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EX-99.2 - EX-99.2 - ENDURANCE SPECIALTY HOLDINGS LTDd619617dex992.htm
8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTDd619617d8k.htm

Exhibit 99.1

 

LOGO

Endurance Reports Third Quarter 2013 Financial Results

PEMBROKE, Bermuda – November 4, 2013 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $75.2 million and $1.70 per diluted common share for the third quarter of 2013 versus net income of $31.9 million and $0.74 per diluted common share for the third quarter of 2012.

For the nine months ended September 30, 2013, Endurance reported net income available to common shareholders of $220.2 million and $5.04 per diluted common share versus net income of $170.6 million and $3.94 per diluted common share for the nine months ended September 30, 2012. Book value per diluted share was $54.33 at September 30, 2013, an increase of 4.6% from June 30, 2013 and up 2.7% from December 31, 2012.

Operating highlights for the quarter ended September 30, 2013 were as follows:

 

    Net premiums written of $395.3 million, a decline of 23.1% compared to the same period in 2012;

 

    Combined ratio of 87.7%, which included 8.7 percentage points of favorable prior year loss reserve development and 3.7 percentage points of catastrophe losses from 2013 events;

 

    Net investment income of $38.1 million, a decrease of $7.8 million from the same period in 2012;

 

    Operating income, which excludes after-tax realized investment losses and foreign exchange losses, of $83.9 million and $1.89 per diluted common share; and

 

    Operating return on average common equity for the quarter of 3.6% or 14.2% on an annualized basis.

Operating highlights for the nine months ended September 30, 2013 were as follows:

 

    Net premiums written of $1,768.9 million, a decline of 3.9% over the same period in 2012;

 

    Combined ratio of 89.3%, which included 10.6 percentage points of favorable prior year loss reserve development and 4.5 percentage points of current year catastrophe losses;

 

    Net investment income of $119.9 million, a decrease of $14.9 million over the same period in 2012;

 

    Operating income, which excludes after-tax realized investment gains and foreign exchange losses, of $221.0 million and $5.06 per diluted common share; and

 

    Operating return on average common equity for the first nine months of the year of 9.4%, or 12.6% on an annualized basis.

John R. Charman, Chairman and Chief Executive Officer, commented, “Endurance had a good quarter, both financially and strategically. Financially, our strong operating results were driven by improved underwriting performance and positive investment returns. Strategically, we have made significant progress driving substantial improvements in our underwriting capabilities, streamlining our operations and enhancing our positioning in the global market. These strategies are accelerating. We continue to attract market leading talent and these new high quality growth initiatives combined with our more streamlined operations significantly improves our ability to transform Endurance into a world class underwriting organization with industry leading profitability.”

Insurance Segment

Operating highlights for Endurance’s Insurance segment for the quarter ended September 30, 2013 were as follows:

 

    Net premiums written of $224.3 million, an increase of 1.4% from the third quarter of 2012;


    Combined ratio of 96.9%, an improvement of 24.1 percentage points from the third quarter of 2012; and

 

    Favorable prior year loss reserve development of 2.1 percentage points during the current period, compared to 6.2 percentage points of favorable prior year loss reserve development in the third quarter of 2012.

Operating highlights for Endurance’s Insurance segment for the nine months ended September 30, 2013 were as follows:

 

    Net premiums written of $820.5 million, a decrease of 1.8% from the same period in 2012;

 

    Combined ratio of 99.4%, an improvement of 8.3 percentage points from the same period in 2012; and

 

    Favorable prior year loss reserve development of 4.1 percentage points during the current period, compared to 5.5 percentage points of favorable prior year loss reserve development in the same period in 2012.

Net premiums written in the Insurance segment increased $3.1 million for the third quarter compared to the same period in 2012. Increases within the agriculture and casualty and other specialty lines of business were partially offset by declines in the professional and property lines of business. Within the agriculture line of business, net premiums written increased due to growth in spring crop policy counts and were partially offset by lower premiums from fall crops that were impacted by lower commodity prices compared to third quarter 2012. The increase in casualty and other specialty lines of business was predominantly driven by the addition of new underwriting teams in ocean and inland marine and within excess casualty. The decline in net premiums written in the professional line of business resulted from the termination of a program relationship in late 2012. The decline in property net premiums written reflects the nonrenewal of certain working layer property catastrophe contracts in order to improve the risk characteristics of the portfolio. For the nine months ended September 30, 2013, net premiums written declined $15.2 million as a decline in professional insurance was partially offset by growth in agriculture, property and casualty and other specialty lines of business.

