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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTDd671512d8k.htm
EX-99.2 - EX-99.2 - ENDURANCE SPECIALTY HOLDINGS LTDd671512dex992.htm

Exhibit 99.1

 

LOGO

Endurance Reports Fourth Quarter 2013 Financial Results

PEMBROKE, Bermuda – February 6, 2014 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $59.0 million and $1.33 per diluted common share for the fourth quarter of 2013 compared to a net loss attributable to common shareholders of $40.8 million and $0.96 per diluted common share for the fourth quarter of 2012.

For the year ended December 31, 2013, Endurance reported net income available to common shareholders of $279.2 million and $6.37 per diluted common share versus net income available to common shareholders of $129.8 million and $3.00 per diluted common share for the year ended December 31, 2012. Book value per diluted share was $55.18 at December 31, 2013, an increase of 4.3% from year end 2012.

Operating highlights for the quarter ended December 31, 2013 were as follows:

 

    Gross premiums written of $370.8 million, an increase of 41.5% from the same period in 2012;

 

    Net premiums written of $280.1 million, an increase of 49.0% from the same period in 2012;

 

    Combined ratio of 93.0%, which included 12.2 percentage points of favorable prior year loss reserve development and 1.2 percentage points of catastrophe losses from 2013 events;

 

    Net investment income of $46.3 million, an increase of $7.7 million from the same period in 2012;

 

    Operating income, which excludes after-tax realized investment gains and foreign exchange gains and losses, of $59.9 million and $1.35 per diluted common share; and

 

    An operating return on average common equity for the quarter of 2.5% or 9.9% on an annualized basis.

Operating highlights for the year ended December 31, 2013 were as follows:

 

    Gross premiums written of $2,665.2 million, an increase of 4.6% from the same period in 2012;

 

    Net premiums written of $2,048.9 million, an increase of 1.0% from the same period in 2012;

 

    Combined ratio of 90.2%, which included 11.0 percentage points of favorable prior year loss reserve development and 3.7 percentage points of current year catastrophe losses;

 

    Net investment income of $166.2 million, a decrease of $7.1 million from 2012;

 

    Operating income, which excludes after-tax realized investment gains and foreign exchange gains and losses, of $281.0 million and $6.41 per diluted common share; and

 

    An operating return on average common equity of 11.9%.

John R. Charman, Chairman and Chief Executive Officer, commented, “Against the backdrop of the strategic re-underwriting and rebalancing of our underwriting portfolios, Endurance generated solid financial results in the fourth quarter and full year of 2013, with a full year operating return on equity of 11.9% and a combined ratio of 90.2%. Our results benefitted from lower levels of catastrophe losses and strong favorable reserve development, and we are just beginning to see the positive impact of the significant underwriting investments we have made over the last year. Strategically, we have made great progress in the transformation of Endurance into a leading diversified global specialty insurer and reinsurer and I am very pleased with the positive impact of the high quality, market leading underwriting teams that we have quickly and effectively integrated into Endurance. Last autumn, our strategic forward planning


envisaged our underwriting activity taking place in a soft market environment for the next couple of years; critically, we now have the leadership, underwriting experience and expertise to profitably align and direct Endurance through these exceptionally challenging times. My colleagues and I are excited about our prospects for 2014 and are determined to reward our shareholders accordingly.”

Insurance Segment

Operating highlights for Endurance’s Insurance segment for the quarter ended December 31, 2013 were as follows:

 

    Gross premiums written of $200.7 million, an increase of 13.3% from the fourth quarter of 2012;

 

    Net premiums written of $112.0 million, an increase of 5.0% from the fourth quarter of 2012;

 

    Combined ratio of 123.0%, 3.9 percentage points higher than the fourth quarter of 2012; and

 

    Favorable prior year loss reserve development of 2.0 percentage points during the current period, compared to 3.0 percentage points of favorable prior year loss reserve development in the fourth quarter of 2012.

Operating highlights for Endurance’s Insurance segment for the year ended December 31, 2013 were as follows:

 

    Gross premiums written of $1,475.4 million, an increase of 3.2% from 2012;

 

    Net premiums written of $932.5 million, a decrease of 1.0% from 2012;

 

    Combined ratio of 105.3%, an improvement of 5.3 percentage points from 2012; and

 

    Favorable prior year loss reserve development of 3.6 percentage points during the current period, compared to 4.8 percentage points of favorable prior year loss reserve development in 2012.

