Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD | enh8-kcoverpageq26302015.htm |
| EX-99.2 - EX-99.2 - ENDURANCE SPECIALTY HOLDINGS LTD | enh8-kfinancialsupplementq.htm |
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Exhibit 99.1
Endurance Reports Second Quarter 2015 Financial Results
PEMBROKE, Bermuda – August 3, 2015 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $76.0 million and $1.68 per diluted common share for the second quarter of 2015 versus net income of $75.0 million and $1.68 per diluted common share for the second quarter of 2014.
For the six months ended June 30, 2015, Endurance reported net income available to common shareholders of $176.3 million and $3.91 per diluted common share versus net income of $171.3 million and $3.84 per diluted common share for the six months ended June 30, 2014. Book value per diluted share was $63.32 at June 30, 2015, up 3.2% from December 31, 2014.
Operating highlights for the quarter ended June 30, 2015 were as follows:
• | Gross premiums written of $861.2 million, an increase of 24.9% compared to the same period in 2014; |
• | Net premiums written of $559.1 million, an increase of 9.3% compared to the same period in 2014; |
• | Combined ratio of 85.5%, which included 12.8 percentage points of favorable prior year loss reserve development and 2.2 percentage points of net catastrophe losses from 2015 events, 3.9 percentage points of large property and energy losses, and 0.8 percentage points of corporate expenses related to the acquisition of Montpelier Re Holdings Ltd. ("Montpelier"); |
• | Net investment income of $32.3 million, a decrease of $7.1 million from the same period in 2014; |
• | Operating income, which excludes after-tax realized investment gains and foreign exchange losses, of $79.5 million and $1.76 per diluted common share; and |
• | Operating return on average common equity for the quarter of 2.8% or 11.1% on an annualized basis. |
Operating highlights for the six months ended June 30, 2015 were as follows:
• | Gross premiums written of $2,162.6 million, an increase of 17.1% over the same period in 2014; |
• | Net premiums written of $1,324.0 million, an increase of 1.1% over the same period in 2014; |
• | Combined ratio of 84.1%, which included 13.7 percentage points of favorable prior year loss reserve development, 2.1 percentage points of current year catastrophe losses, 2.1 percentage points of large property and energy losses, and 0.5 percentage points of corporate expenses related to the acquisition of Montpelier; |
• | Net investment income of $74.1 million, a decrease of $6.2 million over the same period in 2014; |
• | Operating income of $170.7 million and $3.78 per diluted common share; and |
• | Operating return on average common equity for the first six months of the year of 6.1%, or 12.1% on an annualized basis. |
John R. Charman, Chairman and Chief Executive Officer, commented, “During the second quarter we continued to deliver improved profitability by generating an operating ROE of 11.1% in spite of very challenging market conditions. We were also able to meaningfully expand our global specialty book of business as evidenced by our 25% growth in gross written premiums. These strong results continue to reflect the significant strategic improvements we have implemented over the past 30 months at Endurance. Our globally recognized, market leading underwriters are now firmly established and are attracting high quality, historically profitable business. Our underwriters' careful risk selection and underwriting discipline remain critical in this very competitive rate environment and I am confident of our ability to continue to deliver strong financial results as well as creating exceptional value for our shareholders.
Last week we announced the completion of our acquisition of Montpelier after both Endurance and Montpelier received overwhelming shareholder support for the transaction. Having spent the last several months diligently
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planning, we have already begun to immediately integrate Montpelier into Endurance. We are confident in our ability to materially exceed our original synergy estimates and to achieve our targeted strategic and financial objectives."
Insurance Segment
Operating highlights for Endurance’s Insurance segment for the quarter ended June 30, 2015 were as follows:
• | Gross premiums written of $468.9 million, an increase of 45.8% from the second quarter of 2014; |
• | Net premiums written of $190.3 million, an increase of 6.3% from the second quarter of 2014; and |
• | Combined ratio of 95.2%, which included favorable prior year loss reserve development of 9.2 percentage points, net catastrophe losses from 2015 events of $1.2 million or 0.6 percentage points and large property and energy losses of $16.2 million or 8.8 percentage points. |
Operating highlights for Endurance’s Insurance segment for the six months ended June 30, 2015 were as follows:
• | Gross premiums written of $1,205.1 million, an increase of 23.8% from the same period in 2014; |
• | Net premiums written of $494.3 million, a decrease of 5.3% from the same period in 2014; and |
• | Combined ratio of 92.2%, which included favorable prior year loss reserve development of 11.6 percentage points, net catastrophe losses from 2015 events of $5.7 million or 1.7 percentage points and large property and energy losses of $16.2 million or 5.3 percentage points. |
Gross premiums written in the Insurance segment increased $147.3 million and $231.3 million for the quarter and six months ended June 30, 2015 compared to the same periods in 2014 as we achieved growth across all lines of business. The underwriting investments we have made over the last 30 months within the professional lines, casualty and other specialty and property, marine and energy lines of business continue to attract new business to Endurance. Non-agriculture net premiums written increased $34.4 million and $74.6 million for the quarter and six months ended June 30, 2015, compared to the same periods in 2014. Net premiums written were impacted by greater levels of reinsurance, including additional quota share protection for individual lines of business as well as across the entire portfolio. Within agriculture insurance, greater cessions to the federal government and increased purchases of third party reinsurance led to a decline in net premiums written of $23.1 million and $102.3 million for the quarter and six months ended June 30, 2015 compared to the same periods in 2014.
