Highlights Strong Preliminary Results,
Operating Momentum and Benefits of Investments in Business
Urges Shareholders to Sign, Date and Return
BLUE Revocation Card to REJECT Endurance Proposals
Aspen Insurance Holdings Limited (“Aspen” or “Company”)
(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.
Earlier today, Aspen announced preliminary financial results for
the quarter ended June 30, 2014, which demonstrate the continued
benefits of the Company’s strategic investments in its business and
the strength of Aspen’s plan to drive shareholder value. Aspen will
report final results for the quarter on July 23, 2014.
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 10, 2014
Dear Aspen Shareholder:
ASPEN’S PLAN IS DELIVERING STRONG,
HIGH-QUALITY RESULTS
Board Urges Shareholders NOT to Submit Any
White Endurance Authorization Cards –Please Sign, Date and
Return the BLUE Revocation Card Instead
As you may have seen, this afternoon your company, Aspen
Insurance Holdings Limited, reported strong
preliminary financial results for the second quarter,
including:
Preliminary Q2 2014
Diluted Book Value Per Sharei
$44.60 – $44.80
Annualized Operating Return on
Equityii
12.0% – 12.8%
Diluted Operating Earnings Per Shareii
$1.30 – $1.35
Preliminary book value per share figures indicate 4.4%-4.9%
growth since March 31, 2014 and 9.0%-9.5% growth since December 31,
2013. Our continued strong performance during the second quarter –
following an excellent first quarter – clearly demonstrates the
continued benefits of the strategic investments we have made in our
business and the strength of our plan to drive shareholder value.
Aspen will report final results for the quarter on July 23rd.
While we are delivering strong results for shareholders,
Endurance continues to pursue its ill-conceived and inadequate
offer along with proposals related to the calling of a special
meeting and a convoluted legal strategy Endurance has said it will
pursue with the Bermuda Supreme Court. 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.
ENDURANCE’S
OFFER IS HIGHLY INADEQUATE AND IS BECOMING EVEN LESS ATTRACTIVEIN
LIGHT OF ASPEN’S CONTINUED STRONG, HIGH-QUALITY RESULTS
Our plan is working – we are delivering high-quality results,
including diversified revenues and continued strong returns from
our investments in our business, and we remain well-positioned to
deliver increased value to our shareholders. As our book value grows, Endurance’s offer is
increasingly inadequate; it now represents about half of the
premium to Aspen’s book value per share in Endurance’s initial
proposal. iii
ENDURANCE CONTINUES TO
MISCHARACTERIZEASPEN’S CLEARLY SUPERIOR UNDERWRITING
RESULTS
Aspen’s underwriting results have been consistently better than
those of Endurance as shown by historic accident year combined
ratios in the graph below. Lower ratios represent stronger
performance – and Aspen has performed better than Endurance in four
of the past five years with continued outperformance in the first
quarter of 2014.
Aspen’s superior results came in spite of the fact that during
this period we were investing $150 million in our insurance
platform to build underwriting, claims, actuarial, technological
and other infrastructure capabilities in the U.S. – investments
that are now paying dividends and enabling us to generate even
stronger results. In addition, Endurance’s results have reflected
an increasing reliance on prior year reserve releases, masking the
underperformance of its business and raising serious questions
about the quality of its earnings. In 2012, Endurance’s reserve
releases improved its combined ratio by 6 percentage points. This
increased to 11 percentage points in 2013 and almost 13 points in
the first quarter of 2014.