The fourth quarter increase in gross premiums written in the Insurance segment was driven by the improved positioning and expanded underwriting talent in the Company’s professional and casualty and other specialty lines of business. Full year gross premiums written increased in the Company’s agriculture and casualty and other specialty lines from successful expansion efforts that were partially offset by the termination of a large professional lines program in late 2012 and from the impact of non-renewals and re-underwriting actions taken earlier in 2013. Net premiums written in the fourth quarter and full year were impacted by reduced retentions in the Company’s agriculture, casualty and other specialty and professional lines as additional reinsurance protection was purchased on attractive terms.

The increase in the Insurance segment combined ratio for the quarter ended December 31, 2013 compared to the same period in 2012 was driven by a higher general and administrative expense ratio partially offset by a lower net loss ratio.

The general and administrative expense ratio was higher in the current quarter due to higher incentive compensation accruals reflecting the improved overall Company profitability in the current year. In addition, the general and administrative expense ratio was higher in the current quarter due to greater levels of corporate expense, severance costs, and expenses associated with the hiring of new underwriting teams. The net loss ratio was lower in the current quarter compared to a year ago predominantly due to improvements in the accident year loss ratios in the Company’s property insurance line from lower catastrophe losses and in the casualty and other specialty and professional lines of business where the positive impacts of our expanded underwriting teams, our refocused underwriting and our active portfolio management strategies are becoming evident. These improvements were partially offset by a higher net loss ratio in the fourth quarter in the Company’s agriculture insurance business to reflect the impact of reduced commodity prices and modestly lower harvest yields in certain states, which led to a full year net loss ratio in our agriculture insurance business of 97.6%.

The improved combined ratio for full year 2013 compared to full year 2012 was driven by a lower net loss ratio partially offset by a higher general and administrative expense ratio. The net loss ratio for the twelve months ended December 31, 2013 declined primarily as a result of lower losses in the agriculture line of business, lower catastrophe losses in the property line of business and accident year loss ratio improvements in the professional and casualty and other specialty

 

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lines of business. The general and administrative expense ratio was higher in 2013 due to higher incentive compensation accruals, reflecting improved overall Company profitability. In addition, the general and administrative expense ratio was higher in 2013 due to severance costs and expenses associated with the hiring of new underwriting teams.

Reinsurance Segment

Operating highlights for Endurance’s Reinsurance segment for the quarter ended December 31, 2013 were as follows:

 

    Gross premiums written of $170.1 million, an increase of 100.3% from the fourth quarter of 2012;

 

    Net premiums written of $168.1 million, an increase of 106.8% from the fourth quarter of 2012;

 

    Combined ratio of 66.1%, an improvement of 53.1 percentage points from the fourth quarter of 2012;

 

    Favorable prior year loss reserve development of 21.3 percentage points compared to 7.2 percentage points of favorable prior year loss reserve development in the fourth quarter of 2012; and

 

    Net catastrophe losses from 2013 events of $6.7 million or 2.5 percentage points on the combined ratio compared to net catastrophe losses of $123.7 million or 44.1 percentage points in the fourth quarter of 2012.

Operating highlights for Endurance’s Reinsurance segment for the year ended December 31, 2013 were as follows:

 

    Gross premiums written of $1,189.8 million, an increase of 6.3% from 2012;

 

    Net premiums written of $1,116.4 million, an increase of 2.7% from 2012;

 

    Combined ratio of 76.8%, an improvement of 17.9 percentage points from 2012;

 

    Favorable prior year loss reserve development of 17.6 percentage points during the current period, compared to 7.0 percentage points of favorable prior year loss reserve development in 2012; and

 

    Net catastrophe losses from 2013 events of $72.2 million or 7.1 percentage points on the combined ratio compared to net catastrophe losses of $171.4 million or 16.6 points in 2012.

