Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) announced
today that its Board of Directors, after careful evaluation with
the assistance of its financial and legal advisors, unanimously
determined to reject an unsolicited proposal from Endurance
Specialty Holdings Ltd. (“Endurance”) (NYSE:ENH) to acquire Aspen
for $47.50 per share, 60% in Endurance common stock and 40% in
cash.
Glyn Jones, Chairman of the Board of Directors, said: “After
careful review and deliberation, the Board of Directors unanimously
determined that Endurance’s proposal is not in the best interests
of Aspen or its shareholders. Endurance’s ill-conceived proposal
undervalues our company, represents a strategic mismatch, carries
significant execution risk, and would result in substantial
dis-synergies. Furthermore, most of the consideration to Aspen
shareholders would be in a stock that would reflect these
problems.
“Aspen has a proven track record of performance and a clear
strategy to increase shareholder value. Endurance has a mixed
operating track record, new leadership, an unproven strategy, and
no experience with large acquisitions. Moreover, this transaction
would be highly disruptive to Aspen’s corporate culture, which has
proven to be a significant competitive advantage in the
marketplace.”
In making its determination, the Aspen Board of Directors
considered, among other factors, the following:
- Aspen is executing a clear strategy to
deliver superior value for shareholders, while Endurance’s proposal
undervalues the company and carries significant risks.
- A combination would burden Aspen with
Endurance’s unproven underwriting teams with no clear strategy; an
unprofitable insurance business1; and a volatile and challenged
crop business.
- Endurance has shown a public disdain
for Lloyd’s, which is the growth engine of Aspen’s well-established
international insurance business.
- Endurance has a mixed operating track
record, no experience with large acquisitions, new leadership and
an unproven strategy.
- The proposed transaction jeopardizes
Aspen’s corporate culture, which the Company believes is a
significant component of its franchise value because it
differentiates Aspen with clients and allows Aspen to recruit and
retain outstanding professionals.
- The disruption of market and
underwriting relationships likely would result in material loss of
business.
- The proposal involves a number of
substantial execution risks, including financing uncertainty, due
diligence outcome, regulatory approvals, the need for favorable
votes by the shareholders of both companies, and integration
risk.
Goldman, Sachs & Co. is acting as financial advisor and
Wachtell, Lipton, Rosen & Katz and Willkie Farr & Gallagher
LLP are acting as legal advisors to Aspen.
Below is a letter that Aspen previously sent to Endurance’s
Board of Directors rejecting the same proposal that Endurance made
public today:
8 April 2014
Board of Directorsc/o John R. Charman, Chairman and Chief
Executive OfficerEndurance Specialty Holdings Ltd.Wellesley House90
Pitts Bay RoadPembroke HM 08Bermuda
Dear Members of the Board:
The Board of Directors of Aspen Insurance Holdings Limited has
received your letter of 3 April 2014.
Your most recent letter does not add to the information the
Aspen Board had when we thoroughly considered your 18 February 2014
letter and unanimously concluded that the possible acquisition of
Aspen by Endurance was not in the best interests of Aspen or its
stockholders and that we did not wish to pursue the matter further.
The Aspen Board continues to have no interest in pursuing the
matter further.
As was the case with your prior letters, we find your most
recent letter to be based on uninformed and unsubstantiated
assertions and assumptions about alleged benefits of the
combination that do not stand up to analysis. The Aspen Board has
concluded that Aspen will be able to create superior value for our
stockholders based on our standalone plan. Aspen has a long history
of value creation for its stockholders and has a clearly
articulated growth strategy for delivering value to its
stockholders going forward. We have built a diversified business
with a strong balance sheet, proven management team and disciplined
risk management, and are confident that continued execution of our
strategy provides value far in excess of what you have suggested in
the letter. The levers that we have available to achieve our ROE
goals are clear and well-understood by the market and you have
clearly misrepresented our 10% ROE guidance for 2014 as our
long-term goal. We are confident we will be able to deliver
superior growth by following our plan.