SETTING THE RECORD STRAIGHT ON ENDURANCE’S
LATEST ERRONEOUS CLAIMS
In a letter filed publicly this morning, Endurance made a number
of erroneous and ill-informed claims about Aspen’s business, which
underscores our deep concern about their failure to understand the
significant dis-synergies that would result from the misguided
transaction they are proposing. We want to set the record
straight:
Aspen’s catastrophe reinsurance exposures: In contrast to
Endurance, Aspen Re has a very strong and successful brand and
track record in the catastrophe reinsurance business. Unlike
Endurance, Aspen has embraced the significant changes heralded by
third party capital in catastrophe reinsurance and views this as a
significant opportunity for future growth and diversity of
earnings. Since Aspen Re enjoys numerous long-term and highly
profitable relationships with core clients, Aspen Re was able to
increase its share on some of the most desirable risks in the
catastrophe reinsurance market, not only during the important
January 1 renewal period, but throughout this year. We have
benefited significantly from Aspen Capital Markets, our third-party
capital markets entity, which enables us to increase our gross
premiums written while maintaining the same net risk position by
redistributing risk to the capital markets and at the same time
adding underwriting fees and profit commission.
U.S. programs: Similar to most major insurers, we have
found that for certain categories of smaller and homogenous risks,
it is economically beneficial to participate on a program basis,
with tight and careful controls over underwriting, claims, and risk
management. Currently our U.S. Program business is profitable and
represents approximately 6% of our 2013 annual written premium.
Reserving: We have consistently said publicly that we aim
to maintain our reserves at a prudent level such that the
probability of reserve redundancies in future periods is in the
mid-to-high 80% range. At year end 2013 the figure was 86%.
Endurance references our year end 2011 reserving at the 90th
percentile in a veiled attempt to discredit our robust reserving
process. The higher than normal percentile selected at that time
was due to the extreme catastrophe events that occurred during that
year. At year end 2009 our reserving percentile stood at 86%.
Furthermore, since Endurance does not make a similar type of
disclosure, it is impossible for shareholders to assess the
consistency of their reserving strength over time or the relative
level of the reserving risk they are taking. This is one of many
reasons for our deep concern with receiving Endurance shares in
exchange for Aspen’s.
PROTECT THE VALUE OF YOUR
INVESTMENT:PLEASE SIGN, DATE AND RETURN THE ENCLOSED BLUE
REVOCATION CARD TODAY
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.
- Do NOT sign
Endurance’s white authorization card.
- Sign, date and
return the enclosed BLUE revocation card.
- 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 and your vote are important.
Sincerely yours,
/s/
/s/
Glyn Jones Chris O’Kane
Chairman of the Board of Directors
Chief Executive Officer
Even if you have already signed
Endurance’s white authorization card,you may revoke your
authorizations by signing, dating and returningthe enclosed
BLUE revocation card.
If you have questions or need
assistancerevoking your authorizations for your shares, please
contact our agent:
INNISFREE M&A INCORPORATED
Shareholders call toll-free: (877)
717-3930Banks and Brokers call collect: (212) 750-5833
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, to the extent 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.
The preannounced preliminary results referred to in this press
release are forward-looking statements of particular financial
measures and no inferences should be made in relation to other
financial measures, outlook or guidance that Aspen may disclose
when the final second quarter and six month results are announced
on July 23, 2014. 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.
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.
i Diluted Book Value per Ordinary Share is not a non-GAAP
financial measure. Aspen has included diluted book value per
ordinary share as it illustrates the effect on basic book value per
share of dilutive securities thereby providing a better benchmark
for comparison with other companies. Diluted book value per share
is calculated using the treasury stock method, which assumes that
the proceeds received from the exercise of options will be used to
purchase Aspen's ordinary shares at the average market price during
the period of calculation.
ii Non-GAAP Financial Measures
In presenting Aspen's preliminary results, management has
included and discussed certain "non-GAAP financial measures" as
such term is defined in Regulation G. Management believes that
these non-GAAP financial measures, which may be defined differently
by other companies, better explain Aspen's results of operations in
a manner that allows for a more complete understanding of the
underlying trends in Aspen's business. However, these measures
should not be viewed as a substitute for those determined in
accordance with GAAP. In this letter, Aspen provides non-GAAP
financial information regarding its expected financial results for
the second quarter of 2014. A reconciliation of such non-GAAP
financial measures to their respective most directly comparable
GAAP financial measures is not accessible at this time because
Aspen believes it is not possible to finalize particular
information which can fluctuate significantly within or without a
range and may have a significant impact on the GAAP financial
measures. The information that is being finalized includes net
foreign exchange gains and losses and realized gains and losses in
investments. A reconciliation of operating income to net income,
average ordinary shareholders’ equity to average shareholders’
equity and diluted and basic operating earnings per share to basic
earnings per share will be provided in Aspen’s quarterly financial
supplement to be issued with Aspen’s final quarterly earnings
announcement to be released on July 23, 2014. At such time, Aspen’s
financial supplement can be obtained from the Investor Relations
section of Aspen's website at www.aspen.co.