The increase in gross premiums written within the Reinsurance segment during the fourth quarter of 2013 compared to the fourth quarter of 2012 resulted primarily from growth in casualty and professional lines of business, which was partially offset by reductions within catastrophe and property lines of business. The increase within the casualty and professional lines was generated by our recently expanded underwriting teams in our US reinsurance operation, which underwrote several new large quota share contracts. The decline in catastrophe premiums for the current quarter reflects an absence of reinstatement premiums compared to a year ago, which included reinstatement premiums related to Superstorm Sandy. The decline in property premiums from a year ago was caused by lower premium adjustments, certain contract renewal dates shifting to 2014 and the non-renewal of business that no longer met our profit targets. For full year 2013, gross premiums written increased in casualty, professional and other specialty lines from business written by new underwriting teams that joined Endurance since late 2012. This new business was offset by significant non-renewals and reduced participation on contracts in the property and catastrophe lines of business. Gross premiums written in the catastrophe line of business were impacted by lower reinstatement premiums and reduced limits and lower rates on renewals. Net premiums written for the fourth quarter and full year 2013 were impacted by increased purchases of retrocessional protection for the Company’s catastrophe and property reinsurance lines of business.

The combined ratio in the Reinsurance segment for the fourth quarter of 2013 improved compared to the same period in 2012, predominantly due to a lower net loss ratio partially offset by higher acquisition and general and administrative expense ratios. The Reinsurance segment’s net loss ratio in the fourth quarter of 2013 improved from lower catastrophe activity and higher levels of favorable prior year loss reserve development. The current quarter’s net loss ratio benefited from $56.1 million, or 21.3 percentage points, of favorable prior year loss reserve development, compared to $20.8 million, or 7.2 percentage points, for the same period a year ago, with the increase largely attributable to shorter tail lines

 

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of business where actual losses have been much lower than originally expected. The Reinsurance segment’s acquisition expense ratio increased in the current quarter compared to a year ago as a lower net loss ratio led to the payment of higher loss sensitive commissions compared to 2012 and from the professional line of business, which incurs higher acquisition costs generating a more meaningful portion of premiums in the current quarter. General and administrative expenses increased in the current quarter due to higher corporate expenses and higher incentive compensation accruals, reflecting greater overall Company profitability.

For the full year 2013, the Reinsurance segment reported a combined ratio of 76.8% compared to 94.7% for the full year 2012. The improvement in the combined ratio was largely attributable to an improvement in the net loss ratio as a result of the lower frequency and severity of catastrophe events in 2013 and greater levels of prior year favorable development partially offset by higher acquisition and general and administrative expense ratios.

Investments

Endurance’s net investment income for the quarter and year ended December 31, 2013 was $46.3 million and $166.2 million, an increase of $7.7 million and a decrease of $7.1 million, respectively, compared to the same periods in 2012. The total return of Endurance’s investment portfolio was 0.74% and 1.43% for the quarter and year ended December 31, 2013, respectively, compared to 0.60% and 4.70% for the quarter and year ended December 31, 2012, respectively. Investment income generated from Endurance’s available for sale investments decreased by $3.2 million and $22.8 million for the quarter and year ended December 31, 2013, respectively, compared to the same periods in 2012 due to lower reinvestment rates during 2013. During the quarter and year ended December 31, 2013, Endurance’s net investment income included gains of $21.2 million and $64.3 million, respectively, on our alternative investment funds and high yield loan funds, which are included in other investments, as compared to gains of $11.0 million and $49.1 million in the quarter and year ended December 31, 2012, respectively. The ending book yield on Endurance’s fixed maturity investments at December 31, 2013 was 2.05%, down from 2.35% at December 31, 2012.

At December 31, 2013, Endurance’s fixed maturity portfolio, which comprises 86.0% of Endurance’s investments, had an average credit quality of AA and a duration of 3.11 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $46.0 million at December 31, 2013, a decrease of $95.8 million from December 31, 2012. Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $5.2 million and $13.5 million during the quarter and year ended December 31, 2013 compared to net realized investment gains of $41.8 million and $71.3 million during the quarter and year ended December 31, 2012.

Endurance ended the fourth quarter of 2013 with cash and invested assets of $6.5 billion, which represents a 0.8% decrease from December 31, 2012. Net operating cash flow was $157.9 million for the year ended December 31, 2013 versus $272.8 million for the same period in 2012. The decrease in operating cash flows in 2013 was largely due to claim payments related to the 2011 and 2012 catastrophe losses and the settlement of 2012 agriculture insurance losses.

