ANNUAL REPORT 2010 A YEAR OF PROGRESS

ANNUAL REPORT 2010 A YEAR OF PROGRESS

Aspen Insurance Holdings Limited Annual Report 2010 Overview SUMMARY AND OVERVIEW ASPEN INSURANCE HOLDINGS LIMITED IS A LEADING SPECIALTY INSURANCE AND REINSURANCE GROUP WITH OVER 670 EMPLOYEES IN EIGHT COUNTRIES. FIVE-YEAR SUMMARY 2006 2007 2008 2009 2010 SUMMARY INCOME STATEMENT DATA US$ millions Gross written premiums 1,945.5 1,818.5 2,001.7 2,067.1 2,076.8 Net earned premiums 1,676.2 1,733.6 1,701.7 1,823.0 1,898.9 Net investment income 204.4 299.0 139.2 248.5 232.0 Underwriting income including corporate expenses 295.6 295.1 74.8 288.4 63.1 Net income 378.1 489.0 103.8 473.9 312.7 SELECTED RATIOS (BASED ON US GAAP INCOME STATEMENT DATA) % Loss ratio 1 53.1 53.1 65.8 52.0 65.8 Expense ratio 1 29.3 29.9 29.8 32.1 30.9 Combined ratio 1 82.4 83.0 95.6 84.1 96.7 Net income return on equity 18.5 21.6 3.3 18.4 11.2 Operating return on equity 2 21.1 18.4 5.4 18.0 9.4 SUMMARY BALANCE SHEET DATA US$ millions Cash and investments 5,176.1 5,878.7 5,754.0 6,745.4 7,265.4 Total assets 6,640.1 7,201.3 7,288.8 8,257.2 8,832.1 Long-term debt 249.4 249.5 249.5 249.6 498.8 Total shareholders equity 2,389.3 2,817.6 2,779.1 3,305.4 3,241.9 PER SHARE DATA US$ Basic earnings per share 3 3.79 5.14 1.49 5.33 3.18 Diluted earnings per share 3 3.72 4.99 1.44 5.16 3.03 Book value per share 22.44 28.05 28.95 35.42 40.96 Diluted book value per share (treasury stock method) 21.92 27.17 28.19 34.14 38.90 Cash dividend declared per ordinary share 0.60 0.60 0.60 0.60 0.60 Basic weighted average shares outstanding (million) 94.8 87.8 83.0 82.7 76.3 Diluted weighted average shares outstanding (million) 96.7 90.4 85.5 85.3 80.0 1 Based on net earned premiums. 2 For a full definition of operating return on equity, refer to Aspen s website at www.aspen.bm 3 Based on operating income adjusted for preference share dividends. Note: See Aspen s quarterly financial supplement for a reconciliation of operating income to net income, average equity to closing shareholders equity and diluted book value per share to basic book value per share in the Investor Relations section of Aspen s website at www.aspen.bm

Aspen Insurance Holdings Limited Annual Report 2010 Overview 1 KEY HIGHLIGHTS CONTENTS OVERVIEW 1 Key highlights 4 What we do and where we do it 6 Chairman s statement 10 CEO s statement 14 Market environment 16 Strategy and performance ASPEN INSURANCE HOLDINGS LIMITED REPORTED A REASONABLE SET OF RESULTS FOR 2010. DILUTED BOOK VALUE PER SHARE INCREASED BY 14% AND NET INCOME AFTER TAX WAS US$312.7 MILLION. THESE RESULTS WERE ACHIEVED IN A DIFFICULT UNDERWRITING ENVIRONMENT, WITH CONTINUED DOWNWARD PRESSURE ON PRICES AND INTEREST RATES AT HISTORICALLY LOW LEVELS. THE YEAR WAS ALSO CHARACTERIZED BY TWO MAJOR NATURAL CATASTROPHES. BUSINESS REVIEW 20 Reinsurance 22 Insurance OUR BUSINESS 26 How we manage risk 28 Investment management 29 Capital management 30 Our people SHAREHOLDER INFORMATION 34 Board of Directors 36 Executive Committee 37 Shareholder information 37 Contacts US$2,077m GROSS WRITTEN PREMIUMS (2009: US$2,067 million) 9.4% 96.7% COMBINED RATIO (2009: 84.1%) US$38.90 OVERVIEW OPERATING RETURN ON EQUITY (2009: 18.0%) DILUTED BOOK VALUE PER SHARE (2009: US$34.14)

2 Aspen Insurance Holdings Limited Annual Report 2010 Overview

Aspen Insurance Holdings Limited Annual Report 2010 Overview 3 AVIATION INSURANCE AGAINST THE TREND Airline safety is improving all the time but the aviation insurance industry losses in 2010 are estimated to have been in excess of US$2 billion. This was a surprisingly high figure in a year when few incidents made headline news and was also disappointing for the industry as airline losses once again exceeded premiums written by a wide margin. DAVID WHITER HEAD OF AVIATION INSURANCE Yet for Aspen Insurance s Aviation team, 2010 was another very good year, reflecting Aspen s focus on certain niches in the market. Gross written premiums of US$112 million produced a loss ratio which, at 62.7%, was little changed on 2009. Why did we do so well in a poor market? The answer s simple we have smart underwriters with a great deal of experience, says David Whiter, Head of Aviation Insurance. We have very good contacts and can adapt to changing conditions quickly. By adopting a niche-based approach for many years, we have built up the data and expertise to play in segments of the market which many of our competitors don t have the skills to access and which are typically the better performing areas. OVERVIEW

