Best Affirms U.K.’s Aspen Re Ratings; Assigns Issuer Credit Rating

October 27, 2004

A.M. Best Co. announced that it has affirmed the “A” (Excellent) financial strength rating of Aspen Insurance UK Limited (Aspen Re) and assigned an issuer credit rating (ICR) of “a” to the company. At the same time, Best said it has affirmed the “bbb”I CR of Aspen Re’s ultimate parent, Bermuda-based Aspen Insurance Holdings Ltd. (AHL) and the “bbb” debt rating of the $250 million 6 percent senior notes issued by AHL. The outlook for all ratings is stable.

Aspen Re’s ratings “reflect its likely maintenance of superior risk-adjusted capitalisation in 2004 and 2005 supported by solid retained earnings,” said Best. It believes that “the company benefits from additional financial flexibility derived from AHL’s ability to raise funds should the need arise. Financial performance is likely to be excellent in 2004 and 2005, despite potential exposure to the series of major catastrophes in the second half of 2004, which continue to be discussed with senior management.” Best said it “anticipates that the losses will be material; however, a combined ratio of approximately 85 percent remains achievable in 2004 and 2005.”

The rating agency noted that “Aspen Re has an excellent profile as a London-based property, casualty and U.K. commercial lines underwriter.” It noted, however that the “business profile is likely to change for 2005 as the U.S. and Japanese property reinsurance portfolio (projected to account for approximately USD 350 million of premium income in 2004) is to be renewed into AHL’s Bermuda operation, Aspen Insurance Limited (Aspen). This will reduce business concentration with property reinsurance projected to account for less than 20 percent of Aspen Re’s 2005 premium income, down from approximately 40 percent anticipated in 2004.”

Essentially Best acknowledged that “Aspen Re will lose a strongly performing account.” It noted, however, that the “reduction in premium income will likely be partially offset by the development of new marine and aviation accounts (projected to account for approximately 15 to 20 percent of premium income for 2005).

“A partially offsetting factor is the company’s reliance upon retrocession cover. Aspen Re is likely to cede approximately 25 to 30 percent of gross premiums in 2005.”

Best said it would “closely monitor the maintenance and quality of the company’s retrocession coverage.”

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