Recommends Rejecting Endurance’s Coercive
Legal Tactics That Serve to Facilitate an Ill-Conceived Offer
Significantly Undervaluing Aspen
Urges Shareholders to Sign, Date and Return
BLUE Revocation Card to REJECT Endurance Proposals
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) announced
today that it is mailing its revocation materials--including a
letter and a BLUE revocation card--to shareholders, in opposition
to Endurance Specialty Holdings Ltd. (“Endurance”) (NYSE:ENH)
solicitation of authorizations. Aspen’s Board of Directors urges
shareholders to reject both of Endurance’s proposals by promptly
signing, dating and returning Aspen’s BLUE revocation card and
disregarding Endurance’s white authorization card.
Information on Aspen’s response to Endurance’s unsolicited
offer, including links to press releases, presentations, and other
important documents and SEC filings are available on the Internet
at http://aspen.shareholderresource.com, or on Aspen’s website at
http://www.aspen.co.
Below is the full text of the letter to Aspen shareholders:
June 27, 2014
Dear Aspen Shareholder:
We write seeking your support in rejecting two shareholder
proposals put forth by Endurance Specialty Holdings Ltd., a
Bermudian-based insurance and re-insurance company, which has
launched a hostile campaign to acquire your company, Aspen
Insurance Holdings Limited, on highly unattractive terms.
Endurance’s proposals ostensibly relate to the calling of a special
meeting and to support a convoluted legal strategy Endurance has
said it will pursue with the Bermuda Supreme Court. Do not be misled. These coercive legal
tactics are attempts by Endurance to acquire Aspen at the lowest
possible price. Endurance is desperately pursuing these tactics
because time is not on its side – Aspen’s business continues to
strengthen. In fact, Endurance’s “revised offer” is worth even less
than its initial offer based on the increase in Aspen’s book value
and decrease in Endurance’s stock price since its initial
proposal.
We urge you to reject Endurance’s coercive tactics to force
through its inadequate offer:
1. Do NOT sign Endurance’s white
authorization card.
2. Sign, date and return the enclosed
BLUE revocation card.
3. Even if you have already signed Endurance’s white
authorization card, you may revoke your authorizations by signing,
dating and returning the enclosed BLUE revocation card.
ENDURANCE’S EXCHANGE OFFER SIGNIFICANTLY
UNDERVALUES ASPEN
In pursuit of its offer, Endurance also has launched an
unsolicited exchange offer for Aspen shares, which your Board of
Directors has rejected. The Board’s reasons for rejecting
Endurance’s exchange offer are detailed in a separate mailing to
Aspen shareholders, and include the following:
- Endurance is
touting a “headline price” for its offer that simply does not
exist. Endurance has been publicly stating that it is
offering “$49.50” per share – but based on the offer’s proposed
exchange ratio and mix of cash and stock consideration as of the
market close on June 26, 2014, the value of the offer is only
$47.64 per Aspen share, and the value of an all stock election in
the offer is worth only $46.40 per Aspen share.
- Aspen is
successfully executing on a strategic plan and we are confident
that it will deliver superior value to Aspen shareholders.
Aspen’s strategic investments in its business are paying off. The
Company is on track to achieve its 10% operating ROE objective in
2014 and current analyst consensus for Aspen’s 2014 earnings per
share has increased 18% year-to-date. 1 And the future continues to
look even brighter – Aspen is poised to increase its operating ROE
in the order of 100 basis points in 2015 over 2014, with additional
continued benefits from operating leverage beyond 2015.2
Here’s What Industry Analysts Are
Saying About Aspen’s Strong Performance3
“Aspen’s results continue to
improve. So far catastrophe activity has been low in 2Q14,
leading us to take up 2014 numbers in anticipation of another
mid-teens ROE quarter.” (Deutsche Bank, 6/9/14)
“[Aspen’s] top line results in the [first]
quarter coupled with the solid underlying underwriting results…
demonstrates AHL's ability to deliver its target 10% run-rate
operating ROE in 2014.” (UBS, 4/23/14)
“We thought [1Q] was a very good
quarter since: 1) core margins were 100 bps better than our
estimate driven by strong yr/yr improvement in both insurance and
reinsurance 2) catastrophe losses were lower than expected, 3)
favorable development was higher than expected 4) top line growth
was higher than expected driven by US insurance teams and 4) BVPS
grew 4.4%.” (Evercore, 4/23/14)
- We believe that Endurance’s stock, which in total would comprise 60% of
the consideration to Aspen shareholders, is an unattractive
currency, given Endurance’s business mix, with an
overreliance on the volatile, low-margin and challenged crop
insurance business and a dependency on reserve releases to fuel
earnings.
- The value of
Endurance’s stock is also adversely impacted by the significant
dilutive impact resulting from the issuance of approximately
37 million shares under the proposed exchange ratio, an 82%
increase in dilutive shares outstanding as of March 31, 2014, or up
to 61 million shares for a full stock offer.