4 Aspen Insurance Holdings Limited Annual Report 2010 Overview WHAT WE DO AND WHERE WE DO IT WE ARE A DIVERSIFIED, WELL-CAPITALIZED AND STRONGLY RATED COMPANY, PROVIDING CAREFULLY TAILORED UNDERWRITING SOLUTIONS IN SELECT, TYPICALLY HIGH VALUE-ADDED MARKETS. OUR PROGRESS IS BUILT ON THE ABILITY TO IDENTIFY AND RESPOND SWIFTLY TO EMERGING OPPORTUNITIES AND TO OPERATE ACROSS A WIDE RANGE OF COUNTRIES AND SPECIALIST BUSINESS LINES. BUSINESS PLATFORMS CLIENTS BROKERS REINSURANCE Aspen Re is built on a deep understanding of its clients needs and expertise in the risks it assumes. We focus on those clients who exhibit sound underwriting with transparent exposures where risk transfer is a vital part of their business needs and hence long-term reinsurance relationships are valued. INSURANCE Aspen Insurance has recognized leadership and a significant presence in many of its chosen markets. Each of our business lines is represented by highly regarded and experienced industry experts with a deep knowledge of their products and supported by motivated teams of professionals. We write insurance and reinsurance on three main platforms: London, Bermuda and the US. We have branches of our UK FSA-regulated company in Dublin, Paris, Singapore, Zurich and Cologne. We are licensed to write business in Australia and Canada and also operate at Lloyd s of London through our Lloyd s Syndicate 4711. Our US headquarters are in New York and we have 15 additional offices located across the country. We attract insurance and reinsurance clients from all over the world seeking fl exible solutions to a wide variety of risks. We seek to differentiate ourselves by providing our customers with innovative and customized solutions to complex risks. Most of our business comes through intermediaries, with three brokers accounting for just over half of GWP.

Aspen Insurance Holdings Limited Annual Report 2010 Overview 5 SETTLING CLAIMS INVESTMENT MANAGEMENT CAPITAL MANAGEMENT PEOPLE OVERVIEW Our approach is to settle valid claims quickly and fairly. We have invested in claims workflow technology so that we are able to do so. Aspen manages its investment portfolio with two goals in mind: to generate an investment income that contributes to return on equity (ROE), while at the same time preserve the value of the principal invested and maintain adequate levels of liquidity. Most of Aspen s US$7.3 billion investment portfolio is in a diverse range of highly rated fixed income securities and money market funds. We manage our capital prudently, but we are flexible. We seek to expand and contract our balance sheet to take advantage of opportunities as they arise with the right balance of debt and equity. Ratings Standard & Poor s A.M. Best Moody s A (Strong) A (Excellent) A2 (Good) Aspen s 670-plus employees are our greatest resource. Our underwriters combine a deep knowledge of their sectors with entrepreneurial flair and close customer contact. Our support staff in operations, claims, finance and other functions are skilled and committed to providing the highest level of service. US$667m US$7,265m US$408m 678 NET CLAIMS PAID IN THE YEAR (2009: US$809 million) CASH AND INVESTMENTS (2009: US$6,745 million) CAPITAL RETURNED IN THE YEAR (2009: US$nil) EMPLOYEES (2009: 614) WE HAVE A DEEP UNDERSTANDING OF THE MARKETS WE WORK IN

6 Aspen Insurance Holdings Limited Annual Report 2010 Overview WE HAVE DELIVERED VALUE DESPITE TOUGH TRADING CONDITIONS

Aspen Insurance Holdings Limited Annual Report 2010 Overview 7 CHAIRMAN S STATEMENT OVERVIEW ASPEN HAS AGAIN DELIVERED VALUE FOR ITS SHAREHOLDERS IN 2010, DESPITE FACING EXTREMELY TOUGH TRADING CONDITIONS. WE REPORTED STRONG GROWTH IN BOOK VALUE PER SHARE, AND WHILE OUR OPERATING RETURN ON EQUITY WAS LOWER THAN 2009 IT HAS TO BE CONSIDERED IN THE LIGHT OF SLUGGISH ECONOMIC GROWTH OVERALL, VERY LOW INTEREST RATES, A STILL DETERIORATING PRICING ENVIRONMENT AND TWO MAJOR EARTHQUAKES IMPACTING THE INDUSTRY. Although the global economy returned to growth in 2010 after the recession of 2009, recovery has been slow in most of the developed world. There have been concerns about a double dip recession and a number of European countries have found it diffi cult to manage their budgetary defi cits without further support from the European Union and International Monetary Fund. Low levels of economic activity and heightened uncertainty typically affect the demand for insurance and reinsurance and can often exacerbate claims. Our industry has also continued to be impacted by weak pricing resulting from ample capacity, a trend we expect to be maintained in 2011. Inadequate premium rates have prompted us to cut back the amount of premium we have written in a number of our lines of business, although this has been partly offset by premiums written in some of our newer lines. The historically low level of interest rates has been a further challenge. Our investment portfolio primarily comprises high quality fi xed income assets. Since December 2008, US Federal Funds Rate has been less than 0.5% and this has impacted our book yield by just over 50 basis points in 2010 as reinvestment rates fell. We have also had to think about the possibility of higher inflation and we have taken some initiatives on both the underwriting side and in our investment portfolio to try to mitigate these potential pressures. It is also worth commenting briefl y on the trend of increased regulatory oversight within the financial services sector in response to the global financial crisis. The business model for insurers, however, is very different from that of banks insurers collect premiums and invest these prudently in order to meet future liabilities. Strong balance sheets and liquidity are an essential requirement of the business. The basic structure of the banking balance sheet, with long-term assets often mismatched against short-term liabilities, proved to be a flawed proposition in a crisis. The distinction between the banking and insurance industry is now more clearly understood and appreciated by policy makers and regulators alike. SOLID RESULTS FOR 2010 Despite these challenges we are encouraged by our performance in 2010. Aspen s continued strategy of geographical and product line diversifi cation and pursuit of profitable growth underpins our 2010 results. All the key metrics for the Group are given in the Chief Executive s Statement and elsewhere in the Annual Report, but I would like to comment on operating return on equity (operating ROE) and Book Value per Share (BVPS), our two principal measures of financial return.