The 3.4 percentage point increase in the Insurance segment combined ratio for the quarter ended June 30, 2015 compared to the same period in 2014 was driven by higher net loss and acquisition expense ratios partially offset by a lower general and administrative expense ratio. The increase in the net loss ratio reflects lower levels of favorable loss reserve development which improved the current quarter's net loss ratio by 9.2 percentage points compared to 10.1 percentage points in 2014. The accident year net loss ratio increased modestly in the current quarter as two large energy losses totaling $16.2 million, or 8.8 percentage points, were partially offset by improved profitability within our expanding professional lines business. The current quarter's decline in the general and administrative expense ratio reflects higher ceding commissions received as a result of increased quota share reinsurance purchases. The acquisition expense ratio increased in the current quarter as specialty lines with higher related acquisition costs accounted for a greater percentage of earned premiums than a year ago. For the six months ended June 30, 2015 compared to the same period in 2014, the combined ratio improved as lower net loss and general and administrative expense ratios were partially offset by a higher acquisition expense ratio.
Reinsurance Segment
Operating highlights for Endurance’s Reinsurance segment for the quarter ended June 30, 2015 were as follows:
• | Gross premiums written of $392.3 million, an increase of 6.6% from the second quarter of 2014; |
• | Net premiums written of $368.8 million, an increase of 10.9% from the second quarter of 2014; and |
• | Combined ratio of 73.0%, which included favorable prior year loss reserve development of 15.7 percentage points and net catastrophe losses from 2015 events of $8.6 million or 3.5 percentage points. |
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Operating highlights for Endurance’s Reinsurance segment for the six months ended June 30, 2015 were as follows:
• | Gross premiums written of $957.5 million, an increase of 9.7% from the same period in 2014; |
• | Net premiums written of $829.7 million, an increase of 5.3% from the same period in 2014; and |
• | Combined ratio of 73.8%, which included favorable prior year loss reserve development of 15.0 percentage points, and net catastrophe losses from 2015 events of $11.3 million or 2.3 percentage points. |
Gross premiums written in the Reinsurance segment increased $24.4 million and $84.4 million for the quarter and six months ended June 30, 2015 compared to the same periods in 2014. For the second quarter of 2015, the increase was driven by the professional lines and casualty lines of business, partially offset by declines within the property, catastrophe and specialty lines of business. Growth in professional lines and casualty predominantly resulted from expansion of existing contracts at renewal, some renewal date changes, as well as the entry into new quota share agreements. Declines in the property and catastrophe lines of business were driven by the non-renewal of numerous contracts that no longer met our profitability targets, while the decline in the specialty line of business resulted primarily from reduced premium estimates on some existing treaties. For the quarter and six months ended June 30, 2015, net premiums written increased $36.4 million and $41.6 million from a year ago as the growth in gross premiums written was largely offset by the purchase of greater levels of proportional and aggregate excess of loss retrocessional coverage for the Company’s catastrophe portfolio and the initiation of a new whole account quota share retrocession for the majority of the specialty line of business.
The combined ratio in the Reinsurance segment for the second quarter of 2015 improved by 1.3 percentage points compared to the same period in 2014, due to a lower net loss ratio that was partially offset by higher acquisition and general and administrative expense ratios. The net loss ratio improved by 5.2 percentage points in the current quarter compared to a year ago predominantly due to higher levels of favorable reserve development and a lower level of catastrophe losses. The 2.1 percentage point increase in the current quarter's acquisition expense ratio was attributed to an increase in gross premiums written in the specialty lines of business, which has higher acquisition expenses. The general and administrative expense ratio increased 1.8 percentage points in the second quarter of 2015 primarily from higher personnel expenses related to strategic investments made within our global specialty reinsurance operations.