The improvement in the Insurance segment combined ratio for the quarter ended September 30, 2013 compared to the same period in 2012 was primarily driven by lower net loss and acquisition expense ratios, partially offset by a higher general and administrative expense ratio. The biggest driver of the improvement in the net loss ratio resulted from a better crop year in the agriculture insurance line of business as 2012 was impacted by a severe drought. Also impacting the current quarter’s net loss ratio was improved accident year loss ratios in the property and casualty and other specialty lines of business that were partially offset by lower levels of prior period favorable reserve development. The general and administrative expense ratio was higher in the current quarter due to a greater level of corporate expenses related to severance costs, higher expenses associated with recently added underwriting teams and larger variable compensation expense accruals reflecting the Company’s higher current year profitability. For the nine months ended September 30, 2013, the combined ratio was 8.3 percentage points lower than the same period a year ago as lower net loss and acquisition expense ratios were partially offset by a higher general and administrative ratio.

Reinsurance Segment

Operating highlights for Endurance’s Reinsurance segment for the quarter ended September 30, 2013 were as follows:

 

    Net premiums written of $171.0 million, a decrease of 41.6% from the third quarter of 2012;

 

    Combined ratio of 77.4%, an increase of 0.6 percentage points from the third quarter of 2012;

 

    Favorable prior year loss reserve development of 16.0 percentage points compared to 14.2 percentage points of favorable prior year loss reserve development in the third quarter of 2012; and

 

    Net catastrophe losses from 2013 events of $18.1 million or 7.8 percentage points on the combined ratio compared to net catastrophe losses of $13.2 million or 5.3 points in the third quarter of 2012.

 

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Operating highlights for Endurance’s Reinsurance segment for the nine months ended September 30, 2013 were as follows:

 

    Net premiums written of $948.3 million, a decrease of 5.7% from the same period in 2012;

 

    Combined ratio of 80.4%, an improvement of 5.2 percentage points from the same period in 2012;

 

    Favorable prior year loss reserve development of 16.4 percentage points during the current period, compared to 6.9 percentage points of favorable prior year loss reserve development in the same period in 2012; and

 

    Net catastrophe losses from 2013 events of $65.5 million or 8.7 percentage points on the combined ratio compared to net catastrophe losses of $49.6 million or 6.6 points in the first nine months of 2012.

The $121.8 million decrease in net premiums written within the Reinsurance segment during the third quarter of 2013 compared to the third quarter of 2012 resulted primarily from declines in property, catastrophe and casualty reinsurance lines. The $67.2 million decline in property premiums in the current quarter compared to a year ago reflected a reduced participation on a few large contracts where pricing and terms were not adequate. The $23.9 million reduction in catastrophe premiums reflected the purchase of peak zone retrocessional coverage, which reduced net premiums written. Casualty premiums declined $24.1 million as the Company non-renewed business that no longer met profitability targets and a smaller level of premium adjustments were realized in the current quarter compared to a year ago. For the nine months ended September 30, 2013, net premiums written decreased $57.5 million due to declines within the property and catastrophe lines of business, partially offset by modest increases in the casualty and other specialty lines of business.

The combined ratio in the Reinsurance segment for the third quarter of 2013 increased modestly compared to the same period in 2012, predominantly due to a higher general and administrative expense ratio, partially offset by a lower net loss ratio. The net loss ratio in the third quarter of 2013 benefited from $41.9 million, or 16.0 percentage points, of favorable prior year loss reserve development, compared to $38.2 million, or 14.2 percentage points, for the same period a year ago. The favorable development in the current quarter was predominantly driven by short tail lines of business as losses have developed better than original estimates. The current quarter’s combined ratio also included 7.8 percentage points of catastrophe losses mainly related to hail storms in Germany, while the third quarter of 2012 included 5.3 percentage points of catastrophe losses relating to Hurricane Isaac and a number of small loss events. The higher general and administrative expenses were predominantly due to greater allocated corporate expenses related to severance costs from the reduction in senior executives previously announced and larger variable compensation expense accruals reflecting the Company’s higher current year profitability.

