Aspen Insurance Holdings Reports Results for Third Quarter and Nine Months of 2008

-- Third quarter 2008 net loss after tax of $116.7 million, compared with a net profit after tax of $117.2 million in Q3 2007. -- Q3 2008 operating loss per share of $1.02 versus an operating profit per share of $1.12 in Q3 2007. -- Combined ratio of 123.3% for Q3 2008 versus 84.5% in Q3 2007. -- Third quarter 2008 net investment income of $19.3 million, down 73.3% from Q3 2007. -- Other than temporary impairment charges of $44.5 million pre-tax for the quarter and nine months ended September 30, 2008. -- Book value per share on a diluted basis at the end of the quarter was $26.21 compared with $25.68 at September 30, 2007. -- Gross written premium for the quarter of $441.3 million was up 18.2% from $373.5 million in the third quarter of 2007 due mainly to the contribution from new underwriting teams.

• Wednesday October 29, 2008, 4:11 pm EDT

HAMILTON, Bermuda--(BUSINESS WIRE)--Aspen Insurance Holdings Limited (NYSE:AHL - News) today reported a net loss after tax for the third quarter of 2008 of $116.7 million or an operating loss of $1.02 per share, compared to a net profit after tax of $117.2 million, or earnings of $1.12 per share for the same quarter last year. On a year-to-date basis, diluted operating earnings per share were $1.28 compared with $3.52 in 2007. Hurricanes Ike and Gustav accounted for $1.91 of the reduction in diluted earnings per share for the third quarter and $1.80 per share for the first nine months of 2008. The fund of hedge funds performance within the Company’s net investment income accounted for $0.52 of the reduction in diluted earnings per share for the quarter and $0.56 for the first nine months of 2008.

Book value per share on a diluted basis at the end of the third quarter was $26.21 compared with $25.68 at September 30, 2007. Diluted book value per share has decreased by $0.87 since December 31, 2007 and by $2.78 since the end of June 2008, mainly as a result of hurricane losses, impairment losses and increased unrealized losses in the investment portfolio.

Third Quarter Financial Highlights
($ in millions, except per share amounts and percentages)
(Unaudited)
		Q3 2008			Q3 2007			Change
Gross written premium		$	441.3		$	373.5		18.2	%
Net earned premium		$	434.2		$	419.7		3.5	%
Net investment income		$	19.3		$	72.4		(73.3	)%
Net income/(loss) after tax		$	(116.7	)	$	117.2		(199.6	)%
Operating earnings per share		$	(1.02	)	$	1.12		(191.1	)%
Annualized operating return on equity			(14.4	)%		18.7	%
Combined ratio			123.3	%		84.5	%
Diluted book value per share		$	26.21		$	25.68		2.1	%

First Nine Months 2008 Financial Highlights
($ in millions, except per share amounts and percentages)
(Unaudited)
			2008			2007		Change
Gross written premium		$	1,566.3		$	1,513.5		3.5	%
Net earned premium		$	1,223.1		$	1,309.9		(6.6	)%
Net investment income		$	128.9		$	218.7		(41.1	)%
Net income after tax		$	91.4		$	353.8		(74.2	)%
Combined ratio			96.5	%		84.1	%
Annualized operating return on equity			6.4	%		20.3	%
Diluted operating earnings per share		$	1.28		$	3.52		(63.6	)%

Chris O'Kane, Chief Executive Officer said, "Our third quarter earnings were impacted by the September hurricanes and investment losses resulting from the global financial crisis. Our estimated losses from Hurricanes Ike and Gustav are in line with our expectations for storms of this size and nature. The impairment charge to our investment portfolio was mainly due to write downs on our holdings of Lehman Brothers bonds and we also experienced negative performance in our funds of hedge funds investments. Our strong balance sheet leaves us well positioned to benefit from the improved pricing environment which we expect to result from the hurricanes and financial markets crisis. Our prudent risk management and disciplined underwriting approach will enable us to deploy our capital effectively against a backdrop of a radically changing economic landscape."

Third Quarter 2008 Highlights

• The expense ratio for the quarter was 28.1%, down from 32.1% in the third quarter of 2007 due to a combination of an increase in earned premiums from new underwriting teams and a reduction in operating expenses.
• Cash flow from operations for the quarter was $122.6 million and $442.4 million for the first nine months of 2008.
• Reserve releases were $15.6 million for the third quarter and $95.6 million for the first nine months of 2008.

Business Segment Highlights

A summary of the operating highlights for each of Aspen’s four business segments is presented below.

Property Reinsurance

The property reinsurance segment recorded a combined ratio of 146.0% for the third quarter compared with 69.1% for the same period in 2007. Hurricanes Ike and Gustav accounted for 89 percentage points on the combined ratio for the quarter. On a year-to-date basis, as of September 30, 2008, Aspen’s combined ratio was 93.4% compared to 71.9% in the comparative period in 2007. Gross written premium of $152.8 million for the third quarter of 2008 increased by 9.5% when compared to the same period in 2007 mainly as a result of reinstatement premiums associated with Hurricanes Ike and Gustav. For the first nine months of 2008, gross written premium of $507.5 million decreased by 2.8% when compared to the same period in 2007.