Investments
Endurance’s net investment income for the quarter and six months ended June 30, 2015 was $32.3 million and $74.1 million, a decrease of $7.1 million and $6.2 million, respectively, compared to the same periods in 2014. The total return of Endurance’s investment portfolio was (0.07)% and 0.81% for the quarter and six months ended June 30, 2015, compared to 1.52% and 2.78% for the quarter and six months ended June 30, 2014. Investment income generated from Endurance’s available for sale investments increased by $0.1 million and $2.0 million for the three and six months ended June 30, 2015, compared to the same periods in 2014 as assets and returns have remained relatively flat. During the quarter and six months ended June 30, 2015, Endurance’s net investment income on its alternative investment funds and high yield loan funds, which are included in other investments, included gains of $3.6 million and $16.0 million, as compared to $10.8 million and $24.3 million in the second quarter and the first six months of 2014. The ending book yield on Endurance’s fixed maturity investments at June 30, 2015 was 2.27%, up from 2.15% at June 30, 2014.
At June 30, 2015, Endurance’s fixed maturity portfolio, which comprises 82.6% of Endurance’s investments, had an average credit quality of AA- and a duration of 3.08 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $43.6 million at June 30, 2015, a decrease of $42.5 million from December 31, 2014. Endurance recorded net realized investment gains, net of impairments, of $9.3 million and $26.8 million during the second quarter and first six months of 2015, compared to $3.2 million and $8.0 million during the second quarter and first six months of 2014.
Endurance ended the second quarter of 2015 with cash and invested assets of $6.6 billion, which represents a 0.8% decrease from December 31, 2014. Net operating cash inflow was $23.5 million for the six months ended June 30, 2015 versus $19.7 million for the same period in 2014.
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Capitalization and Shareholders’ Equity
At June 30, 2015, Endurance’s shareholders’ equity was $3.30 billion or $63.32 per diluted common share versus $3.19 billion or $61.33 per diluted common share at December 31, 2014. For the quarter and six months ended June 30, 2015, Endurance declared and paid common dividends of $0.35 and $0.70 per share, respectively.
Earnings Call
Endurance will host a conference call on August 4, 2015 at 9:00 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 240-9314 or (913) 312-1477 (international) and entering pass code: 1577277. 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 August 18, 2015 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 1577277.
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 second quarter of 2015 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.
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, marine and energy lines of insurance and catastrophe, property, casualty, professional lines and 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 Waterloo House, 100 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, and Endurance may make related oral 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," “would,” "expect," "intend," "plan," "believe," "project," “target,” "anticipate," "seek," "will," “deliver,” 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 materially 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, 2014.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Endurance’s most recent report on Form 10-K and other documents of Endurance on file with the Securities and Exchange Commission. Any forward-looking statements made in this material are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Endurance will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Endurance or its business or operations. Except as required by law, Endurance undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
The contents of any website referenced in this press release are not incorporated by reference herein.
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ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars, except share and per share amounts)
June 30, | December 31, | ||||||||
2015 | 2014 | ||||||||
Assets | |||||||||
Cash and cash equivalents | $ | 622,642 | $ | 745,472 | |||||
Fixed maturity investments, available for sale, at fair value | 4,933,776 | 5,092,581 | |||||||
Short-term investments, available for sale, at fair value | 16,366 | 9,014 | |||||||
Equity securities, available for sale, at fair value | 420,411 | 331,368 | |||||||
Other investments | 623,868 | 541,454 | |||||||
Premiums receivable, net | 1,665,990 | 883,450 | |||||||
Insurance and reinsurance balances receivable | 108,162 | 122,214 | |||||||
