Endurance Specialty’s Largest Shareholder Calls for Merger

Endurance Specialty Holdings Ltd. is getting some static from its largest shareholder, who has taken the unusual step of filing a form with the U.S. Securities and Exchange Commission to suggest he's displeased with recent management changes at the company, and that the company consider a merger or acquisition.

Richard C. Perry, an Endurance board member and president of Perry Corp., a New York-based investment adviser, filed the amended Schedule 13D last week following the announcement that Endurance founder Kenneth J. LeStrange, would step down as president and chief executive officer.

The Endurance president and CEO roles will be divided between David Cash, who had been the company's chief underwriting officer, becoming CEO, and William M. Jewett, who had been president and CEO of Endurance Worldwide Reinsurance, becoming president (BestWire, Feb. 18, 2010). Both appointments were effective March 1.

Cash has also been with the company since it was founded in 2001. LeStrange will continue as chairman of the board until March 2, 2011, the company said. Cash and Jewett will be nominated to the board in May 2010.

Perry said he is the largest shareholder, owning 12% of Endurance's shares, and has also been on the board since the company's 2001 founding.

In his SEC filing, Perry said Endurance should evaluate "strategic alternatives and pursue a possible merger or other strategic transaction in order to create a stronger company with a defined growth strategy and best-in-class lines of business."

Perry said he expects "consolidation in the Bermuda market reinsurance industry to accelerate in the near-term. Many market participants are trading below book value per share and are heavily concentrated on similar lines of business. These factors, together with the recovery in the financial markets, are likely to support a trend of industry consolidation or a return of excess capital."

He also said he's concerned that the leadership changes at the company won't position Endurance "to capitalize on industry consolidation opportunities."

Perry suggested he may contact other shareholders to join him in urging Endurance to pursue a merger, including soliciting a proxy proposal or electing directors to the board.

The Endurance board and management responded with a statement saying the company is "committed to delivering shareholder value, as demonstrated by its record of performance since inception, culminating in last week's reporting of record earnings and growth in book value per share."

Also, Endurance said the separation of the chairman and CEO positions, combined with the ongoing lead independent director role, is "consistent with best practices in corporate governance."

Attempts to reach Endurance and Perry for additional comment were unsuccessful.

Endurance is the latest Bermuda reinsurer to face an unusual action from a major shareholder.

Last week, Omega Insurance Holdings Ltd., a property insurer and reinsurer, announced it will hold a special shareholder meeting March 12 to consider an investor's request to oust the entire current board of directors and install completely new leadership. Invesco Ltd., which owns 29.5% of Omega, is requesting that shareholders vote to install John Coldman, the retired chairman of the reinsurance broker Benfield Group (which merged with Aon in 2008) as chairman of the Omega board, as well as replace the rest of the current directors (BestWire, Feb. 23, 2010).

Omega is urging shareholders to vote against the coup.

Endurance's subsidiaries currently have Best's Financial Strength Ratings of A (Excellent).

Shares of Endurance (NYSE: ENH) were trading at $38.70 a share on the morning of March 3, up 0.42% from the previous close.

(By Meg Green, senior associate editor, BestWeek: [email protected])