace a little bit if pricing remains and continues to improve.
Speaker 5
Thanks. Sticking within reinsurance, $10 million of favorable, but I think you mentioned some offset by casualty reinsurance. Can you maybe just give some more color on line or accident year there?
Speaker 8
Yeah, thanks, Andrew. It's Mark Pickering here. As we mentioned in the opening remarks, we had favorable prior year development, indicative of obviously the diversification across the lines of business, the segments, and the geographic mix. The industry is continuing to see pressure from social inflation in the casualty lines. We do a deep dive across all of our lines of business every 12 months, and in the second quarter, we touched on some of the top tier exposed lines to social inflation, both in the insurance and reinsurance segments. The deep dives during the quarter reflected some unfavorable experience in 2021 and prior in the casualty insurance and reinsurance book, and we took the opportunity to strengthen our assumptions accordingly.
This is an example, again, where we've responded quickly to bad news in line with our reserving philosophy, while we're much slower to react to good news in the book and remain in a favorable A versus E position.
Speaker 9
Just maybe one point to add there. The deep dives are a really important part of how we think about not just reserves, but also pricing and underwriting. There is a feedback loop that's in place and really high lines of communication between the reserving actuaries, the pricing actuaries, and the underwriters. What we see, as well as the claims teams, and what we see on the reserving side is immediately fed back into the pricing side and also to the underwriters. We also look to reflect that in our initial estimated loss picks for those individual classes. As Mark said, the philosophy is to be quick to respond to bad news and slower to respond to favorable, but get that into the pricing side very quickly so that we can make sure that the rates are reflecting loss trend.
Speaker 7
Your next question comes from a line of Robert Cox from Goldman Sachs. Your line is open.
Speaker 4
Hey, thanks. Good morning. Yeah, noticed the growth in programs was highlighted in the quarter for the insurance segment. Curious how much of the overall insurance portfolio is in programs, and if you could talk about your approach to growth there.
Speaker 9
Thanks, Rob. Good question. The insurance book is just around 30% on a delegated basis. That is with a relatively small number of partners, a number of them who we've been with for a very long time. Those are not small one-off program plays for us. Those are strategic longer-term partnerships across multiple classes. Some of those have been a little more public than others. We're in our roadshow decks and in the prospectus, so you can see some of those there. The strategy there is really to partner where there's very strong alignment and very complementary underwriting teams who are giving access to classes that may be difficult for us to access. Maybe they're small niche lines. They require a high level of technical expertise, for example. It's not a scenario where we would partner with anybody to give us more of what we're underwriting ourselves.
We really work very closely to onboard and performance manage that business going forward. That's really the strategy. It's worked quite well over the last few years. We do see a pretty steady pipeline of those kind of opportunities coming through. They do take some time to think through and put together. It's not necessarily the most predictable from when they will come on board and also how those earn in. They're a little bit lumpy, but we would expect to put on one or two of those a year over time. Generally, we'll be looking for them to be meaningful from a premium perspective.
Speaker 4
Okay, great. Thanks for that. I just wanted to follow up on terms and conditions. I appreciate the color on those holding up well. How defensible do you think the changes in terms and conditions have been throughout recent years? Would you expect if we keep going down the road of a softer market that these changes on terms and conditions could be fixed?
Speaker 9
Yeah, there has not been much movement on terms and conditions over the last couple of years. I think we're still quite away from a soft market. I think recent memory and experience is still relatively fresh. I think on the cat side in particular, it's a good sign that the market has remained disciplined around retention. Those haven't slipped back, and we feel quite strongly that that needs to hold. Outside of that, there really hasn't been a lot of erosion there. I don't think there's a sign that that's suddenly going to emerge. I think we're actually, there's quite a bit of discipline around the market on some of the details.
Speaker 7
Your next question comes from a line of Elyse Beth Greenspan from Wells Fargo Securities. Your line is open.
Speaker 1
Hi, thanks. Good morning. For my first question, I was hoping you could give us a sense of where the excess capital sits today. What would you guys need to see to consider returning capital to shareholders? Is that a potentially 2025 event, something to think about for 2026?