8 Aspen Insurance Holdings Limited Annual Report 2010 Overview Our operating ROE of 9.4% was lower than the 18.0% generated in 2009, which reflects a much greater impact from natural catastrophes in 2010 compared to 2009. Diluted BVPS reached almost US$39 per share, 14% higher than in 2009. PAYMENTS TO SHAREHOLDERS Our share repurchase program in 2010 was an important component of our financial performance. We repurchased just under 17% of our opening issued shares for US$408 million, rather than seeking to pursue business with inadequate returns. This resulted in total payments to shareholders during the year of US$454 million including dividends on ordinary shares. Our balance sheet is robust and conservatively run plus our credit ratings are strong. CORPORATE PERFORMANCE In early 2010, Aspen s structure was simplified, with all business lines grouped under either Aspen Re or Aspen Insurance. Aspen Re performed better than Aspen Insurance, and had a good year notwithstanding the two major natural catastrophe events. Market commentators have estimated losses for the insurance and reinsurance industry from catastrophe events in 2010 to amount to US$37 billion and, unusually, it was an accumulation of earthquakes, rather than hurricanes, that did the damage. 2010 is believed to be among the six most loss intensive years for the industry since 1980. Aspen Insurance s results were mixed with many units performing very well and good progress made in realizing a number of our strategic objectives. UK and US Property, Marine, Energy and Transportation, UK Commercial Liability and Aviation were the highlights of 2010. The management team of Aspen Insurance has been strengthened with the appointment of John Cavoores, who had been a Non-Executive Director at Aspen since 2006, as Co-CEO of Aspen Insurance alongside Rupert Villers. STRATEGIC DEVELOPMENT AND PLAYING TO OUR STRENGTHS We made good progress in 2010 in furthering our strategic objectives. We continued our focus on identifying profitable niches consistent with our skill-set and moved selectively into new product areas such as Non-US Agriculture reinsurance. We developed our three main platforms further. We also opened an offi ce in Miami to access the Latin American reinsurance market. We now have three offices serving the UK regions and insurance operations in Zurich. This level of operational leverage will stand the company in good stead for when the market eventually hardens. Aspen is very much an underwriting-led company; this is the foundation stone of our success, and will continue to be so. We bring expert knowledge where needed and an understanding of risk to our customers. We endeavour to avoid the more commoditized business, rather we bring our intellectual property to bear in order to find solutions for our clients. We have sought to create an environment where skilled underwriters can flourish, supported by able professionals in our actuarial, risk, claims and other operational departments. We have been successful in attracting talented people. We have a strong culture, and we are entrepreneurial and fl exible. Preparing for new financial regulation in particular the European Union s Solvency II directive which comes into effect at the end of 2012 has been a priority. For the industry the full impact of implementation is not yet clear. It will, however, undoubtedly increase capital requirements across the industry and thus raise issues for some. We do not currently believe this will be the case at Aspen. Keeping a watching brief on the implications of the US s Dodd-Frank Wall Street Reform and the Consumer Protection Act is also important, and we recently voluntarily adopted the Act s say-on-pay requirements, which give our shareholders a non-binding advisory vote on executive compensation.

Aspen Insurance Holdings Limited Annual Report 2010 Overview 9 Left and above Within our Property Insurance business line, both UK Commercial Property and Construction and US Property (E&S) performed well. Above We have moved into new product areas, including Non-US Agriculture reinsurance. OVERVIEW WE BRING EXPERT KNOWLEDGE AND AN UNDERSTANDING OF RISK TO OUR CUSTOMERS LOOKING BACK, AND AHEAD Our business has expanded greatly in almost nine years. Essentially, Aspen was a property reinsurance business when it started in 2002, a singleplatform operation based in London with about 50 people. Since then we have diversified into Casualty and Specialty reinsurance; we have moved into insurance which generated more than 40% of total gross written premiums in 2010 and we have become more global operating from three platforms in London, Bermuda and the US with more than 670 employees. It has been a period of considerable achievement and we are well placed to continue on this path. This is a company that does not just write premiums; we look at risk-adjusted returns. If we do not think a proposition is profitable enough, we will not write it. This is an attitude that requires strong discipline and is something we passionately believe in. Glyn Jones Chairman

10 Aspen Insurance Holdings Limited Annual Report 2010 Overview OUR RESULTS REFLECT THE BENEFIT OF OUR DIVERSIFIED APPROACH

