Aspen Insurance Holdings Reports Second Quarter and First Half 2008 Results

HAMILTON, Bermuda--(BUSINESS WIRE)--Aspen Insurance Holdings Limited (NYSE:AHL) today reported net income for the second quarter of 2008 of $126.9 million or diluted earnings per share of $1.44, an increase of 26.3% over the same quarter last year. The combined ratio was 78.2%, comparing favorably to 88.4% in the same quarter last year. Annualized operating return on equity was 21.2%, an increase of 1.5 percentage points compared with the second quarter of 2007. Book value per share increased 22.1% to $29.84 when compared to the second quarter of 2007.

Second Quarter Financial Highlights ($ in millions, except per share amounts and percentages) (Unaudited)
		Q2 2008		Q2 2007		Change
Gross written premium		$528.8		$503.5		5.0%
Net earned premium		$397.3		$451.2		(11.9)%
Net investment income		$70.5		$78.8		(10.5)%
Net income after tax		$126.9		$114.7		10.6%
Diluted earnings per share		$1.44		$1.14		26.3%
Operating return on equity		21.2%		19.7%
Combined ratio		78.2%		88.4%
Book value per share		$29.84		$24.44		22.1%
Diluted book value per share		$28.99		$23.63		22.7%

First Half 2008 Financial Highlights ($ in millions, except per share amounts and percentages) (Unaudited)
		H1 2008		H1 2007		Change
Gross written premium		$1,125.0		$1,140.0		(1.3)%
Net earned premium		$788.9		$890.2		(11.4)%
Net investment income		$109.6		$146.3		(25.1)%
Net income after tax		$208.1		$236.6		(12.1)%
Combined ratio		81.7%		83.9%
Operating return on equity		16.6%		21.1%
Diluted earnings per share		$2.23		$2.40		(7.1)%

Chris O'Kane, Chief Executive Officer, said, “Aspen had a strong quarter and delivered results ahead of our expectations including net income of $126.9 million, operating ROE of 21.2%, EPS of $1.44 and a combined ratio of 78.2%. Our solid underwriting performance demonstrates our well diversified portfolio and stringent risk selection criteria."

Second Quarter 2008 Operating Highlights

• Second quarter combined ratio of 78.2% reflects Aspen’s benign catastrophe loss experience against a backdrop of significant industry losses in the U.S. Midwest.
• Commenced writing business in our new Lloyd’s syndicate, Syndicate 4711.
• Repurchased $100 million ordinary shares under our share repurchase program.
• Launch of our Singapore branch at the end of June.
• $40 million favorable prior year claims development for the quarter across all segments.
• Improving performance from our U.S. insurance business.
• Book value per share of $29.84 increased from $24.44 a year ago, up 22.1%.
• Eleventh consecutive quarterly increase in book value per share, up 2.1% in the quarter.

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 65.0% for the quarter, a 12.3 percentage point improvement over the same period in 2007, with no significant loss activity in the second quarter 2008. On a year to date basis, the combined ratio of 64.2% compares favorably to 73.0% recorded in the first half of 2007. Aspen’s exposure to the storms and floods in the U.S. Midwest is within our expectations. The prior year was impacted by catastrophe losses from windstorm Kyrill and the June U.K. Floods. Gross written premium decreased by 10.4% compared with the second quarter of 2007, and 7.2% year to date.

Casualty Reinsurance

The combined ratio for the quarter for the casualty reinsurance segment improved to 91.5% from 94.7% in the second quarter of 2007. The improvement in the combined ratio was due largely to $24.0 million of reserve releases during the quarter, reflecting favorable loss experience from a number of classes in this segment including international casualty and U.S. casualty reinsurance. The combined ratio for the second quarter of 2007 included $4.6 million of reserve strengthening. On an accident year basis, the combined ratio for the first half of 2008 was 100.6%. Gross written premium in this segment was down by 28.5% compared to the second quarter of 2007, and down by 21.1% for the first half of this year versus the same period in 2007. The reduction in written premium was primarily due to our rigorous risk selection criteria in challenging market conditions in addition to downward premium adjustments and commutations in our international and U.S. casualty lines.

International Insurance

The international insurance segment reported a combined ratio for the second quarter of 79.2% compared with 88.0% for the same period in 2007. The loss ratio for the segment has improved to 51.3% in the second quarter of 2008 from 61.3% for the second quarter in 2007. This improvement was driven by more favorable loss experience this quarter compared with 2007, which was adversely impacted by large losses on the marine hull and U.K. commercial property business lines during that period. On a year to date basis, the combined ratio was 87.1% compared with 85.5% last year. Gross written premium for the quarter was up by 30.2% at $258.9 million, reflecting the incremental contributions from lines of business such as political risk, excess casualty insurance and professional lines.

