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Rising estimates and five straight quarters of positive earnings surprises with an average beat of 49.1% helped Aspen Insurance Holdings Ltd. (AHL - Snapshot Report) achieve a Zacks #1 Rank (Strong Buy) on October 2.

Moreover, the stock surged to hit its 52-week high of $31.11 on October 2. With a year-to-date return of 16.8% and long-term earnings growth projection of 15%, the reinsurance and insurance coverage provider offers an attractive investment opportunity.

Solid Second Quarter Results

On July 25, Aspen reported its second quarter results with operating earnings of $1.32, outperforming the Zacks Consensus Estimate by 51.7%. It was way ahead of 35 cents earned in the year-ago quarter.

Top line was $566 million, down 5% from the Zacks Consensus Estimate.

Gross written premiums improved 15% year over year on the heels of a 25% increase in insurance segment.

Underwriting income was $65.8 million, rebounding from a loss of $24.0 million.

Combined ratio improved substantially to 87.3% in the second quarter of 2012 from 105.3% in the year-ago period.

Aspen spent $25.0 million to buyback 0.9 million shares in the second quarter and is left with $167 million under its authorization.

Operating return on average equity was 13.6% in the second quarter, comparing favorably with 3.6% in the year-ago quarter.

Guidance

For 2012, Aspen expects gross written premiums to be $2.4 billion (with a 5% variance) and premiums ceded to be between 10% and 12% of gross earned premiums.

Combined ratio is projected in a range of 93% to 98%, including a catastrophe loss of $135 million for the remainder of the year,

Earnings Estimate Revisions

The Zacks Consensus Estimate for third quarter is currently pegged at 42 cents, representing an elevation of 31.2% over the last 30 days as one of the eight estimates was raised. The company is scheduled to release its third quarter results on October 24 after the bell.

The Zacks Consensus Estimate for 2012 augmented nearly 4.6% to $3.39 per share over the same time frame as two of eight estimates was pulled up. Also, this represents a year-over-year increase of 364.4%.

Valuation

Aspen currently trades at a forward P/E of 7.0x, a 10.3% premium to the peer group average of 6.3x. On a price-to-book basis, the shares are trading at 0.6x, compared to the peer group average of 0.8x.

Aspen has a trailing 12-month return on equity (ROE) of 7.4%, slightly higher than the peer group average of 7.3%.

About the Company

Based in Hamilton, Bermuda and founded in 2002, Aspen provides reinsurance and insurance coverage. With a market capitalization of $2.21 billion, the company operates through wholly-owned subsidiaries and offices in Bermuda, France, Germany, Ireland, Singapore, Switzerland, the United Kingdom and the United States.

Other Zacks #1 Rank insurance provider includes Assured Guaranty Ltd. (AGO - Snapshot Report).

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