- Additional shareholder dilution and
erosion of book value per share will also occur as a result of the
need to refinance Endurance’s costly bridge
loan used to secure initial financing. Further, CVC has been
granted a $250 million option to purchase shares at a below-market
price as well as equity warrants.
- Aspen believes that the loss of business resulting from a combination would cause
significant financial harm to shareholders. Endurance's own
estimate is that more than $500 million in premiums will be lost.4
We think it's even more. Our estimates of loss of business are
consistent with feedback received from policyholders, brokers and
employees, and we expect that the business lost would be among the
most valued and would not be easily replaced.
RATHER THAN OFFERING APPROPRIATE
VALUE,ENDURANCE IS PURSUING COERCIVE LEGAL TACTICSIN
AN ATTEMPT TO ACQUIRE ASPEN AT THE LOWEST POSSIBLE PRICE
Endurance is soliciting authorizations from Aspen’s shareholders
to: (1) requisition the Aspen Board to convene a special meeting of
shareholders where Aspen shareholders would vote on a proposal to
increase the size of Aspen’s Board to an unwieldy 19 directors and
(2) to support Endurance petitioning the Supreme Court of Bermuda
as part of a convoluted legal maneuver called an involuntary scheme
of arrangement.
We urge shareholders to REJECT Endurance’s coercive proposals by
NOT signing Endurance’s white authorization card, and by signing,
dating and returning the enclosed BLUE revocation card in support
of Aspen.
REJECT Endurance’s Proposal to Call
a Special Meeting
- Endurance’s first proposal – if it
gains the necessary support from 10% of Aspen’s outstanding common
shares – would set in motion a series of shareholder solicitations
and meetings, which would result in significant time, expense and
distraction. Even if successful at the special meeting, Endurance
would have to wait until Aspen’s 2015 annual general meeting to
seek control of Aspen’s Board. We question Endurance’s motivations
in making this proposal now as it could choose to expand the Board
size at the time of the AGM and seek to elect its nominees at that
same time, thus sparing Aspen shareholders the cost of holding a
special meeting purely to serve Endurance's interests.
- If Endurance is ultimately successful,
a 19-member Board would be almost twice the average Board size for
S&P 500 companies.5 This would make efficient decision making
cumbersome, and makes it more difficult for a Board to convene on
short notice and respond swiftly to situations and opportunities as
they arise. In its own Corporate Governance Guidelines6, Endurance
states: “The Board believes that a board ranging in size from 9 to
15 Directors provides diversity of thought and experience without
hindering effective discussion or diminishing individual
accountability.”
REJECT Endurance’s Proposal to
Support its Scheme of Arrangement
- An involuntary scheme of arrangement
would be an unprecedented usurping of an independent Board’s
judgment, which has been rejected by the Supreme Court of Bermuda
in its past consideration of the matter.
- If successful in its pursuit of an
involuntary scheme of arrangement, Endurance would be able to
circumvent the Aspen Board as negotiator and submit its current
unattractive proposal to Aspen shareholders for a “take it or leave
it” vote.
REJECT ENDURANCE’S
PROPOSALS: PLEASE SIGN, DATE
AND RETURN THE ENCLOSED BLUE REVOCATION CARD TODAY
Aspen strongly urges shareholders not sign any white
authorization cards sent to you by Endurance. Whether or not you
have previously executed Endurance’s white authorization card, you
may reject Endurance’s proposals if you sign, date and deliver
the enclosed BLUE revocation card using the enclosed pre-paid
envelope. Regardless of the number of ordinary shares of Aspen that
you own, your views are important.
Sincerely yours,
/s/ /s/ Glyn Jones
Chris O’Kane
Chairman of the Board of Directors
Chief Executive Officer
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.
1 Source: Bloomberg data
2 Guidance as at April 23, 2014. In 2014, ROE guidance assumes a
pre-tax catastrophe load of $185 million, normal loss experience
and given the current interest rate and insurance pricing
environment. In 2015, ROE guidance assumes a pretax catastrophe
load of $200 million, normal loss experience, Aspen’s expectations
for rising interest rates, and a less favorable insurance pricing
environment. See Safe Harbor disclosure above.
3 Emphasis added. Permission to cite quotes has neither been
sought nor obtained.
4 Endurance 1Q 2014 Earnings Call Transcript. “... we would
assume a typical attrition in combining a portfolio in the 5% to
10% range [of combined premiums].” – Michael McGuire, Endurance
CFO
5 According to the most recent 2013 Spencer Stuart Board Index,
the average Board size for S&P 500 companies was 10.7
directors, and over 80% of such companies had Boards with 12 or
fewer directors.