Capitalization and Shareholders’ Equity

At December 31, 2013, Endurance’s shareholders’ equity was $2.89 billion, or $55.18 per diluted common share, versus $2.71 billion, or $52.88 per diluted common share, at December 31, 2012. For the quarter and year ended December 31, 2013, Endurance declared and paid common dividends of $0.32 and $1.28 per share, respectively. Total share repurchases amounted to $14.6 million for the year ended December 31, 2013. No common shares were repurchased during the fourth quarter of 2013.

 

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Earnings Call

Endurance will host a conference call on February 7, 2014 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 455-2263 or (719) 457-2689 (international) and entering pass code: 3198923. 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 February 21, 2014 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 3198923.

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 fourth quarter of 2013 will be available on Endurance’s website at www.endurance.bm shortly after the release of earnings.

Operating income (loss), operating return (loss) on average common equity, operating income (loss) per diluted common share, operating income (loss) allocated (attributable) 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.

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, professional lines 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)

 

     December 31,
2013
     December 31,
2012
 

Assets

     

Cash and cash equivalents

   $ 845,851      $ 1,124,019  

Fixed maturity investments, available for sale, at fair value

     4,840,251        4,868,150  

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

     35,028        42,230  

Equity securities, available for sale, at fair value

     252,466        86,997  

Other investments

     617,478        517,546  

Premiums receivable, net

     669,198        601,952  

Insurance and reinsurance balances receivable

     127,722        105,663  

Deferred acquisition costs

     186,027        168,252  

Prepaid reinsurance premiums

     187,209        166,702  

Reinsurance recoverable on unpaid losses

     593,755        691,783  

Reinsurance recoverable on paid losses

     164,220        83,159  

Accrued investment income

     24,104        27,166  

Goodwill and intangible assets

     165,378        172,000  

Deferred tax asset

     51,703        43,501  

Net receivable on sales of investments

     54,910        9,144  

Other assets

     162,822        86,708  
  

 

 

    

 

 

 

Total Assets

   $ 8,978,122      $ 8,794,972  
  

 

 

    

 

 

 

Liabilities

     

Reserve for losses and loss expenses

   $ 4,002,259      $ 4,240,876  

Reserve for unearned premiums

     1,018,851        965,244  

Deposit liabilities

     19,458        22,220  

Reinsurance balances payable

     181,061        110,843  

Debt

     527,478        527,339  

Net payable on purchases of investments

     129,047        81,469  

Other liabilities

     213,419        136,384  
  

 

 

    

 

 

 

Total Liabilities

     6,091,573        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

     

44,368,742 issued and outstanding (2012 - 43,116,394)

     44,369        43,116  

Additional paid-in capital

     569,116        527,915  

Accumulated other comprehensive income

     62,731        152,463  

Retained earnings

     2,193,133        1,969,903  
  

 

 

    

 

 

 

Total Shareholders’ Equity

     2,886,549        2,710,597  
  

 

 

    

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 8,978,122      $ 8,794,972  
  

 

 

    

 

 

 

Book Value per Common Share

     

Dilutive common shares outstanding

     44,518,210        43,130,075  

Diluted book value per common share [a]

   $ 55.18      $ 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 (2012 - $430 million).

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

 

     Quarter Ended     For the Year Ended  
     December 31,     December 31,     December 31,     December 31,  
     2013     2012     2013     2012  

Revenues

        

Gross premiums written

   $ 370,809     $ 262,046     $ 2,665,244     $ 2,549,026  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 280,064     $ 187,946     $ 2,048,933     $ 2,029,495  

Change in unearned premiums

     219,423       343,107       (32,449     (15,595
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

     499,487       531,053       2,016,484       2,013,900  

Other underwriting loss

     (2,740     (520     (2,046     (2,183

Net investment income

     46,346       38,603       166,216       173,326  

Net realized and unrealized gains

     5,197       41,881       15,164       72,139  

Total other-than-temporary impairment losses

     (41     (90     (1,616     (364

Portion of loss recognized in other comprehensive (loss) income

     —         —         —         (483
  

 

 

   

 

 

   

 

 

   

 

 

 

Net impairment losses recognized in earnings (losses)

     (41     (90     (1,616     (847
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     548,249       610,927       2,194,202       2,256,335  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Net losses and loss expenses