Deferred acquisition costs | 296,568 | 207,368 | |||||||
Prepaid reinsurance premiums | 668,964 | 354,940 | |||||||
Reinsurance recoverable on unpaid losses | 785,472 | 670,795 | |||||||
Reinsurance recoverable on paid losses | 157,287 | 218,291 | |||||||
Accrued investment income | 25,118 | 27,183 | |||||||
Goodwill and intangible assets | 150,296 | 153,405 | |||||||
Deferred tax asset | 46,779 | 48,995 | |||||||
Net receivable on sales of investments | 21,420 | 38,877 | |||||||
Other assets | 172,162 | 199,375 | |||||||
Total Assets | $ | 10,715,281 | $ | 9,644,782 | |||||
Liabilities | |||||||||
Reserve for losses and loss expenses | $ | 3,833,525 | $ | 3,846,859 | |||||
Reserve for unearned premiums | 2,046,933 | 1,254,519 | |||||||
Deposit liabilities | 13,376 | 15,136 | |||||||
Reinsurance balances payable | 632,457 | 375,711 | |||||||
Debt | 528,123 | 527,715 | |||||||
Net payable on purchases of investments | 82,375 | 151,682 | |||||||
Other liabilities | 275,586 | 287,978 | |||||||
Total Liabilities | 7,412,375 | 6,459,600 | |||||||
Shareholders' Equity | |||||||||
Preferred shares | |||||||||
Series A, non-cumulative - 8,000,000 issued and outstanding (2014 - 8,000,000) | 8,000 | 8,000 | |||||||
Series B, non-cumulative - 9,200,000 issued and outstanding (2014 - 9,200,000) | 9,200 | 9,200 | |||||||
Common shares | |||||||||
45,156,845 issued and outstanding (2014 - 44,765,153) | 45,157 | 44,765 | |||||||
Additional paid-in capital | 610,585 | 598,226 | |||||||
Accumulated other comprehensive income | 36,965 | 76,706 | |||||||
Retained earnings | 2,592,999 | 2,448,285 | |||||||
Total Shareholders’ Equity | 3,302,906 | 3,185,182 | |||||||
Total Liabilities and Shareholders’ Equity | $ | 10,715,281 | $ | 9,644,782 | |||||
Book Value per Common Share | |||||||||
Dilutive common shares outstanding | 45,367,976 | 44,920,768 | |||||||
Diluted book value per common share [a] | $ | 63.32 | $ | 61.33 | |||||
Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2014, 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)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues | ||||||||||||||||
Gross premiums written | $ | 861,184 | $ | 689,425 | $ | 2,162,616 | $ | 1,846,940 | ||||||||
Net premiums written | $ | 559,083 | $ | 511,427 | $ | 1,324,037 | $ | 1,310,132 | ||||||||
Change in unearned premiums | (100,948 | ) | (29,889 | ) | (476,043 | ) | (432,328 | ) | ||||||||
Net premiums earned | 458,135 | 481,538 | 847,994 | 877,804 | ||||||||||||
Other underwriting income (loss) | 1,389 | (4,824 | ) | 3,795 | (6,062 | ) | ||||||||||
Net investment income | 32,252 | 39,302 | 74,113 | 80,292 | ||||||||||||
Net realized and unrealized gains | 9,680 | 3,411 | 27,869 | 8,283 | ||||||||||||
Total other-than-temporary impairment losses | (424 | ) | (198 | ) | (1,073 | ) | (309 | ) | ||||||||
Portion of loss recognized in other comprehensive (loss) income | — | — | — | — | ||||||||||||
Net impairment losses recognized in earnings | (424 | ) | (198 | ) | (1,073 | ) | (309 | ) | ||||||||
Total revenues | 501,032 | 519,229 | 952,698 | 960,008 | ||||||||||||
Expenses | ||||||||||||||||
Net losses and loss expenses | 239,122 | 259,196 | 411,058 | 436,092 | ||||||||||||
Acquisition expenses | 84,971 | 78,601 | 167,064 | 150,758 | ||||||||||||
General and administrative expenses | 54,965 | 58,312 | 109,855 | 117,813 | ||||||||||||
Corporate expenses [a] | 12,634 | 28,143 | 24,902 | 41,848 | ||||||||||||
Amortization of intangibles | 1,579 | 1,623 | 3,178 | 3,240 | ||||||||||||
Net foreign exchange losses | 12,981 | 319 | 20,533 | 3,283 | ||||||||||||
Interest expense | 9,062 | 9,732 | 18,121 | 18,783 | ||||||||||||
Total expenses | 415,314 | 435,926 | 754,711 | 771,817 | ||||||||||||
Income before income taxes | 85,718 | 83,303 | 197,987 | 188,191 | ||||||||||||
Income tax expense | (1,512 | ) | (140 | ) | (5,302 | ) | (548 | ) | ||||||||
Net income | 84,206 | 83,163 | 192,685 | 187,643 | ||||||||||||
Preferred dividends | (8,188 | ) | (8,188 | ) | (16,376 | ) | (16,376 | ) | ||||||||
Net income available to common and participating common shareholders | $ | 76,018 | $ | 74,975 | $ | 176,309 | $ | 171,267 | ||||||||
Per share data | ||||||||||||||||
Basic earnings per common share | $ | 1.69 | $ | 1.68 | $ | 3.92 | $ | 3.84 | ||||||||
Diluted earnings per common share | $ | 1.68 | $ | 1.68 | $ | 3.91 | $ | 3.84 | ||||||||
[a] The Company incurred $3.5 million and $4.5 million of corporate expenses in relation to the Company's acquisition of Montpelier for the quarter and six months ended June 30, 2015. For the quarter and six months ended June 30, 2014, the Company incurred $12.1 million and $13.0 million of corporate expenses in relation to the Company's proposed acquisition of Aspen Insurance Holdings Limited.