For the first nine months of 2013, the Reinsurance segment reported a combined ratio of 80.4% compared to 85.6% for the same period in 2012 principally due to a lower net loss ratio that included a greater level of favorable prior year loss reserve development, partially offset by a higher general and administrative expense ratio.

Investments

Endurance’s net investment income for the quarter and nine months ended September 30, 2013 was $38.1 million and $119.9 million, a decrease of $7.8 million and $14.9 million, respectively, compared to the same periods in 2012. The total return of Endurance’s investment portfolio was 1.32% and 0.68% for the quarter and nine months ended September 30, 2013, respectively, compared to 1.75% and 4.08% for the quarter and nine months ended September 30, 2012, respectively. Investment income generated from Endurance’s available for sale investments declined by $6.1 million and $19.6 million for the three and nine months ended September 30, 2013, respectively, compared to the same periods in 2012 due to lower reinvestment rates during 2013 and the short duration of Endurance’s fixed maturity portfolio. During the third quarter and nine months ended September 30, 2013, Endurance’s net investment income included gains of $13.2 million and $43.1 million, respectively, on its alternative investment funds and high yield loan funds, which are included in other investments, as compared to gains of $15.1 million and $38.1 million in the third quarter and first nine months of 2012, respectively. The ending book yield on Endurance’s fixed maturity investments at September 30, 2013 was 2.28%, down from 2.38% at September 30, 2012.

 

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At September 30, 2013, Endurance’s fixed maturity portfolio, which comprises 86.4% of Endurance’s investments, had an average credit quality of AA and a duration of 3.10 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $59.7 million at September 30, 2013, a decrease of $82.0 million from December 31, 2012. Endurance recorded net realized investment losses, net of impairment losses recognized in earnings, of $6.8 million and gains of $8.4 million during the third quarter and first nine months of 2013 compared to net realized investment gains of $10.0 million and $29.5 million during the third quarter and first nine months of 2012.

Endurance ended the third quarter of 2013 with cash and invested assets of $6.4 billion, which represents a 3.2% decrease from December 31, 2012. Net operating cash outflow was $(16.6) million for the nine months ended September 30, 2013 versus $211.4 million inflow for the same period in 2012. The decline year over year was primarily due to the payment of claims related to prior years and a shift in settlement dates for agriculture insurance related receivables from the U.S. Federal Government.

Capitalization and Shareholders’ Equity

At September 30, 2013, Endurance’s shareholders’ equity was $2.84 billion or $54.33 per diluted common share versus $2.71 billion or $52.88 per diluted common share at December 31, 2012. For the quarter and nine months ended September 30, 2013, Endurance declared and paid common dividends of $0.32 and $0.96 per share, respectively. During the nine months ended September 30, 2013, the Company repurchased 318,252 common shares at an average cost of $45.83 per share. Total share repurchases amounted to $14.6 million for the nine months ended September 30, 2013. No common shares were repurchased during the third quarter of 2013.

Earnings Call

Endurance will host a conference call on November 5, 2013 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 219-1420 or (913) 312-0420 (international) and entering pass code: 9454891. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 19, 2013 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 9454891.

The public may access a live broadcast of the conference call at the “Investors” section of Endurance’s website, www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance’s website.

A copy of Endurance’s financial supplement for the third quarter of 2013 will be available on Endurance’s website at www.endurance.bm shortly after the release of earnings.

Operating income, operating return on average common equity, operating income per diluted common share, operating income allocated to common shareholders and the combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables.

 

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About Endurance Specialty Holdings

Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes agriculture, casualty and other specialty, professional lines and property lines of insurance and catastrophe, property, casualty, and other specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor’s on our principal operating subsidiaries. Endurance’s headquarters are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit www.endurance.bm.

