Seeking Alpha: Endurance Specialty Is Getting Scale, But More Challenges As Well

Endurance Specialty (NYSE:ENH) chairman and CEO John Charman has made no secret of the fact that he believes Endurance needs more scale to be a truly competitive player in the evolving insurance and reinsurance markets. While Aspen (NYSE:AHL) rebuffed the company's takeover attempt, Montpelier Re (NYSE:MRH) put itself up for sale not long thereafter and the companies announced a merger on March 31 of this year.

While an acquisition of Aspen would have made more sense (at least superficially), the Montpelier deal should be accretive for Endurance on both earnings and ROE pretty much from day one. I'm a little concerned about the greater shift toward property catastrophe reinsurance, but it's not a transformative shift and it is one I believe Endurance can manage. What's more, Montpelier's Lloyds and Blue Capital assets may be a lot more valuable than the market currently projects. Valuing Endurance on the premise that the deal goes through suggests to me that the company could be more than 10% undervalued today, but there is going to be a "show me" process where management has to deliver on the proposed synergies to unlock the value.

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Endurance Specialty Is Getting Scale, But More Challenges As Well