Aspen Insurance Holdings Limited Annual Report 2010 Overview 11 CEO S STATEMENT OVERVIEW I AM PLEASED WITH OUR RESULTS THIS YEAR, ESPECIALLY CONSIDERING THE DIFFICULT MARKET CONDITIONS FOR INSURERS AND REINSURERS. WE HAVE CONTINUED TO MAKE PROGRESS AGAINST OUR STRATEGY, WITH DIVERSIFICATION OF OUR PRODUCT LINES AND BROADENING OF OUR GEOGRAPHICAL REACH IN BOTH OUR INSURANCE AND REINSURANCE LINES. WE ALSO BEDDED OUR BUSINESS INTO A NEW DUAL STRUCTURE WHERE ALL OUR UNDERWRITING ACTIVITIES ARE GROUPED UNDER EITHER ASPEN RE OR ASPEN INSURANCE. Our success has been down to our underwriting expertise, prudent investment strategy, efficient operational platforms, motivated people, responsiveness, and above all a clear and disciplined vision of what we want to achieve. This is, I believe, what puts us in an extremely strong position to take rapid advantage of a turn in market conditions and build on our achievements in the years ahead. Our results in 2010 reflected a positive contribution from both underwriting and investments and the benefits of the capital management actions we took. During the year we repurchased 13.8 million shares for US$408 million. We ended the year with a strong balance sheet increasing diluted book value per share by 14% to just under US$39 a share from US$34 at the start of the year. Net income after tax amounted to US$313 million with a net income ROE of 11.2%. This was achieved against a backdrop of continued downward pressure on prices and interest rates remaining at historically low levels. The year was also characterized by a number of significant natural catastrophes unlike 2009 which, as I said at the time, was essentially a year free of insured natural catastrophes. Our results demonstrate very clearly the benefi t of our diversified approach as we absorbed US$181 million of catastrophe losses from the Chilean and New Zealand earthquakes. Aspen Re performed very well with each of our four business lines generating positive earnings. The results of Aspen Insurance were mixed with many units making a strong positive contribution and good progress made in realizing a number of our strategic objectives. ASPEN RE Performance of our Reinsurance segment in 2010 was particularly pleasing considering the soft underwriting market and the impact of the New Zealand and Chilean earthquakes on the industry. Overall we reported underwriting profits of US$134 million and a combined ratio of 88.2% in fact our accident year ratio excluding natural catastrophe losses was barely changed at 79.1%. Losses from natural catastrophes were high for the entire reinsurance industry 2010 was one of the most loss-intensive years of the last 30 years. The earthquakes in Chile and New Zealand cost Aspen Re around US$170 million, net of reinstatement premiums. However, within our Property Other category, our Pro Risk, Pro Rata and Facultative businesses did particularly well with a combined ratio of 73.6% and underwriting income of US$67.4 million. We continue to adopt a cautious stance in relation to our casualty reinsurance lines and are mindful both of the inflationary risks inherent in the business and the current low rates of interest. During the year we reduced both the number of clients and the average exposure per client. Specialty Reinsurance produced exceptional results, with gross written premiums up by 2% compared with the previous year. It is a diversifi ed book of business, not dominated by any one exposure. Its success is down to our experienced underwriters and their teams, who are not interested in market share or increasing their premiums but focus on identifying the best opportunities going.

12 Aspen Insurance Holdings Limited Annual Report 2010 Overview WE HAVE A CLEAR VISION IN AN OFTEN CLOUDY MARKET Within Specialty, Trade Credit and Surety reinsurance is relatively new for Aspen and has delivered excellent results from the beginning. The main European private sector credit insurers had a poor year in 2008. We entered the market to reinsure them in 2009 and achieved a loss ratio of 62.6%; we did even better in 2010 with a loss ratio of 48.9%. Our achievement here demonstrates the benefits of diversification one of our guiding principles as it brings with it new opportunities, a better spread of risks and a more efficient use of capital. Aspen Re is now a relatively mature business and has been a major contributor to the Group generating underwriting income before operating expenses of US$1.7 billion since 2003 on a total premium base of US$9.5 billion. Future reinsurance growth will depend heavily on diversifi cation away from US peak zone natural catastrophe risk. For now Casualty reinsurance, especially in North America, is generally underpriced and therefore an area where we are reducing our exposure overall rather than seeking to increase it. We are interested in expanding our footprint in continental Europe, where historically we have been somewhat under-represented. Our Zurich reinsurance office, which opened three years ago, has been very successful and is leading the way with just over US$165 million of gross written premiums in 2010. We are also targeting Latin America, and we opened an offi ce in Miami in 2010 to do this. The region is one of the developing economies with good prospects for growth which will spur demand for reinsurance. Asia-Pacific has increased in importance as well and we opened a Singapore office two years ago. ASPEN INSURANCE It was a year of continued positive contribution from some of our Insurance lines. We are very pleased with the way our Aviation account performed in a tough market, with a loss ratio of 62.7% again likely to be a top quartile performance in the industry if not decile. We believe that the aviation loss ratios for the industry are in excess of 100%, the fourth successive year of loss. Our approach, which is niche based we focus on areas such as deductible buy-backs while de-emphasizing US airlines and products liability for critical components has once again delivered very profitable results. In addition, Financial and Political Risk, UK Commercial Liability, UK and US Property have once more given us excellent returns in difficult market circumstances. Financial and Political Risk is an area where we have also been able to leverage our knowledge and expertise very successfully. Our loss ratio for this product is 39.2%, which we believe puts us again in the top quartile for the industry, and underlines the value in our approach. Our Property Insurance lines also performed well with a loss ratio across both our US and UK Property accounts of 40.5%. Finally, in our UK Commercial Liability account, aggressive cycle management has delivered excellent results. Some areas, however, have been disappointing, which impacted our results for Aspen Insurance overall. US Casualty has been one such business where we have taken strong remedial action. John Cavoores, who had been a Non-Executive Director of our Board since 2006, has taken on an executive role and was appointed Co-CEO of Aspen Insurance alongside Rupert Villers in October. John is now overseeing our US Insurance business and we took a number of steps in 2010 to up-scale and re-skill our US operations. Furthermore, by July 2011 we expect to have reactivated licenses in 48 states in our admitted company. Building a profi table franchise in the US insurance market remains a core component of our strategy. Diversification is a key objective for Aspen. It creates new business, spreads risks, and works our capital harder. It is why, for example, we established a network of regional offices in the UK and a Swiss branch in Zurich for Aspen Insurance. These are also good examples of where we have been able to leverage our existing skills and expertise to expand our client base. It is through establishing close proximity with our customers that we can offer tailored solutions that directly meet their needs. Ultimately it is about continued investment in our franchise, but in a controlled and measured way. MEETING THE DEMANDS OF SHAREHOLDERS AND CUSTOMERS Aligning the interests of shareholders and customers to maximize shareholder value, yet at the same time provide what customers want at a fair price, is a delicate balancing act. Our capital has to be employed effectively to deliver a return to shareholders. We do that by managing the cycle aggressively. If prices are falling in a business line, we allocate less capital to it, or get out of it altogether. When pockets of opportunity emerge, we move into them. If we have surplus capital that we cannot put to work as profitably as we would like, we aim to return it to shareholders. Our customers come to us because we have an informed point of view and they value our insight into their businesses. They know we are an important player in our chosen markets, that our underwriters are experts in their fields, and we can create singular, exceptional solutions for them where needed. We understand our customers, and we have an entrepreneurial mindset that says: We can find solutions to meet your needs. This is at the heart of our value proposition for our customers and why they are prepared to pay us a fair price for the proportion of the risks that they transfer to us.