Casualty Reinsurance

The combined ratio for the casualty reinsurance segment improved to 90.4% for the quarter from 101.7% in the third quarter of 2007. The improvement in the combined ratio is due largely to favorable development from prior years and prior period premium adjustments particularly in our US Casualty line. On a year-to-date basis, as of September 30, 2008, the combined ratio improved to 92.2% from 94.0% in 2007. In the third quarter, gross written premium in this segment increased marginally, however in the nine months gross written premium decreased by 16% over the same period in 2007, reflecting the Company’s response to the prevailing market conditions.

International Insurance

The international insurance segment reported a combined ratio for the third quarter of 119.4% compared with 81.0% for the same period in 2007. Losses associated with Hurricanes Ike and Gustav of $46.0 million, net of reinsurance recoveries and reinstatement premiums, accounted for 29 percentage points of the combined ratio for the quarter, arising mainly in our offshore energy account. The residual variance in the combined ratio is attributable mainly to the reduction in reserve releases from $24.1 million in the third quarter of 2007 to $1.9 million in the current quarter. On a year-to-date basis, the combined ratio for the segment was 97.9% compared to 84.0% for the same period in 2007. Gross written premium increased by 40.2% to $180.8 million, reflecting the incremental contributions from business lines such as financial institutions, professional liability and excess casualty insurance, which have been developed over the past year.

U.S. Insurance

The combined ratio for the U.S. insurance segment in the quarter was 172.1% with Hurricanes Ike and Gustav accounting for 63 percentage points of the increase compared with 97.3% for the same period in 2007. Losses of $15.0 million have been incurred in respect of Hurricanes Ike and Gustav. Excluding the impact of the hurricanes, the combined ratio for the first nine months of 2008 has reduced slightly compared to the same period in 2007. Nine-month gross written premium increased marginally to $101.2 million when compared to the same period last year.

Investment Performance

Net investment income for the quarter was $19.3 million compared with $72.4 million in the third quarter of 2007 due primarily to the performance from the funds of hedge funds. Funds of hedge funds have been materially impacted by the turmoil in the financial markets, with performance, measured by funds net asset value, down by 7.6% or $42.2 million in the quarter and by 8.6% or $48.3 million for the first nine months of 2008. In the prior year, funds of hedge funds returned 1.6% in the third quarter of 2007 and 7.1% for the first nine months. The book yield on the fixed income portfolio is 4.87% down from 5.08% in the third quarter of 2007.

Third quarter performance included a $44.5 million, pre tax, charge for other than temporary impairments in the investment portfolio, principally in connection with Aspen’s holdings in Lehman Brothers Holdings Inc. senior notes and subordinated debt. This charge represents approximately 0.8% of cash and invested assets at September 30, 2008. Unrealized losses at the end of September 2008 were $82.2 million compared with unrealized gains of $41.7 million at the end of 2007.

Aspen’s fixed income portfolio consists of high quality, diversified assets with 45.9% of the portfolio invested in U.S. and foreign government-backed securities. The fixed income portfolio has an average credit quality of AAA or equivalent, as rated by S&P, and an average duration of 3.5 years.

Outlook for 2008

The Company anticipates that total gross written premium will remain within original guidance of $1.8 billion +/- 5%. The combined ratio has been revised to a range of 92% - 96% as a result of the hurricane driven loss activity in the third quarter. Volatility in the financial markets is expected to continue throughout the remainder of the year and as a result guidance for investment income has been revised to a range of $160 million to $205 million, with fixed income and short-term investments expected to contribute $230 million to $245 million and funds of hedge funds expected to contribute losses of between $40 million and $70 million. The tax rate has been revised to a range of 14% to 17% as a result of the distribution of hurricane losses within the group. The assumed cat-load has also been revised to $235 million for the full year. Operating return on average equity is expected to be in the range of 8.0% to 11.0% for 2008 assuming normal loss experience for the remainder of the year.

Earnings conference call

Aspen will hold a conference call to discuss its financial results on Thursday, October 30, 2008 at 10:00 a.m. (Eastern Time).

CONFERENCE CALL PARTICIPATION DETAILS – October 30, 2008 at 10:00 a.m. (ET)

Participant Dial-In Numbers: +1 (888) 459-5609 (US Toll Free)

+1 (404) 665-9920 (International)

Conference ID: 65669655

Please call to register at least 10 minutes before the conference call begins.

The conference call will be webcast live in the ‘presentations’ section of the Investor Relations page of Aspen's website, which is located at www.aspen.bm. The earnings press release and a detailed financial supplement will be posted to the website, as well as a brief slide presentation which may be used for reference during the earnings call.

REPLAY DETAILS

A replay of the call will be available for 10 days via telephone and Internet starting two hours following the end of the live call.