     302,620       504,808       1,219,684       1,520,995  

Acquisition expenses

     82,151       73,780       304,430       303,179  

General and administrative expenses

     79,599       54,324       294,906       235,689  

Amortization of intangibles

     1,634       2,359       7,012       10,347  

Net foreign exchange losses (gains)

     5,718       (1,212     14,214       (15,911

Interest expense

     9,050       9,042       36,188       36,174  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     480,772       643,101       1,876,434       2,090,473  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     67,477       (32,174     317,768       165,862  

Income tax expense

     (296     (453     (5,853     (3,346
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     67,181       (32,627     311,915       162,516  

Preferred dividends

     (8,186     (8,186     (32,750     (32,750
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available (attributable) to common and participating common shareholders

   $ 58,995     $ (40,813   $ 279,165     $ 129,766  
  

 

 

   

 

 

   

 

 

   

 

 

 

Per share data

        

Basic earnings (losses) per common share

   $ 1.33     $ (0.96   $ 6.37     $ 3.00  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (losses) per common share

   $ 1.33     $ (0.96   $ 6.37     $ 3.00  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

     For the quarter ended December 31, 2013  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 200,726     $ 170,083     $ 370,809  

Ceded premiums written

     (88,750     (1,995     (90,745
  

 

 

   

 

 

   

 

 

 

Net premiums written

     111,976       168,088       280,064  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     235,967       263,520       499,487  

Other underwriting loss

     —         (2,740     (2,740
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     235,967       260,780       496,747  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     230,708       71,912       302,620  

Acquisition expenses

     16,754       65,397       82,151  

General and administrative expenses

     42,804       36,795       79,599  
  

 

 

   

 

 

   

 

 

 
     290,266       174,104       464,370  
  

 

 

   

 

 

   

 

 

 

Underwriting (loss) income

   $ (54,299   $ 86,676     $ 32,377  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     97.8     27.3     60.7

Acquisition expense ratio

     7.1     24.8     16.4

General and administrative expense ratio

     18.1     14.0     15.9
  

 

 

   

 

 

   

 

 

 

Combined ratio

     123.0     66.1     93.0
  

 

 

   

 

 

   

 

 

 

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

     For the quarter ended December 31, 2012  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 177,116     $ 84,930     $ 262,046  

Ceded premiums written

     (70,464     (3,636     (74,100
  

 

 

   

 

 

   

 

 

 

Net premiums written

     106,652       81,294       187,946  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     244,101       286,952       531,053  

Other underwriting loss

     —         (520     (520
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     244,101       286,432       530,533  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     244,985       259,823       504,808  

Acquisition expenses

     17,332       56,448       73,780  

General and administrative expenses

     28,445       25,879       54,324  
  

 

 

   

 

 

   

 

 

 
     290,762       342,150       632,912  
  

 

 

   

 

 

   

 

 

 

Underwriting loss

   $ (46,661   $ (55,718   $ (102,379
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     100.3     90.5     95.1

Acquisition expense ratio

     7.1     19.7     13.9

General and administrative expense ratio

     11.7     9.0     10.2
  

 

 

   

 

 

   

 

 

 

Combined ratio

     119.1     119.2     119.2
  

 

 

   

 

 

   

 

 

 

 

- 9 -


ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

     For the year ended December 31, 2013  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 1,475,429     $ 1,189,815     $ 2,665,244  

Ceded premiums written

     (542,919     (73,392     (616,311
  

 

 

   

 

 

   

 

 

 

Net premiums written

     932,510       1,116,423       2,048,933  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     946,474       1,070,010       2,016,484  

Other underwriting loss

     —         (2,046     (2,046
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     946,474       1,067,964       2,014,438  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     774,425       445,259       1,219,684  

Acquisition expenses

     64,778       239,652       304,430  

General and administrative expenses

     157,596       137,310       294,906  
  

 

 

   

 

 

   

 

 

 
     996,799       822,221       1,819,020  
  

 

 

   

 

 

   

 

 

 

Underwriting (loss) income

   $ (50,325   $ 245,743     $ 195,418  
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     81.8     41.6     60.5

Acquisition expense ratio

     6.8     22.4     15.1

General and administrative expense ratio

     16.7     12.8     14.6
  

 

