SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
8-K
Current Report
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
March 31, 2015
Date of Report (Date of earliest event reported)
Endurance
Specialty Holdings Ltd.
(Exact name of registrant as specified in its charter)
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| Bermuda |
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1-31599 |
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98-0392908 |
| (State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
Waterloo House, 100 Pitts Bay Road, Pembroke, HM 08, Bermuda
(Address of principal executive offices, including zip code)
(441) 278-0400
(Registrant’s telephone number, including area code)
Not Applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| x |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 |
Regulation FD Disclosure. |
In connection with the Merger (as defined and described
below), beginning on March 31, 2015, Endurance Specialty Holdings Ltd. (“Endurance”) will present information to shareholders of Endurance, Montpelier Re Holdings Ltd. (“Montpelier”) and other persons. A copy of the
presentation is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Such presentation is being furnished for informational
purposes only and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended. Registration statements or other documents filed with the U.S. Securities and Exchange Commission shall not incorporate such presentation or any other information set forth in this Item 7.01
by reference, except as otherwise expressly stated in such filing. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.
On March 31, 2015, Endurance and Montpelier issued a joint press
release announcing that Endurance and Montpelier have entered into a definitive merger agreement pursuant to which Endurance will acquire all of the issued and outstanding shares of Montpelier (the “Merger”). A copy of the joint press
release is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.
| Item 9.01 |
Financial Statements and Exhibits. |
| (d) |
Exhibits. The following exhibits are filed with this report: |
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| Exhibit
No. |
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Description |
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| 99.1 |
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Investor Presentation, dated March 31, 2015 |
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| 99.2 |
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Joint Press Release, dated March 31, 2015 |
Cautionary Note Regarding Forward-Looking Statements
This material may include, and Endurance may make related oral, 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 Montpelier (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 material 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, 2014.
Additionally, the proposed transaction is subject to risks and uncertainties,
including: (A) that Endurance and Montpelier may be unable to complete the proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived; (B) uncertainty as to the
timing of completion of the proposed transaction; (C) uncertainty as to the actual premium of the Endurance share component of the proposal that will be realized by Montpelier shareholders in connection with the transaction;
(D) uncertainty as to the long-term value of Endurance ordinary shares; (E) failure to realize the anticipated benefits and synergies from the proposed transaction, including as a result of failure or delay in integrating Montpelier’s
businesses into Endurance; (F) the risk that regulatory or other approvals required for the transaction are not obtained or are obtained subject to conditions that are not anticipated; (G) the inability to retain key personnel;
(H) any changes in general economic and/or industry specific conditions; and (I) the outcome of any legal proceedings to the extent initiated against Endurance, Montpelier and others following the announcement of the proposed transaction,
as well as Endurance and Montpelier management’s response to any of the aforementioned factors.
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 Endurance’s most recent report on Form 10-K and the risk factors
included in Montpelier’s most recent report on Form 10-K and other documents of Endurance and Montpelier on file with the Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this material 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,
Endurance or its business or operations. Except as required by law, the parties undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Additional Information about the Proposed Transaction and Where to Find It
The issuance of Endurance ordinary shares to Montpelier shareholders in the merger will be submitted to shareholders of Endurance for their consideration. The
proposed merger will be submitted to shareholders of Montpelier for their consideration. This material is not a solicitation of any vote or approval and is not a substitute for the joint proxy statement/prospectus or any other documents which
Endurance or Montpelier may send to their respective shareholders in connection with the proposed merger.
This material does not constitute an offer to
sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such jurisdiction. No offering of securities shall be made except by means of a proxy statement/prospectus meeting the requirements of the Securities Act of 1933, as amended.
ENDURANCE AND MONTPELIER SHAREHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS FOR THE PROPOSED MERGER WHEN IT IS FILED, AND ANY AMENDMENT OR
SUPPLEMENT THERETO THAT MAY BE FILED, WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. 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 Relations contact below.
