Majority of execs believe Montpelier Re was Endurance’s second choice

The majority of re/insurance executives believe that the acquisition of Montpelier Re was very much a case of second choice for Endurance after its earlier bid for Aspen was rejected, according to an online poll conducted by Intelligent Insurer.

Over three quarters of respondents said the Montpelier Re deal was very much a second choice for Endurance as opposed to being the right move for both firms. Only 22 percent of respondents believed that the acquisition is the right move for both firms.

In March this year, Endurance revealed it had set its sights on Montpelier Re, just months after its failed acquisition of Aspen Insurance, which cost Endurance some $13.7 million in the first half of 2014.

Many respondents were critical of the strategic advantages Montpelier Re could provide, adding that it was a poor strategic fit for the companies.

“Endurance clearly would have preferred to have had Aspen in its stable. It was a very public, hostile bid that posed significant reputational risk and they were willing to take the risk,” said one respondent.

Respondents also suggested more deals could be ahead for Endurance. One respondent said: “Whether a second choice or not, Endurance is at a critical stage where growth is imperative to maintain their momentum and they must position themselves for continued expansion. I would trust that this will not be their only move for acquisitions.”

Another added: “It was the right move, but also a case of second choice as well, but it will come good in the end.”

Respondents offered mixed views on the value of the deal. One suggested: “Endurance has paid too much for what it gets from the Montpelier acquisition. There’s no real strategic acceleration of Endurance's business plan.”

Another said, however: “If you break the deal into three parts, the syndicate, the Bermuda cat platform and Blue Capital and value each part independently they have a great deal.”

Analysts have tended to agree with this sentiment. Meyer Shields, managing director at Keefe, Bruyette & Woods (KBW), said the acquisition might not satisfy Endurance’s appetite, making another deal in the next year likely.

He said: “I think that once the next 6-9 months go by, Endurance could be interested in another deal to further enhance its premium volume.

“Endurance’s main goal is to grow in specialty insurance lines, and Montpelier Re is almost 75 percent reinsurance, and a big chunk (30 percent of 2014 gross written premiums) is property catastrophe reinsurance, which is somewhat out of favour,” said Shields.

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