Best’s News & Research Service - October 23, 2014 11:38 AM (EDT)
A.M. Best Affirms Ratings of Aspen Insurance Holdings Limited and Its Subsidiaries
- October 23, 2014 11:38 AM (EDT)
London //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings (ICR) of "a" of Aspen Insurance UK Limited (AIUK) (United Kingdom) and Aspen Bermuda Limited (ABL) (Bermuda). At the same time, A.M. Best has affirmed the ICR of "bbb" and the debt ratings of Aspen Insurance Holdings Limited (Aspen) (Bermuda) [NYSE: AHL], the non-operating holding company of the Aspen group of companies. The outlook for all ratings remains stable. (Please see below for a detailed listing of the debt ratings.)
The ratings reflect A.M. Best's expectation that Aspen's consolidated risk-adjusted capitalisation will remain at an excellent level, in spite of a continuing programme of share repurchases. Projected growth in premium volumes, which is mainly targeted within the U.S. insurance market, is expected to be supported by internal capital generation. Additionally, AIUK and ABL are expected to maintain strong stand-alone risk-adjusted capitalisation. AIUK continues to be the main earnings contributor of the Aspen group, whilst ABL remains important to Aspen's capital management strategy, as it provides internal reinsurance to other Aspen group companies and access to third-party business written in Bermuda.
Aspen's operating performance for 2014 is expected to remain at an excellent level, assuming normal catastrophe activity for the remainder of the year. A pre-tax profit of USD 261 million was reported in the first half of 2014, up from USD 139 million in the first half of 2013, reflecting a lower incidence of catastrophe losses.
The performance of Aspen's U.S.-domiciled subsidiaries has been a negative rating factor, largely as a result of the subsidiaries' high start-up costs relative to net earned premiums. However, the technical results of these subsidiaries are improving despite challenging market conditions, and a break-even position in 2014 is anticipated. A.M. Best will continue to monitor closely the performance of these subsidiaries.
Aspen maintains a robust business profile in the London and Bermudian markets, supported by its diversified portfolio of property/casualty and specialty insurance and reinsurance business. Diversification has improved significantly in recent years through growth in insurance lines and increased geographical spread. Aspen's access to business is enhanced by its U.S. subsidiaries and network of branches in Europe, Canada, Singapore and Australia.
Positive rating actions could occur if Aspen continues to maintain its excellent risk-adjusted capitalisation levels and generates good underwriting results across the group's subsidiaries. Unexpected weak operating performance or a material deterioration in the group's consolidated risk-adjusted capitalisation could lead to negative rating pressure.
The following debt ratings have been affirmed:
Aspen Insurance Holdings Limited--
-- "bbb" on USD 300 million 4.65% senior unsecured notes, due 2023
-- "bbb" on USD 250 million 6% senior unsecured notes, due 2020
-- "bb+" on USD 200 million 7.401% perpetual non-cumulative preference shares (currently USD 133 million outstanding)
-- "bb+" on USD 275 million 5.95% perpetual non-cumulative preference shares
-- "bb+" on USD 160 million 7.25% perpetual non-cumulative preference shares
The following debt ratings under the universal shelf registration have been affirmed:
Aspen Insurance Holdings Limited--
-- "bbb" on senior unsecured debt
-- "bbb-" on senior subordinated debt
-- "bb+" on junior subordinated debt
-- "bb+" on preferred stock
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Catastrophe Analysis in A.M. Best Ratings
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
- Understanding Universal BCAR
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.
This rating announcement has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.