Speaker 9
Yeah, thanks, Elyse, for the question. It's Mark here. Yes, we have some excess capital at the moment. We reported our 2024 BSCR, the Bermuda Regulatory Ratio, at 264%. We are going into our planning for next year, our three-year planning process for 2026 through 2028. We'll be looking at growth opportunities in the market, as well as the effect on the capital requirements there. Bringing all of that part of the planning process together, we'll also consider any capital management activity that may or may not be required. I would expect that any type of future return of capital would be in the form of share repurchases or special dividends.
Speaker 1
Thanks. My follow-up, as we just think about putting a lot of your comments together on a still good market, but obviously some areas of softening and you guys are picking your spots. Should we think about growth, I guess, going forward, right? Being, if we look at recent trends being driven off of insurance and continuing to see some declines in reinsurance, or just help us think about the premiums-written trajectory and thinking about the back half of this year, but also heading into 2026 as well. Thank you.
Speaker 9
Thanks, Elyse. I wouldn't anticipate reinsurance shrinking. I think we're in a pretty good place there. The real driver of the reinsurance premium on a gap basis was this client adjustment issue at a primary insurance level where essentially they saw rate softening and then also some of them reduced their volumes. It wasn't really the reinsurance team itself downsizing the portfolio. On an underwriting year basis, things are pretty much where we would have expected. We have a really good relationship with the insurers out there who we want to trade with. Most of them have said they'd like to do more with Aspen over time. I think reinsurance is in a good spot and they'll grow quickly when they see opportunities. If the market loses its discipline, which I'm not predicting, they would then react to that quickly as well. We don't think about growth quarterly.
We think about it on a longer-term horizon and we want to make sure that we bring these transactions in, in an orderly fashion and that we really do our homework. We don't really anticipate getting into a lot of new lines in the immediate future. The underwriting philosophy is very much bottom-line focused. I think we've demonstrated that over the last couple of years that when we feel we need to respond to a market development, we will, but then we're able to access new opportunities on the back of that.
Speaker 7
Your next question comes from the line of Matthew John Carletti from Citizens JMP Securities. Your line is open.
Speaker 8
Hey, thanks. Good morning. Just a quick numbers question. Corporate and other expenses, you know, $25 million-ish the past couple of quarters. Is that kind of a good way to think about it, or are there any kind of IPO or other kind of one-time expenses buried in there, and we should think about a different run rate going forward?
Speaker 9
Good question, Matt. In Corporate and Other expenses, that $25 million is an appropriate run rate going forward. In terms of IPO-related expenses, they sit in the non-operating expense line.
Speaker 8
Great. That's all I got. Thanks.
Speaker 9
Thank you.
Speaker 7
Your next question comes from a line of Charles William Lederer from BMO Capital Markets. Your line is open.
Speaker 4
Hey, thanks. I just wanted to follow up on the pay-to-incurred ratio in the quarter ticked up a little bit. Is that just wildfires, or is there anything else to call out there that's notable? Thanks.
Speaker 9
Sorry, could you repeat that, please, Charlie?
Speaker 4
Sorry, the pay-to-incurred ratio at the consolidated level in the quarter ticked up year over year. Is there anything notable in there? Is that related to the wildfires in the first quarter, just the payments on them, or any color there? Thanks.
Speaker 9
Yeah, sorry, this is Christian. I suspect what you're seeing there is kind of more accelerated payments on the California wildfires when there's limit losses, full limit losses. Under, I believe, under California law, there's a requirement to pay those within a certain timeframe. I suspect that's what you're picking up.
Speaker 4
Thanks.
Speaker 7
Your next question comes from a line of Matthew G. Heimermann from Citigroup Inc. Your line is open.
Speaker 9
That's been answered. Thank you.
Speaker 7
That concludes our question and answer session. I will now turn the call back over to Mark Cloutier for closing remarks.
Speaker 6
Thank you to everyone who joined today's call. As you have heard, we're pleased with this set of results, which affirms the power of our differentiated One Aspen strategy and very disciplined execution. Looking ahead, we are focused on continuing to deliver a profitable portfolio with mid-teens operating ROEs through the cycle and are confident that the strong fundamentals that we have in place will underpin our future success. This concludes our call today. Thank you for your support, and we look forward to talking to you again soon.
Speaker 7
This concludes today's conference call. You may now disconnect.