Aspen Insurance Holdings (AHL) is a Bermuda-based holding company that provides property and liability insurance in the United Kingdom and the U.S., as well as property and casualty reinsurance in global markets.
When AHL was selling at $39 in mid – April of 2014, it received an unsolicited takeover bid of $47.50 per share from Endurance Specialty Holdings Ltd. (ENH), also headquartered in Bermuda. Aspen Insurance rejected the bid but Endurance Specialty has persisted, and on Monday raised its bid to $49.50 per share in either cash or stock or a combination of both. Aspen’s board of directors immediately rejected the improved bid as inadequate. They said that based on their strong 1st quarter earnings performance, the revised bid was actually lower on a book value per share basis than the previous bid.
Endurance has vowed to wage a proxy fight to gain control of Aspen Insurance Holdings. Aspen has a very bullish Chaikin Power Gauge rating and sells at 11x earnings with a 1.73% yield. At current levels the price to book ratio is .89, below its industry average.
Aspen is an A rated insurance company with a strong balance sheet. They reported excellent 1st quarter earnings in April of $1.55 per share vs. $1.06 last year, beating analyst estimates of $0.96 handily. AHL has a history of exceeding analyst estimates, having bested estimates in 11 or the past 12 quarters. Full year estimates for 2014 have been increased to $4.25 vs. $3.88 in 2013.
With Endurance likely to persist, a higher price than 49.50 may ultimately result in Aspen’s capitulation and acceptance of the takeover bid. With the stock market overbought and attractive names hard to find at a reasonable price, AHL which closed Friday, June 6, 2014 at 46.32 represents an attractive investment in the strong Insurance group which may yield a gain of 10% or more in the short-term if a better price is offered by Endurance. The stock is attractive without the takeover bid looming and it would likely attract other suitors if its bankers reached out.
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