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ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
Three Months Ended June 30, 2015 | ||||||||||||||
Insurance | Reinsurance | Reported Totals | ||||||||||||
Revenues | ||||||||||||||
Gross premiums written | $ | 468,866 | $ | 392,318 | $ | 861,184 | ||||||||
Ceded premiums written | (278,567 | ) | (23,534 | ) | (302,101 | ) | ||||||||
Net premiums written | 190,299 | 368,784 | 559,083 | |||||||||||
Net premiums earned | 201,460 | 256,675 | 458,135 | |||||||||||
Other underwriting income | — | 1,389 | 1,389 | |||||||||||
Total underwriting revenues | 201,460 | 258,064 | 459,524 | |||||||||||
Expenses | ||||||||||||||
Net losses and loss expenses | 145,483 | 93,639 | 239,122 | |||||||||||
Acquisition expenses | 17,702 | 67,269 | 84,971 | |||||||||||
General and administrative expenses | 28,567 | 26,398 | 54,965 | |||||||||||
191,752 | 187,306 | 379,058 | ||||||||||||
Underwriting income | $ | 9,708 | $ | 70,758 | 80,466 | |||||||||
Net investment income | 32,252 | |||||||||||||
Corporate expenses | (12,634 | ) | ||||||||||||
Interest expense | (9,062 | ) | ||||||||||||
Amortization of intangibles | (1,579 | ) | ||||||||||||
Net foreign exchange losses | (12,981 | ) | ||||||||||||
Net realized and unrealized gains | 9,680 | |||||||||||||
Net impairment losses recognized in earnings | (424 | ) | ||||||||||||
Income before income taxes | $ | 85,718 | ||||||||||||
Net loss ratio | 72.2 | % | 36.5 | % | 52.2 | % | ||||||||
Acquisition expense ratio | 8.8 | % | 26.2 | % | 18.5 | % | ||||||||
General and administrative expense ratio | 14.2 | % | 10.3 | % | 14.8 | % | [a] | |||||||
Combined ratio | 95.2 | % | 73.0 | % | 85.5 | % | ||||||||
[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.
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ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
Three Months Ended June 30, 2014 | ||||||||||||||
Insurance | Reinsurance | Reported Totals | ||||||||||||
Revenues | ||||||||||||||
Gross premiums written | $ | 321,526 | $ | 367,899 | $ | 689,425 | ||||||||
Ceded premiums written | (142,488 | ) | (35,510 | ) | (177,998 | ) | ||||||||
Net premiums written | 179,038 | 332,389 | 511,427 | |||||||||||
Net premiums earned | 218,563 | 262,975 | 481,538 | |||||||||||
Other underwriting loss | — | (4,824 | ) | (4,824 | ) | |||||||||
Total underwriting revenues | 218,563 | 258,151 | 476,714 | |||||||||||
Expenses | ||||||||||||||
Net losses and loss expenses | 149,567 | 109,629 | 259,196 | |||||||||||
Acquisition expenses | 15,128 | 63,473 | 78,601 | |||||||||||
General and administrative expenses | 35,969 | 22,343 | 58,312 | |||||||||||
200,664 | 195,445 | 396,109 | ||||||||||||
Underwriting income | $ | 17,899 | $ | 62,706 | 80,605 | |||||||||
Net investment income | 39,302 | |||||||||||||
Corporate expenses | (28,143 | ) | ||||||||||||
Interest expense | (9,732 | ) | ||||||||||||
Amortization of intangibles | (1,623 | ) | ||||||||||||
Net foreign exchange losses | (319 | ) | ||||||||||||
Net realized and unrealized gains | 3,411 | |||||||||||||
Net impairment losses recognized in earnings | (198 | ) | ||||||||||||
Income before income taxes | $ | 83,303 | ||||||||||||
Net loss ratio | 68.5 | % | 41.7 | % | 53.8 | % | ||||||||
Acquisition expense ratio | 6.9 | % | 24.1 | % | 16.3 | % | ||||||||
General and administrative expense ratio | 16.4 | % | 8.5 | % | 18.0 | % | [a] | |||||||
Combined ratio | 91.8 | % | 74.3 | % | 88.1 | % | ||||||||
[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.
