A.M. Best Co. has affirmed the A- (Excellent) financial strength ratings of Bermuda-based Aspen Insurance Limited as well as Arch Reinsurance Limited.

A.M. Best released its latest ratings on each company in separate ratings reports. The affirmation of the A- (Excellent) rating for Aspen Insurance Limited came with a revised outlook to positive from stable. A.M. Best also assigned an issuer credit rating of ?a-? to the company with a positive outlook.

?The outlook for both ratings reflects a likely improvement in Aspen?s business profile and earnings,? the report said. ?The ratings reflect Aspen?s excellent risk-adjusted capitalisation, which is likely to be supportive of the company?s plans to grow its property reinsurance portfolio in 2005. This factors a USD 200 million capital injection from its ultimate parent, Aspen Insurance Holdings Ltd. in November 2004. Overall earnings are likely to be excellent in 2004 and 2005 despite potential exposure to the series of major catastrophes in the second half of 2004.?

A.M. Best says that early indications of potential losses make it unlikely these events will have any significant impact on prospective operating performance, with a forecast return on capital and surplus of approximately ten percent in 2004 based on a combined ratio of approximately 90 percent in the absence of any further catastrophe events.

A.M. Best said: ?Aspen?s gross premium income from property reinsurance is likely to grow substantially in 2005 by approximately 250 percent as a result of its access to the US and Japanese business currently written by Aspen Insurance UK Limited. A.M. Best said: ?This portfolio has an excellent track record of profitability within Aspen Re and is likely to strengthen Aspen?s business profile, although business concentration will significantly increase (property reinsurance is forecast to account for approximately 70 percent of 2005 gross premium income.?

A.M. Best says that these strengths are offset by the high net retention or approximately 90 percent of premiums.

?Aspen largely writes business on a gross basis, although the company will benefit from additional catastrophe excess of loss and risk excess cover from 2005 relating to the expansion of the property reinsurance business.?

With the affirmation of the financial strength rating of A- (Excellent) for Arch Reinsurance Ltd. and its reinsured affiliated, A.M. Best also assigned issuer credit ratings of ?a-? to Arch and its reinsured affiliates. It assigned an issuer credit rating of ?bbb-? to Arch Capital Group Limited (Bermuda) and has affirmed its senior debt rating of ?bbb-? on $300 million 7.35 percent senior unsecured notes, due 2034.

A.M. Best has also affirmed all debt securities filed under the existing shelf registrations for Arch Capital Group Limited and Arch Capital Group (US) Inc. (Stamford, CT), along with the assigning of an issuer credit rating of ?bb+? to Arch Capital Group (US) Inc. The outlook for all ratings is stable. A.M. Best said in its ratings report that the ratings reflect Arch?s ?excellent capitalisation, solid operating performance and well regarded operating franchise in both its primary and reinsurance business?.

A.M. Best said: ?The company?s historical and recent operating performance has been profitable, and despite third quarter 2004 hurricane losses totalling $140 million, the company expects to produce an operating profit in the current quarter.

?The combination of Arch?s solid profits, strong risk management capability and demonstrated financial flexibility enabled it to withstand the heightened loss activity of this year?s hurricane season,? A.M. Best said. ?Over the past year, Arch?s management has focused on its core property/casualty lines of business by enhancing its underwriting and risk management control systems along with the divestiture of non-core affiliates and lines of business.?

A.M. Best said that Arch?s risk-based capital continues to meet the more stringent requirements established for new company formations. The company also maintains a solid balance sheet with investments in high quality government and corporate fixed income securities. A.M. Best said: ?Partially offsetting these strengths is Arch?s higher underwriting leverage position relative to its peer group combined with the overall casualty orientation of its reinsurance and insurance lines of business. Despite Arch?s loss reserve adequacy based on current actuarial studies, approximately 60 percent of its book of business is in long-tail casualty lines. Due to the company?s relatively short operating history and long-tail nature of casualty business, the pricing and reserve adequacy of these lines will not be fully apparent for several years.?