Urges Shareholders to Sign, Date and Return
BLUE Revocation Card to REJECT Endurance Proposals
Raises Issues About Value of Endurance
Offer, Coercive Legal Tactics and Governance Practices
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) announced
today that it is mailing 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:
July 1, 2014
Dear Aspen Shareholder:
We have recently sent you a letter expressing our very serious
concerns about a hostile attempt by Endurance Specialty Holdings
Ltd. to acquire Aspen Insurance Holdings Limited on highly
unattractive terms. As we said in that letter, Endurance’s proposed
valuation for Aspen is inadequate, its stock is an undesirable form
of consideration and the loss of business resulting from a
combination would cause significant financial harm to
shareholders.
In addition, Endurance has submitted proposals to Aspen
shareholders related to the calling of a special meeting and a
convoluted legal strategy Endurance has said it will pursue with
the Bermuda Supreme Court.
Do not be misled by Endurance’s claims – these proposals are
desperate legal tactics designed to coerce you into selling your
shares at the lowest possible price. Aspen strongly urges
shareholders not to 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 return the
enclosed BLUE revocation card using the pre-paid
envelope provided.
If Endurance were to successfully take over Aspen, you would
become an Endurance shareholder and Endurance’s directors would be
your fiduciaries. Therefore, Endurance’s poor corporate
governance practices, particularly related to Board composition and
executive compensation, are highly relevant considerations.
And, notably, while Endurance is petitioning for your support now,
it has a documented history of disregarding shareholder
interests.
ENDURANCE’S OFFER IS
INCREASINGLY INADEQUATEAS ASPEN
CONTINUES TO DELIVER ON ITS PLAN
- Endurance
continues to misrepresent to you the value of its offer as
$49.50 per Aspen share, even though the aggregate consideration to
Aspen shareholders under the 60/40 stock/cash offer is currently
worth only $48.27 per share. Since the announcement of Endurance's revised offer on June 2, 2014, the aggregate
value per share has NEVER equaled the claimed $49.50 per share
“headline” price.
- Aspen is
successfully executing a strategic plan that we are confident will
deliver superior value to shareholders. Aspen reported very
strong results in the first quarter of 2014 and the future looks
even brighter. The Company is well positioned to achieve its 10%
operating ROE objective in 2014 and we expect operating ROE in 2015
to increase over 2014 on the order of 100 basis points.1
- Aspen believes
that loss of business resulting from a combination with Endurance
would cause significant financial harm to shareholders. Even
Endurance acknowledges that as much as $500 million in annual
premiums would be lost in a combination. Based on continued
discussions with clients and brokers, however, we believe that that
estimate greatly understates the actual loss of premiums.
- We believe Endurance’s stock is an unattractive currency
given Endurance’s overreliance on the volatile, low-margin and
challenged crop insurance business and a dependency on reserve
releases to fuel earnings.
ENDURANCE’S POOR
CORPORATE GOVERNANCE PRACTICES – INCLUDING EXCESSIVE PAY FOR
CHAIRMAN/CEO JOHN CHARMAN – SHOULD CAUSE YOU CONCERN
Given that Aspen shareholders would own a significant portion of
a combined company under Endurance’s ill-conceived offer, it is
important to know the facts
about Endurance’s troubling corporate governance practices.
Granting outsized equity to executives with little regard to
shareholder value
- Despite Mr. Charman reportedly getting kicked out of his prior
company,2 in 2013 the Endurance Board gave him a $35.1 million
restricted stock grant and options valued at another $10.2
million.
- These awards are not conditioned on performance and are simply
a handout to Mr. Charman, as long as he stays at Endurance for
several years.
- Institutional Shareholder Services (ISS) said that this “mega
equity award” raises “significant concerns” including “potential
pay-for-failure.”3
- Endurance further evidences its tone deafness by actually
boasting about its high insider ownership when that ownership level
is substantially due to these excessive equity awards.
In contrast: 75% of
Aspen’s executive share awards are performance-related
Ignoring shareholder feedback on excessive pay packages
- Holders of over 60% of Endurance’s shares voting at this year’s
Annual Meeting rejected Mr. Charman’s compensation package.4
- Endurance’s Board has made no changes to his compensation in
response to this clear message.
In contrast: Aspen
received 94% support for executive compensation at its 2014 Annual
Meeting
Granting option to private equity firm without seeking
shareholder approval
- Without shareholder input, Endurance’s Board gave CVC Capital
Partners an option to acquire $250 million of common shares of the
combined company at a below market price, and has promised, if CVC
exercises the option, to give them warrants to purchase additional
shares over the next 10 years.
- Neither Endurance nor Aspen shareholders would have a say in
this dilutive option grant.
In contrast: Aspen has not granted
options or warrants to any outside investor
Combined Chairman and CEO positions
- Combined Chairman and CEO position creates a structure where
the CEO's board leadership is not challenged.
- This may explain the failure of Endurance’s Board to stand up
for shareholders.
In contrast: Aspen has a separate
Chairman and CEO
Entrenched Endurance Board
- Endurance has not appointed a new independent director in the
past 3 years.
- Excluding Mr. Charman, the median tenure of Endurance’s
directors is 10 years.
- Endurance’s lead director has served on the Board since
2001.
In contrast: Aspen added 3 new
independent directors in 2013; median director tenure 6
years
REJECT ENDURANCE’S
COERCIVE PROPOSALS: PLEASE SIGN, DATE AND RETURN THE ENCLOSED BLUE
REVOCATION CARD TODAY
Rather than offer real value for your company, Endurance has
instead determined to engage in convoluted legal tactics that are
destructive to the value of your company in an effort to coerce you
into selling your shares on the cheap. Endurance’s goal is to usurp
the power of your Board as negotiator and bring its current offer
to you as a "take it or leave it" proposition – an offer your Board
unanimously believes – and all of the shareholders we have spoken
with believe – significantly undervalues Aspen. 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 have every right to revoke your
authorizations by signing, dating and returning the enclosed
BLUE revocation card.
If you have questions or need assistance revoking your
authorizations for your shares, please contact our agent Innisfree
M&A Incorporated: Shareholders call toll-free: (877) 717-3930;
Banks and Brokers call collect: (212) 750-5833.
Regardless of the number of ordinary shares of Aspen that you
own, your views are important.
Sincerely yours,
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.
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.
Cautionary Statements Concerning Forward-Looking
Statements
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
common law doctrine and (as applicable) 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
at. http://aspen.shareholderresource.com or 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.
iGuidance 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 Cautionary Statement disclosure above.iiSNL
Insurance Daily, August 23, 2013iiiSource: ISS Report, Endurance
Specialty Holdings Ltd. May 21, 2014 (Permission to quote was
neither sought nor obtained)ivAccording to a recent study, this
puts Endurance among the 5% of mid-cap companies that failed to get
majority shareholder support for executive compensation
“Say-on-Pay” proposals in shareholder meetings held this year.
For further information:
Please visit www.aspen.co
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20140701005767/en/
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 Merrell, +44 20 7638
9571patrick.donovan@citigatedr.co.ukcaroline.merrell@citigatedr.co.uk
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