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ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
Six Months Ended June 30, 2015 | ||||||||||||||
Insurance | Reinsurance | Reported Totals | ||||||||||||
Revenues | ||||||||||||||
Gross premiums written | $ | 1,205,084 | $ | 957,532 | $ | 2,162,616 | ||||||||
Ceded premiums written | (710,746 | ) | (127,833 | ) | (838,579 | ) | ||||||||
Net premiums written | 494,338 | 829,699 | 1,324,037 | |||||||||||
Net premiums earned | 337,324 | 510,670 | 847,994 | |||||||||||
Other underwriting income | — | 3,795 | 3,795 | |||||||||||
Total underwriting revenues | 337,324 | 514,465 | 851,789 | |||||||||||
Expenses | ||||||||||||||
Net losses and loss expenses | 219,995 | 191,063 | 411,058 | |||||||||||
Acquisition expenses | 33,585 | 133,479 | 167,064 | |||||||||||
General and administrative expenses | 57,409 | 52,446 | 109,855 | |||||||||||
310,989 | 376,988 | 687,977 | ||||||||||||
Underwriting income | $ | 26,335 | $ | 137,477 | 163,812 | |||||||||
Net investment income | 74,113 | |||||||||||||
Corporate expenses | (24,902 | ) | ||||||||||||
Interest expense | (18,121 | ) | ||||||||||||
Amortization of intangibles | (3,178 | ) | ||||||||||||
Net foreign exchange losses | (20,533 | ) | ||||||||||||
Net realized and unrealized gains | 27,869 | |||||||||||||
Net impairment losses recognized in earnings | (1,073 | ) | ||||||||||||
Income before income taxes | $ | 197,987 | ||||||||||||
Net loss ratio | 65.2 | % | 37.4 | % | 48.5 | % | ||||||||
Acquisition expense ratio | 10.0 | % | 26.1 | % | 19.7 | % | ||||||||
General and administrative expense ratio | 17.0 | % | 10.3 | % | 15.9 | % | [a] | |||||||
Combined ratio | 92.2 | % | 73.8 | % | 84.1 | % | ||||||||
[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.
- 10 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
Six Months Ended June 30, 2014 | ||||||||||||||
Insurance | Reinsurance | Reported Totals | ||||||||||||
Revenues | ||||||||||||||
Gross premiums written | $ | 973,802 | $ | 873,138 | $ | 1,846,940 | ||||||||
Ceded premiums written | (451,737 | ) | (85,071 | ) | (536,808 | ) | ||||||||
Net premiums written | 522,065 | 788,067 | 1,310,132 | |||||||||||
Net premiums earned | 362,584 | 515,220 | 877,804 | |||||||||||
Other underwriting loss | — | (6,062 | ) | (6,062 | ) | |||||||||
Total underwriting revenues | 362,584 | 509,158 | 871,742 | |||||||||||
Expenses | ||||||||||||||
Net losses and loss expenses | 238,100 | 197,992 | 436,092 | |||||||||||
Acquisition expenses | 27,389 | 123,369 | 150,758 | |||||||||||
General and administrative expenses | 72,668 | 45,145 | 117,813 | |||||||||||
338,157 | 366,506 | 704,663 | ||||||||||||
Underwriting income | $ | 24,427 | $ | 142,652 | 167,079 | |||||||||
Net investment income | 80,292 | |||||||||||||
Corporate expenses | (41,848 | ) | ||||||||||||
Interest expense | (18,783 | ) | ||||||||||||
Amortization of intangibles | (3,240 | ) | ||||||||||||
Net foreign exchange losses | (3,283 | ) | ||||||||||||
Net realized and unrealized gains | 8,283 | |||||||||||||
Net impairment losses recognized in earnings | (309 | ) | ||||||||||||
Income before income taxes | $ | 188,191 | ||||||||||||
Net loss ratio | 65.7 | % | 38.5 | % | 49.6 | % | ||||||||
Acquisition expense ratio | 7.6 | % | 23.9 | % | 17.2 | % | ||||||||
General and administrative expense ratio | 20.0 | % | 8.7 | % | 18.2 | % | [a] | |||||||
Combined ratio | 93.3 | % | 71.1 | % | 85.0 | % | ||||||||
[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.