Aspen Insurance Holdings Limited Annual Report 2010 Overview 13 Above Within our Casualty Insurance business line, UK Commercial Liability is one of the areas that has again given us excellent returns in a diffi cult market. OVERVIEW WHAT MAKES ASPEN DIFFERENT? We are a specialty insurance and reinsurance company. By specialty I mean we focus on risks that are in some sense special, less commoditized and less homogenous; risks where research, experience, judgment, expertise and good actuarial science are critical factors in quoting the right price and getting business on our books. Offering our opinion and informed insight, we believe, is our added value and is what makes us different. We believe in a diverse business. We are continuously on the look-out for new areas of risk offering good profit potential. So long as they are within our sphere of competence and there is a way to sell similar risks in different places, then we will do so. We have a clear vision in an often cloudy market, which is why we have been building our teams and geographic reach in difficult conditions so that we are well placed to benefit when the market turns. Underwriting excellence is key. But three other elements are essential too: operational effectiveness, talented and empowered staff, and agility the speed at which we respond to new opportunities and withdraw capital from areas of business where the expectation of profi t is past. We possess these qualities. They have driven our success since we came into existence almost nine years ago, and will continue to do so in the future. Christopher O Kane Chief Executive Officer US$232m NET INVESTMENT INCOME (2009: US$249 million)

14 Aspen Insurance Holdings Limited Annual Report 2010 Overview MARKET ENVIRONMENT IN 2010 INSURERS AND REINSURERS CONTINUED TO FACE THE HEADWINDS OF SOFT PRICING AND LOW FIXED INCOME INVESTMENT YIELDS. WITH AMPLE INDUSTRY CAPACITY REMAINING THERE IS NO OBVIOUS CATALYST TO CHANGE MARKET PRICING. THE IMPORTANT JANUARY RENEWAL SEASON SIGNALED THAT 2011 IS LIKELY TO BE A YEAR OF MORE OF THE SAME. CONTINUED DOWNWARDS PRICING PRESSURE The global insurance and reinsurance markets continued to soften in 2010. Market conditions were undoubtedly tough, with pricing under pressure but with terms and conditions for the most part broadly stable. In soft markets, stringent risk assessment, selection and patience are essential. As a result, we scaled back the amount of business we wrote in those areas where returns were below our risk adjusted targets. Our diversified model allowed us to concentrate on lines of business where there was less pressure on premiums. There were still pockets of opportunity, although a lot fewer than the previous year. 2010 had also been forecast to be a year of higher than average hurricanes. In fact, few made landfall with any intensity. Estimated losses from natural catastrophes in 2010, however, were still some US$130 billion, causing an estimated US$35 billion to US$40 billion in losses for insurance and reinsurance companies. For our industry this cost was among the highest since 1980. The two biggest events in terms of insurance industry losses were the earthquakes in Chile and New Zealand, costing an estimated US$10 billion and US$5 billion, respectively. LOWER INVESTMENT RETURNS With continued low interest rates, insurance and reinsurers are also experiencing pressure on investment returns. Investment assets, which are usually invested for the short to medium-term, mostly in fi xed income securities, have in recent times typically yielded in the region of 4% to 4.5% a year, but in 2010 the average reinvestment yield was around 2%. The importance of investment income to profi tability varies by line of business depending on the expected duration of liability. In the past, lower investment returns have had a positive impact on pricing especially in long-tail casualty lines but this failed to materialize in 2010. OUTLOOK January 1 is a key renewal date for many reinsurance classes. Capacity has remained abundant, and competition has been tough exacerbated by the weak economy and higher cedant retentions. Within our Property Reinsurance account, we experienced average rate declines of 7% although we recorded some rises on loss affected accounts. Competitive pressure was particularly acute in Europe and Asia. Conditions within the Casualty reinsurance market remain challenging. We are continuing to see rate decreases on original business of around 2% to 5% but this varies by product. As a result, we have only deployed capacity on business where adequate returns could be achieved, resulting in an approximate 25% reduction in our renewal book. Within Specialty Reinsurance, for our London account, treaties with Energy and Energy Liability exposures and losses from Deepwater Horizon have seen rate increases averaging around 20%. January 1 is not a major renewal date for insurance business but the overall picture is broadly similar with both Property and Casualty lines continuing to experience significant competitive pressures. Within Marine, Energy and Transportation, losses in the Energy market resulted in rate firming. Uncertainty surrounding the ongoing regulation of the offshore drilling industry continues and a number of insurance and reinsurance capacity initiatives have been announced, but we expect this to have a positive impact on pricing overall. In Aviation, we believe that there could be some removal of capacity in 2011 for Airline business but the effect will be unclear until at least April when the first major accounts renew. Looking further ahead, compliance with the European Union s Solvency II Directive will likely result in higher capital requirements for some market participants. This could increase the demand for reinsurance. It is also likely to raise the barriers to entry for smaller insurers and may lead to some industry consolidation. It is hard to believe that we are not close to the inflection pricing point yet it is still very difficult to see what will turn the market and when. Some observers think that it may require a very significant catastrophe event, while others believe it will be the confirmation of declining accident year results and lower investment returns. Whatever the catalyst, the key to success will be the speed with which companies are able to respond to that turn.

