Best Affirms FSR for Aspen

January 17, 2006

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and the issuer credit rating (ICR) of “a” of Aspen Insurance UK Limited (AIUK) (United Kingdom).

At the same time, A.M. Best has affirmed the ICR of “bbb” of AIUK’s ultimate parent, Aspen Insurance Holdings Ltd. (AHL) (Bermuda) and the debt rating of “bbb” on the USD 250 million 6% senior notes issued by AHL. Concurrently, A.M. Best has affirmed the indicative ratings of “bbb” on senior unsecured notes, “bbb-” on subordinated notes, “bb+” on junior subordinated notes and “bb” on preferred stock of AHL’s USD 500 million universal shelf registration filed in February 2005. The outlook on all ratings has been revised to negative from stable.

The negative outlook reflects the expected level of Aspen group’s consolidated risk-adjusted capitalization at year-end 2005, taking into account A.M. Best’s two-event stress test. Although A.M. Best believes there is likely to be strengthening in 2006-2007, this is based on anticipated improvement in performance, which remains subject to significant volatility derived from the group’s substantial property catastrophe account.

A.M. Best believes AIUK’s risk-adjusted capitalization remains excellent, factoring a GBP 87 million (USD 150 million) capital injection from AHL in January 2006 to compensate for the impact of the 2005 hurricane season. A.M. Best expects the maintenance of AIUK’s current level of risk-adjusted capitalization to be highly dependent on a reduction in exposure to major loss events implemented as part of a group-wide risk tolerance reassessment. These measures help compensate for the potential volatility incurred due to the proportion of property reinsurance transferred to AIUK in 2006 as a result of a reciprocal quota share arrangement with AHL’s Bermudan operation, Aspen Insurance Limited (AIL).

A.M. Best anticipates a strong profit after tax in 2006 and a return on premium of more than 15% (factoring a return to normal levels of catastrophe experience). A.M. Best also expects a combined ratio of between 85%-90% and a stable investment return in excess of 3% in 2006. Despite exposure to the major catastrophes in the second half of 2005, A.M. Best expects AIUK to report a small profit after tax, although the combined ratio is likely to increase significantly from the 79.3% recorded in 2004.

In A.M. Best’s opinion, AIUK benefits from an excellent business profile based on its well established book of property and casualty reinsurance, primary U.K. commercial insurance, and specialty insurance and reinsurance business (comprises marine liability, hull, energy and aviation business).

A.M. Best expects AIUK to report an increase in its gross premium written of approximately 4% in 2006, resulting primarily from the reciprocal quota share arrangement with AIL, and an anticipated 30% growth in its specialty account.

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