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Transatlantic And Allied World Mutually Terminate Merger Agreement

We have expeditiously and fully evaluated alternative offers.  Management traveled the country twice since June to solicit and respond to investor views.  We have returned every phone call.  We have been honest and transparent.  Do not believe what Validus' management tells you about our motivations.  They are biased and wrong.

This brings us to the consent solicitation filed by Validus this week.  In our view, it is obvious that Validus thinks it can determine the future course of your Company by nominating its three hand-picked candidates to consummate a hostile takeover.  We believe the solicitation is another in a series of transparent and opportunistic attempts to mislead stockholders into accepting an acquisition offer that does not reflect full and fair value.  We strongly urge stockholders to reject the Validus consent solicitation.

Finally, Validus has made a number of inaccurate assertions that we would like to address directly to correct the record.  We have included a fact sheet at the end of this letter that recaps these misstatements and states the facts.

Notwithstanding all of the foregoing, we are ready to enter talks with Validus in a constructive manner that will allow both parties to conduct mutual due diligence.

The Path Forward

If we were to undertake a strategic combination, it would have to be the right transaction, one that fairly rewards stockholders and meets multiple objectives.  To be clear, Transatlantic believes that the right strategic combination presents an attractive opportunity, but is not an imperative.  

We have a proven track record of creating value for our stockholders.  Over a 20-plus year period as a public company, we have grown book value per share at 12% per year over multiple industry cycles and have done so while being a U.S. taxpayer (unlike most of our competitors).  We strongly believe that Transatlantic's existing franchise will continue to deliver this type of performance, which should be further enhanced by the $600 million share repurchase program we announced today.  This program, which represents a $455 million increase to our existing repurchase authority, includes a commitment to repurchase $300 million of shares prior to December 31, 2011 and plans to complete the remainder of the program during 2012.  This program should deliver immediate value to our stockholders.  Had the repurchase activity taken place in the first half of 2011, it would have enhanced book value per share by 7%(5) while preserving our franchise and ratings.

Additionally, we have never stopped addressing the strategic initiatives we identified in our original 2010 review:
  1. Completing insurance licensing process for our Putnam subsidiary, which will provide access to U.S. primary insurance business
  2. Executing on existing plan to address European and Latin American regulatory requirements
  3. Adjusting the mix of short-tail and long-tail business, given the current or future market environment
  4. Remaining focused on lowering cost of capital

In closing, Transatlantic has a proven track record of value creation and your Board of Directors has a clear path to enhancing that record in the months and years to come.  Looking ahead, we have an experienced management team in place to execute on our path forward.  Consistent with Bob Orlich's prior plans to retire as CEO upon the closing of the Allied World transaction, Bob will now remain CEO through the end of this year and retire from that post on December 31, while remaining on the Board.  Meanwhile, Mike Sapnar will assume the role of President, effective immediately, and will take on the additional duties of CEO upon Bob's retirement.  

All of us on the Board and in management have and will continue to work tirelessly to deliver value for our stockholders.  We appreciate your thoughtful feedback over the past several months and we look forward to continuing that dialogue in the future.

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