Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD | d728803d8k.htm |
| EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD | d728803dex991.htm |
 Increased
Proposal to Aspen Shareholders: Creating a Global Leader in Specialty Insurance and
Reinsurance June 2, 2014
Exhibit 99.2 |
 Cautionary
Note
Regarding
Forward
Looking
Statements
Some of the statements in this presentation may include forward-looking statements which
reflect our current views with respect to future events and financial performance. Such statements may include forward-looking
statements both with respect to us in general and the insurance and reinsurance sectors
specifically, both as to underwriting and investment matters. These statements may also include assumptions about our proposed acquisition
of
Aspen
(including
its
benefits,
results,
effects
and
timing).
Statements
which
include
the
words
"should,"
"would,"
"expect,"
"intend,"
"plan,"
"believe,"
"project,"
"anticipate,"
"seek,"
"will,"
and
similar
statements
of
a
future
or
forward-looking
nature
identify
forward-looking
statements
in
this
presentation
for
purposes
of
the
U.S.
federal
securities
laws
or
otherwise.
We
intend
these
forward-looking
statements
to
be
covered
by
the
safe
harbor
provisions for forward-looking statements in the Private Securities Litigation Reform Act
of 1995. All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ materially from those indicated in the forward-
looking
statements.
These
factors
include,
but
are
not
limited
to,
the
effects
of
competitors’
pricing
policies,
greater
frequency
or
severity
of
claims
and
loss
activity,
changes
in
market
conditions
in
the
agriculture
insurance
industry, termination of or changes in the terms of the U.S. multiple peril crop insurance
program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance
or retrocessional coverage, our inability to renew business previously underwritten or
acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations,
uncertainties in our reserving process, changes to our tax status, changes in insurance
regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker
counterparties,
assessments
for
high
risk
or
otherwise
uninsured
individuals,
possible
terrorism
or
the
outbreak
of
war,
a
loss
of
key
personnel,
political
conditions,
changes
in
accounting
policies,
our
investment
performance,
the
valuation of our invested assets, a breach of our investment guidelines, the unavailability of
capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention
in the insurance and reinsurance industry, illiquidity in the credit markets, changes in
general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2013 and our
Quarterly
Report
on
Form
10-Q
for
the
quarter
ended
March
31,
2014.
Additional
risks
and
uncertainties
related
to
the
proposed
transaction
include,
among
others,
uncertainty
as
to
whether
Endurance
will
be
able
to
enter
into
or
consummate
the
transaction
on
the
terms
set
forth
in
the
proposal,
the
risk
that
our
or
Aspen’s
shareholders
do
not
approve
the
transaction,
potential
adverse
reactions
or
changes
to
business
relationships
resulting
from
the
announcement or completion of the transaction, uncertainties as to the timing of the
transaction, uncertainty as to the actual premium of the Endurance share component of the proposal that will be realized by Aspen
shareholders in connection with the transaction, competitive responses to the transaction, the
risk that regulatory or other approvals required for the transaction are not obtained or are obtained subject to conditions that are not
anticipated,
the
risk
that
the
conditions
to
the
closing
of
the
transaction
are
not
satisfied,
costs
and
difficulties
related
to
the
integration
of
Aspen’s
businesses
and
operations
with
Endurance’s
businesses
and
operations,
the
inability to obtain, or delays in obtaining, cost savings and synergies from the transaction,
unexpected costs, charges or expenses resulting from the transaction, litigation relating to the transaction, the inability to retain key
personnel, and any changes in general economic and/or industry specific conditions.
Forward-looking
statements
speak
only
as
of
the
date
on
which
they
are
made,
and
we
undertake
no
obligation
publicly
to
update
or
revise
any
forward-looking
statement,
whether
as
a
result
of
new
information,
future
developments or otherwise.
The
foregoing
review
of
important
factors
should
not
be
construed
as
exhaustive
and
should
be
read
in
conjunction
with
the
other
cautionary
statements
that
are
included
herein
and
elsewhere,
including
the
risk
factors
included
in our most recent reports on Form 10-K and Form 10-Q and the risk factors included in
Aspen's most recent reports on Form 10-K and Form 10-Q and other documents of Endurance and Aspen on file with the U.S. Securities and
Exchange
Commission
(the
“SEC”).