 

   

 

 

   

 

 

 

Combined ratio

     105.3     76.8     90.2
  

 

 

   

 

 

   

 

 

 

 

- 10 -


ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

     For the year ended December 31, 2012  
     Insurance     Reinsurance     Reported
Totals
 

Revenues

      

Gross premiums written

   $ 1,429,930     $ 1,119,096     $ 2,549,026  

Ceded premiums written

     (487,573     (31,958     (519,531
  

 

 

   

 

 

   

 

 

 

Net premiums written

     942,357       1,087,138       2,029,495  
  

 

 

   

 

 

   

 

 

 

Net premiums earned

     955,089       1,058,811       2,013,900  

Other underwriting (loss) income

     (2,684     501       (2,183
  

 

 

   

 

 

   

 

 

 

Total underwriting revenues

     952,405       1,059,312       2,011,717  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Net losses and loss expenses

     855,941       665,054       1,520,995  

Acquisition expenses

     75,597       227,582       303,179  

General and administrative expenses

     125,108       110,581       235,689  
  

 

 

   

 

 

   

 

 

 
     1,056,646       1,003,217       2,059,863  
  

 

 

   

 

 

   

 

 

 

Underwriting (loss) income

   $ (104,241   $ 56,095     $ (48,146
  

 

 

   

 

 

   

 

 

 

Net loss ratio

     89.6     62.8     75.5

Acquisition expense ratio

     7.9     21.5     15.1

General and administrative expense ratio

     13.1     10.4     11.7
  

 

 

   

 

 

   

 

 

 

Combined ratio

     110.6     94.7     102.3
  

 

 

   

 

 

   

 

 

 

 

- 11 -


ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

     For the quarter ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     97.8     100.3     27.3     90.5     60.7     95.1

Acquisition expense ratio

     7.1     7.1     24.8     19.7     16.4     13.9

General and administrative expense ratio

     18.1     11.7     14.0     9.0     15.9     10.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     123.0     119.1     66.1     119.2     93.0     119.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

     For the quarter ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     2.0     3.0     21.3     7.2     12.2     5.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net of Prior Year Net Loss Reserve Development

 

     For the quarter ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     99.8     103.3     48.6     97.7     72.9     100.4

Acquisition expense ratio

     7.1     7.1     24.8     19.7     16.4     13.9

General and administrative expense ratio

     18.1     11.7     14.0     9.0     15.9     10.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     125.0     122.1     87.4     126.4     105.2     124.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 year ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     81.8     89.6     41.6     62.8     60.5     75.5

Acquisition expense ratio

     6.8     7.9     22.4     21.5     15.1     15.1

General and administrative expense ratio

     16.7     13.1     12.8     10.4     14.6     11.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     105.3     110.6     76.8     94.7     90.2     102.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

     For the year ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     3.6     4.8     17.6     7.0     11.0     6.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net of Prior Year Net Loss Reserve Development

 

     For the year ended December 31,  
     Insurance     Reinsurance     Total  
     2013     2012     2013     2012     2013     2012  

Net loss ratio

     85.4     94.4     59.2     69.8     71.5     81.5

Acquisition expense ratio

     6.8     7.9     22.4     21.5     15.1     15.1

General and administrative expense ratio

     16.7     13.1     12.8     10.4     14.6     11.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Combined ratio

     108.9     115.4     94.4     101.7     101.2     108.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 December 31, 2013 and 2012:

 

     Quarter Ended December 31, 2013      Quarter Ended December 31, 2012  
     Gross Premiums
Written
     Net Premiums
Written
     Gross Premiums
Written
     Net Premiums
Written
 

Insurance

           

Agriculture

   $ 58,220      $ 24,454      $ 64,798      $ 25,413  

Casualty and other specialty

     76,666        50,022        59,942        43,683  

Professional lines

     55,056        32,138        39,242        30,044  

Property

     10,784        5,362        13,134        7,512  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Insurance

   $ 200,726      $ 111,976      $ 177,116      $ 106,652  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Catastrophe

   $ 13,778      $ 12,270      $ 24,112      $ 22,073  

Property

     9,358        9,417        31,065        31,065  

Casualty

     30,066        29,661        16,112        16,111  

Professional lines

     113,089        113,089        8,849        8,849  

Other specialty

     3,792        3,651        4,792        3,196  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Reinsurance