Safe Harbor for Forward-Looking Statements

Some of the statements in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “should,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2012.

Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation publicly to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

(In thousands of United States dollars, except share and per share amounts)

 

     September 30,      December 31,  
     2013      2012  

Assets

     

Cash and cash equivalents

   $ 789,999      $ 1,124,019  

Fixed maturity investments, available for sale, at fair value

     4,800,838        4,868,150  

Short-term investments, available for sale, at fair value

     11,599        42,230  

Equity securities, available for sale, at fair value

     262,866        86,997  

Other investments

     594,156        517,546  

Premiums receivable, net

     1,006,227        601,952  

Insurance and reinsurance balances receivable

     123,777        105,663  

Deferred acquisition costs

     197,048        168,252  

Prepaid reinsurance premiums

     263,499        166,702  

Reinsurance recoverable on unpaid losses

     513,080        691,783  

Reinsurance recoverable on paid losses

     428,300        83,159  

Accrued investment income

     21,783        27,166  

Goodwill and intangible assets

     167,000        172,000  

Deferred tax asset

     50,148        43,501  

Net receivable on sales of investments

     124,236        9,144  

Other assets

     192,104        86,708  
  

 

 

    

 

 

 

Total Assets

   $ 9,546,660      $ 8,794,972  
  

 

 

    

 

 

 

Liabilities

     

Reserve for losses and loss expenses

   $ 4,052,102      $ 4,240,876  

Reserve for unearned premiums

     1,314,687        965,244  

Deposit liabilities

     17,577        22,220  

Reinsurance balances payable

     347,048        110,843  

Debt

     527,506        527,339  

Net payable on purchases of investments

     224,473        81,469  

Other liabilities

     224,257        136,384  
  

 

 

    

 

 

 

Total Liabilities

     6,707,650        6,084,375  
  

 

 

    

 

 

 

Shareholders’ Equity

     

Preferred shares

     

Series A, non-cumulative - 8,000,000 issued and outstanding (2012 - 8,000,000)

     8,000        8,000  

Series B, non-cumulative - 9,200,000 issued and outstanding (2012 - 9,200,000)

     9,200        9,200  

Common shares

     

44,249,622 issued and outstanding (2012 – 43,116,394)

     44,250        43,116  

Additional paid-in capital

     560,204        527,915  

Accumulated other comprehensive income

     69,457        152,463  

Retained earnings

     2,147,899        1,969,903  
  

 

 

    

 

 

 

Total Shareholders’ Equity

     2,839,010        2,710,597  
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 9,546,660      $ 8,794,972  
  

 

 

    

 

 

 

Book Value per Common Share

     

Dilutive common shares outstanding

     44,337,727        43,130,075  

Diluted book value per common share [a]

   $ 54.33      $ 52.88  
  

 

 

    

 

 

 

Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2012, which was derived from Endurance’s audited financial statements.

 

[a] Excludes the $430 million liquidation value of the preferred shares.

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands of United States dollars, except share and per share amounts)

 

     Quarter Ended     For the Nine Months Ended  
     September 30,
2013
    September 30,
2012
    September 30,
2013
    September 30,
2012
 

Revenues

        

Gross premiums written

   $ 544,363     $ 621,255     $ 2,294,435     $ 2,286,980  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 395,333     $ 514,080     $ 1,768,869     $ 1,841,549  

Change in unearned premiums

     158,212       37,792       (251,872     (358,702
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     553,545       551,872       1,516,997       1,482,847  

Other underwriting (loss) income

     (943     (1,347     694       (1,663

Net investment income

     38,097       45,882       119,870       134,723  

Net realized and unrealized (losses) gains

     (6,640     10,097       9,967       30,258  

Total other-than-temporary impairment losses

     (190     (126     (1,575     (274

Portion of loss recognized in other comprehensive income (loss)

     —         (5     —         (483
  

 

 

   

 

 

   

 

 

   

 

 

 

Net impairment losses recognized in earnings

     (190     (131     (1,575     (757
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     583,869       606,373       1,645,953       1,645,408  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Net losses and loss expenses

