Endurance Sends Letter To Aspen Shareholders
Endurance Specialty Holdings Ltd. has sent a letter to the shareholders of Aspen Insurance Holdings Limited along with a definitive solicitation statement, as the exchanges between the two Bermuda-based re/insurers continue.
The letter being mailed to Aspen common shareholders reads as follows:
Dear Fellow Aspen Shareholder:
As you may know, Endurance has announced an increased proposal to acquire all of the common shares of Aspen for $3.2 billion, or $49.50 per Aspen share [based on Endurance's unaffected closing share price on April 11, 2014], with a combination of cash and Endurance common shares.
We know from our conversations with many of you that you have been frustrated by the dismissive and entrenched response of Aspen’s board and management to our highly attractive acquisition proposal in favor of an untested standalone strategy for generating future shareholder value. Our proposal represents a 19.5% premium over Aspen’s all-time high share price prior to our offer. What Aspen’s board and management have failed to achieve for 10 years, we are prepared to deliver today.
You now have the opportunity to take concrete action towards realizing the value presented by endurance’s proposal and to send an unequivocal message to the aspen board of directors
By voting FOR the two proposals on your WHITE card, you will be endorsing actions that can provide you the direct opportunity to vote for Endurance’s proposal through a Scheme of Arrangement under Bermuda law, as well as the right to elect a majority of Aspen directors who will place the interests of Aspen’s shareholders first. In addition, your vote for Endurance’s two authorizations will send a strong message to Aspen’s board of directors that it should engage immediately in good faith discussions with Endurance regarding our proposed transaction.
We firmly believe that a combination of Endurance and Aspen makes compelling strategic and financial sense, creating a company with increased scale, an attractive diversified platform across products and geographies, and greater market presence and relevance. Aspen shareholders deserve the opportunity to have their voices heard on this value-enhancing combination, which offers them a highly attractive premium [including a meaningful cash component] and the opportunity to participate in future value creation through a stronger and more profitable company.
It is clear that Aspen’s board and management, with less than 1.2% ownership of Aspen, are not aligned with the best interests of their shareholders and have presented no credible plan to deliver value that can compete with what we are offering. In contrast, our board and management own approximately 5.1% of Endurance and I have personally committed to invest another $25 million in the transaction, clearly demonstrating our alignment with the interests of our shareholders.
Aspen has a history of underperformance and resistance to change. Endurance, on the other hand, has engineered an operational transformation and is today in the vanguard of acting on the clear need for industry consolidation and responding constructively to clients’ demands for greater global scale and reach. Moreover, Endurance has consistently outperformed Aspen over the past several years, including:
- Endurance has had a significantly higher total return to shareholders for the 5 years preceding the announcement of Endurance’s initial proposal on April 11, 2014 – 124% for Endurance versus a much lower 83% for Aspen;
- Endurance has achieved meaningfully higher diluted book value per share growth [including dividends] – 13.0% CAGR for Endurance versus a much lower 9.4% CAGR for Aspen;
- Endurance has attained higher underwriting profitability – 95.6% average combined ratio for Endurance versus a higher 96.7% for Aspen; and
- Endurance has been more efficient than Aspen, having managed to an average expense ratio of 29.0% – versus a much higher 33.5% for Aspen.
Aspen’s shareholders should be asking themselves whether Aspen’s weak performance track record supports the leap of faith required of them to accept Aspen’s untested standalone strategy for generating future shareholder value instead of Endurance’s proposed delivery of immediate superior value to Aspen’s shareholders with the opportunity for significant upside value in the future.
We urge Aspen shareholders to take concrete action towards realizing the value presented by Endurance’s proposed transaction and speak forcefully to Aspen’s board by supporting our two shareholder proposals. Strong shareholder support will help ensure that Aspen’s board and management will no longer be able to ignore the will of the true owners of Aspen.
Our proposal delivers a highly attractive premium and the opportunity for future value
Pursuant to Endurance’s increased proposal, each holder of Aspen common shares will have the right to receive, at their election: all cash [$49.50 for each Aspen share]; all Endurance common shares [0.9197 Endurance shares for each Aspen share]; or a combination of cash and Endurance common shares [0.5518 Endurance common shares and $19.80 in cash for each Aspen share]. The election will be subject to a customary proration mechanism to achieve an aggregate consideration mix of 40% cash and 60% Endurance common shares [based on Endurance's unaffected closing share price on April 11, 2014].
Endurance’s proposal represents a highly attractive premium to Aspen’s pre-announcement trading price and allows you the opportunity to participate in future value created by a stronger and more profitable company. The compelling value for Aspen shareholders includes:
- a 25.7% premium to Aspen’s unaffected closing share price of $39.37 on April 11, 2014;
- a 19.5% premium to Aspen’s unaffected all-time high share price of $41.43 on December 31, 2013;
- 1.16x Aspen’s March 31, 2014 diluted book value per share and 1.21x Aspen’s December 31, 2013 diluted book value per share; and
- 11.8x 2014 consensus Street earnings estimates for Aspen.
Despite the clear and compelling business logic and financial benefits of our proposal and the urging of major shareholders, Aspen’s board has rejected our offer, refusing even to discuss it with us, and adopted a poison pill to impede your ability to benefit from our proposal. Now you have an opportunity to take concrete action towards realizing the value presented by Endurance’s proposed transaction and make your views known directly and emphatically.
Vote for Endurance’s two shareholder authorizations
1. Special General Meeting - A written requisition to convene a special general meeting of Aspen shareholders to consider a proposal at that meeting to increase the size of Aspen’s board of directors from 12 to 19 directors. If the proposal is approved at the special general meeting, a majority of Aspen’s directors will stand for election at Aspen’s 2015 annual general meeting, thereby giving Aspen shareholders the ability to hold their board directly accountable for their failure to be responsive to the interests of the company’s true owners.
