Urges Shareholders Not to Exchange Their Shares
Recommends Shareholders Reject Coercive Endurance Tactics to Force
Through Ill-Conceived Offer That Significantly Undervalues the Company
Issues Investor Presentation Detailing Standalone Strategy for
Superior Value Creation
HAMILTON, Bermuda--(BUSINESS WIRE)--
Aspen Insurance Holdings Limited (“Aspen”) (NYSE:AHL) announced today
that the Company’s Board of Directors, after careful consideration and
discussions with its financial and legal advisors, unanimously agreed to
reject the unsolicited exchange offer from Endurance Specialty Holdings
Ltd. (“Endurance”) (NYSE:ENH) to acquire all of the outstanding shares
of Aspen for a combination of common stock and cash (“the Offer”). The
Board determined the Offer is not in the best interests of Aspen or its
shareholders and recommends that Aspen shareholders reject the Offer and
not tender their shares to Endurance. The Board noted that the value
offered by Endurance is unchanged from the unsolicited proposal
Endurance made on June 2, 2014, which Aspen’s Board thoroughly
considered and rejected.
Aspen today issued an investor presentation detailing the Company’s
strong standalone growth strategy, clear path for continued improvement
in return on equity, and the inadequacy of Endurance’s offer. The
presentation is available on the investor relations page of Aspen’s
website at: http://www.aspen.co/Investors-Media/Investor-Relations/Presentations/.
Glyn Jones, Chairman of the Board of Directors, said, “The Aspen Board
of Directors is unanimous in its belief that the Endurance offer
significantly undervalues Aspen and fails to reflect the value of our
business and strong future prospects. We are highly confident that Aspen
can achieve more value for its shareholders – and without the
significant risks that are inherent in a merger with Endurance – by
continuing to execute its strategic business plan.”
Mr. Jones added, “Beyond the offer’s significant undervaluation of our
Company, we believe that there is a fundamental strategic mismatch
between Aspen and Endurance and that a combination would create
significant dis-synergies. Additionally, the 60% stock component of
Endurance’s offer is highly unappealing given Endurance’s unattractive
business mix, with an overreliance on the volatile, low-margin and
challenged crop insurance business and a dependency on reserve releases
to fuel earnings. We urge shareholders not to tender their shares into
Endurance’s offer.”
The reasons for the Board’s recommendation are set forth in a Schedule
14D-9, which is being filed with the Securities and Exchange Commission
(“SEC”) and disseminated to shareholders. Among the specific reasons
cited in Aspen’s Schedule 14D-9 are the following:
1.While Aspen’s business has
strengthened, Endurance’s offer has become even less attractive
Aspen’s diluted book value per share at March 31, 2014 was $42.72, up
4.4% from December 31, 2013. Endurance’s “revised” offer is a step
backwards, representing a lower premium over diluted book value per
share than its initial offer. Moreover, Endurance touts a “headline
price” that simply does not exist. Endurance has been publicly stating
that it is offering “$49.50” per share. But the stock component of the
Offer consideration is currently – and has since announcement of its
offer on April 14 been – worth less than that headline price. Based on
the proposed exchange ratio, as of June 13, 2014, the last practicable
trading date before filing, the Endurance Common Stock offered (at an
exchange ratio of 0.9197 shares of Endurance Common Stock per Aspen
share), and which constitutes 60% of the total consideration offered for
Aspen, had a value of only $47.48 per Aspen share.
2.The Offer significantly undervalues
Aspen
Endurance’s Offer significantly undervalues Aspen, and Aspen is
confident that its strategic plan will deliver value to Aspen
shareholders that is superior to the Offer. Aspen is successfully
executing on its plan. In the first quarter of 2014, its annualized
operating return on average equity was 14.8%. This was the highest
quarterly ROE since Aspen began significant investments in the business.
As a result, as Aspen stated on its earnings call on April 23, 2014, it
believes that the Company is well positioned to achieve its 10%
operating ROE objective in 2014, and would expect operating ROE in 2015
to increase over 2014 on the order of 100 basis points.1
Beyond 2015, it would expect to obtain additional continued benefits to
its ROE from increasing operating leverage. Aspen has built a business
that is poised to deliver growth across its diversified platform, with
strength in its U.S. insurance business, a valuable Lloyd’s franchise
and an industry-leading reinsurance business.
3.Endurance Common Stock is an
unattractive transaction currency
Endurance has historically underperformed, and there are a number of
reasons why Aspen does not believe Endurance’s claims about its
prospects and believes that Endurance’s stock is not an attractive
currency, particularly in comparison to Aspen’s shares, including:
-
Endurance is over-reliant on crop insurance, a business which is
troubled, low-margin, recently volatile and exposed to major risks.
-
Endurance’s results are heavily dependent upon reserve releases.
-
Endurance’s dependence on reserve releases also indicates a subpar
underwriting performance. The insurance business underwriting
performance has been especially lackluster compared to Aspen’s.
Endurance’s insurance calendar-year loss ratios ex-reserve development
and catastrophe losses were 30 points higher than Aspen’s in 2012, and
20 points higher in 2013.
4.The combination of Aspen and
Endurance would not be financially attractive to Aspen shareholders
There are a number of important reasons why the combination of Aspen and
Endurance is not a financially attractive alternative for Aspen
shareholders. In particular, Aspen believes Endurance’s estimate for
dis-synergies dramatically understates the real-world impact of
combining Aspen’s and Endurance’s businesses, and that the loss of
business resulting from dis-synergies would cause significant financial
harm to its shareholders. Aspen’s dis-synergies estimates are consistent
with feedback received from clients, brokers and employees, and the
Company expects that the business lost would be among the most valued
and would not be easily replaced.
