Aspen Posts $116.7 Million Q3 Loss; $91.4 Million 9 Month Profit

Aspen Insurance Holdings has reported a 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. Operating earnings per share also posted a loss in the third quarter of $1.02, compared to an operating profit per share of $1.12 in Q3 2007.

Aspen also noted the following highlights:
— Combined ratio of 123.3 percent for Q3 2008 versus 84.5 percent in Q3 2007.
— Third quarter 2008 net investment income of $19.3 million, down 73.3 percent 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 percent from $373.5 million in the third quarter of 2007 due mainly to the contribution from new underwriting teams.

Aspen said that 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.”

CEO Chris O’Kane commented: “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.”

Concerning the remainder of 2008, Aspen gave the following outlook: “The Company anticipates that total gross written premium will remain within original guidance of $1.8 billion +/- 5 percent. The combined ratio has been revised to a range of 92 percent – 96 percent 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 percent to 17 percent 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 percent to 11.0 percent for 2008 assuming normal loss experience for the remainder of the year.”

The complete report, additional information and details on accessing the Company’s earnings conference call, held yesterday, October 30, may be obtained on the Company’s web site at: www.aspen.bm.

Source: Aspen Insurance Holdings