Aspen’s entrenchment device of a classified board, coupled with its restrictive bye-law provisions, have necessitated this action to ensure Aspen’s shareholders have a voice in the direction of their company.
2. Scheme of Arrangement – A shareholder authorization to support the proposal of a Scheme of Arrangement by Endurance, a process that will entail the holding of a court-ordered meeting of Aspen shareholders to directly consider and vote on Endurance’s acquisition proposal.
Your support for the authorization concerning the Scheme of Arrangement does not require you to vote for the Scheme if the court-ordered meeting is held; it merely expresses your support for such a meeting at which your voice can finally be heard.
A court-ordered meeting on a Scheme of Arrangement will provide Aspen shareholders with a formal mechanism to put your company back on a course that prioritizes shareholder value creation over the self-preservation concerns of Aspen’s board and senior management.
The principal obstacle to your receiving the compelling value of Endurance’s proposal is the entrenched opposition of Aspen’s own board of directors and management
The continued refusal by Aspen’s board and management to engage in any discussions with Endurance on behalf of your best interests demonstrates their entrenched position. They have made irresponsible assertions about Endurance’s proposal without conducting the simplest due diligence on its details. The arguments that have accompanied Aspen’s “rejections” have been merely a smokescreen for criticizing Endurance, a company that has from its inception delivered superior growth in book value per share to that of Aspen. They amount to nothing more than a brazen attempt by the Aspen board and management to distract you from the highly attractive premium value the Endurance proposal represents.
Endurance is fully committed to delivering our highly attractive premium to Aspen shareholders. We stand ready and willing to meet with Aspen and its advisors to make this transaction a reality or, if Aspen’s board and management continue to ignore the value presented by our proposal and the will of Aspen’s shareholders, to continue to move towards completing the actions we have proposed with all conviction. Continued delay and non-engagement by the Aspen board represent the only true risks to both companies’ shareholders.
Endurance’s proposed combination with Aspen is compelling and value-enhancing for investors
If Endurance’s proposals are approved by Aspen’s shareholders, Aspen’s board and management will have little choice but to recognize that the will of the true owners of the company is to engage in discussions with Endurance in order to make the proposed transaction a reality, fulfilling the significant benefits of a combination between Endurance and Aspen, including:
Increased scale and market presence: On a combined basis, the companies will have over $5 billion of shareholders’ equity and over $5 billion of annual gross premiums written, a size equal to or greater than many of our key competitors. This will create an enterprise of both scale and broad expertise well positioned to capitalize on the critical distribution relationships within its global markets and more effectively able to compete in an increasingly challenging market environment.
Diversified platform across products and geographies: While Endurance and Aspen share certain common businesses, the relative weighting of each is quite complementary. Aspen’s core strength in the London insurance market – including through Lloyd’s – is an attractive area where Endurance has significant management experience but currently has limited market presence. In addition, while Endurance has a market-leading and profitable agriculture insurance business in the U.S. that is uncorrelated with traditional property and casualty insurance and reinsurance, as well as a highly profitable global catastrophe reinsurance business, Aspen has historical strength in marine and energy lines. These are just a few examples where each company’s relative strengths are a natural fit and where, on a combined basis, the two companies can form a market leader of significant importance to brokers and customers.
Enhanced profit potential: While a key strategic rationale for this transaction is the enhanced scale and diversification evident in the combined company, as described above, we believe the combination of a strong management team comprised of industry-leading talent and world-class underwriting expertise from both companies, and expected transaction synergies exceeding $100 million annually [including cost savings, underwriting improvements, capital efficiencies, and enhanced capital management opportunities] will enable significantly improved profit potential.
Strengthened balance sheet and capital position: With a pro forma combined shareholders’ equity as of March 31, 2014 of $5.9 billion and total capital of $7.3 billion, the combined Endurance and Aspen will have a significantly enhanced capital position, which will allow the combined company to more meaningfully pursue growth opportunities and better withstand volatility. We also believe the added diversification of the business has the potential to create capital efficiencies. Through the unique combination of our businesses we also believe this added diversification, significantly increased size, as well as the combined strength of reserves and investments from both companies, will be viewed favorably by rating agencies.
The path forward is in your hands. Vote today to take concrete action towards realizing the value presented by Endurance’s proposed transaction and to tell the Aspen board it’s time to engage with Endurance
Aspen shareholders deserve a board and management team that focuses less on erecting self-preserving defenses and more on enhancing Aspen’s value for its shareholders. Today, Aspen’s shareholders have the ability to take concrete action towards realizing the substantial benefits of Endurance’s proposal and make their opinions known on this value-enhancing combination. In the face of ongoing resistance from Aspen’s board and management, the time is now for Aspen’s shareholders to reassert their voice and their final authority over the future direction of their company by voting FOR the proposals on the WHITE card.
Your vote is extremely important. A vote FOR the proposals on the WHITE card will represent concrete action towards realizing the value presented by Endurance’s proposed transaction and will send a clear message that you want the Aspen board of directors to engage with Endurance. Please vote the WHITE card TODAY by signing, dating and returning the enclosed WHITE card in the postage-paid envelope provided.
If you have any questions or need assistance voting your shares, please contact the firm assisting us with this solicitation, Georgeson Inc., at [877] 278-9672 [toll-free] or via email at enduranceaspen@georgeson.com.
Thank you in advance for your support.
John R. Charman
Chairman and Chief Executive Officer
Endurance Specialty Holdings Ltd.