Aspen Insurance Holdings Limited Annual Report 2010 Overview 15 Above The magnitude 8.8 earthquake struck Central Chile on February 27, 2010 causing signifi cant damage. Above A seismic rupture in a road in Christchurch on September 4, 2010 after a 7.1 magnitude earthquake. Left A shrimp boat is used to collect oil from the Deepwater Horizon oil spill. OVERVIEW RELATIVE RATE VALUE IN 2010 Relative annual rate change on premium weighted average basis on business renewed % Reinsurance Property (4) Casualty 1 Specialty 1 Insurance Property (2) Casualty (1) Marine energy transportation 2 Financial and professional lines 3 IN SOFT MARKETS STRINGENT RISK ASSESSMENT SELECTION AND PATIENCE ARE ESSENTIAL

16 Aspen Insurance Holdings Limited Annual Report 2010 Overview STRATEGY AND PERFORMANCE OUR OBJECTIVE IS TO DELIVER ATTRACTIVE FINANCIAL RETURNS TO SHAREHOLDERS WHILE AT THE SAME TIME ACHIEVING COMPARATIVELY LOWER EARNINGS VOLATILITY RELATIVE TO COMPANIES IN OUR PEER GROUP. OVER THE PAST FEW YEARS WE HAVE SOUGHT TO ACHIEVE THIS BY DIVERSIFYING OUR EXPOSURES (PRODUCT, PERIL AND PLATFORM) AND LIMITING OUR EXPOSURE TO CATASTROPHIC EVENTS. TARGETED RETURNS Our principal measures of financial return are: ROE Percentage change in BVPS. OUR PERFORMANCE IF WE CANNOT USE OUR CAPITAL EFFICIENTLY WE AIM TO RETURN IT TO SHAREHOLDERS

Aspen Insurance Holdings Limited Annual Report 2010 Overview 17 RICHARD HOUGHTON CHIEF FINANCIAL OFFICER WE WILL EXECUTE OUR STRATEGY BY: OVERVIEW DIVERSIFICATION We are a specialty insurer and reinsurer and we aim to diversify by product, peril and platform. OUR PROGRESS Product Peril Platform 56% REINSURANCE (2003: 77%) 53% PROPERTY (2003: 61%) 64% UK (2003: 94%) 44% INSURANCE (2003: 23%) 47% CASUALTY (2003: 39%) 19% US (2003: 2%) 17% BERMUDA (2003: 4%) MEASURED EXPANSION We seek to expand into areas where we have competitive advantage. 2010 NEW PRODUCTS Non US Agriculture Reinsurance US Professional Liability Insurance US D&O Insurance US Excess Casualty Insurance US Inland Marine and Ocean Liability 2010 EXTENDED REACH Cologne (Reinsurance) Miami (Reinsurance) Zurich (Insurance) UK Regional (Insurance) US Admitted (Insurance) A STRONG RISK MANAGEMENT FRAMEWORK AND CULTURE We take an enterprise-wide approach to risk management. In 2010 we published our Corporate Risk Appetite Statement which aligns the Company s risk appetite with its business strategy, and in so doing firmly positions risk as a value-creating activity rather than just a risk-minimizing activity. STRONG Enterprise Risk Management as rated by Standard & Poor s, August 31, 2010 PRUDENT STEWARDSHIP OF CAPITAL If we cannot use all our capital efficiently we seek to return it to shareholders. US$1,156m Cumulative return of capital 2003-2010 HIRING AND DEVELOPMENT OF TALENT We value experienced and motivated staff, and we help them fulfil their career ambitions. 63% of our staff have invested in Aspen s share purchase plans

18 Aspen Insurance Holdings Limited Annual Report 2010 Business review

Aspen Insurance Holdings Limited Annual Report 2010 Business review 19 SINGAPORE ASPEN RE S ASIAN HUB Asia has led the global economic recovery and Singapore has been at the forefront of this trend. Singapore is not only ranked in the top four of the world s leading financial centers but numbers among the top two as a logistics hub. HEATHER GOODHEW MANAGING DIRECTOR AND HEAD OF ASIA PACIFIC, MIDDLE EAST AND NORTH AFRICA ASPEN RE The establishment of Aspen Re s Singapore branch recognizes the increasing regionalization of international reinsurance business as a growing trend and we transact business throughout the region. Property and Engineering business formed the initial thrust but Casualty, both Treaty and Facultative, and more Specialty business are now being selectively added. Singapore marked the initial phase of our emerging markets strategy, says Heather Goodhew, Managing Director and Head of Asia Pacific, Middle East and North Africa Aspen Re. Through this operation we can offer enhanced service levels to our clients in the region not least because Singapore is a minimum of seven time zones from London and 12 from New York. The region is an exciting market for us and much of the potential is still untapped. BUSINESS REVIEW