U.S. Insurance

The combined ratio for the U.S. insurance segment was 91.0%, down significantly from 122.6% for the second quarter of 2007. Year to date, the combined ratio was 96.6%, down from 107.7% in 2007. Gross written premium on a year to date basis has increased 3.7% when compared to the same period last year. Our property book has changed significantly with greater diversity and reduced loss activity.

Investment Performance

Net investment income for the quarter was $70.5 million compared with $78.8 million in the second quarter of 2007 due primarily to the performance of our fund of hedge funds and a slight reduction in book yield. This was a significant improvement on the first quarter of 2008 as a result of the positive contribution from the funds of hedge funds. Funds of hedge funds contributed $10.8 million in the quarter against the backdrop of volatile market conditions. Net investment income year to date was $109.6 million compared with $146.3 million in the first half of 2007, with the decrease attributable mainly to the reduced contribution from our investments in funds of hedge funds. The quarter also included $88.6 million of net unrealized investment losses on the fixed term bond portfolio. The book yield on the fixed income element of our portfolio has remained stable at 4.8% when compared to the end of the first quarter of 2008, and decreased marginally when compared with 4.9% at the end of the second quarter in 2007. The average credit quality of our fixed income book is AA+, with 89% of the portfolio being graded A or higher.

Capital Management

On May 13, 2008, Aspen repurchased $100 million of ordinary shares representing approximately 4% of Aspen’s market capitalization at that date. The share repurchase of $100 million was funded from cash on hand of the Company.

Outlook for 2008

The Company expects that for the remainder of 2008 pricing will continue to soften in most lines. Total gross written premium levels will remain within the original guidance of $1.8 billion +/- 5%. Volatility in the capital and equity 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 $230 million to $265 million, with fixed income and short-term investments expected to contribute $230 million to $245 million and funds of hedge funds are expected to contribute less than $20 million. The assumed cat load has also been revised to $115 million for the full year, reflecting experience of the half year. Estimated return on average equity is unchanged in the range of 13.0% to 16.0% 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, July 31, 2008 at 8:30 a.m. (Eastern Time).

CONFERENCE CALL PARTICIPATION DETAILS – July 31, 2008 at 8:30 a.m. (EST)

Participant Dial-In Numbers:		+1 (888) 459-5609 (US Toll Free)
		+1 (404) 665-9920 (International)
		Conference ID: 51488921

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:		51488921

Aspen Insurance Holdings Limited Summary Consolidated Balance Sheet (Unaudited)
(in US$ millions, except for per share data)		As at June 30, 2008		As at December 31, 2007
ASSETS
Total investments		$5,361.6		$5,227.3
Cash and cash equivalents		620.8		651.4
Reinsurance recoverables		330.6		381.7
Premiums receivables		792.0		575.6
Other assets		394.1		365.3
Total assets		$7,499.1		$7,201.3
LIABILITIES
Losses and loss adjustment expenses		$2,944.4		$2,946.0
Unearned premiums		1,018.9		757.6
Other payables		432.4		430.6
Long-term debt		249.5		249.5
Total liabilities		$4,645.2		$4,383.7
SHAREHOLDERS’ EQUITY
Total shareholders’ equity		2,853.9		2,817.6
Total liabilities and shareholders’ equity		$7,499.1		$7,201.3
Book value per share		$29.84		$27.95
Diluted book value per share (treasury stock method)		$28.99		$27.08

Aspen Insurance Holdings Limited Summary Consolidated Statements of Income (Unaudited)
(in US$ millions, except for percentages)		Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
UNDERWRITING REVENUES
Gross written premiums		$528.8		$503.5
Premiums ceded		(22.8)		(85.0)
Net written premiums		506.0		418.5
Change in unearned premiums		(108.7)		32.7
Net earned premiums		397.3		451.2
UNDERWRITING EXPENSES
Losses and loss expenses		188.3		272.7
Acquisition expenses		65.0		81.7
General and administrative expenses		57.1		44.4
Total underwriting expenses		310.4		398.8
Underwriting income		86.9		52.4
OTHER OPERATING REVENUE
Net investment income		70.5		78.8
Interest expense		(4.0)		(4.4)
Total other operating revenue		66.5		74.4
Other income		-		1.9
OPERATING INCOME BEFORE TAX		153.4		128.7
OTHER
Net realized and unrealized exchange gains (losses)		(5.0)		8.0
Net realized and unrealized investment gains (losses)		0.8		(5.6)
INCOME BEFORE TAX		149.2		131.1
Income taxes expense		(22.3)		(16.4)
NET INCOME AFTER TAX		126.9		114.7
Dividends paid on ordinary shares		(12.8)		(13.2)
Dividends paid on preference shares		(7.0)		(7.0)
Retained income		$107.1		$94.5
Components of net income (after tax)
Operating income		$131.2		$110.8
Net realized and unrealized exchange gains (losses) (after tax)		(5.0)		8.0
Net realized and unrealized investment gains (losses) (after tax)		0.7		(4.1)
NET INCOME AFTER TAX		$126.9		$114.7
Loss ratio		47.4%		60.5%
Policy acquisition expense ratio		16.4%		18.1%
General and administrative expense ratio		14.4%		9.8%
Expense ratio		30.8%		27.9%
Combined ratio		78.2%		88.4%