Any
forward-looking
statements
made
in
this
presentation
are
qualified
by
these
cautionary
statements,
and
there
can
be
no
assurance
that
the
actual
results
or
developments
anticipated
by
Endurance will be realized or, even if substantially realized, that they will have the expected
consequences to, or effects on, us or our business or operations. Additional
Information
and
Where
to
Find
It
This
presentation
relates
to
the
offer
to
be
commenced
by
Endurance
to
exchange
each
issued
and
outstanding
common
share
of
Aspen
(together
with
associated
preferred
share
purchase
rights)
for
$49.50
in
cash,
0.9197
Endurance
common
shares,
or
a
combination
of
cash
and
Endurance
common
shares,
subject
to
a
customary
proration
mechanism.
This
presentation
is
for
informational
purposes
only
and
does
not
constitute
an
offer
to
exchange, or a solicitation of an offer to exchange, Aspen common shares, nor is it a
substitute for the Tender Offer Statement on Schedule TO or the preliminary Prospectus/Offer to Exchange to be included in the Registration
Statement on Form S-4 (including the Letter of Transmittal and Election and related
documents and as amended from time to time, the “Exchange Offer Documents”) that Endurance intends to file with the SEC. The Endurance
exchange offer will be made only through the Exchange Offer Documents.
This presentation is not a substitute for any other relevant documents that Endurance may file
with the SEC or any other documents that Endurance may send to its or Aspen’s shareholders in connection with the proposed
transaction. Today, Endurance will file with the SEC a preliminary solicitation statement
with respect to the solicitation of (i) written requisitions that the board of directors of Aspen convene a special general meeting of Aspen’s
shareholders to vote on an increase in the size of Aspen’s board of directors from 12 to
19 directors and (ii) Aspen shareholder support for the proposal of a scheme of arrangement by Endurance which will entail the holding of a
court-ordered meeting of Aspen shareholders at which Aspen’s shareholders would vote
to approve a scheme of arrangement under Bermuda law pursuant to which Endurance would acquire all of Aspen’s outstanding common
shares
on
financial
terms
no
less
favorable
than
those
contained
in
its
acquisition
proposal
announced
on
June
2,
2014
(the
“Solicitation
Statement”).
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE EXCHANGE OFFER DOCUMENTS AND THE
SOLICITATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS THAT ENDURANCE HAS FILED OR MAY FILE WITH THE
SEC
IF
AND
WHEN
THEY
BECOME
AVAILABLE
BECAUSE
THEY
CONTAIN
OR
WILL
CONTAIN
IMPORTANT
INFORMATION
ABOUT
THE
PROPOSED
TRANSACTION.
All
such
documents,
when
filed,
are
available
free
of
charge
at
the
SEC’s
website (www.sec.gov) or by directing a request to Endurance at the Investor , +1 441 278 0988
(phone), investorrelations@endurance.bm (email). Participants
in
the
Solicitation
Endurance and its directors and certain of its executive officers and employees may be deemed
to be participants in any solicitation of shareholders in connection with the proposed transaction. Information about Endurance’s
directors,
executive
officers
and
employees
who
may
be
deemed
to
be
participants
in
the
solicitation,
including
a
description
of
their
direct
and
indirect
interests,
by
security
holdings
or
otherwise,
is
set
forth
in
the
Solicitation
Statement and Endurance’s proxy statement, dated April 9, 2014, for its 2014 annual
general meeting of shareholders. Forward looking statements & other information
2 |
 Regulation
G
Disclaimer
In this presentation, management has included and discussed certain non-GAAP
measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the proposed
transaction in a manner that allows for a more complete understanding. However, these
measures should not be viewed as a substitute for those determined in accordance with GAAP. For a complete description of non-GAAP
measures
and
reconciliations,
please
review
the
Investor
Financial
Supplement
on
our
web
site
at
www.endurance.bm.
The
combined
ratio
is
the
sum
of
the
loss,
acquisition
expense
and
general
and
administrative
expense
ratios.
Endurance
presents
the
combined
ratio
as
a
measure
that
is
commonly
recognized
as
a
standard
of
performance
by
investors,
analysts,
rating
agencies
and
other
users
of
its
financial
information.
The
combined
ratio,
excluding
prior
year
net
loss
reserve
development,
enables
investors,
analysts,
rating
agencies
and
other
users
of
its
financial
information to more easily analyze Endurance’s results of underwriting activities in a
manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, excluding prior year net loss
reserve development, should not be viewed as a substitute for the combined ratio.
Net premiums written is a non-GAAP internal performance measure used by Endurance in the
management of its operations. Net premiums written represents net premiums written and deposit premiums, which are premiums on
contracts
that
are
deemed
as
either
transferring
only
significant
timing
risk
or
transferring
only
significant
underwriting
risk
and
thus
are
required
to
be
accounted
for
under
GAAP
as
deposits.