Participants in the Solicitation
Endurance and Montpelier and their directors and executive officers are deemed to be participants in any solicitation of Endurance and Montpelier shareholders
in connection with the proposed merger. Information about Endurance’s directors and executive officers is available in Endurance’s Definitive Proxy Statement, dated April 9, 2014, for its 2014 Annual General Meeting of shareholders
and Form 8-K, dated November 26, 2014. Information about
Montpelier’s directors and executive officers is available in Montpelier’s Definitive Proxy Statement, dated March 26, 2014, for its 2014 Annual General Meeting of shareholders and
Form 8-K, dated May 15, 2014.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: March 31, 2015
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| By: |
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/s/ John V. Del Col |
| Name: |
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John V. Del Col |
| Title: |
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General Counsel & Secretary |
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| Exhibit 99.1
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Endurance: Acquisition of Montpelier Re Investor Presentation
March 31, 2015
Forward Looking Statements and Regulation G Disclaimer
Cautionary Note Regarding Forward Looking Statements
Some of the statements in this presentation may include, and Endurance may make related oral, 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 Montpelier (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,
2014.
Additionally, the proposed transaction is subject to risks and uncertainties, including: (A) that
Endurance and Montpelier may be unable to complete the proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived; (B) uncertainty as to the timing of completion of
the proposed transaction; (C) uncertainty as to the actual premium of the Endurance share component of the proposal that will be realized by Montpelier shareholders in connection with the transaction; (D) uncertainty as to the long-term
value of Endurance ordinary shares; (E) failure to realize the anticipated benefits and synergies from the proposed transaction, including as a result of failure or delay in integrating Montpelier’s businesses into Endurance; (F) the
risk that regulatory or other approvals required for the transaction are not obtained or are obtained subject to conditions that are not anticipated; (G) the inability to retain key personnel; (H) any changes in general economic and/or
industry specific conditions; and (I) the outcome of any legal proceedings to the extent initiated against Endurance, Montpelier and others following the announcement of the proposed transaction, as well as Endurance and Montpelier
management’s response to any of the aforementioned factors.
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 Endurance’s most recent report on Form 10-K and the risk
factors included in Montpelier’s most recent report on Form 10-K and other documents of Endurance and
Montpelier on file with the Securities and Exchange Commission (“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, Endurance or its business or operations. Except as required by law, the parties undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future
developments or otherwise.
Additional Information about the Proposed Transaction and Where to Find It
The issuance of Endurance ordinary shares to Montpelier shareholders in the merger will be submitted to
shareholders of Endurance for their consideration. The proposed merger will be submitted to shareholders of Montpelier for their consideration. This presentation is not a solicitation of any vote or approval and is not a substitute for the joint
proxy statement/prospectus or any other documents which Endurance or Montpelier may send to their respective shareholders in connection with the proposed merger.
This presentation does not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. No offering of securities shall be made except by means of a proxy
statement/prospectus meeting the requirements of the Securities Act of 1933, as amended.
ENDURANCE AND
MONTPELIER SHAREHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS FOR THE PROPOSED MERGER WHEN IT IS FILED, AND ANY AMENDMENT OR
SUPPLEMENT THERETO THAT MAY BE FILED, WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. 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 Relations contact on the next page.
2
Forward Looking Statements and Regulation G Disclaimer
(cont’d)
Participants in the Solicitation
Endurance and Montpelier and their directors and executive officers are deemed to be participants in any
solicitation of Endurance and Montpelier shareholders in connection with the proposed merger. Information about Endurance’s directors and executive officers is available in Endurance’s Definitive Proxy Statement, dated April 9, 2014,
for its 2014 Annual General Meeting of shareholders and Form 8-K, dated November 26, 2014. Information about Montpelier’s directors and executive officers is available in Montpelier’s Definitive Proxy Statement, dated March 26,
2014, for its 2014
Annual General Meeting of shareholders and Form 8-K, dated May 15, 2014.
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.
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. The Company 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.