   $ 170,083      $ 168,088      $ 84,930      $ 81,294  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 370,809      $ 280,064      $ 262,046      $ 187,946  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 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 years ended December 31, 2013 and 2012:

 

     Year Ended December 31, 2013      Year Ended December 31, 2012  
     Gross Premiums
Written
     Net Premiums
Written
     Gross Premiums
Written
     Net Premiums
Written
 

Insurance

           

Agriculture

   $ 954,389      $ 570,738      $ 903,730      $ 553,762  

Casualty and other specialty

     316,609        229,087        296,325        216,780  

Professional lines

     148,537        95,101        169,815        137,885  

Property

     55,894        37,584        60,060        33,930  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Insurance

   $ 1,475,429      $ 932,510      $ 1,429,930      $ 942,357  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reinsurance

           

Catastrophe

   $ 355,751      $ 294,260      $ 378,387      $ 351,140  

Property

     297,806        292,872        349,579        349,586  

Casualty

     252,163        250,330        224,237        222,997  

Professional lines

     163,594        163,594        59,076        59,076  

Other specialty

     120,501        115,367        107,817        104,339  
  

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Reinsurance

   $ 1,189,815      $ 1,116,423      $ 1,119,096      $ 1,087,138  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,665,244      $ 2,048,933      $ 2,549,026      $ 2,029,495  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 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 (loss), net income (loss) per diluted common share, net income (loss) allocated to common shareholders under the two-class method and annualized return on average common equity to operating income (loss), operating income (loss) per diluted common share, operating income (loss) allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the quarters and years ended December 31, 2013 and 2012:

 

     Quarter Ended
December 31,
    Year Ended
December 31,
 
     2013     2012     2013     2012  

Net income (loss)

   $ 67,181     $ (32,627   $ 311,915     $ 162,516  

Add (less) after-tax items:

        

Net foreign exchange losses (gains)

     5,708       (1,220     14,352       (14,077

Net realized and unrealized gains

     (4,808     (34,500     (14,064     (62,208

Net impairment losses recognized in earnings (losses)

     26       89       1,568       814  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) before preferred dividends

   $ 68,107     $ (68,258   $ 313,771     $ 87,045  

Preferred dividends

     (8,186     (8,186     (32,750     (32,750
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) allocated (attributable) to common and participating common shareholders

   $ 59,921     $ (76,444   $ 281,021     $ 54,295  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) allocated (attributable) to common shareholders under the two-class method

   $ 58,267     $ (76,650   $ 274,534     $ 53,411  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average diluted common

     43,120,449       42,603,831       42,818,207       42,601,835  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) per diluted common share [b]

   $ 1.35     $ (1.80   $ 6.41     $ 1.25  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average common equity [a]

   $ 2,432,780     $ 2,330,736     $ 2,368,573     $ 2,230,881  

Operating return on average common equity

     2.5     (3.3 )%      11.9     2.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Annualized operating return on average common equity

     9.9     (13.1 )%      11.9     2.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 67,181     $ (32,627   $ 311,915     $ 162,516  

Preferred dividends

     (8,186     (8,186     (32,750     (32,750
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available (attributable) to common and participating common shareholders

   $ 58,995     $ (40,813   $ 279,165     $ 129,766  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available (attributable) to common shareholders under the two-class method

   $ 57,367     $ (41,019   $ 272,721     $ 127,653  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per diluted common share

   $ 1.33     $ (0.96   $ 6.37     $ 3.00  
  

 

 

   

 

 

   

 

 

   

 

 

 

Return (loss) on average common equity, Net income (loss)

     2.4     (1.8 )%      11.8     5.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Annualized return (loss) on average common equity, Net income (loss)

     9.7     (7.0 )%      11.8     5.8
  

 

 

   

 

 

   

 

 

   

 

 

 

 

[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 losses 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 (loss) and operating income (loss) per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income (loss) allocated (attributable) to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income (loss) divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating income (loss) 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 (loss) and net income (loss) per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income (loss) and operating income (loss) 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 (loss) and operating income (loss) per dilutive common share should not be viewed as substitutes for GAAP net income (loss) and net income (loss) 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 -