Endurance
believes
these
amounts
are
significant to its business and underwriting process and excluding them distorts the analysis
of its premium trends. In addition to presenting gross premiums written determined in accordance with GAAP, Endurance believes that
net premiums written enables investors, analysts, rating agencies and other users of its
financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes
Endurance’s underlying business performance. Net premiums written should not be
viewed as a substitute for gross premiums written determined in accordance with GAAP.
Return on Equity (ROE) is comprised using the average common equity calculated as the
arithmetic average of the beginning and ending common equity balances for stated periods. Endurance presents various measures of Return
on Equity that are commonly recognized as a standard of performance by investors, analysts,
rating agencies and other users of its financial information. Certain information
included in this presentation has been sourced from third parties. Endurance does not make any representations regarding the accuracy, completeness or timeliness of such third party information. Permission
to cite such information has neither been sought nor obtained.
All information in this presentation regarding Aspen, including its businesses, operations and
financial results, was obtained from public sources. While Endurance has no knowledge that any such information is inaccurate or
incomplete, Endurance has not had the opportunity to verify any of that information.
Additional
Information
All
references
in
this
presentation
to
“$”
refer
to
United
States
dollars.
The
contents
of
any
website
referenced
in
this
presentation
are
not
incorporated
by
reference
herein.
Forward looking statements & other information (continued)
3
Third
Party-Sourced
Information |
 •
Improved proposed transaction offers enhanced upfront premium and opportunity for
long-term value for Aspen’s shareholders –
Increased price of $49.50
(1)
–
a substantial premium valuation
–
Opportunity to receive cash and/or Endurance shares
–
Simplified and improved financing plan
•
The combination of Endurance and Aspen is a unique opportunity to create a global leader in
the specialty insurance and reinsurance sector
–
Over $5 billion of combined annual gross premiums written, diversified across products and
geographies –
$5.9 billion of pro forma shareholders’
equity
(2)
and $7.3 billion in total capital
(2)
, yielding a sizable and strong capital base to
compete in the increasingly competitive global market
•
The transaction will create a company with a superior financial profile
–
Increased scale, diversification, market presence and relevance
–
Enhanced profitability driven by:
•
Proven management team comprised of industry-leading talent
•
World-class underwriting expertise from both companies
•
Over $100 million of anticipated annual synergies from the transaction
•
Actions being taken to provide Aspen shareholders the means to expedite transaction:
–
Pursuing special general meeting of Aspen’s shareholders to increase size of Aspen’s
board, allowing Aspen's shareholders the ability to replace the majority of Aspen's
board at the 2015 general meeting
–
Seeking Aspen shareholder support for the proposal for a Scheme of Arrangement which will
entail the holding of a court- ordered meeting of Aspen shareholders to approve a
Scheme of Arrangement in order to vote upon completing the transaction with Endurance
without Aspen board support if necessary –
Commencing an exchange offer for all Aspen common shares in the near future reflecting the
same economic terms as Endurance's increased proposal
Endurance and Aspen –
A Compelling Combination
Improved Proposed Transaction will yield significant value for shareholders and create a
company with greater scale, market presence, diversification and profit potential
4
Notes
1.
Based on Endurance’s unaffected closing share price of $53.82 as of 4/11/2014
2.
Figures as of 3/31/2014, pro forma for transaction and reflects permanent financing plan,
assuming no exercise of CVC’s option to purchase $250MM of Endurance ordinary shares post-closing.
Shareholders’
equity excludes non-controlling interest |
 Improved
Transaction Terms Compelling value for Aspen shareholders while generating significant
earnings and ROE accretion for Endurance shareholders
5
Notes
1.
Based on 66.3MM fully-diluted Aspen shares as of 4/25/2014 and Endurance’s unaffected
closing share price of $53.82 as of 4/11/2014 2.
Based on pro rata consideration mix of 40% cash and 60% stock
3.
Reflects permanent financing plan and assumes repayment of Endurance’s $200MM senior debt
maturing in October 2015 4.
Assumes $0.5Bn of common equity issued to new investors at 3% discount to Endurance’s
closing share price of $51.72 as of 5/30/2014; assumes no exercise of option by CVC to purchase $250MM of
Endurance ordinary shares post-closing
Transaction Proposal
•
Endurance to acquire all of the common shares of Aspen
Value
•
Revised
proposal
values
Aspen
at
$49.50
per
share
or
$3.2
billion
(1)
–
1.16x Aspen’s diluted book value per share at 3/31/2014 and 11.8x 2014 consensus Street
earnings estimates –
25.7% premium to Aspen’s unaffected closing share price on 4/11/2014 and 19.5% premium
to (pre-announcement) all- time high
–
The consideration is based on Endurance’s unaffected closing share price on 4/11/2014.