Contact
Information
Endurance Specialty Holdings Ltd. Investor Relations Phone: +1 441 278 0988 Email:
investorrelations@endurance.bm
Media Relations
Mark Semer and Thomas Davies Kekst and Company Phone: 212 521 4802/4873
Email: mark-semer@kekst.com and tom-davies@kekst.com
3
Key Transaction Terms
Transaction •
Endurance to acquire all of the common shares of Montpelier in a cash and stock acquisition
• $1.8
billion transaction equity value ($40.24 per share) (1)
Value
1.21x Montpelier fully converted book value per common share as of 12/31/14
• Consideration mix of approximately 25% cash to Montpelier shareholders and 75% stock(1) , including on a per
share basis:
Consideration Mix $9.89 per share special pre-closing dividend of cash, and
0.472 Endurance shares (fixed exchange ratio)
• $450 million aggregate cash consideration, funded by special pre-closing dividend by Montpelier
Financing
• $1.4 billion of newly issued Endurance shares (1)
Pro Forma Endurance • 68% by existing Endurance shareholders
Ownership (1) • 32% by existing Montpelier shareholders
• Current Endurance management to remain in place
Management and Board
• Increase
Endurance’s Board of Directors at closing to include 3 current Montpelier Directors
• Regulatory
approvals and other customary closing conditions
• Approval of Montpelier and Endurance shareholders
Approvals and Timing Funds affiliated with Charlesbank Capital Partners have agreed to vote their Montpelier
common share
stake in favor of the proposed transaction
• Expected closing in third quarter of 2015
Preferred Share • Montpelier preferred shares will be redeemed prior to Montpelier shareholder meeting at $26, or $156
Redemption million in aggregate, plus declared and unpaid dividends, if any, to the date of redemption
Notes
1. Figures based on Endurance closing share price of $64.30 as of 3/30/2015 and 45.5MM fully-diluted Montpelier common shares
4
Transaction Highlights
• Transaction creates
an enterprise with over $3.6 billion (1) of annual gross premiums written
Increased Scale and
Market Presence • Increased size allows organization to better capitalize on distribution relationships and more
effectively
compete across all market conditions
• Good-sized and scalable Lloyd’s platform expands distribution and product capabilities and provides
access to new markets to further accelerate Endurance’s London market insurance growth strategy
Diversified Platform • Addition of established third party capital management franchise (Blue Capital)
expands market
Across Products and presence, enhances capital flexibility and provides stable source of income
Geographies
• Montpelier’s attractive property catastrophe business complements existing reinsurance portfolio
• Insurance to remain above 50% of the combined diversified portfolio (1)
• Meaningful transaction synergies, including more than $60 million of annual run-rate cost savings
• Expected to be immediately accretive to EPS and ROE, excluding non-recurring integration and
Financially Attractive transaction costs
•
Neutral to book value per share and modestly dilutive to tangible book value per share
• Potential for
enhanced capital management over time
• With common shareholders’ equity of $4.1 billion
(2) and total capital of $5.5 billion (2), the combined
Stronger Balance company will have a
substantially improved financial profile
Sheet and Capital
Position • Larger, stronger balance sheet better positions combined company to pursue growth, withstand
volatility and manage capital
• Montpelier maintains high quality business in lines where Endurance has significant underwriting and
Manageable management expertise
Integration Risk
• Similar corporate cultures and view of risk
• Straightforward corporate and organizational
structure
Notes
1. Based on 2014 figures
2. Figures as of
12/31/14, pro forma for transaction. Based on Endurance closing share price of $64.30 as of 3/30/2015. Shareholders’ equity and total capital exclude non-controlling interests
5
Transaction Provides Increased Scale and Stronger Balance
Sheet
2014 Gross Premiums Written of Common
Shareholders’ Equity of Peer
Peer Companies Companies (12/31/14)
$Bn $Bn
XL + CGL 14.1 XL + CGL (2) 11.9
PRE + AXS
10.6 PRE + AXS (2) 11.0
RE 5.7 Y 7.5
Y 5.1 RE 7.5
ACGL 4.8 ACGL 5.8
ENH + MRH 3.6 RNR (2) 4.2
AWH 2.9 ENH + MRH (3) 4.1
AHL 2.9 AWH 3.8
ENH 2.9 VR 3.6
VR 2.4 AHL 2.9
RNR (1) 2.1 ENH 2.8
AGII 1.9 AGII 1.6
MRH 0.7 MRH 1.5
0 4 8 12 16 0 4 8 12 16
Notes
1. Pro forma for Platinum acquisition
2. As of 12/31/2014, XL, PRE + AXS and RNR common shareholders’ equity shown pro forma for stock issued in connection with transactions based on publicly filed pro forma financial
disclosure
3. As of 12/31/2014, pro forma for the acquisition of MRH, does not include impact of purchase