As part of our review, we have evaluated Endurance’s business
mix, market presence, quality of earnings, earnings outlook and
management culture, all of which we found to be either unattractive
or incompatible with Aspen’s strategy. With respect to business
mix, Endurance is over-concentrated in crop insurance, a business
which is troubled, low margin, recently volatile and exposed to
major risks. The other insurance businesses are nascent and have
not demonstrated progress. Endurance’s continued well-publicized
antipathy for Lloyd’s is inconsistent with Aspen’s business model,
as our Lloyd’s syndicate is one of the most dynamic parts of our
insurance franchise and a top quartile performer amongst Lloyd’s
syndicates. Aspen has a strong and well-regarded reinsurance
business with a clearly defined strategy for addressing the changes
in market dynamics while, in contrast, Endurance is hesitant and
uncertain about the industry. Furthermore, as analysts have pointed
out, Endurance’s earnings in recent years have been
disproportionately driven by reserve releases (a trend that
accelerated at year-end 2013) and the path for future earnings is
unclear.
Any combination with Endurance’s centralized, top-down
management model, as compared to our collaborative,
teamwork-oriented culture, would result in extreme personnel
disruption and loss of attractive business. It is worth noting that
our company is in significant litigation due to your orchestrated
poaching of Aspen employees and clear breaches of fiduciary and
other duties arising from this. The dis-synergies from the
transaction you propose, including loss of business and personnel,
combined with Endurance’s unappealing business mix, earnings track
record and incompatible culture, make the combination unattractive,
particularly in contrast to what Aspen expects to achieve by
following our standalone plan.
In addition, your letter poses significant risks and
uncertainties, including (1) Endurance’s due diligence of Aspen,
(2) due diligence of Aspen by your financing sources, (3) your
ability to raise the necessary funds, even the most general terms
and amounts of which are omitted from your letter (we note in this
regard that one of the financing sources from your prior letter is
no longer included, and CVC’s commitment is no longer described as
“equity”), (4) your ability to secure all required regulatory
approvals and (5) importantly, approval of your own
stockholders.
The foundation of Aspen’s business is our client relationship
franchise, and our people are our most valuable assets. The
uncertainty and distraction that would result from pursuing what
your letter proposes would be destructive of value for our company
and our stockholders. Your “proposal” is merely the request for a
one-way option to start an investigation of our company and later
decide if you wish to pursue a transaction. The Aspen Board is
vehemently opposed to the hostile attempt of Endurance to address
its business problems at the expense of Aspen and its stockholders
and to your potential effort to destabilise a key competitor.
For the reasons outlined above, we are not interested in
pursuing what your letter proposes and do not believe that any
purpose would be served by meeting with you or your advisors.
Yours sincerely,
/s/ /s/ Glyn Jones Chris O’Kane Chairman of
the Board of Directors Chief Executive Officer cc:
CVC Capital Partners Advisory
_________________________1 Endurance’s insurance segment
underwriting income ex reserve releases has been negative from
2011-2013.
- ENDS -
About Aspen Insurance Holdings Limited
Aspen provides reinsurance and insurance coverage to clients in
various domestic and global markets through wholly-owned
subsidiaries and offices in Bermuda, France, Germany, Ireland,
Singapore, Switzerland, the United Kingdom and the United States.
For the year ended December 31, 2013, Aspen reported $10.2 billion
in total assets, $4.7 billion in gross reserves, $3.3 billion in
shareholders’ equity and $2.6 billion in gross written premiums.
Its operating subsidiaries have been assigned a rating of “A”
(“Strong”) by Standard & Poor’s, an “A” (“Excellent”) by A.M.
Best and an “A2” (“Good”) by Moody’s.
Application of the Safe Harbor of the Private Securities
Litigation Reform Act of 1995
This press release may contain written “forward-looking
statements” within the meaning of the U.S. federal securities laws.
These statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements that do not
relate solely to historical or current facts, and can be identified
by the use of words such as “expect,” “intend,” “plan,” “believe,”
“project,” “anticipate,” “seek,” “will,” “likely,” “estimate,”
“may,” “continue,” “deliver,” and similar expressions of a future
or forward-looking nature.
All forward-looking statements rely on a number of assumptions,
estimates and data concerning future results and events and are
subject to a number of uncertainties and other factors, many of
which are outside Aspen’s control that could cause actual results
to differ materially from such statements.
Forward-looking statements do not reflect the potential impact
of any future collaboration, acquisition, merger, disposition,
joint venture or investments that Aspen may enter into or make, and
the risks, uncertainties and other factors relating to such
statements might also relate to the counterparty in any such
transaction if entered into or made by Aspen.
