Bermuda-based Aspen Insurance Holdings Ltd. last night reported an 84-percent slump in fourth-quarter profits as hedge-fund investments slumped.

Aspen posted a net income of $21.8 million, or operating earnings of 17 cents per share, in the three months through December 31, compared to $135.2 million, or operating earnings of $1.47 per share, in the same period in 2007.

Net income for the full year 2008 was $103.8 million, down 78.8 percent from 2007's earnings of $489 million.

Gross premiums written soared 42.8 percent during the quarter, as chief executive officer Chris O'Kane saw reasons for optimism for 2009.

"We enter 2009 with a strong capital position and expanded product range despite difficult underwriting and investment conditions in 2008," Mr. O'Kane said in last night's earnings statement. "Global economic stress will continue to provide challenges, but current signs are that rates are firming across many sectors and business flows remain strong as customers respond to Aspen's combination of specialist expertise and balance sheet strength."

Aspen said its funds of hedge funds investments had been "materially impacted by the turmoil in the financial markets" and that the company had reduced its exposure by redeeming around 40 percent of these investments at the end of last year.

These investments' performance, measured by funds' net asset value was down by 9.5 percent, or $49 million, for the quarter, and down by 17.3 percent, or $97.3 million, for the year. The funds' performance accounted for 55 cents per share in the reduction in earnings for the quarter.

Remaining fund of hedge funds investments account for five percent of Aspen's investment assets.

Book value per share increased by $1.02 over the year to $28.10, and by $1.89 since the end of September 2008, mainly as a result of net income after tax and increased unrealised gains in the investment portfolio.

Underwriting was profitable for the quarter and for the year, despite the losses from Hurricane Ike that impacted fourth-quarter, as well as third-quarter results. Combined ratio — the percentage of premium dollars paid out on claims and expenses — was 93.4 percent for the quarter and 95.6 percent for the year.

Operating return on equity was 5.4 percent for the year, down from 21.1 percent in 2007.

Aspen's shares fell six cents (0.3 percent) to $21.75 in New York trading yesterday, before the results were announced.

ASPEN Q4 REPORT CARD

compared to $135.2 million in 2007.

Combined ratio: 93.4 percent compared to 79.4 percent in 2007.

Gross premiums written: $435.4 million compared to $305 million