Best Affirms Aspen’s ‘A-‘ Ratings

November 24, 2006

A.M. Best Co. has affirmed the financial strength rating of “A-” (Excellent) and the issuer credit rating of “a-” of Bermuda’s Aspen Insurance Limited (AIL) with a stable outlook.

Best said it “believes AIL’s risk-adjusted capitalization is likely to remain excellent at year-end 2006, benefiting from an anticipated 100 percent retention of earnings of approximately $160 million-170 million.”

Best took into account the “benign hurricane season experienced in 2006” in calculating the projected earnings and indicated that its “assessment of AIL’s risk-adjusted capitalization continues to factor potential volatility in earnings due to its substantial property catastrophe account. However, the implementation of a group-wide risk tolerance reassessment (resulting in lower probable maximum losses) is likely to partially offset this volatility.”

In its assessment Best noted that it “factors an anticipated decrease in the level of net premiums written (NPW) of approximately 8 percent-10 percent in 2006 (due in part to the risk tolerance reassessment), followed by a significant anticipated increase of approximately 40 percent in 2007. The 2007 increase in NPW is due to changes to its inter-group reciprocal quota share arrangement with Aspen Insurance UK Limited (AIUK), continued favorable rate increases in its U.S.-exposed property catastrophe account and an anticipated uplift in net premium income from structured risk business.”

Best also said it “anticipates a strong recovery in AIL’s performance in 2006. A combined ratio of between 85 percent-90 percent (down from 136 percent in 2005) is anticipated despite an increase in AIL’s expense ratio of approximately 10 percentage points (due mainly to increased reinsurance costs and policy acquisition ratios). A.M. Best believes AIL is likely to achieve a similar strong performance in 2007 (subject to catastrophe experience), factoring a continuation of the firm property catastrophe market and some softening in its other main lines of business.

“In A.M. Best’s opinion, AIL benefits from an excellent business profile based on its well established book of property and casualty reinsurance (in particular, reinsurance of AIUK) and specialty insurance and reinsurance business (including its significant structured risk account).”

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