Aspen believes these factors include, but are not limited to:
our ability to successfully implement steps to further optimize the
business portfolio, ensure capital efficiency and enhance
investment returns; the possibility of greater frequency or
severity of claims and loss activity, including as a result of
natural or man-made (including economic and political risks)
catastrophic or material loss events, than our underwriting,
reserving, reinsurance purchasing or investment practices have
anticipated; the assumptions and uncertainties underlying reserve
levels that may be impacted by future payments for settlements of
claims and expenses or by other factors causing adverse or
favorable development; the reliability of, and changes in
assumptions to, natural and man-made catastrophe pricing,
accumulation and estimated loss models; decreased demand for our
insurance or reinsurance products and cyclical changes in the
highly competitive insurance and reinsurance industry; changes in
insurance and reinsurance market conditions; increased competition
from existing insurers and reinsurers and from alternative capital
providers and insurance-linked funds and collateralized special
purpose insurers on the basis of pricing, capacity, coverage terms,
new capital, binding authorities to brokers or other factors and
the related demand and supply dynamics as contracts come up for
renewal; changes in the availability, cost or quality of
reinsurance or retrocessional coverage; changes in general economic
conditions, including inflation, deflation, foreign currency
exchange rates, interest rates and other factors that could affect
our financial results; the risk of a material decline in the value
or liquidity of all or parts of our investment portfolio; evolving
issues with respect to interpretation of coverage after major loss
events; our ability to adequately model and price the effect of
climate cycles and climate change; any intervening legislative or
governmental action and changing judicial interpretation and
judgments on insurers’ liability to various risks; the
effectiveness of our loss limitation methods, including our
reinsurance purchasing; changes in the total industry losses, or
our share of total industry losses, resulting from past events and,
with respect to such events, our reliance on loss reports received
from cedants and loss adjustors, our reliance on industry loss
estimates and those generated by modeling techniques, changes in
rulings on flood damage or other exclusions as a result of
prevailing lawsuits and case law; the impact of one or more large
losses from events other than natural catastrophes or by an
unexpected accumulation of attritional losses; the impact of acts
of terrorism, acts of war and related legislation; any changes in
our reinsurers’ credit quality and the amount and timing of
reinsurance recoverables; the continuing and uncertain impact of
the current depressed lower growth economic environment in many of
the countries in which we operate; the level of inflation in repair
costs due to limited availability of labor and materials after
catastrophes; a decline in our operating subsidiaries’ ratings with
S&P, A.M. Best or Moody’s; the failure of our reinsurers,
policyholders, brokers or other intermediaries to honor their
payment obligations; our ability to execute our business plan to
enter new markets, engage in acquisitions or introduce new products
and develop new distribution channels, including their integration
into our existing operations; our reliance on the assessment and
pricing of individual risks by third parties; our dependence on a
few brokers for a large portion of our revenues; the persistence of
heightened financial risks, including excess sovereign debt, the
banking system and the Eurozone debt crisis; changes in our ability
to exercise capital management initiatives (including our share
repurchase program) or to arrange banking facilities as a result of
prevailing market changes or changes in our financial position;
changes in government regulations or tax laws in jurisdictions
where we conduct business; changes in accounting principles or
policies or in the application of such accounting principles or
policies; Aspen or Aspen Bermuda Limited becoming subject to income
taxes in the United States or the United Kingdom; loss of one or
more of our senior underwriters or key personnel; our reliance on
information and technology and third party service providers for
our operations and systems; and increased counterparty risk due to
the credit impairment of financial institutions.
For a detailed description of uncertainties and other factors
that could impact the forward-looking statements in this press
release, including the positioning to deliver profitable growth and
value for investors, please see the “Risk Factors” section in
Aspen’s Annual Report on Form 10-K for the year ended December 31,
2013, filed with the U.S. Securities and Exchange Commission on
February 20, 2014. Aspen undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result
of new information, future events or otherwise.
For further
information:Please visit www.aspen.co or
contact:InvestorsKerry Calaiaro, Senior Vice President,
Investor Relations, AspenKerry.Calaiaro@aspen.co+1 (646) 502
1076orKathleen de Guzman, Vice President, Investor Relations,
Aspenkathleen.deguzman@aspen.co+1 (646) 289 4912orMediaSteve
Colton, Head of Communications, AspenSteve.Colton@aspen.co+44 20
7184 8337orNorth America – Sard Verbinnen & CoPaul Scarpetta or
Jamie Tully+1 (212) 687 8080orInternational – Citigate Dewe
RogersonPatrick Donovan or Caroline
Merrellpatrick.donovan@citigatedr.co.ukcaroline.merrell@citigatedr.co.uk+44
20 7638 9571
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