Aspen Insurance Holdings is expected to announce this week - and perhaps as early as tomorrow - that its five month sale process has come to an end with an agreed buy-out that values the NYSE-listed firm at nearly $2.6bn.

Investment heavyweight Apollo Global Management will acquire the firm in cash for a price believed to be between $42 and $43 per share following shareholder approval and regulatory sign-off slated for before Q1 ends next year, re-Insurance.com understands.

The agreed price is believed to be within the $42-43 range identified by re-Insurance.com last week.

Apollo - which is separately expected to close its majority stake acquisition of Bermuda legacy firm Catalina early next month - will then add Aspen to its stable of insurance assets following a sale process that began in late March.

Earlier this month, Re-insurance.com revealed Apollo has launched a new Bermuda class 3A reinsurer, Acra Re Ltd, which will be used to finance large trades and capital relief transactions. It is also the controlling shareholder in Athene Holdings, the giant Bermudian annuity buy-out firm.

While Apollo was unavailable for comment on proceedings at time of going to press, the timetable chimes with comments O’Kane made on a Q2 investor call earlier this month when he said he expects the process to be resolved “relatively soon”.

At between $42-$43 a share, the agreed price is a premium to Aspen’s half-year book value of $38.21. This price is also within the 1.1-1.15x price-to-book range that re-Insurance.com predicted on 24 July when it revealed the two firms were now in “advanced talks”.

After completion, the transaction is likely to have echoes of Apollo’s 2011 buy-out of Lloyd’s insurer Brit Insurance with the investment firm expected to eventually parachute in new management, shrink Aspen’s book to focus on profitable lines, cut costs and improve the investment return.

Aspen - whose was carved out of Lloyd’s amidst the post-9/11 uncertainty and reborn as a stand-alone Bermudian reinsurer - has evolved into a larger and more complicated business than Brit Insurance over its seventeen-year life.

Listed on the NYSE, Aspen now owns a Bermudian (re)insurer, a US admitted insurer, a US non-admitted insurer, a UK licensed carrier and a Lloyd’s managing agency. It also underwrites in Singapore - through the Lloyd’s Asia platform - and has branch offices in Dublin, Zurich, Australia, China (on the Lloyd’s China platform) and Dubai.

Aspen-shares'-rollercoaster-ride-in-2018

O’Kane has already implemented a rationalisation program at Aspen – which began in late 2017 - and earlier this month revealed that headcount at the firm could even fall by as much as 20 percent when his two-year rationalisation process completes in 2019.

The firm initiated a sale process led by Goldman Sachs and JP Morgan in late March after posting a 2017 FY loss of $266.4mn - the equivalent of a combined ratio of 125.7 percent - which O’Kane described as “well below acceptable”.

The loss ratio of 86.5 percent included $561.9mn, or 24.6 percentage points, of pre-tax cat losses from events such as hurricanes Harvey, Irma and Maria, as well as the Californian wildfires, net of reinsurance recoveries and reinstatement premiums.

O’Kane - who was instrumental in the creation of Aspen in 2002 when it was carved-out of then-Lloyd’s blue-chip Wellington - famously fended off a hostile approach from John Charman’s Endurance, which tried to buy the firm in 2014 at around $49.50 in cash and paper.

Two years later, Charman later agreed a $6.3bn offer from Japanese carrier Sompo which would have had the effect of turning his Aspen cash/paper offer to around $70 a share if the 2014 offer had been accepted and Aspen shareholders had patiently retained their Endurance stock.

More recently, Aspen has parted company with a series of senior managers - including primary boss Stephen Postelwaite, reinsurance heads Brian Boornazian and Thomas Lillelund - and cut back its underwriting book in some classes.

It has also reduced its overall risk appetite, buying substantially more reinsurance on an ongoing basis and also a $125mn adverse development cover to protect against deteriorations on its prior year book.

Alternative bidders that fell away in this year’s sale process include investment firm Blackstone and rival Bermudians Hamilton and Argo Group. A host of other strategics - including Markel, The Hartford and Sirius - were thought to have shown an initial interest when the investor memorandum was circulated in late March and early April but failed to follow up.

Earlier this year, O’Kane and chief financial officer Scott Kirk negotiated improved terms in the event of a change of control while re-Insurance.com revealed that O’Kane has recently redomiciled to Bermuda where tax treatment is significantly better than the UK.

Apollo did not respond to a request for comment at time of going to press while an Aspen spokesperson said it “does not comment on market rumour and speculation”.

 

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