Aspen Insurance Holdings Limited Summary Consolidated Financial Data (Unaudited)
		Three Months Ended				Six Months Ended
(in US$ except for number of shares)		June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
Basic earnings per ordinary share
Net income adjusted for preference share dividend		$1.44		$1.22		$2.31		$2.53
Operating income adjusted for preference dividend		$1.49		$1.18		$2.30		$2.47
Diluted earnings per ordinary share
Net income adjusted for preference share dividend		$1.39		$1.19		$2.24		$2.46
Operating income adjusted for preference dividend		$1.44		$1.14		$2.23		$2.40
Weighted average number of ordinary shares outstanding (in millions)		83.513		88.205		84.512		88.014
Weighted average number of ordinary shares outstanding and dilutive potential ordinary shares (in millions)
		86.010		90.827		86.980		90.634
Book value per ordinary share						$29.84		$24.44
Diluted book value (treasury stock method)						$28.99		$23.63
Ordinary shares outstanding at end of the period (in millions)						81.321		88.545
Ordinary shares outstanding and dilutive potential ordinary shares at end of the period (treasury stock method) (in millions)
						83.691		91.553

Aspen Insurance Holdings Limited Summary Consolidated Segment Information (Unaudited)
(in US$ millions, except for percentages)		Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Gross written premiums
Property Reinsurance		$170.5		$190.3
Casualty Reinsurance		56.8		79.4
International Insurance		258.9		198.9
U.S. Insurance		42.6		34.9
Total		$528.8		$503.5
Premiums ceded
Property Reinsurance		$5.0		$74.7
Casualty Reinsurance		2.3		1.3
International Insurance		7.3		2.0
U.S. Insurance		8.2		7.0
Total		22.8		85.0
Net written premiums
Property Reinsurance		$165.5		$115.6
Casualty Reinsurance		54.5		78.1
International Insurance		251.6		196.9
U.S. Insurance		34.4		27.9
Total		$506.0		$418.5
Net earned premiums
Property Reinsurance		$123.6		$144.3
Casualty Reinsurance		85.8		125.7
International Insurance		162.9		156.0
U.S. Insurance		25.0		25.2
Total		$397.3		$451.2
Underwriting profit
Property Reinsurance		$43.3		$32.7
Casualty Reinsurance		7.3		6.7
International Insurance		34.1		18.7
U.S. Insurance		2.2		(5.7)
Total		$86.9		$52.4
Combined ratio
Property Reinsurance		65.0%		77.3%
Casualty Reinsurance		91.5%		94.7%
International Insurance		79.2%		88.0%
U.S. Insurance		91.0%		122.6%
Total		78.2%		88.4%

About Aspen Insurance Holdings Limited

Aspen provides reinsurance and insurance coverage to clients in various domestic and global markets through wholly-owned subsidiaries and offices in Bermuda, France, Ireland, the United States, the United Kingdom, Singapore and Switzerland. For the six months ended June 30, 2008, Aspen reported gross written premiums of $1,125.0 million, net income of $208.1 million and total assets of $7.5 billion. For more information about Aspen, please visit www.aspen.bm.

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:

This press release contains, and Aspen's earnings conference call will contain, written or oral "forward-looking statements" within the meaning of the U.S. federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as "expect," "intend," "plan," "believe," "project," "anticipate," "seek," "will," "estimate," "may," "continue," “guidance” and similar expressions of a future or forward-looking nature.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aspen believes these factors include, but are not limited to: the impact of deteriorating credit environment created by the sub-prime crisis and global credit crunch; a decline in the value of our investment portfolio or a rating downgrade of the securities in our portfolio; Aspen’s reliance on loss reports received from cedants and loss adjustors; Aspen's reliance on industry loss estimates and those generated by modeling techniques; any changes in Aspen's reinsurers' credit quality; changes in assumptions on flood damage exclusions as a result of prevailing lawsuits and case law;