Based on Endurance’s closing share
price
on
5/30/2014,
Endurance’s
proposal
would
value
Aspen
at
$48.34
per
share
(2)
Consideration
•
Aggregate consideration mix of 40% cash and 60% stock
•
Aspen
shareholders
can
elect
to
receive
(i)
$49.50
in
cash
per
Aspen
share,
(ii)
0.9197
(1)
Endurance
common
shares
for
each
Aspen
share,
or
(iii)
a
combination
of
0.5518
(1)
Endurance
common
shares
and
$19.80
in
cash
for
each
Aspen
share,
subject
to a customary proration mechanism
•
Proposal structured to be tax-free to Aspen common shareholders with respect to the
Endurance common shares received in the transaction
Financing
•
$1.3 billion of cash consideration to be funded through Endurance’s cash on hand and
$1.0Bn committed bridge financing –
Financing
to
replace
bridge
facility
currently
anticipated
to
be
generated
from
Aspen
cash
on
hand
of
$0.2Bn,
public
investment grade debt financing of ~$0.3Bn and common equity financing of ~$0.5Bn
–
Pro forma debt to total capital of 19% at 3/31/2014, expected to
be approximately 15% by end of 2015
(3)
Endurance CEO
Investment
•
John Charman, Endurance’s Chairman and Chief Executive Officer, remains committed to
purchase $25 million of Endurance common shares in connection with the transaction,
bringing his total purchases of Endurance shares to $55 million Pro Forma Ownership
•
49% by Endurance shareholders (including John Charman)
•
40% by Aspen shareholders
•
11% by New Investors
(4)
Financial Benefits
•
Relative to Endurance’s initial proposal, improved EPS and ROE accretion for
Endurance shareholders, lower initial book value
per
share
dilution,
assuming
permanent
financing
as
contemplated
above
•
Over $100 million of annual synergies anticipated |
 Actions to
expedite transaction further demonstrate Endurance’s commitment to pursuing this
transaction
while
providing
Aspen
shareholders
multiple
means
to
voice
support
and
complete
transaction in spite of Aspen’s refusal to engage.
Endurance and Aspen –
A Compelling Combination
Actions to expedite transaction give Aspen shareholders opportunity to voice support for the
transaction while providing a path forward to a successful transaction
6
Increased
Proposal to
$49.50
(1)
and
updated
financing
plan
Notes
1.
Calculated based on Endurance’s unaffected closing share price of $53.82 as of 4/11/2014,
the last trading day prior to Endurance’s announcement of its initial proposal to acquire Aspen for $47.50 per share |
 Creating a
Global Leader in Specialty Insurance and Reinsurance |
 Transaction
Creates Company With Improved Market Presence and Diversification, Stronger Capitalization
and Enhanced Profitability 8
Diversified Platform
Across Products and
Geographies
Increased Scale and
Market Presence
•
Combination creates an enterprise with over $5 billion of annual
gross premiums written
•
Expanded leadership and underwriting expertise
•
Increased size allows organization to better capitalize on distribution relationships
•
Greater scale better positions combined company to compete with largest players as
competition intensifies
•
Endurance and Aspen share certain common businesses; however, the relative weighting of each
is quite complementary
•
Aspen’s strength in the Lloyd’s market and Endurance’s market-leading U.S.
agriculture business are examples of uncorrelated and diversified businesses
•
The global breadth and diversity of the combined business will be more relevant for brokers
and customers
•
Aspen’s Lloyd’s platform complements global insurance and reinsurance footprint and
is highly attractive to Endurance
Enhanced
Profitability
•
With shareholders’
equity
(1)
of $5.9 billion and total capital of $7.3 billion
(1)
, the combined
company will have scale comparable to many of its key competitors
•
Larger, stronger balance sheet will be better positioned to pursue growth and withstand
volatility •
Additional capital efficiencies due to improved business diversification anticipated
•
Meaningful transaction synergies through cost savings, underwriting improvements, capital
efficiencies and enhanced capital management opportunities anticipated
•
Combined company will be well positioned to produce an improved ROE
•
Larger asset base will enable the combined company to capitalize
on investment opportunities as
they arise
Notes
1.
Figures as of 3/31/2014, pro forma for transaction and reflects permanent financing plan,
assuming no exercise of CVC’s option to purchase $250MM of Endurance ordinary shares post-closing.