20 Aspen Insurance Holdings Limited Annual Report 2010 Business review REINSURANCE ASPEN RE PERFORMED WELL AND REPORTED A PROFIT IN ALL FOUR BUSINESS LINES AGAINST A BACKDROP OF DIFFICULT MARKET CONDITIONS. BY INVESTING IN EXPERIENCED UNDERWRITERS AND NEW PLATFORMS, WE ARE POISED TO TAKE MAXIMUM ADVANTAGE OF NEW OPPORTUNITIES SUBJECT TO MARKET CONDITIONS. Our 2010 results underline the success of Aspen Re s focus on building a diverse portfolio of specialized risks, intimate knowledge of our customers, an international footprint and a deep understanding of the reinsurance market. PROPERTY CATASTROPHE Despite forecasts for an active US wind season in 2010, there were very few land-falling hurricanes. However, 2010 saw significant earthquake activity with insured market losses from the Chile and New Zealand earthquakes estimated at around US$15 billion. Within Property Catastrophe, these two events amounted to US$155 million, net of reinstatement premiums. Our claims in Chile arose primarily from our international clients with worldwide operations, while those in New Zealand were largely due to one large domestic customer. Notwithstanding the impact from these earthquakes, we achieved an underwriting income of US$21.3 million for our Property Catastrophe book which refl ects the benefi ts of the diversifi cation we have achieved within this account. PROPERTY OTHER In the non-catastrophe segment of our property book, we anticipated that rates would fall during 2010 and so skewed the business we wrote to the January 1, 2010 renewals. Conditions remained competitive throughout the year with ample capacity exacerbated by a weak economy acting as a drag on pricing. Against this background the 73.6% combined ratio we achieved was highly rewarding. CASUALTY The Casualty reinsurance market faced a challenging year with rates continuing to decline and some pressure on terms and conditions. The key to success in this environment is active portfolio management and focus on a core client base. We executed on this strategy effectively in 2010 and repositioned our portfolio towards those lines that were more profi table and less volatile. We have continued to prune our book into 2011, during the recent January 1 renewals, we reduced our top line on an underwriting year basis by approximately 25%. UNDERWRITING METRICS Net premiums earned % 2009 2010 Combined ratio 70.4 88.2 Catastrophe losses 15.3 Accident year combined ratio 79.9 79.1 Prior year adjustment (9.5) (6.2) Policy acquisition expense ratio 19.4 17.7 Operating and administrative expense ratio 8.8 9.8 Expense ratio 28.2 27.5 SPECIALTY It was a year of broadened market opportunity for Specialty Reinsurance. Historically our underwriters have created a consistently profi table portfolio in Specialty classes such as Marine, Energy, Aviation, Contingency and Space, operating primarily in the London market. More recently we have sought to export the knowledge and expertise our underwriters possess to other geographical markets, particularly continental Europe, and have also commenced writing selective new lines of business such as international Credit and Surety and Non-US Agriculture reinsurance. The benefits of this approach were clearly reflected in our results for this unit where we achieved a combined ratio of 83.7% and underwriting income of US$37.3 million. The Deepwater Horizon oil rig explosion in the Gulf of Mexico has had significant repercussions in the industry with a number of capacity initiatives in both the insurance and reinsurance markets and new legislation proposals. While the loss occurred after the major Energy renewal season, it has reversed the declining rate trend seen in the Marine and Energy reinsurance markets, which is positive for anticipated rate increases in 2011. WHAT MAKES ASPEN DIFFERENT Business diversification is one of our strengths. Aspen Re started as primarily a property catastrophe reinsurer and now has a broad mix of business by product, peril and geography. For example, Property Reinsurance is about more than Property Catastrophe, it is also Facultative, Pro Rata and Risk Excess.

Aspen Insurance Holdings Limited Annual Report 2010 Business review 21 LINES OF BUSINESS MAJOR PRODUCTS BRIAN BOORNAZIAN CHIEF EXECUTIVE OFFICER, ASPEN REINSURANCE JAMES FEW PRESIDENT, ASPEN REINSURANCE PROPERTY CATASTROPHE REINSURANCE OTHER PROPERTY REINSURANCE Treaty Catastrophe Treaty Risk Excess Treaty Pro Rata Global Property Facultative Risk Solutions CASUALTY REINSURANCE US Casualty Treaty International Casualty Treaty Global Casualty Facultative BUSINESS REVIEW WE PRIDE OURSELVES ON OFFERING INFORMED INSIGHT TO OUR CLIENTS SPECIALTY REINSURANCE Credit and Surety Reinsurance Agriculture Specialty Reinsurance Structured Our service offering to our clients is predicated on in-depth experience and technical expertise. Our 106 reinsurance underwriters can draw heavily on the resources of our dedicated team of 29 actuaries and 27 modelers. We believe being close to the client is crucial and our Zurich office is an excellent example of the benefits of client proximity. We opened our offi ce three and a half years ago and this generated just over US$165 million of gross written premiums with five different product lines in 2010. We have taken that model and applied it to Singapore which we opened two years ago, and to Miami (Latin America) where we opened an offi ce in 2010. We also hired an underwriter from the Middle East, based in London, with a deep knowledge of the region s markets and cultures who will help us access that market. Our new offi ce in Cologne concentrates on Property Facultative business. We pride ourselves on offering informed insight to our clients. Customers come to us not just for reinsurance, but for advice on what is going on in the marketplace, whether it is rates, loss and claims trends, or other issues. We focus on products where we have in-depth expertise and can bring additional intellect and knowledge to bear for the benefit of customers. We offer value-added services which clients can rely upon and our audit services have been particularly well received. For example, we lead approximately 90% of the Property Per Risk business we underwrite in the US, which is a significant endorsement from both our clients and brokers. Product innovation also has a part to play. Facultative reinsurance is one of our most profitable lines of business. We have now developed an automated online desktop tool called EZ Fac. This facilitates more immediate access to our Facultative capacity and gives us a competitive edge to secure more of our targeted business.