- 11 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported | ||||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 72.2 | % | 68.5 | % | 36.5 | % | 41.7 | % | 52.2 | % | 53.8 | % | ||||||||
Acquisition expense ratio | 8.8 | % | 6.9 | % | 26.2 | % | 24.1 | % | 18.5 | % | 16.3 | % | ||||||||
General and administrative expense ratio | 14.2 | % | 16.4 | % | 10.3 | % | 8.5 | % | 14.8 | % | 18.0 | % | ||||||||
Combined ratio | 95.2 | % | 91.8 | % | 73.0 | % | 74.3 | % | 85.5 | % | 88.1 | % | ||||||||
Effect of Prior Year Net Loss Reserve Development | ||||||||||||||||||||
Favorable / (Unfavorable) | ||||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 9.2 | % | 10.1 | % | 15.7 | % | 12.2 | % | 12.8 | % | 11.3 | % | ||||||||
Net of Prior Year Net Loss Reserve Development | ||||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 81.4 | % | 78.6 | % | 52.2 | % | 53.9 | % | 65.0 | % | 65.1 | % | ||||||||
Acquisition expense ratio | 8.8 | % | 6.9 | % | 26.2 | % | 24.1 | % | 18.5 | % | 16.3 | % | ||||||||
General and administrative expense ratio | 14.2 | % | 16.4 | % | 10.3 | % | 8.5 | % | 14.8 | % | 18.0 | % | ||||||||
Combined ratio | 104.4 | % | 101.9 | % | 88.7 | % | 86.5 | % | 98.3 | % | 99.4 | % | ||||||||
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. | ||||||||||||||||||||
- 12 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported | ||||||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 65.2 | % | 65.7 | % | 37.4 | % | 38.5 | % | 48.5 | % | 49.6 | % | ||||||||
Acquisition expense ratio | 10.0 | % | 7.6 | % | 26.1 | % | 23.9 | % | 19.7 | % | 17.2 | % | ||||||||
General and administrative expense ratio | 17.0 | % | 20.0 | % | 10.3 | % | 8.7 | % | 15.9 | % | 18.2 | % | ||||||||
Combined ratio | 92.2 | % | 93.3 | % | 73.8 | % | 71.1 | % | 84.1 | % | 85.0 | % | ||||||||
Effect of Prior Year Net Loss Reserve Development | ||||||||||||||||||||
Favorable / (Unfavorable) | ||||||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 11.6 | % | 9.3 | % | 15.0 | % | 13.7 | % | 13.7 | % | 11.9 | % | ||||||||
Net of Prior Year Net Loss Reserve Development | ||||||||||||||||||||
Six Months Ended June 30, | ||||||||||||||||||||
Insurance | Reinsurance | Total | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net loss ratio | 76.8 | % | 75.0 | % | 52.4 | % | 52.2 | % | 62.2 | % | 61.5 | % | ||||||||
Acquisition expense ratio | 10.0 | % | 7.6 | % | 26.1 | % | 23.9 | % | 19.7 | % | 17.2 | % | ||||||||
General and administrative expense ratio | 17.0 | % | 20.0 | % | 10.3 | % | 8.7 | % | 15.9 | % | 18.2 | % | ||||||||
Combined ratio | 103.8 | % | 102.6 | % | 88.8 | % | 84.8 | % | 97.8 | % | 96.9 | % | ||||||||
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 three months ended June 30, 2015 and 2014:
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2015 | June 30, 2014 | |||||||||||||||
Gross Premiums Written | Net Premiums Written | Gross Premiums Written | Net Premiums Written | |||||||||||||
Insurance | ||||||||||||||||
Agriculture | $ | 112,012 | $ | 22,677 | $ | 80,540 | $ | 45,826 | ||||||||
Casualty and other specialty | 146,056 | 65,302 | 108,030 | 56,475 | ||||||||||||
Professional lines | 96,736 | 43,443 | 74,650 | 29,846 | ||||||||||||
Property, marine and energy | 114,062 | 58,877 | 58,306 | 46,891 | ||||||||||||
Subtotal Insurance | 468,866 | 190,299 | 321,526 | 179,038 | ||||||||||||
Reinsurance | ||||||||||||||||
Catastrophe | 139,833 | 122,305 | 158,372 | 123,411 | ||||||||||||
Property | 30,560 | 30,118 | 42,887 | 42,886 | ||||||||||||
Casualty | 48,132 | 48,132 | 30,875 | 30,868 | ||||||||||||
Professional lines | 134,241 | 134,241 | 84,117 | 84,117 | ||||||||||||
Specialty | 39,552 | 33,988 | 51,648 | 51,107 | ||||||||||||
Subtotal Reinsurance | 392,318 | 368,784 | 367,899 | 332,389 | ||||||||||||
Total | $ | 861,184 | $ | 559,083 | $ | 689,425 | $ | 511,427 | ||||||||
- 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 six months ended June 30, 2015 and 2014:
Six Months Ended | Six Months Ended | |||||||||||||||
June 30, 2015 | June 30, 2014 | |||||||||||||||
Gross Premiums Written | Net Premiums Written | Gross Premiums Written | Net Premiums Written | |||||||||||||
Insurance | ||||||||||||||||
Agriculture | $ | 628,928 | $ | 225,137 | $ | 608,434 | $ | 327,471 | ||||||||
Casualty and other specialty | 246,738 | 110,360 | 175,683 | 93,288 | ||||||||||||
Professional lines | 151,496 | 67,674 | 113,430 | 44,416 | ||||||||||||
Property, marine and energy | 177,922 | 91,167 | 76,255 | 56,890 | ||||||||||||
Subtotal Insurance | $ | 1,205,084 | $ | 494,338 | $ | 973,802 | $ | 522,065 | ||||||||
Reinsurance | ||||||||||||||||
Catastrophe | $ | 264,240 | $ | 175,765 | $ | 285,020 | $ | 202,374 | ||||||||
Property | 156,260 | 153,567 | 209,300 | 209,208 | ||||||||||||
Casualty | 106,230 | 106,230 | 115,857 | 114,260 | ||||||||||||
Professional lines | 178,098 | 178,098 | 109,736 | 109,736 | ||||||||||||
Specialty | 252,704 | 216,039 | 153,225 | 152,489 | ||||||||||||
Subtotal Reinsurance | $ | 957,532 | $ | 829,699 | $ | 873,138 | $ | 788,067 | ||||||||
Total | $ | 2,162,616 | $ | 1,324,037 | $ | 1,846,940 | $ | 1,310,132 | ||||||||
- 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 basic or 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 basic or 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 six months ended June 30, 2015 and 2014:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Net income | $ | 84,206 | $ | 83,163 | $ | 192,685 | $ | 187,643 | ||||||||
Add (less) after-tax items: | ||||||||||||||||
Net foreign exchange losses | 12,910 | 305 | 20,484 | 3,277 | ||||||||||||
Net realized and unrealized gains | (9,707 | ) | (3,559 | ) | (27,021 | ) | (8,563 | ) | ||||||||
Net impairment losses recognized in earnings | 309 | 198 | 957 | 309 | ||||||||||||
Operating income before preferred dividends | 87,718 | 80,107 | $ | 187,105 | $ | 182,666 | ||||||||||
Preferred dividends | (8,188 | ) | (8,188 | ) | (16,376 | ) | (16,376 | ) | ||||||||
Operating income allocated to common and | ||||||||||||||||
participating common shareholders | $ | 79,530 | $ | 71,919 | $ | 170,729 | $ | 166,290 | ||||||||
Operating income allocated to common | ||||||||||||||||
shareholders under the two-class method | $ | 77,152 | $ | 69,797 | $ | 165,657 | $ | 161,447 | ||||||||
Weighted average diluted common shares | 43,896,721 | 43,350,911 | 43,792,626 | 43,265,626 | ||||||||||||
Operating income per diluted common share [b] | $ | 1.76 | $ | 1.61 | $ | 3.78 | $ | 3.73 | ||||||||
Average common equity [a] | $ | 2,858,876 | $ | 2,628,392 | $ | 2,814,044 | $ | 2,571,112 | ||||||||
Operating return on average common equity | 2.8 | % | 2.7 | % | 6.1 | % | 6.5 | % | ||||||||
Annualized operating return on average common equity | 11.1 | % | 10.9 | % | 12.1 | % | 12.9 | % | ||||||||
Net income | $ | 84,206 | $ | 83,163 | $ | 192,685 | $ | 187,643 | ||||||||
Preferred dividends | (8,188 | ) | (8,188 | ) | (16,376 | ) | (16,376 | ) | ||||||||
Net income available to common and | ||||||||||||||||
participating common shareholders | $ | 76,018 | $ | 74,975 | $ | 176,309 | $ | 171,267 | ||||||||
Net income allocated to common shareholders | ||||||||||||||||
under the two-class method | $ | 73,745 | $ | 72,763 | $ | 171,072 | $ | 166,279 | ||||||||
Net income per diluted common share [b] | $ | 1.68 | $ | 1.68 | $ | 3.91 | $ | 3.84 | ||||||||
Return on average common equity, Net income | 2.7 | % | 2.9 | % | 6.3 | % | 6.7 | % | ||||||||
Annualized return on average common equity, Net income | 10.6 | % | 11.4 | % | 12.5 | % | 13.3 | % | ||||||||
[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.
[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 basic or 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 that used by management to analyze the Company’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
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