Shareholders’
equity excludes non-controlling interest
Strong Balance
Sheet and Capital
Position |
 Combined Company
Will Have Scale to Compete With Market Leaders
9
Notes
1.
Excluding non-controlling interest
2.
As of 3/31/2014, pro forma for transaction and reflects permanent financing plan, assuming no
exercise of CVC’s option to purchase $250MM of Endurance ordinary shares post-closing
Shareholders’
Equity of Peer Companies
(1)
As of 3/31/2014
$Bn
(2)
10.2
7.0
6.8
5.9
5.9
5.8
3.8
3.6
3.6
3.4
3.0
1.8
1.7
1.6
0.0
2.0
4.0
6.0
8.0
10.0
12.0
XL
RE
PRE
ACGL
ENH+AHL
AXS
RNR
VR
AWH
AHL
ENH
PTP
MRH
AGII |
 Combined
Business Well Diversified Across Business Lines and Sectors Geographic and distribution
diversification benefits are also achieved 10
Endurance
Aspen
Combined
Property
2%
Agriculture
36%
Professional
Lines
6%
Casualty &
Other Specialty
12%
Property
9%
Casualty &
Other
Specialty
(2)
16%
Financial &
Professional
Lines
13%
Marine, Energy
& Transportation
20%
Catastrophe
13%
Property
11%
Casualty &
Specialty
(1)
20%
+
=
Property
Catastrophe
10%
Other
Property
11%
Casualty &
Specialty
21%
GPW: $2.7Bn
GPW: $2.6Bn
GPW: $5.3Bn
Insurance 55%
Reinsurance 45%
Insurance 57%
Reinsurance 43%
Catastrophe
12%
Insurance 56%
Reinsurance 44%
Agriculture
18%
Property
5%
Casualty &
Other
Specialty
(2)
14%
Professional
Lines
9%
Marine, Energy
& Transportation
10%
Property
11%
Casualty &
Specialty
(1)
21%
Notes
1.
Includes Professional Lines reinsurance segment for Endurance
2.
Includes Programs insurance segment for Aspen
Full Year 2013 Gross Written Premiums |
 Analysts See
Logic in Combination and Support Engagement 11
Equity Research #4
-
April 30, 2014
“[W]ith P&C pricing decelerating, and an outright soft market in
reinsurance, we see cost-driven consolidation among the Bermuda
group as strategically logical and shareholder friendly …
[A] combined
entity would be a solid mid-cap name with a capital base towards the
larger end of its peer group …
The companies also have complementary
strengths, as Endurance is underweight in London and does not have a
Lloyd's syndicate –
one of the strongest aspects of Aspen's business.
Further, ENH's crop insurance business, while currently over-weight
relative to its size, would provide a more balanced contribution
to the
combined underwriting portfolio, and deliver a revenue stream that is
not correlated to the P&C pricing cycle”
Equity Research #5
-
April 17, 2014
“Given softening market conditions (especially in reinsurance), the
entry of 3rd party capital (pension/hedge fund), excess capital
(everywhere), shrinking loss reserve redundancies, low interest rates,
the competitive advantages of “size,”
…
we’ve discussed the increasing
attractiveness of combinations in Bermuda …
From Endurance’s
perspective the move “in line”
with management’s stated strategy of
developing market “relevance”
(with both clients and brokers) through
increased sophistication, diversification and scale”
Equity Research #3
-
April 24, 2014
“Thoughts on ROE Outlook: AHL’s ROE in this quarter was 14.9%,
however if we normalize for cat losses and reserve releases in excess of
our forecast we get ROE closer to 9%. We continue to have difficulty
finding the levers in our model to get to an ROE close to management’s
targets for 2014.”