6 Endurance Specialty Holdings’ Corporate Governance Guidelines
can be found on the Corporate Governance page of its website at:
http://ir.endurance.bm/phoenix.zhtml?c=137754&p=irol-govhighlights
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 contains written, and Aspen may make related
oral, "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," "do not believe," "aim," "project," "anticipate,"
"seek," "will," "likely," “assume,” "estimate," "may," "continue,"
"guidance," “objective,” “outlook,” “trends,” “future,” “could,”
“would,” “should,” “target,” 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.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause actual results to differ
materially from those indicated in these statements. 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; 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 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 risk
management 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;
changes in the availability, cost or quality of reinsurance or
retrocessional coverage; 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, 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 more
detailed description of these uncertainties and other factors,
please see the "Risk Factors" section in Aspen's Annual Report on
Form 10-K as filed with the U.S. Securities and Exchange Commission
on February 20, 2014 and in Aspen’s Quarterly Report on Form 10-Q
as filed with the U.S. Securities and Exchange Commission on May 1,
2014. Aspen undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the dates on which they are made.
The guidance in this communication relating to 10% Operating ROE
in 2014 and with a further 100 basis point increase over 2014 in
2015 was and is made as at April 23, 2014. Such guidance assumes
for 2014 a pre-tax catastrophe load of $185 million per annum,
normal loss experience and given the current interest rate and
insurance pricing environment and for 2015 a pre-tax catastrophe
load of $200 million, normal loss experience, our expectations for
rising interest rates, and a less favorable insurance pricing
environment. Aspen has identified and described in the
presentations in the investor relations section of its website
actions and additional underlying assumptions in each of its three
operating return on equity levers – optimization of the business
portfolio (including particular lines of business), capital
efficiency and enhancing investment returns – to seek to achieve
the targeted operating ROE in 2014 and 2015. These forward looking
statements are subject to the assumptions, risks and uncertainties,
as discussed above and in the presentations noted, which could
cause actual results to differ materially from these
statements.
In addition, any estimates relating to loss events involve the
exercise of considerable judgment and reflect a combination of
ground-up evaluations, information available to date from brokers
and cedants, market intelligence, initial tentative loss reports
and other sources. The actuarial range of reserves and management's
best estimate represents a distribution from our internal capital
model for reserving risk based on our then current state of
knowledge and explicit and implicit assumptions relating to the
incurred pattern of claims, the expected ultimate settlement
amount, inflation and dependencies between lines of business. Due
to the complexity of factors contributing to the losses and the
preliminary nature of the information used to prepare these
estimates, there can be no assurance that Aspen’s ultimate losses
will remain within the stated amounts.
Additional Information
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities or a solicitation
of any vote or approval. This communication is for informational
purposes only and is not a substitute for any relevant documents
that Aspen may file with the U.S. Securities and Exchange
Commission (“SEC”).
Endurance has commenced an exchange offer for the outstanding
shares of Aspen (together with associated preferred share purchase
rights). Aspen has filed with the SEC a solicitation/recommendation
statement to its shareholders on Schedule 14D-9. Endurance is also
soliciting authorizations from Aspen’s shareholders. Aspen has
filed a revocation statement to its shareholders on Schedule 14A
with the SEC in opposition to Endurance’s solicitation of
authorizations.
INVESTORS AND SECURITY HOLDERS OF ASPEN ARE URGED TO READ THIS
AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY
AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors and security holders will be able to obtain
free copies of these documents (when available) and other documents
filed with the SEC by Aspen through the web site maintained by the
SEC at http://www.sec.gov. These documents will also be available
on Aspen’s website at http://www.aspen.co.
Certain Information Regarding Participants
Aspen and certain of its respective directors and executive
officers may be deemed to be participants under the rules of the
SEC. Security holders may obtain information regarding the names,
affiliations and interests of Aspen’s directors and executive
officers in Aspen’s Annual Report on Form 10-K for the year ended
December 31, 2013, which was filed with the SEC on February 20,
2014, and its proxy statement for the 2014 Annual Meeting, which
was filed with the SEC on March 12, 2014. These documents can be
obtained free of charge from the sources indicated above.
For further
information:Please visit www.aspen.co or
contact:InvestorsAspenKerry Calaiaro, +1-646-502 1076Senior
Vice President, Investor RelationsKerry.Calaiaro@aspen.coorKathleen
de Guzman, +1-646-289 4912Vice President, Investor
Relationskathleen.deguzman@aspen.coorInnisfree M&A
IncorporatedArthur Crozier/Jennifer Shotwell/Larry Miller+1-212-750
5833orMediaAspenSteve Colton, +44 20 7184 8337Head of
CommunicationsSteve.Colton@aspen.coorNorth 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
Aspen Insurance (NYSE:AHL)
Historical Stock Chart
From Jul 2024 to Aug 2024
Aspen Insurance (NYSE:AHL)
Historical Stock Chart
From Aug 2023 to Aug 2024