22 Aspen Insurance Holdings Limited Annual Report 2010 Business review INSURANCE THERE WERE MANY GOOD PERFORMANCES IN 2010 BY THE TEAMS WITHIN ASPEN INSURANCE; ENERGY PROPERTY, UK COMMERCIAL LIABILITY, AVIATION, UK AND US PROPERTY, FINANCIAL AND POLITICAL RISKS AND MARINE, ENERGY AND CONSTRUCTION LIABILITY ALL MADE STRONG CONTRIBUTIONS. WE MADE GOOD PROGRESS TOWARDS ACCOMPLISHING A NUMBER OF OUR STRATEGIC OBJECTIVES WITH ORGANIZATIONAL RESTRUCTURING, OPENING OF NEW OFFICES AND THE RECRUITMENT OF NEW TEAMS. Our progress was achieved against the background of a challenging pricing environment across all four of our lines of business. MARINE, ENERGY AND TRANSPORTATION Our Marine, Energy and Transportation insurance lines generated US$44 million of underwriting income and a combined ratio of 89.4%, refl ecting particularly strong performances from our Offshore-Energy, Marine, Energy and Construction Liability and Aviation accounts. Our Aviation unit reported a loss ratio for the year of 62.7%. We believe that the aviation industry as a whole recorded a loss ratio in excess of 100%, its fourth successive year of loss, and that our performance is once again in the top quartile. Our niche focused approach, de-emphasizing crowded sectors such as US Airlines and Products Liability for manufacturers of critical components, enabled us to distinguish our results from those of others. Superior client selection within our Energy Property account led to, what we believe is, another market beating performance and we recorded a loss ratio of 37.3%. CASUALTY INSURANCE Within our Casualty lines of business, performance was mixed with strong results in our UK Commercial Liability account and a good underlying performance in Excess Casualty offset by poor results in our US Casualty book, mainly due to prior year reserve strengthening on the contractors segment of our portfolio. Our UK Commercial Liability book is a good example of how we actively seek to manage the underwriting cycle. We have reduced gross written premiums from US$223 million at the peak in 2003 to just US$40 million in 2010 reflecting tough market conditions but have remained profi table throughout. FINANCIAL AND PROFESSIONAL LINES The performance of our Professional Lines book was impacted by losses arising mostly from valuation issues on our UK Professional Indemnity account. Within our Financial Lines book, the Financial Institutions account has responded extremely well to recent restructuring. Meanwhile our Political Risk account has performed very strongly and is an area where we have been able to leverage our knowledge and expertise successfully. Our loss ratio for this product is 39.2%, which we believe puts us again in the top quartile for the industry and underlines the value in our approach. PROPERTY Our Property insurance lines performed very well, with a combined ratio across both our US and UK Property accounts of 77.5%. This reflects a consistent strong performance by our UK Commercial Property account and the benefi ts of the repositioning of our US E&S property book which we undertook in 2007. THOUGHTFUL EXPANSION Building a meaningful and sustainable franchise in the US insurance market is a core component of our strategy. John Cavoores assumed executive oversight of our US Insurance operations when he was appointed Co-CEO of Aspen Insurance in October 2010. The performance of our US Insurance business has not been acceptable and we have taken strong remedial action to address this. We have exited a number of business areas, established new underwriting teams in our targeted areas (Inland Marine and Ocean Liability, US Professional Lines and US D&O) to add to our core Property and General Casualty portfolio and built out our infrastructure and operational capability by upgrading our claims, actuarial, HR and legal expertise on the ground. We purchased an admitted shell company in 2010 and are currently going through the process of re-activating the licenses. We expect to be able to write admitted business in 48 states by July 2011. Our establishment of a UK regional platform is a good example of our approach to building our business and how we seek to differentiate ourselves from the competition. We employed two extremely experienced insurance executives with a proven track record of building successful ventures in the UK regional market. Our offering is not a mass market one but predicated on offering wider business protection solutions to our clients. We are seeking to minimize our customers business risk through clear identification and prevention of risk. By opening three regional offices with a target of five by the end of the year we can listen and respond to our customers needs and provide a superior service. It is a thoughtful approach and one that is valued by our clients.

Aspen Insurance Holdings Limited Annual Report 2010 Business review 23 LINES OF BUSINESS MAJOR PRODUCTS RUPERT VILLERS CO-CHIEF EXECUTIVE OFFICER, ASPEN INSURANCE JOHN CAVOORES CO-CHIEF EXECUTIVE OFFICER, ASPEN INSURANCE MARINE, ENERGY AND TRANSPORTATION INSURANCE MEC Liability Energy Property Marine Hull Specie Aviation FINANCIAL AND PROFESSIONAL LINES Financial Institutions Professional Liability (including Management and Technology Liability) Financial and Political Risks BUSINESS REVIEW PROSPECTS We believe that the market environment is unlikely to change much in 2011 and we will find ourselves operating in markets that remain overcrowded, with an excess of capital chasing limited opportunities. We will continue to set ourselves ambitious but realistic targets for the business we write, while maintaining a rigorous focus on underwriting discipline. Building a business in today s market environment is not easy but we will continue to seek ways to leverage our skills and capabilities for the longer term. We are not interested in top-line revenue growth for short-term gain, only in longer term value creation for our shareholders. UNDERWRITING METRICS Net premiums earned % 2009 2010 Combined ratio 98.1 103.1 Accident year combined ratio 98.0 99.2 Prior year adjustment 0.1 3.9 Policy acquisition expense ratio 16.7 16.7 Operating and administrative expense ratio 14.1 13.1 Expense ratio 30.8 29.8 PROPERTY INSURANCE CASUALTY INSURANCE UK Commercial Property and Construction US Property (E&S) UK Commercial Liability Excess Casualty US Casualty (E&S) BUILDING A MEANINGFUL AND SUSTAINABLE FRANCHISE IN THE US INSURANCE MARKET IS A CORE COMPONENT OF OUR STRATEGY

24 Aspen Insurance Holdings Limited Annual Report 2010 Our business LISA GIBBARD GROUP HEAD OF IT BUSINESS BENEFIT THE IT PARTNERSHIP Finding the best way to leverage technology to the benefit of the business is at the heart of Aspen s IT strategy. Our reinsurance business is constantly seeking to refine its catastrophe modeling capability whether through improving our tools for data mining, real-time portfolio analysis and aggregation monitoring or working closely with leading modeling companies, such as RMS, to promote the need for improved data quality across the industry, says Lisa Gibbard, Group Head of IT. Technology is one part of the equation and we work in partnership with the underwriting and catastrophe risk modeling teams to help them realize their business objectives. Improved claims workflow technology has been another key priority. We have been able to achieve a significant reduction in settlement times for certain claims types which is a real benefit for customers.