Equity Research #2
-
April 14, 2014
“Aspen has a strong Lloyd's franchise, while Endurance is known for its
substantial agriculture insurance operation. While there would be some
overlap, the deal would likely result in a company double the size of
each individual company with an increased presence across the globe
across more products …
Reinsurance rates continue to soften with
capital pouring in from hedge funds and alternative vehicles. In
such an
environment, growth by acquisition rather than undercutting the
competition makes sense”
Equity Research #1
-
April 15, 2014
“We suspect that current AHL shareholders will ask the AHL board to
reconsider this transaction and/or look for competitive offers. Looking
over the landscape we do not see too many competitors that would
be
willing to pay a similar premium to book value for AHL”
Note: Permission to use quoted material neither sought nor obtained
|
 Endurance’s Actions to Expedite
the Transaction |
 Actions to
Expedite the Transaction 13
In addition to significantly increasing its highly attractive premium proposal, Endurance is
taking the following actions: Action
1:
Special
General
Meeting
of
Aspen
Shareholders
–
Calling
special
general
meeting
requires
support
of
at
least
10%
of
Aspen’s
outstanding
common
shares
–
If the special general meeting is held, and the proposal is approved, a majority of
Aspen’s directors would stand for election at Aspen’s 2015 annual general
meeting, and Aspen’s shareholders would have the ability to hold the board
directly accountable for failing to comply with the will of the true owners of the company
Action
2:
Supporting
Proposal
of
Scheme
of
Arrangement
by
Endurance
–
Aspen’s poison pill is not anticipated to be an impediment to completing a Scheme of
Arrangement Action
3:
Exchange
Offer
Preliminary solicitation statement being filed with SEC seeking the support of Aspen’s
common shareholders to convene
a
special
general
meeting
of
Aspen
shareholders
at
which
they
would
consider
a
proposal
to
increase
the
size of Aspen’s board from 12 to 19 directors
Preliminary solicitation statement also seeks the support of Aspen’s shareholders for the
proposal of a Scheme of Arrangement by Endurance which will entail the holding of a
court-ordered meeting at which Aspen’s shareholders would
vote
on
a
Scheme
of
Arrangement
on
financial
terms
no
less
favorable
than
those
contained
in
Endurance’s
increased proposal
The
Scheme
of
Arrangement
can
be
accomplished
–
without
the
approval
of
the
Aspen
board
–
if
approved
by
Aspen
shareholders at two shareholder meetings and sanctioned by the Supreme Court of Bermuda
Commencing
an
exchange
offer
in
the
near
future
made
directly
to
Aspen’s
shareholders
for
all
Aspen
common
shares
on the same economic terms as Endurance’s increased proposal
|
 Actions to
Expedite the Transaction (continued) 14
•
A Scheme of Arrangement is a court approved arrangement between a company and its shareholders
that would allow Endurance to simultaneously acquire all of the outstanding Aspen
common shares
No
Yes
Support
from at least
15% of Aspen’s
outstanding common
shares
Solicitation seeking support of
Aspen’s shareholders for a
proposal for a Scheme of
Arrangement
Application to the Supreme
Court of Bermuda for court-
ordered meeting
If granted, hold court-ordered
special general meeting to
consider Scheme of
Arrangement
Hold Aspen special general
meeting to allow Aspen
shareholders to approve
Scheme of Arrangement on
behalf of Aspen
Requisition Aspen special
general meeting to approve
Scheme of Arrangement
Aspen’s board approves
Scheme of Arrangement?
Support
from majority
of Aspen’s holders
present at the meeting
representing at least 75%
in value of votes cast
Support
from majority of
votes cast at Aspen
special general meeting
Apply to Supreme Court of
Bermuda to sanction the
Scheme of Arrangement
Deliver a copy of the order of
the Supreme Court of
Bermuda sanctioning the
Scheme of Arrangement to
the Bermuda Registrar of
Companies |
 Simplified and
Improved Financing Plan 15
Notes
1.
Reflects permanent financing plan and assumes repayment of Endurance’s $200MM senior debt
maturing in October 2015 2.
Based on 66.3MM fully-diluted Aspen shares as of 4/25/2014 and an exchange ratio of 0.9197
based on Endurance’s unaffected closing share price of $53.82 as of 4/11/2014
3.
For illustrative purposes only; assumes no exercise of CVC’s option to purchase $250MM of
Endurance ordinary shares post-closing •
$1.0Bn committed bridge loan facility from Morgan Stanley to fund, together with cash on hand
at Endurance, the cash portion of the consideration payable to Aspen’s
shareholders –
Endurance’s increased proposal is not subject to a financing condition
•
Permanent financing expected to include common equity and investment grade debt on customary
terms –
Pro
forma
leverage
of
19%
at
3/31/2014,
expected
to
be
approximately
15%
by
end
of
2015
(1)
•
Endurance believes that, pro forma for the transaction, its financial position will be well
within the ratings criteria to maintain its current ratings
Permanent
Financing
Plan
($Bn)
(3)
Common Equity
$0.5
Debt
$0.3
Aspen available cash (est.)
