A.M. Best Affirms Ratings of Aspen Insurance Holdings Limited
07 October 2010 - 4:35AM
Business Wire
A.M. Best Europe – Ratings Services Limited has affirmed
the financial strength ratings of A (Excellent) and the issuer
credit ratings (ICR) of “a” of Aspen Insurance UK Limited
(AIUK) (United Kingdom) and Aspen Insurance Limited (AIL)
(Bermuda). A.M. Best has also affirmed the ICR of “bbb” and the
ratings of “bbb” on USD 250 million 6% senior unsecured notes,
“bb+” on USD 133 million perpetual non-cumulative preference shares
and “bb+” on USD 230 million perpetual preferred income equity
replacement securities of Aspen Insurance Holdings Limited
(Aspen) (Bermuda) [NYSE: AHL], the non-operating holding company of
the Aspen group of companies. In addition, A.M. Best has affirmed
the ratings for Aspen’s universal shelf registration of “bbb”,
“bbb-” and “bb+” on senior unsecured debt, subordinated debt, and
preferred stock, respectively. The outlook for all ratings remains
stable.
The ratings of the Aspen group companies reflect A.M. Best’s
expectation that consolidated risk-adjusted capitalisation will
remain strong in 2010, in spite of a USD 200 million share buy-back
undertaken at the start of the year. Planned premium growth, mainly
in the United States, is likely to continue to be supported by
internal capital generation. Additionally, AIL and AIUK are
expected to maintain strong stand-alone risk-adjusted
capitalisation. AIUK continues to be the main earnings contributor
of the Aspen group, whilst AIL remains important to Aspen’s capital
management strategy as the provider of internal reinsurance to
other Aspen group companies.
A good, albeit lower, consolidated pre-tax profit is expected in
2010 (2009: USD 534.7 million), largely supported by positive
earnings from the group’s conservative cash and fixed income
investment portfolio. A deterioration in the combined ratio to
between 95% and 100% is anticipated (2009: 83.9%), reflecting the
weaker rating environment and the impact of the major loss events
in the first half of 2010 (including a net loss of USD 112 million
from the Chilean earthquake). Business derived from Aspen’s
US-domiciled subsidiary (representing less than 10% of consolidated
gross written premiums) is likely to continue to dampen
performance, owing to high start-up costs relative to premium
earned and ongoing weak market conditions. In more recent years,
the US account has also been affected by the unfavourable
development of prior year claims, although consolidated
underwriting results have been supported by consistent small
overall reserve releases relative to net earned premium.
Aspen maintains a strong business profile in the London and
Bermudian markets, writing a diversified portfolio of property,
casualty and specialty lines insurance and reinsurance business.
Additionally, Aspen’s access to business is enhanced by its US
subsidiary and network of branch offices in Europe, Canada,
Singapore and Australia. The United States remains Aspen’s primary
focus for growth in the medium term, with more modest growth
anticipated in the European and UK regional markets. Although
Aspen’s growth plans in the United States have been constrained due
to ongoing competitive conditions, A.M. Best will continue to
closely monitor expansion of the US casualty account in view of the
weak rating environment for this business and the potential impact
of the economic downturn on claims experience.
The principal methodology used in determining these ratings is
Best’s Credit Rating Methodology -- Global Life and Non-Life
Insurance Edition, which provides a
comprehensive explanation of A.M. Best’s rating process and
highlights the different rating criteria employed. Additional key
criteria utilised include: “Risk Management and the Rating Process
for Insurance Companies”; “Understanding Universal BCAR”; “Rating
Members of Insurance Groups”; “Natural Catastrophe Stress Test
Methodology”, “Equity Credit for Hybrid Securities”; and “A.M.
Best’s Ratings & the Treatment of Debt”. Methodologies can be
found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the
following is a link to required disclosures: A.M. Best Europe -
Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of
A.M. Best Company. Founded in 1899, A.M. Best Company is a global
full-service credit rating organization dedicated to serving the
financial and health care service industries, including insurance
companies, banks, hospitals and health care system
providers.
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