(1) Annualized Operating Return on Average Equity (“Operating
ROE”) is a non-GAAP financial measure. Operating ROE is
calculated using operating income, as defined below, and average
equity is calculated as the arithmetic average on a monthly basis
for the stated periods of shareholders’ equity excluding the
aggregate value of the liquidation preferences of our preference
shares net of issuance costs and the total amount of
non-controlling interest. Aspen presents Operating ROE as a measure
that is commonly recognized as a standard of performance by
investors, analysts, rating agencies and other users of its
financial information.
(2) Operating Income is a non-GAAP financial measure.
Operating income is an internal performance measure used by Aspen
in the management of its operations and represents after-tax
operational results excluding, as applicable, after-tax net
realized and unrealized capital gains or losses, including net
realized and unrealized gains or losses on interest rate swaps,
after-tax net foreign exchange gains or losses, including net
realized and unrealized gains and losses from foreign exchange
contracts and certain non-recurring items. In the second quarter
2014, non-recurring items included costs associated with defending
the unsolicited approach from Endurance Specialty Holdings Ltd. in
the amount of $5.3 million.
Aspen excludes these above items from its calculation of
operating income because they are either not expected to recur and
therefore are not reflective of underlying performance or the
amount of these gains or losses is heavily influenced by, and
fluctuates in part, according to the availability of market
opportunities. Aspen believes these amounts are largely independent
of its business and underwriting process and including them would
distort the analysis of trends in its operations. In addition to
presenting net income determined in accordance with GAAP, Aspen
believes that showing operating income enables investors, analysts,
rating agencies and other users of its financial information to
more easily analyze Aspen's results of operations in a manner
similar to how management analyzes Aspen's underlying business
performance. Operating income should not be viewed as a substitute
for GAAP net income.
(3) Accident Year Combined Ratio is a non-GAAP financial
measure. Accident Year Combined Ratios exclude the impact of net
prior year reserve movements in the period. Accident Year Combined
Ratios are calculated by dividing net losses excluding net prior
year reserve movements and net expenses by net earned premiums.
Aspen believes that the Accident Year Combined Ratios support
meaningful comparison from period to period of the underlying
performance of the business. The following table contains a
reconciliation of Aspen’s Accident Year Combined Ratios.
2009 2010
2011 2012 2013
Q1 2014 Net Earned Premium
1,823.0 1,898.9 1,888.5
2,083.5 2,171.8 566.5 Combined Ratio
84.1% 96.7% 115.9%
94.3% 92.6% 87.6% Net Reserve
Movement 84.4 21.4 92.3
137.4 107.7 28.2 % of Net
Premiums Earned 4.6% 1.1%
4.9% 6.6% 5.0% 5.0%
Accident Year Combined Ratio 88.7%
97.8% 120.8% 100.9% 97.6%
92.5%
(4) Diluted Operating Earnings per Share and Basic Operating
Earnings per Share are non-GAAP financial measures. Aspen
believes that the presentation of diluted operating earnings per
share and basic operating earnings per share supports meaningful
comparison from period to period and the analysis of normal
business operations. Diluted operating earnings per share and basic
operating earnings per share are calculated by dividing operating
income by the diluted or basic weighted average number of shares
outstanding for the period.
iii Based on total stock/cash offer value on 4/11/14, 5/30/14
and 7/9/14 and AHL book value per share on 12/31/13, 3/31/14 and
preliminary book value as of 6/30/14.
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20140710006384/en/
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, Jamie Tully or Jared Levy+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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