Replay Access: +1 (800) 642-1687 (US Toll Free)

+1 (706) 645-9291 (International)

www.aspen.bm

Replay ID: 65669655

Aspen Insurance Holdings Limited
Summary Consolidated Balance Sheet
($ in millions, except per share data)
(Unaudited)
(in US$ millions)		As at September 30, 2008		As at December 31, 2007
ASSETS
Total investments		5,150.1		5,227.3
Cash and cash equivalents		741.6		651.4
Reinsurance recoverables		319.0		381.7
Premium receivables		675.4		575.6
Other assets		418.0		365.3
	Total assets	7,304.1		7,201.3
LIABILITIES
Losses and loss adjustment expenses		3,081.9		2,946.0
Unearned premiums		940.8		757.6
Other payables		394.3		430.6
Long-term debt		249.5		249.5
	Total liabilities	4,666.5		4,383.7
SHAREHOLDERS’ EQUITY
Total shareholders’ equity		2,637.6		2,817.6
Total liabilities and shareholders’ equity		7,304.1		7,201.3
Tangible book value per share		27.14		27.95
Diluted book value per share (treasury stock method)		26.21		27.08

Aspen Insurance Holdings Limited
Summary Consolidated Statements of Income
($ in millions, except share, per share data and ratios)
(Unaudited)
(in US$ millions)			Three Months Ended September 30, 2008			Three Months Ended September 30, 2007
UNDERWRITING REVENUES
Gross written premiums			441.3			373.5
Premiums ceded			(37.5	)		(24.7	)
Net written premiums			403.8			348.8
Change in unearned premiums			30.4			70.9
Net earned premiums			434.2			419.7
UNDERWRITING EXPENSES
Losses and loss expenses			413.4			219.9
Acquisition expenses			70.4			76.1
General and administrative expenses			51.6			58.6
Total underwriting expenses			535.4			354.6
Underwriting income			(101.2	)		65.1
OTHER OPERATING REVENUE
Net investment income			19.3			72.4
Interest expense			(3.8	)		(4.2	)
Total other operating revenue			15.5			68.2
Other income (expense)			0.6			(2.7	)
OPERATING INCOME BEFORE TAX			(85.1	)		130.6
OTHER
Net realized exchange gains			(2.7	)		9.2
Net realized investment losses			(46.8	)		(1.9	)
INCOME BEFORE TAX			(134.6	)		137.9
Income tax expense			17.9			(20.7	)
NET INCOME AFTER TAX			(116.7	)		117.2
Dividends paid on ordinary shares			(12.2	)		(13.3	)
Dividend paid on preference shares			(6.9	)		(6.9	)
Retained income			(135.8	)		97.0
Components of net income (after tax)
	Operating income		(76.1	)		109.2
	Net realized exchange gains (after tax)		(2.7	)		9.2
	Net realized investment losses (after tax)		(37.9	)		(1.2	)
NET INCOME AFTER TAX			(116.7	)		117.2
Loss ratio			95.2	%		52.4	%
Policy acquisition expense ratio			16.2	%		18.1	%
General and administrative expense ratio			11.9	%		14.0	%
Expense ratio			28.1	%		32.1	%
Combined ratio			123.3	%		84.5	%

Aspen Insurance Holdings Limited
Summary Consolidated Financial Data
($ in millions, except share, per share data and ratios)
(Unaudited)
	Three Months Ended							Nine Months Ended
(in US$ except for number of shares)	September 30, 2008				September 30, 2007			September 30, 2008			September 30, 2007
Basic earnings (loss) per ordinary share
Net income (loss) adjusted for preference share dividend	$	(1.52	)		$	1.24		$	0.85		$	3.77
Operating income (loss) adjusted for preference dividend	$	(1.02	)		$	1.15		$	1.32		$	3.62
Diluted earnings (loss) per ordinary share
Net income (loss) adjusted for preference share dividend	$	(1.52	)		$	1.21		$	0.82		$	3.67
Operating income (loss) adjusted for preference dividend	$	(1.02	)		$	1.12		$	1.28		$	3.52
Weighted average number of ordinary shares outstanding (in millions)		81.376				88.712			83.459			88.250
Weighted average number of ordinary shares outstanding and dilutive potential ordinary shares (in millions)
		81.376				91.082			86.114			90.758
Book value per ordinary share								$	27.14		$	26.46
Diluted book value (treasury stock method)								$	26.21		$	25.68
Ordinary shares outstanding at end of the period (in millions)									81.450			87.146
Ordinary shares outstanding and dilutive potential ordinary shares at end of the period (treasury stock method) (in millions)
									84.325			89.794
The basic and diluted number of ordinary shares for the three months ended September 30, 2008 are the same, as the inclusion of dilutive securities in a loss-making period would be anti-dilutive.

Aspen Insurance Holdings Limited
Summary Consolidated Segment Information
($ in millions except ratios)
(Unaudited)
			Three Months Ended September 30, 2008			Three Months Ended September 30, 2007
Gross written premiums
	Property Reinsurance		152.8			139.5