accounting adjustments or transaction expenses
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Combined Business Well Diversified Across Business Lines and Platforms
Meaningfully greater scale in reinsurance with premiums up ~35%
Overall business mix remains balanced, with over 50% insurance
Endurance (1) Montpelier (1) (2) Combined
Reinsurance: 41% Insurance: 59% Reinsurance: 73% Insurance: 27% Reinsurance: 47% Insurance: 53%
$1.2Bn $1.7Bn $0.5Bn $0.2Bn $1.7Bn $1.9Bn
Other
Collateralized
Collateralized Insurance Re
Other Insurance Re 4% Other 2%
Reinsurance 59% 11% Lloyd’s
Reinsurance
29% Insurance
Other 27%
23%
Reinsurance
18%
+ = Insurance
48%
Property Property
Catastrophe Lloyd’s
Catastrophe
Reinsurance Property Reinsurance Reinsurance
12% Catastrophe 14% 16%
Reinsurance Lloyd’s Lloyd’s
30%
Reinsurance Insurance
3% 5%
GPW: $2.9Bn GPW: $0.7Bn GPW: $3.6Bn
Notes
1. Based on full year 2014 gross premiums written
2. Montpelier insurance includes Property and Specialty Individual Risk; reinsurance includes Property Catastrophe –
Treaty, Property Specialty – Treaty, and Other Specialty – Treaty
7
Transaction Adds Important New Strategic Capabilities to
Endurance
Montpelier Overview Benefits to
Endurance
• Profitable, diversified syndicate focused
• Accelerates Endurance’s London market
on specialty insurance opportunities
growth plans
Lloyd’s • Focus on non-cat exposed products
• Provides good-sized and scalable Lloyd’s
complementary to other Endurance
platform
businesses
• Leading insurance-linked securities • Fee revenue generates stable source of
manager with $625 million total 3rd party income and enhances ROE profile
AUM(1)
• Creates capability to offer clients
Blue
Capital • Two publicly traded vehicles, BCGR (LSE) collateralized paper via Blue Capital
and BCRH (NYSE),
represent permanent
capital and expand Endurance’s sources • Increases retrocessional opportunities
of capital for Endurance’s existing business
Notes
1. As of 1/1/2015
8
Financially Compelling Transaction
Transaction
economics are highly attractive for Endurance shareholders
Key Financial Drivers
• More than $60MM of annual run-rate cost savings
Modest premium reduction from re-underwriting
Enhanced financial flexibility from generation of excess capital
Summary of Financial Impact to Endurance
EPS
(1) • Immediately accretive to EPS
ROE (1) • Accretive vs. standalone Endurance ROE
• Neutral to book value per share
Book Value Per Share • Modest initial dilution to tangible book value per share
Notes
1. Excluding non-recurring integration and transaction costs
9
Enhanced Balance Sheet Strength
Endurance
Montpelier Pro Forma (1)
Cash and Invested Assets $6.7Bn $3.2Bn $9.3Bn
Total Assets $9.6Bn $3.6Bn $13.0Bn
Common Equity $2.8Bn $1.5Bn $4.1Bn
Total Capital
$3.7Bn $2.1Bn $5.5Bn
Debt / Total Capital 14.2% 19.8% 17.0%
(Debt + Preferred) / Total Capital 25.8% 27.1% 24.8%
Book Value per Share $61.33 $33.19 $62.20
Notes
1. As of 12/31/2014, pro forma for
transaction, excluding purchase accounting adjustments and transaction expenses; based on Endurance closing share price of $64.30 as of 3/30/2015 and 45.5MM fully-diluted Montpelier common shares. Pro forma includes redemption of $150MM Montpelier
preferred shares and related $6MM charge, plus declared and unpaid dividends, if any, to the date of redemption
10
Conclusion
Transaction is financially attractive
to Endurance shareholders and provides compelling value to Montpelier’s shareholders
Transaction provides
important new strategic capabilities to Endurance with increased scale and market presence
Combined balance
sheet and capital position is significantly enhanced with increased financial flexibility and capital management opportunities
Manageable integration risk with similar cultures, compatible underwriting portfolios and straightforward corporate and organizational structure
11
Exhibit 99.2
Endurance Specialty Holdings to Acquire Montpelier Re Holdings
Increases Endurance’s Scale and Market Presence
Broadens Capabilities Through Addition of Lloyd’s Franchise
Adds Established Third Party Capital Management Franchise
Accretive to Endurance Earnings Per Share and Return on Equity
PEMBROKE, Bermuda, March 31, 2015 – Endurance Specialty Holdings Ltd. (NYSE: ENH) (“Endurance” or the “Company”) and Montpelier
Re Holdings Ltd. (NYSE: MRH) (“Montpelier”) today announced that they have entered into a definitive merger agreement pursuant to which Endurance will acquire Montpelier for consideration of 0.472 shares of Endurance and $9.89 in cash for
each Montpelier common share, which represents $40.24 per Montpelier common share, or $1.83 billion in aggregate, based on Endurance’s closing price on March 30, 2015.