$0.2
Total
$1.0
Total Consideration ($Bn)
Stock
$1.9
Cash
$1.3
Total consideration
$3.2
Initial
“Committed
/
Available”
Cash
Bridge
$1.0
Cash on Hand
$0.4
Total Sources of Cash
$1.4
(2) |
 Increased
Proposal is a Compelling Value Proposition for Aspen
Shareholders |
 Proposed
Valuation Well Above Aspen’s Historical Trading Prices 17
1.16x
0.96x
$49.50
$39.37
Aspen Share Price –
Last 5 Years
4/11/2009 –
4/11/2014
Aspen P/BV –
Last 5 Years
4/11/2009 –
4/11/2014
5-Yr Average: 0.79x
Performance
illustrated
through
April
11,
2014
–
the
trading
day
prior to initial transaction announcement
$20
$30
$40
$50
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Historical Share Price
Endurance Purchase Price
0.50x
0.75x
1.00x
1.25x
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Historical P/BV
Endurance Purchase Price |
 Proposal
Provides Compelling Value for Aspen Shareholders 18
Notes
1.
For the 30 calendar days ending 4/11/2014
2.
All time high and 5-year average P/BV prior to announcement of Endurance’s initial
proposal on 4/11/2014 3.
Based on consensus Street estimates for 2014 and 2015 EPS as of 5/30/2014
Substantial Premium to Trading Prices
Attractive Valuation Multiples
Proposal Price Per Share
$49.50
vs. Price
as of 4/11/2014
$39.37
+25.7%
vs. 1-month VWAP
(1)
$39.27
+26.1%
vs. All Time High
(2)
$41.43
+19.5%
Proposal Price Per Share
$49.50
vs.
Diluted
BVPS
at
12/31/13
$40.90
1.21x
vs.
Diluted
BVPS
at
3/31/14
$42.72
1.16x
vs. 5-year Average P/BV
(2)
0.79x
+46.7%
vs. 2014E Earnings
(3)
$4.20
11.8x
vs. 2015E Earnings
(3)
$4.15
11.9x |
 •
Over $100 million of annual synergies
anticipated, including:
–
Cost savings
–
Underwriting improvements
–
Capital efficiencies
–
Enhanced capital management opportunities
Financially Compelling Transaction
Transaction economics are highly attractive for ongoing Endurance shareholders
19
Notes
1.
As of 3/31/2014, pro forma for transaction and reflects entering
into bridge loan facility commitment and takeout through permanent financing plan, assuming no
exercise of CVC’s option to purchase $250MM of Endurance ordinary shares
post-closing 2.
Excluding non-controlling interests
3.
Excluding integration charges
Key Financial Drivers
Combined Balance Sheet Strength
(1)
Summary of Financial Impact to Endurance
EPS
(3)
•
>15% accretion anticipated in 2015
ROE
(3)
•
12 –
14% pro forma ROE anticipated in 2015; >200bps
increase vs. standalone Endurance ROE
Book Value Per Share
•
Modest initial dilution to book value per share anticipated
Endurance
Pro Forma at
3/31/2014
Shareholders’
Equity
(2)
$3.0Bn
$5.9Bn
Cash and Invested Assets
$6.7Bn
$14.4Bn
Total Capital
$3.5Bn
$7.3Bn |
 Illustrative
Future Value of Aspen Shares (1)(2)
•
The transaction provides
Aspen shareholders the
ability to achieve values
meaningfully higher than
Aspen’s future value
implied by consensus
Street estimates for
Aspen’s ROE and
recent
Aspen management ROE
guidance
•
It will take Aspen over 2
years to surpass the $49.50
proposed acquisition price
based on consensus Street
estimates for Aspen’s ROE
Transaction Provides Substantial Premium and Significant
Upside Potential
20
Notes
1.
Assumes Aspen shareholders receive 0.9197 shares of Endurance for each share of Aspen
2.
Assumes Aspen and pro forma dividend yield maintained at current
level as of 4/11/2014 in all scenarios; dividend yield based on
trailing 12-months dividends per share divided by current share price
3.
Assumes P/BV of 1.0x-1.2x for 12-14% ROE
4.
Assumes P/BV of 1.0x; Aspen’s management guidance of 10% ROE in 2014 and 11% ROE for 2015
and 2016 per first quarter 2014 investor presentation dated 5/20/2014 5.