5.The Offer fails to disclose material
information with respect to Endurance’s financing
The terms and availability of Endurance’s financing remain unclear and
continue to lack certainty. Endurance’s $1 billion bridge loan facility
is temporary, maturing in less than one year, and the intended
“take-out” financing is not committed. It appears that Endurance intends
to replace the bridge loan by issuing a substantial amount of common
equity, at an uncertain price expected to be at a discount to market.
6.Endurance’s coercive legal tactics
are an attempt to acquire Aspen at the lowest possible price and will
result in significant time, expense and distraction to Aspen
The proposal to increase the size of Aspen’s board to 19 would create an
unwieldy and untenable corporate governance structure and Endurance’s
scheme of arrangement would be an unprecedented usurping of an
independent board’s judgment in its attempt to acquire Aspen at a price
that significantly undervalues Aspen.
7.The Offer is replete with
uncertainties and onerous conditions
Endurance’s completion of the Offer is subject to a litany of conditions
that run for six pages of Endurance’s Offer filing, creating major
uncertainty as to whether the Offer could be completed and, if
completed, when and at what price.
8.Aspen has received an inadequacy
opinion from its financial advisor
Goldman Sachs rendered its oral opinion to the Aspen board, subsequently
confirmed in writing, that as of June 13, 2014 and based upon and
subject to the factors and assumptions set forth in the written opinion,
the consideration proposed to be paid to the holders (other than
Endurance or its affiliates) of Aspen shares pursuant to the Offer was
inadequate from a financial point of view to such holders. The full text
of the written opinion of Goldman Sachs, dated June 13, 2014, which sets
forth the assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with such opinion, is
attached to Aspen’s Schedule 14D-9 filing. Goldman Sachs provided its
opinions for the information and assistance of the Aspen board in
connection with its consideration of the Offer. The opinion of Goldman
Sachs is not a recommendation as to whether or not any holder of Aspen
shares should tender such shares in connection with the Offer or any
other matter.
Aspen Urges Shareholders To Reject Coercive Endurance Proxy Tactics
Aspen also announced today that it has filed a preliminary revocation
solicitation statement with the SEC in connection with Endurance’s plan
to seek support from Aspen shareholders to: (1) requisition the Aspen
board to convene a special meeting of shareholders, at which meeting
Aspen shareholders would vote on a proposal to increase the size of
Aspen’s board and (2) support Endurance petitioning the Supreme Court of
Bermuda to request that the Court order a shareholder meeting, at which
Aspen shareholders would vote on a proposal to approve a scheme of
arrangement.
Commenting on Endurance’s coercive tactics, Mr. Jones commented, “Both
Endurance proposals are part and parcel of its desperate attempts to
force through an inadequate offer for Aspen. We strongly urge
shareholders not to support Endurance’s pursuit of an involuntary scheme
of arrangement. If it proceeds, this convoluted legal maneuver could
result in a ‘take-it or leave-it’ shareholder vote on a transaction
under the terms currently proposed by Endurance. In addition,
Endurance’s attempt to expand the Board, if successful, would result in
an unwieldy and highly anomalous 19-member board ill-suited to protect
the interests of Aspen shareholders. Our Board strongly believes that
the continued execution of our strategic plan will generate
significantly greater long-term value than Endurance’s offer.”
Copies of the Schedule 14D-9 and preliminary revocation solicitation
statement are available on the SEC’s website at www.sec.gov
and on the Company’s website at: http://www.aspen.co/Investors-Media/Investor-Relations/SEC-Filings/under the “All Other Filings” tab. Shareholders may also request
additional copies of the Schedule 14D-9 by contacting the Company’s
information agent, Innisfree M&A Incorporated, toll-free at (877)
717-3930.
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 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 below.
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,"
"estimate," "may," "continue," "guidance," “outlook,” “trends,”
“future,” “could,” “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 judgements 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 press release 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 presentation dated May 2014, 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 following slides, 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 Specialty Holdings Ltd. has commenced an exchange offer for
the outstanding shares of Aspen (together with associated preferred
share purchase rights). Aspen has filed a solicitation/recommendation
statement on Schedule 14D-9 with the SEC.
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:
or
Investors
Aspen
Kerry Calaiaro,
Senior Vice President, Investor Relations
+1 (646) 502 1076
Kerry.Calaiaro@aspen.co
or
Aspen
Kathleen
de Guzman, Vice President, Investor Relations
+1 (646) 289 4912
kathleen.deguzman@aspen.co
or
Innisfree
M&A Incorporated
Arthur Crozier/Jennifer Shotwell/Larry Miller
+1
(212) 750 5833
or
Media
Aspen
Steve Colton, Head of
Communications
+44 20 7184 8337
Steve.Colton@aspen.co
or
North
America – Sard Verbinnen & Co
Paul Scarpetta or Jamie Tully
+1
(212) 687 8080
or
International – Citigate Dewe Rogerson
Patrick
Donovan or Caroline Merrell
+44 20 7638 9571
patrick.donovan@citigatedr.co.uk
caroline.merrell@citigatedr.co.uk
Source: Aspen Insurance Holdings Limited