Aspen Says Ike/Gustav Losses at $155 Million; Investments at $47.4 Million

Bermuda-based Aspen Insurance Holdings Limited has issued a comment on the combined loss estimates for the hurricanes Gustav and Ike. In the same bulletin Aspen discussed the “impact of recent events in the financial markets on its investment portfolio.”

Aspen’s preliminary net after tax loss estimate for Hurricane Gustav is approximately $14 million, net of reinsurance and reinstatement premiums. It’s estimate for Ike is approximately $141 million, net of reinsurance and reinstatement premiums, with its reinsurance operations accounting for approximately 78 percent and 22 percent from its insurance segment.

Aspen added: “Firm market loss estimates for Hurricane Ike have yet to be determined and Aspen has received only a very limited number of definitive loss advices from its reinsurance clients. However, Aspen’s investigation and analysis to date suggest that total industry losses from Hurricane Ike will be in the region of $16 billion, comprised of approximately $3 billion off-shore and $13 billion on-shore, with approximately $11 billion of the on-shore losses arising from Texas.”

Turning to its investment portfolio, Aspen repeated the statement it made on Sept. 15, indicating that it held “approximately $38 million in principal amount of Lehman securities comprised of $30 million in senior debt and $8 million in subordinated debt,” less than 0.7 percent of its total investment holdings. Aspen said its “direct investment portfolio has no holding in Lehman equity or preferred shares and has no holding in preferred or ordinary stock in AIG and has less than $2 million held in bonds issued by AIG subsidiaries.”

The bulletin also indicated that Aspen has “no holdings in the subordinated debt, preferred or ordinary stock of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or Washington Mutual, Inc (WaMu), or any corporate debt issued by WaMu.” However, it may have some indirect exposure to these securities through its investments in funds of hedge funds.

In the case of those hedge funds, Aspen noted that the ongoing turmoil in the financial markets “has impacted the performance and value of Aspen’s holdings in funds of hedge funds. The Company’s holdings in funds of hedge funds represented approximately 9 percent of Aspen’s investment portfolio at June 30, 2008, when they were valued at $555.3 million.

“Based on preliminary valuations received to date, the estimated returns on Aspen’s alternative investments for the three months ended September 30, 2008 are expected to be negative $41.3 million or negative 7.4 percent, reflecting monthly results of negative 2.1 percent in July, negative 0.6 percent in August and negative 4.7 percent in September.

“On a year to date basis to September 30, 2008 estimated returns are expected to be negative $47.4 million, or negative 8.4 percent. In accordance with Aspen’s accounting policy, any unrealized mark to market gains and losses emanating from the alternative investment portfolio will be recorded through its net investment income. As these estimated returns are based on preliminary quarter end market and reported information, they are subject to change.”

CEO Chris O’Kane commented: “The most recent information we have received from clients, brokers and loss adjusters has reinforced our belief that industry losses from Hurricane Ike are likely to be more costly than the industry initially thought and this is reflected in our preliminary loss estimate for this event.”

Source: Aspen Insurance Holdings – www.aspen.bm