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Aspen rejects unsolicited proposal from Endurance

14th April

Aspen Insurance Holdings Limited announced today that its Board of Directors, after careful evaluation with the assistance of its financial and legal advisors, unanimously determined to reject an unsolicited proposal from Endurance Specialty Holdings Ltd. (NYSE:ENH) to acquire Aspen for $47.50 per share, 60% in Endurance common stock and 40% in cash.

Glyn Jones, Chairman of the Board of Directors, said: "After careful review and deliberation, the Board of Directors unanimously determined that Endurance's proposal is not in the best interests of Aspen or its shareholders. Endurance's ill-conceived proposal undervalues our company, represents a strategic mismatch, carries significant execution risk, and would result in substantial dis-synergies. Furthermore, most of the consideration to Aspen shareholders would be in a stock that would reflect these problems.

"Aspen has a proven track record of performance and a clear strategy to increase shareholder value. Endurance has a mixed operating track record, new leadership, an unproven strategy, and no experience with large acquisitions. Moreover, this transaction would be highly disruptive to Aspen's corporate culture, which has proven to be a significant competitive advantage in the marketplace."

In making its determination, the Aspen Board of Directors considered, among other factors, the following:

  • Aspen is executing a clear strategy to deliver superior value for shareholders, while Endurance's proposal undervalues the company and carries significant risks.
  • A combination would burden Aspen with Endurance's unproven underwriting teams with no clear strategy; an unprofitable insurance business1; and a volatile and challenged crop business.
  • Endurance has shown a public disdain for Lloyd's, which is the growth engine of Aspen's well-established international insurance business.
  • Endurance has a mixed operating track record, no experience with large acquisitions, new leadership and an unproven strategy.
  • The proposed transaction jeopardizes Aspen's corporate culture, which the Company believes is a significant component of its franchise value because it differentiates Aspen with clients and allows Aspen to recruit and retain outstanding professionals.
  • The disruption of market and underwriting relationships likely would result in material loss of business.
  • The proposal involves a number of substantial execution risks, including financing uncertainty, due diligence outcome, regulatory approvals, the need for favorable votes by the shareholders of both companies, and integration risk.

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.

Below is a letter that Aspen previously sent to Endurance's Board of Directors rejecting the same proposal that Endurance made public today:


8 April 2014

Board of Directors
c/o John R. Charman, Chairman and Chief Executive Officer
Endurance Specialty Holdings Ltd.
Wellesley House
90 Pitts Bay Road
Pembroke HM 08
Bermuda

Dear Members of the Board:

The Board of Directors of Aspen Insurance Holdings Limited has received your letter of 3 April 2014.

Your most recent letter does not add to the information the Aspen Board had when we thoroughly considered your 18 February 2014 letter and unanimously concluded that the possible acquisition of Aspen by Endurance was not in the best interests of Aspen or its stockholders and that we did not wish to pursue the matter further. The Aspen Board continues to have no interest in pursuing the matter further.

As was the case with your prior letters, we find your most recent letter to be based on uninformed and unsubstantiated assertions and assumptions about alleged benefits of the combination that do not stand up to analysis. The Aspen Board has concluded that Aspen will be able to create superior value for our stockholders based on our standalone plan. Aspen has a long history of value creation for its stockholders and has a clearly articulated growth strategy for delivering value to its stockholders going forward. We have built a diversified business with a strong balance sheet, proven management team and disciplined risk management, and are confident that continued execution of our strategy provides value far in excess of what you have suggested in the letter. The levers that we have available to achieve our ROE goals are clear and well-understood by the market and you have clearly misrepresented our 10% ROE guidance for 2014 as our long-term goal. We are confident we will be able to deliver superior growth by following our plan.

As part of our review, we have evaluated Endurance's business mix, market presence, quality of earnings, earnings outlook and management culture, all of which we found to be either unattractive or incompatible with Aspen’s strategy. With respect to business mix, Endurance is over-concentrated in crop insurance, a business which is troubled, low margin, recently volatile and exposed to major risks. The other insurance businesses are nascent and have not demonstrated progress. Endurance's continued well-publicized antipathy for Lloyd's is inconsistent with Aspen's business model, as our Lloyd's syndicate is one of the most dynamic parts of our insurance franchise and a top quartile performer amongst Lloyd's syndicates. Aspen has a strong and well-regarded reinsurance business with a clearly defined strategy for addressing the changes in market dynamics while, in contrast, Endurance is hesitant and uncertain about the industry. Furthermore, as analysts have pointed out, Endurance's earnings in recent years have been disproportionately driven by reserve releases (a trend that accelerated at year-end 2013) and the path for future earnings is unclear.

Any combination with Endurance's centralized, top-down management model, as compared to our collaborative, teamwork-oriented culture, would result in extreme personnel disruption and loss of attractive business. It is worth noting that our company is in significant litigation due to your orchestrated poaching of Aspen employees and clear breaches of fiduciary and other duties arising from this. The dis-synergies from the transaction you propose, including loss of business and personnel, combined with Endurance's unappealing business mix, earnings track record and incompatible culture, make the combination unattractive, particularly in contrast to what Aspen expects to achieve by following our standalone plan.

In addition, your letter poses significant risks and uncertainties, including (1) Endurance's due diligence of Aspen, (2) due diligence of Aspen by your financing sources, (3) your ability to raise the necessary funds, even the most general terms and amounts of which are omitted from your letter (we note in this regard that one of the financing sources from your prior letter is no longer included, and CVC's commitment is no longer described as "equity"), (4) your ability to secure all required regulatory approvals and (5) importantly, approval of your own stockholders.

The foundation of Aspen's business is our client relationship franchise, and our people are our most valuable assets. The uncertainty and distraction that would result from pursuing what your letter proposes would be destructive of value for our company and our stockholders. Your "proposal" is merely the request for a one-way option to start an investigation of our company and later decide if you wish to pursue a transaction. The Aspen Board is vehemently opposed to the hostile attempt of Endurance to address its business problems at the expense of Aspen and its stockholders and to your potential effort to destabilise a key competitor.

For the reasons outlined above, we are not interested in pursuing what your letter proposes and do not believe that any purpose would be served by meeting with you or your advisors.

Yours sincerely,

/s/ /s/

Glyn Jones Chris O’Kane

Chairman of the Board of Directors Chief Executive Officer

cc: CVC Capital Partners Advisory

1 Endurance's insurance segment underwriting income ex reserve releases has been negative from 2011-2013.