Via Facsimile and U.S. Mail
Mail Stop 6010
December 20, 2005
Mr. Julian Cusack
Chief Financial Officer
Aspen Insurance Holdings Limited
Victoria Hall
11 Victoria Street
Hamilton, Bermuda HM 11
Re: Aspen Insurance Holdings Limited
Form 10-K for the Fiscal Year Ended December 31, 2004
Filed March 14, 2005
File No. 001-31909
Dear Mr. Cusack:
We have limited our review of your filing to those issues we
have addressed in our comments. In our comments, we ask you to
provide us with information so we may better understand your
disclosure. Please be as detailed as necessary in your
explanation.
After reviewing this information, we may raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended December 31, 2004
Item 1. Business
Analysis of Consolidated Loss and Loss Expense Reserve Development
Net of Reinsurance Recoverables, page 17
1. We note that the company only provides this information on a
net
basis. Please provide us, in disclosure-type format, a
presentation
of your reserves that includes this information on a gross basis.
Refer to SFAS 113 and Industry Guide 6 paragraphs B(2)(c) and (d).
Alternatively, the staff allows a net GAAP presentation in lieu of
a
gross GAAP presentation, if for all periods, the table a)
reconciles
the net end-of-period liability (the original reserve estimate in
the
10-year table) with the related gross liability on the balance
sheet
and b) presents the gross re-estimated liability as of the end of
the
latest re-estimation period, with separate disclosure of the
related
re-estimated reinsurance recoverable.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Policies
Premiums, page 68
2. We believe your disclosure in Management`s Discussion and
Analysis
regarding the estimate of assumed premium on your reinsurance
business could be improved to better explain the judgments and
uncertainties surrounding this estimate and the potential impact
on
your financial statements. Accordingly, please provide us the
following information in disclosure-type format to help us
evaluate
the adequacy of your disclosure:
a. Please disclose the assumed premium estimate for each line of
business, including the amount of any estimate for commissions and
related expenses and the amount included in premium receivable
related to the estimate.
b. Discuss the key assumptions used to arrive at management`s best
estimate of the assumed premium estimate and what specific factors
led management to believe that this amount is the most realistic.
Please include quantified and narrative disclosure of the impact
that
reasonably likely changes in one or more of the variables (i.e.
methodology and/or assumptions used) would have on reported
results,
financial position and liquidity.
c. Disclose the provision for doubtful accounts that is recorded
related to the assumed premium estimate. If no provision is
recorded, please discuss why management believes all amounts
recorded
are collectible.
Reserve for Losses and Loss Expenses, page 69
3. We note that you set your claim reserves for assumed
reinsurance
operations based upon information received from the cedant. As
this
appears to pose a potential for a higher degree of uncertainty in
establishing the estimate of assumed loss reserves as compared to
direct loss reserves, please expand the disclosure in the critical
accounting estimates section of MD&A related to this uncertainty.
Please provide us the following information in disclosure-type
format
to help us evaluate the adequacy of your disclosure:
a. Include in this disclosure the risks associated with making
this
estimate and the effects and expected effects this uncertainty has
or
will have on management`s judgments and assumptions in
establishing
the assumed loss reserve.
b. The nature and extent of the information received from the
cedants
related to policies, claims, unearned premiums and loss reserves;
c. The time lag from when claims are reported to the cedant to
when
the cedant reports them to the company and whether, how, and to
what
extent this time lag effects the loss reserve estimate;
d. How management uses the information received from the cedants
in
its determination of its assumed loss reserves, whether
reinsurance
intermediaries are used to transact and service reinsurance
policies,
and how that impacts the loss reserving methodology;
e. The amount of any backlog related to the processing of assumed
reinsurance information, whether the backlog has been reserved for
in
the financial statements and, if applicable, when the backlog will
be
resolved;
f. What process management performs to determine the accuracy and
completeness of the information received from the cedants;
g. How management resolves disputes with cedants, how often
disputes
occur, and the magnitude of any current, material disputes; and
h. Whether management uses historical loss information to validate
its existing reserves and/or as a means of noticing unusual trends
in
the information received from the cedants.
4. We note that you provide disclosure for and an analysis around
your total reserve balances on a net basis. To help us evaluate
the
adequacy of your disclosure, please provide us, in disclosure-type
format, disclosure around the reserve balances for each line of
business on a gross basis. Specifically, where you have provided
an
actuarial range, provide this range for each line of business
shown
in the table on page 69. In addition, to aid an investor in
understanding the variability that is reasonably likely from your
estimated gross loss reserve for each line, disclose the key
assumptions used to arrive at management`s best estimate and
quantify
the effect on operations and financial position of reasonably
likely
changes in those assumptions. Estimates of reinsurance
recoverable
should be discussed separately.
5. Because IBNR reserve estimates are more imprecise, please
provide
us, in disclosure-type format, the amount of IBNR separately from
case reserves for each line of business listed in the table on
page
69.
Notes to the Consolidated Financial Statements
Note 21. Unaudited Quarterly Financial Data, page F-34
6. We note that you disclose various non-GAAP financial measures
including "underwriting income," "total other operating revenue,"
and
"operating income before tax." We note that these measures
exclude
realized investment gains and losses and net exchange gains and
losses. Elimination of these items from the most comparable GAAP
measure appears to have the effect of smoothing earnings. While
the
acceptability of a non-GAAP financial measure that eliminates
recurring items from the most comparable GAAP measure depends on
all
facts and circumstances, we do not believe that a non-GAAP measure
that has the effect of smoothing earnings is appropriate. In
addition, we note that the gains and losses you excluded have the
following attributes:
* There is a past pattern of these items occurring in each
reporting
period;
* The financial impact of these items will not disappear or become
immaterial in the future; and
* There is no unusual reason that the company can substantiate to
identify the special nature of these items.
These attributes raise significant questions about managements`
assertions as to the usefulness of these measures for investors
and
the appropriateness of their presentation in accordance with Item
10
of Regulation S-K. Please refer to "Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures" on our website
at
www.sec.gov/divisions/corpfin/faqs/nongaapfaq.htm that we issued
on
June 13, 2003. Please confirm that you will eliminate these
measures
from your future filings or tell us, in disclosure-type format,
why
you believe these measures are useful and appropriate.
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your response to our comment and provide the
requested information. Detailed letters greatly facilitate our
review. Please file your letter on EDGAR under the form type
label
CORRESP.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Dana Hartz, Staff Accountant, at (202) 551-
3648
or Lisa Vanjoske, Assistant Chief Accountant, at (202) 551-3614 if
you have questions regarding the comments. In this regard, do not
hesitate to contact me at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant
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Mr. Julian Cusack
Aspen Insurance Holdings Limited
December 20, 2005
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