Assumes P/BV of 1.0x; consensus Street estimates for Aspen’s ROE based on median 2014 ROE
estimate of 9.8% for +1 year and median 2015 ROE estimate of 9.1% for +2 years and +3 years; estimates as of 5/30/2014
Historical Aspen
Share Price
Pro forma at
12-14% ROE
(3)
Pre-Announcement
+1 Year
+2 Years
+3 Years
-1 Year
Aspen standalone at
consensus Street
estimates
Aspen standalone at
management
guidance
$39.37
$46
$49
$53
$65
$49.50
$81
$46
$51
$55
$30
$40
$50
$60
$70
$80
$90
(4)
(5) |
 Conclusion
21
Aspen's shareholders should vote in FAVOR of the two
shareholder authorizations Endurance is seeking
•
Increased proposal provides enhanced upfront premium and opportunity for long-term value
for Aspen’s shareholders
–
Also creates improved EPS and ROE accretion for Endurance shareholders
•
Formal mechanisms in place for Aspen shareholders to voice support for the transaction
•
Committed bridge loan facility provides increased flexibility and greater certainty of
financing •
The combination of Endurance and Aspen is a unique opportunity to create a global leader in
the specialty insurance and reinsurance sector
–
Increased scale, diversification, market presence and relevance
–
Enhanced profitability driven by industry-leading talent, world-class underwriting
expertise, and meaningful synergies anticipated from the transaction
•
The transaction will create a company with a superior financial profile
|
 Appendix
|
 Continued
Support from Equity Investor 23
•
Endurance and CVC have terminated the previously announced equity commitment letter,
which had been developed under the context of a friendly, negotiated transaction
•
Since Aspen's board and management have refused to engage with Endurance, Endurance is
compelled to take the additional actions being announced today
•
Given
CVC's
continued
support
for
the
merits
of
a
combination
of
Endurance
and
Aspen,
Endurance has granted CVC:
–
Option to invest $250 million
(1)
in the combined company, exercisable for 60 days
following the closing of Endurance’s acquisition of Aspen
–
Right of first refusal to provide any privately raised equity capital in connection with
Endurance’s permanent financing plans for the transaction subject to certain
exceptions •
Endurance does not intend to privately raise equity capital in connection with such
permanent financing, but reserves the right to do so
Notes
1.
CVC may invest $250MM at a price of $50.03 per Endurance ordinary share (6.5% discount to the
20 trading day volume-weighted average NYSE stock price of Endurance on 4/11/2014 of $53.51). If
the option is exercised, CVC will receive warrants to purchase Endurance ordinary shares equal
to 38.5% of the number of Endurance ordinary shares purchased at an exercise price of $58.86 |
 Summary of
Bridge Term Loan Facility Material Terms 24
Facility
•
$1.0Bn 364-Day Senior Unsecured Bridge Term Loan Facility
Commitment
Termination Date
•
December 31, 2014, or if an acquisition agreement is entered into on or prior to December 31,
2014, the earliest to occur of (i)
the
termination
date
specified
in
the
acquisition
agreement,
(ii)
6
months
from
the
execution
of
the
acquisition
agreement
plus
up
to
an
additional
3
months
to
obtain
regulatory
approvals
to
the
extent
deemed
advisable
by
Endurance
to
effect
the
acquisition (and to the extent the termination date under the acquisition agreement is
similarly extended) and (iii) 15 months from the date of the commitment letter for the
Bridge Term Loan Facility Maturity
•
364 days following any funding of the Bridge Term Loan Facility
Pricing
•
Customary structuring, upfront and funding fees
•
Draws
on
the
facility
will
be
priced
on
a
ratings
based
grid.
At
Endurance’s
current
ratings:
–
Days 1-89: L+ 150 bps
–
Days 90-179: L + 175 bps
–
Days 180-269: L + 200 bps
–
Days 270-364: L + 250 bps
•
Ticking / commitment fees: After 60 days, 20.0 bps per annum, increasing to 30.0 bps per
annum on December 31, 2014 and ending on the closing date on the undrawn commitments
outstanding under the Bridge Term Loan Facility •
Duration fees (on bridge loans outstanding):
–
50 bps payable 90 days after funding
–
75 bps payable 180 days after funding
–
100 bps payable 270 days after funding
Prepayments
•
Prepayable at any time at par
•
Mandatory prepayments/commitment reductions: net cash proceeds from debt, equity and
convertible issuances and non- ordinary course asset sales (subject to certain
exceptions) Financial Covenants
•
Minimum Consolidated Tangible Net Worth of $1.8Bn
•
Maximum Debt / Capitalization of 35%, increasing to 40% to the extent a corresponding change
is made to Endurance’s existing credit agreement
Conditions
•
Customary,
including
(i)
minimum
credit
ratings
of
Baa3
(with
stable
outlook)
from
Moody’s
and
BBB-
(with
stable
outlook)
from
S&P,
(ii)
minimum
financial
strength
ratings
of
A-
(with
stable
outlook)
from
S&P
and
A-
(with
stable
outlook)
from
A.M.
Best, and (iii) except in the case of a negotiated transaction, consolidated tangible net
worth, pro forma for the acquisition, of not less than $3.9 billion
|