A.M. Best Co. has assigned an initial financial strength rating of A- (Excellent) with a positive outlook, to reinsurer Aspen Insurance Limited, a subsidiary of Aspen Insurance Holdings (AIH), a Bermuda-registered holding company.
Best also said it had affirmed the A (Excellent) financial strength rating of AIH’s UK operating subsidiary, Wellington Reinsurance Limited.
“The rating reflects the company’s excellent initial risk-based capital base, prospective operating performance, business position and importance as a significant source of group underwriting capacity. Offsetting factors include the uncertainty over exact plans to grow third-party business over the medium term, dependence on retro cover and a relatively concentrated underwriting portfolio, ” said the bulletin.
Aspen’s initial capital is $200 million, and Best indicated it expected this to grow through earnings retentions, with “no additional capital raising being envisaged for the next three years,” and that it would “be maintained at a level that is commensurate with the current rating level.”
Best also sees an assurance of good operating performance, noting that “Aspen’s prospective book of business, largely a 20% quota share reinsurance of Wellington Re, will consist of primarily property and casualty reinsurance,” which had been “historically underwritten by Lloyd’s syndicate 2020 and consistently returned excellent underwriting results.” It expects this to continue.
The company’s projected gross premium is $226 million at year-end 2003, the report indicated. In addition to the quota share with Wellington Re, this will include around $25 million in U.S. third-party business in 2003. Best said it would “closely monitor this business as there is some uncertainty as to Aspen’s exact growth plans in the medium term.”
It noted that “Aspen represents a significant source of underwriting capacity for the Aspen group through the quota share of Wellington Re’s business amounting to USD 225 million in 2003, rising to USD 230 million in 2004. Aspen’s underwriting portfolio will likely be relatively concentrated with property catastrophe and per risk, representing approximately 29% of the total book in 2003 and 31% in 2004.”
It also stated that it “believes Aspen has a significant dependence on the pricing and availability of retrocession cover, and going forward, it will monitor the company’s maintenance of good quality retrocession cover.”
It expects Aspen to achieve a pre-tax profit of approximately $50 million in 2003, “which is largely in line with that proposed in the business plan.”
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