John R. Charman, Endurance’s Chairman and Chief Executive Officer, said, “Endurance’s strategic acquisition of Montpelier represents a
compelling value creation opportunity for Endurance’s shareholders, with accretion to earnings per share and return on equity. As a result of the transaction, we expect to achieve meaningful transaction synergies through cost savings and
greater capital efficiencies. Importantly, the acquisition materially increases our breadth of distribution with the addition of a good-sized and scalable Lloyd’s platform and an attractive property catastrophe business that complements our
existing reinsurance portfolio. The acquisition also provides Endurance with a natural introduction to the business of managing insurance and reinsurance investment products for third-party capital investors. Montpelier’s historic high quality
portfolio reflects a disciplined approach to underwriting that is consistent with Endurance’s strong risk management and underwriting culture.”
Under the terms of the agreement, the aggregate consideration for the transaction will consist of $450 million in cash and approximately 21.5 million
Endurance ordinary shares, which are valued at approximately $1.4 billion based on Endurance’s closing price on March 30, 2015. The cash portion of the consideration will be funded through a pre-closing dividend paid by Montpelier to its
common shareholders. Following completion of the transaction, Montpelier’s existing shareholders will own approximately 32% of Endurance’s outstanding ordinary shares.
The acquisition price of $40.24 per Montpelier common share, based on Endurance’s closing price on March 30, 2015, represents a 19% premium to
Montpelier’s unaffected closing price per common share as of the close of business on December 10, 2014. The acquisition price also represents a multiple of 1.21x Montpelier’s fully converted book value per common share as of
December 31, 2014.
Christopher Harris, Montpelier’s President and Chief Executive Officer, said, “This transaction with Endurance provides
significant value for Montpelier shareholders through up-front cash and an equity interest in a combined Endurance with enhanced scale, greater market presence and substantial product and geographic diversity. The combination of our balance
sheets, our diverse underwriting platforms and high-quality books of business is a compelling opportunity for our shareholders, customers and distribution partners.”
For the twelve months ended December 31, 2014, the two companies had pro forma gross premiums written of $3.6 billion. Endurance common
shareholders’ equity will increase from $2.8 billion to $4.1 billion, total capital will
increase from $3.7 billion to $5.5 billion, and total cash and invested assets will increase from $6.7 billion to $9.3 billion on a pro-forma basis. Endurance expects to achieve more than $60
million of annual run-rate cost savings and to realize meaningful capital efficiencies from the acquisition. The transaction is expected to be immediately accretive to earnings per share and return on equity, excluding non-recurring integration and
transaction costs.
Endurance’s Board of Directors will be expanded at closing to include three of Montpelier’s current directors.
Endurance’s senior management team will lead the combined company from its Bermuda headquarters.
The agreement has been unanimously approved by both
companies’ Boards of Directors. The transaction is expected to be completed in the third quarter of 2015 and is subject to the approval of both companies’ shareholders, regulatory approvals and the satisfaction of customary closing
conditions. Funds affiliated with Charlesbank Capital Partners have agreed to vote their Montpelier common share stake in favor of the proposed transaction.
Endurance’s financial advisors in connection with the transaction are Morgan Stanley & Co. LLC and Jefferies LLC, and its legal counsel is
Skadden, Arps, Slate, Meagher & Flom LLP. Montpelier’s financial advisor in connection with the transaction is Credit Suisse Securities (USA) LLC, and its legal counsel is Cravath, Swaine & Moore LLP.
Investment Community Conference Call
Endurance will host
a conference call beginning at 8:30 a.m. Eastern Time on March 31, 2015 to discuss the transaction with interested investors and shareholders. The conference call may be accessed by calling 888-256-9154 (international +1-913-312-0855) and
entering passcode 9082882. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through April 14, 2015
by dialing 888-203-1112 or +1-719-457-0820 (international) and entering the pass code: 9082882. The slides for the presentation, as well as a webcast, can be accessed at the Investor Relations section of the Endurance website,
www.endurance.bm. An online replay of the webcast will be available shortly following the conclusion of the live broadcast.
About Endurance
Specialty Holdings Ltd.
