Aspen Insurance braves frosty US IPO market
Aspen Insurance, a property and casualty insurer that Apollo Global Management acquired in 2018, is seeking to reopen the stalled US IPO market by offering a cut-rate valuation on its all-secondary US$341m NYSE IPO.
Goldman Sachs, Citigroup and Jefferies launched marketing on Tuesday on the sale of 11m shares at US$29–$31 each for pricing after the close on May 7.
American Integrity Insurance, which insures single-family homes in Florida, is scheduled to price its US$116.9m all-primary NYSE IPO the same day.
“It is not surprising that the IPO market would reopen with two insurance companies,” said a banker working on the American Integrity offering. “Insurance is an acyclical industry.”
Aside from potential hits to their investment portfolios, insurers are not affected by tariffs. Insurance is needed and the industry is benefitting from a relatively benign claims season in 2024, though the California wildfires in January affected first-quarter numbers.
Notably, the insurance IPOs come ahead of the onset of US hurricane season in June.
“After countless investor discussions, we had to evaluate whether there is sufficient interest at a valuation that will work for the seller,” a banker working on the Aspen offering told IFR. “If nothing happens between launch and pricing – no geopolitical typhoons, no macroeconomic tidal waves – a deal can get done.”
Hypervolatility that saw the VIX surge past 60 in early April, shortly after Donald Trump’s “liberation day” tariff announcement, has kept issuers at bay. Ironically, two Chinese companies have since listed in the US – teahouse Chagee for US$411.2m and insurance brokerage Yuanboa for US$30m – but the most recent domestic listing was the US$931.5m primary IPO by SmartStop Self Storage REIT on April 1, the day before the announcement.
There is precedent for insurers reopening the market. In early 2023, P&C insurer Skyward Specialty Insurance brought its US$154.4m Nasdaq IPO that ended a nearly two-month hiatus stemming from concerns over rising interest rates.
For Aspen, the US$29–$31 range is at or slightly below its most recent reported book value of US$30.73 per share. Arch Capital and RenaissanceRE trade at 1.7 and 1.2 times book value, according to LSEG data.
The top of the range would value Aspen at US$2.9bn, only slightly above the US$2.6bn that Apollo paid for the business.
Apollo is reducing its stake to 86.7% at a small profit with flexibility to sell down in 180 days, ideally at a higher price.
To its credit, Apollo has made Aspen a more profitable, flexible business by exiting certain lines of insurance and shifting towards a balanced mix of direct underwriting and reinsurance.
In 2024, Aspen increased the amount of insurance underwritten by 16% to US$4.61bn, the biggest areas of growth coming from other insurance lines under a new partnership with Lloyd’s of London, speciality insurance and casualty and liability insurance.
For the year, the insurer generated a net profit of US$431.2m, down from US$484.8m as higher operating expenses contributed to a modest increase in the adjusted combined ratio to 86.8% in 2024, which is a measure of losses paid out and expenses, the lower the better.
Aspen saw net profits slip in the first quarter to US$19.9m and adjusted combined ratio swell to 94.8% from 86.3% in the year-earlier period, primarily due to losses associated with the California wildfires.
In addition to a more focused business, Aspen has benefited from an agreement in 2022 to sell off exposure to legacy claims for policies before 2020.
“This protection effectively transformed Aspen into a class of 2022 NewCo where our balance sheet is exposed to risk predominately written during more recent hard market pricing years, but with the scale and relationships of a well-established business,” said Aspen group president and CEO of Aspen Bermuda Christian Dunleavy on the online roadshow.
Aspen has reduced volatility by selling off speciality insurance exposure to third parties through a capital markets arm. That contributed US$169m of fee income in 2024 and US$45.6m in the first quarter, providing a stable source of fees that are not exposed to insurance claims.