"The combination of the lessons learned from the 2004-2005 season and the improved understanding of the potential of damage to commercial risk, and a revised understanding of demand surge, caused us to reduce the overall catastrophe exposure in our business model," he said.

Mr. O'Kane said the company has decided not to seek exceptionally high returns by assuming more risk, "but rather maintain our return aspirations but couple them with a lower volatility."

Due to "disappointing" Jan. 1 pricing, Mr. O'Kane said the company cancelled "a great deal" of catastrophe exposed business.

With the company's new exposures, the $1.1 billion loss incurred from Katrina would now be about $630 million if the same event took place this year.

In addition to the Gulf Coast, significant reductions have taken place in California, Europe and other locations.

Prices for U.S. catastrophe exposed business have hardened considerably in the last six weeks, Mr. O'Kane said. "If this hardening carries on, as we expect it will, we will take advantage of this by reassuming some of the risk that we rejected as under priced earlier in the year."

The company posted a combined ratio of 90.4 and net investment income growth of 74 percent to $44.5 million.

Morgan Stanley analyst William Wilt said he underestimated the impact the company's new exposure profile would have on earnings and net premium written. But he feels it sets the stage for Aspen to deploy its capital into an increasingly hardening property reinsurance market, enhancing its earnings prospect.