     339,036       407,523       917,064       1,016,187  

Acquisition expenses

     78,775       88,782       222,279       229,399  

General and administrative expenses

     67,470       52,715       215,307       181,365  

Amortization of intangibles

     1,652       2,434       5,378       7,988  

Net foreign exchange losses (gains)

     2,201       3,774       8,496       (14,699

Interest expense

     9,048       9,041       27,138       27,132  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     498,182       564,269       1,395,662       1,447,372  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     85,687       42,104       250,291       198,036  

Income tax expense

     (2,271     (1,986     (5,557     (2,893
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     83,416       40,118       244,734       195,143  

Preferred dividends

     (8,188     (8,188     (24,564     (24,564
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common and participating common shareholders

   $ 75,228     $ 31,930     $ 220,170     $ 170,579  
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data

        

Basic earnings per common share

   $ 1.70     $ 0.74     $ 5.04     $ 3.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

   $ 1.70     $ 0.74     $ 5.04     $ 3.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

     For the quarter ended September 30, 2013  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 344,819     $ 199,544     $ 544,363  

Ceded premiums written

     (120,481     (28,549     (149,030
  

 

 

   

 

 

   

 

 

 

Net premiums written

     224,338       170,995       395,333  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     291,477       262,068       553,545  

Other underwriting loss

     —         (943     (943
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     291,477       261,125       552,602  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     228,409       110,627       339,036  

Acquisition expenses

     18,440       60,335       78,775  

General and administrative expenses

     35,641       31,829       67,470  
  

 

 

   

 

 

   

 

 

 
     282,490       202,791       485,281  
  

 

 

   

 

 

   

 

 

 

Underwriting income

   $ 8,987     $ 58,334     $ 67,321  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     78.4     42.3     61.3

Acquisition expense ratio

     6.3     23.0     14.2

General and administrative expense ratio

     12.2     12.1     12.2
  

 

 

   

 

 

   

 

 

 

Combined ratio

     96.9     77.4     87.7
  

 

 

   

 

 

   

 

 

 

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

     For the quarter ended September 30, 2012  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 324,808     $ 296,447     $ 621,255  

Ceded premiums written

     (103,543     (3,632     (107,175
  

 

 

   

 

 

   

 

 

 

Net premiums written

     221,265       292,815       514,080  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     283,273       268,599       551,872  

Other underwriting (loss) income

     (1,384     37       (1,347
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     281,889       268,636       550,525  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     288,750       118,773       407,523  

Acquisition expenses

     24,506       64,276       88,782  

General and administrative expenses

     29,409       23,306       52,715  
  

 

 

   

 

 

   

 

 

 
     342,665       206,355       549,020  
  

 

 

   

 

 

   

 

 

 

Underwriting (loss) income

   $ (60,776   $ 62,281     $ 1,505  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     101.9     44.2     73.8

Acquisition expense ratio

     8.7     23.9     16.1

General and administrative expense ratio

     10.4     8.7     9.6
  

 

 

   

 

 

   

 

 

 

Combined ratio

     121.0     76.8     99.5
  

 

 

   

 

 

   

 

 

 

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

     For the nine months ended September 30, 2013  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 1,274,703     $ 1,019,732     $ 2,294,435  

Ceded premiums written

     (454,169     (71,397     (525,566
  

 

 

   

 

 

   

 

 

 

Net premiums written

     820,534       948,335       1,768,869  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     710,507       806,490       1,516,997  

Other underwriting income

     —         694       694  
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     710,507       807,184       1,517,691  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     543,717       373,347       917,064  

Acquisition expenses

     48,024       174,255       222,279  

General and administrative expenses

     114,792       100,515       215,307  
  

 

 

   

 

 

   

 

 

 
     706,533       648,117       1,354,650  
  

 

 

   

 

 

   

 

 

 

Underwriting income

   $ 3,974     $ 159,067     $ 163,041  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     76.4     46.3     60.4

Acquisition expense ratio

     6.8     21.6     14.7

General and administrative expense ratio

     16.2     12.5     14.2
  

 

 

   

 

 

   

 

 

 