Endurance is a global specialty provider of property and casualty insurance and reinsurance. Through its operating
subsidiaries, Endurance writes agriculture, casualty and other specialty, professional lines and property, marine and energy lines of insurance and catastrophe, property, casualty, professional lines and specialty lines of reinsurance. We maintain
excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor’s on our principal operating subsidiaries. Endurance’s headquarters are located at Waterloo
House, 100 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit
www.endurance.bm.
About Montpelier Re Holdings Ltd.
Montpelier, through its operating subsidiaries, is a premier provider of global property and casualty reinsurance and insurance products. Additional
information can be found in Montpelier’s public filings with the Securities and Exchange Commission.
Cautionary Note Regarding Forward-Looking
Statements
Some of the statements in this press release may include, and Endurance may make related oral, 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
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our proposed acquisition of Montpelier (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
press release 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, 2014.
Additionally, the proposed transaction is subject to risks and uncertainties, including: (A) that Endurance and Montpelier may be unable to complete the
proposed transaction because, among other reasons, conditions to the closing of the proposed transaction may not be satisfied or waived; (B) uncertainty as to the timing of completion of the proposed transaction; (C) uncertainty as to the
actual premium of the Endurance share component of the proposal that will be realized by Montpelier shareholders in connection with the transaction; (D) uncertainty as to the long-term value of Endurance ordinary shares; (E) failure to
realize the anticipated benefits and synergies from the proposed transaction, including as a result of failure or delay in integrating Montpelier’s businesses into Endurance; (F) the risk that regulatory or other approvals required for the
transaction are not obtained or are obtained subject to conditions that are not anticipated; (G) the inability to retain key personnel; (H) any changes in general economic and/or industry specific conditions; and (I) the outcome of
any legal proceedings to the extent initiated against Endurance, Montpelier and others following the announcement of the proposed transaction, as well as Endurance and Montpelier management’s response to any of the aforementioned factors.
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 Endurance’s most recent report on Form 10-K and the risk factors included in Montpelier’s most recent report on Form 10-K and other documents of Endurance and
Montpelier on file with the Securities and Exchange Commission (“SEC”). Any forward-looking statements made in this press release 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, Endurance or its business or operations. Except as required by law, the parties undertake no
obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Additional Information about the Proposed Transaction and Where to Find It
The issuance of Endurance ordinary shares to Montpelier shareholders in the merger will be submitted to shareholders of Endurance for their consideration. The
proposed merger will be submitted to shareholders of Montpelier for their consideration. This press release is not a solicitation of any vote or approval and is not a
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substitute for the joint proxy statement/prospectus or any other documents which Endurance or Montpelier may send to their respective shareholders in connection with the proposed merger.
This press release does not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor
shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. No offering of securities shall be made
except by means of a proxy statement/prospectus meeting the requirements of the Securities Act of 1933, as amended.
ENDURANCE AND MONTPELIER
SHAREHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS FOR THE PROPOSED MERGER WHEN IT IS FILED, AND ANY AMENDMENT OR SUPPLEMENT THERETO THAT MAY BE FILED, WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. 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 Relations contact below.
Participants in the Solicitation
Endurance and
Montpelier and their directors and executive officers are deemed to be participants in any solicitation of Endurance and Montpelier shareholders in connection with the proposed merger. Information about Endurance’s directors and executive
officers is available in Endurance’s Definitive Proxy Statement, dated April 9, 2014, for its 2014 Annual General Meeting of shareholders and Form 8-K, dated November 26, 2014. Information about Montpelier’s directors and
executive officers is available in Montpelier’s Definitive Proxy Statement, dated March 26, 2014, for its 2014 Annual General Meeting of shareholders and Form 8-K, dated May 15, 2014.
All references in this press release to “$” refer to United States dollars.
The contents of any website referenced in this press release are not incorporated by reference herein.
Contacts:
For Endurance Specialty Holdings Ltd.
Investor Relations
Phone: +1 441 278 0988
Email: investorrelations@endurance.bm
Media Relations
Mark Semer and Thomas Davies
Kekst and Company
Phone: 212 521 4802/4873
Email: mark-semer@kekst.com and
tom-davies@kekst.com
For Montpelier Re Holdings Ltd.
Ruth Pachman and James David
Kekst and Company
Phone: 212 521 4891/4825
Email: ruth-pachman@kekst.com and
james-david@kekst.com
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