Combined ratio

     99.4     80.4     89.3
  

 

 

   

 

 

   

 

 

 

 

- 10 -


ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

     For the nine months ended September 30, 2012  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 1,252,814     $ 1,034,166     $ 2,286,980  

Ceded premiums written

     (417,109     (28,322     (445,431
  

 

 

   

 

 

   

 

 

 

Net premiums written

     835,705       1,005,844       1,841,549  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     710,988       771,859       1,482,847  

Other underwriting (loss) income

     (2,684     1,021       (1,663
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     708,304       772,880       1,481,184  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     610,956       405,231       1,016,187  

Acquisition expenses

     58,265       171,134       229,399  

General and administrative expenses

     96,663       84,702       181,365  
  

 

 

   

 

 

   

 

 

 
     765,884       661,067       1,426,951  
  

 

 

   

 

 

   

 

 

 

Underwriting (loss) income

   $ (57,580   $ 111,813     $ 54,233  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     85.9     52.4     68.5

Acquisition expense ratio

     8.2     22.2     15.5

General and administrative expense ratio

     13.6     11.0     12.2
  

 

 

   

 

 

   

 

 

 

Combined ratio

     107.7     85.6     96.2
  

 

 

   

 

 

   

 

 

 

 

- 11 -


ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

     For the quarter ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     78.4     101.9     42.3     44.2     61.3     73.8

Acquisition expense ratio

     6.3     8.7     23.0     23.9     14.2     16.1

General and administrative expense ratio

     12.2     10.4     12.1     8.7     12.2     9.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     96.9     121.0     77.4     76.8     87.7     99.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

     For the quarter ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     2.1     6.2     16.0     14.2     8.7     10.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net of Prior Year Net Loss Reserve Development

 

     For the quarter ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     80.5     108.1     58.3     58.4     70.0     83.9

Acquisition expense ratio

     6.3     8.7     23.0     23.9     14.2     16.1

General and administrative expense ratio

     12.2     10.4     12.1     8.7     12.2     9.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     99.0     127.2     93.4     91.0     96.4     109.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

 

- 12 -


ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

     For the nine months ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     76.4     85.9     46.3     52.4     60.4     68.5

Acquisition expense ratio

     6.8     8.2     21.6     22.2     14.7     15.5

General and administrative expense ratio

     16.2     13.6     12.5     11.0     14.2     12.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     99.4     107.7     80.4     85.6     89.3     96.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

     For the nine months ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     4.1     5.5     16.4     6.9     10.6     6.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net of Prior Year Net Loss Reserve Development

 

     For the nine months ended September 30,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     80.5     91.4     62.7     59.3     71.0     74.7

Acquisition expense ratio

     6.8     8.2     21.6     22.2     14.7     15.5

General and administrative expense ratio

     16.2     13.6     12.5     11.0     14.2     12.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     103.5     113.2     96.8     92.5     99.9     102.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

 

- 13 -


ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

The following tables show Endurance’s gross and net premiums written for the quarters ended September 30, 2013 and 2012:

 

     Quarter Ended
September 30, 2013
     Quarter Ended
September 30, 2012
 
     Gross Premiums
Written
     Net Premiums
Written
     Gross Premiums
Written
     Net Premiums
Written
 

Insurance

           

Agriculture

   $ 200,062      $ 120,617      $ 171,826      $ 106,180  

Casualty and other specialty

     95,862        72,431        90,873        66,686  

Professional lines

     34,221        20,972        43,209        34,804  

Property

     14,674        10,318        18,900        13,595  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Insurance

   $ 344,819      $ 224,338      $ 324,808      $ 221,265  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Catastrophe

   $ 38,676      $ 12,551      $ 38,871      $ 36,484  

Property

     91,653        90,528        157,742        157,742  

Casualty

     53,691        53,690        77,781        77,781  

Other specialty

     15,524        14,226        22,053        20,808  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Reinsurance

   $ 199,544      $ 170,995      $ 296,447      $ 292,815  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 544,363      $ 395,333      $ 621,255      $ 514,080  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 14 -


ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

 

The following tables show Endurance’s gross and net premiums written for the nine months ended September 30, 2013 and 2012:

 

     Nine Months Ended
September 30, 2013
     Nine Months Ended
September 30, 2012
 
     Gross Premiums
Written
     Net Premiums
Written
     Gross Premiums
Written
     Net Premiums
Written
 

Insurance

           

Agriculture

   $ 896,169      $ 546,284      $ 838,932      $ 528,349  

Casualty and other specialty

     239,943        179,065        236,383        173,097  

Professional lines

     93,481        62,963        130,573        107,841  

Property

     45,110        32,222        46,926        26,418  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Insurance

   $ 1,274,703      $ 820,534      $ 1,252,814      $ 835,705  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Catastrophe

   $ 341,973      $ 281,990      $ 354,275      $ 329,067  

Property

     288,448        283,455        318,514        318,521  

Casualty

     272,602        271,174        258,352        257,113  

Other specialty

     116,709        111,716        103,025        101,143  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Reinsurance

   $ 1,019,732      $ 948,335      $ 1,034,166      $ 1,005,844  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,294,435      $ 1,768,869      $ 2,286,980      $ 1,841,549  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 15 -


ENDURANCE SPECIALTY HOLDINGS LTD.

RECONCILIATIONS

(in thousands of United States dollars, except share, per share amounts and ratios)

The following is a reconciliation of Endurance’s net income, net income per diluted common share, net income allocated to common shareholders under the two-class method and annualized return on average common equity to operating income, operating income per diluted common share, operating income allocated to common shareholders under the

two-class method and annualized operating return on average common equity (all non-GAAP measures) for the three and nine months ended September 30, 2013 and 2012:

 

     Quarter Ended     Nine Months Ended  
     September 30,     September 30,  
     2013     2012     2013     2012  

Net income

   $ 83,416     $ 40,118     $ 244,734     $ 195,143  

Add (less) after-tax items:

        

Net foreign exchange losses (gains)

     2,395       3,767       8,645       (12,857

Net realized and unrealized losses (gains)

     6,056       (9,691     (9,371     (27,708

Net impairment losses recognized in earnings

     190       131       1,541       737  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before preferred dividends

   $ 92,057     $ 34,325     $ 245,549     $ 155,315  

Preferred dividends

     (8,188     (8,188     (24,564     (24,564
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income allocated to common and participating common shareholders

   $ 83,869     $ 26,137     $ 220,985     $ 130,751  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income allocated to common shareholders under the two-class method

   $ 81,643     $ 25,733     $ 216,225     $ 128,583  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average diluted common

     43,100,139       42,657,906       42,720,431       42,594,293  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income per diluted common share [b]

   $ 1.89     $ 0.60     $ 5.06     $ 3.02  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average common equity [a]

   $ 2,357,532     $ 2,349,058     $ 2,344,804     $ 2,281,020  

Operating return on average common equity

     3.6     1.1     9.4     5.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Annualized operating return on average common equity

     14.2     4.5     12.6     7.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 83,416     $ 40,118     $ 244,734     $ 195,143  

Preferred dividends

     (8,188     (8,188     (24,564     (24,564
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common and participating common shareholders

   $ 75,228     $ 31,930     $ 220,170     $ 170,579  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common shareholders under the two-class method

   $ 73,231     $ 31,436     $ 215,428     $ 167,751  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share

   $ 1.70     $ 0.74     $ 5.04     $ 3.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

Return on average common equity, Net income

     3.2     1.4     9.4     7.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Annualized return on average common equity, Net income

     12.8     5.4     12.5     10.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

[a] Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated period, which excludes the $430 million liquidation value of the preferred shares (2012: $430 million)
[b] Represents diluted income per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method.

 

- 16 -


Operating income and operating income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating income represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Endurance believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income and net income per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income and operating income per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of operations in a manner similar to how management analyzes Endurance’s underlying business performance. Operating income and operating income per dilutive common share should not be viewed as substitutes for GAAP net income and net income per dilutive common share, respectively.

Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

Contact:

Investor Relations

Phone: +1 441 278 0988

Email: investorrelations@endurance.bm

# # #

 

- 17 -