PEMBROKE, Bermuda, Oct. 27, 2011 (GLOBE NEWSWIRE) -- Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported a net loss of $20.0 million and $0.71 per diluted common share for the third quarter of 2011 versus net income of $139.1 million and $2.51 per diluted common share in the third quarter of 2010. For the nine months ended September 30, 2011, the net loss was $66.4 million and $2.07 per diluted common share versus net income of $253.5 million and $4.33 per diluted common share for the nine months ended September 30, 2010.
Operating highlights for the quarter ended September 30, 2011 were as follows:
- Net premiums written of $551.3 million, an increase of 22.0% over the same period in 2010;
- Combined ratio of 104.6%, which included 17.5 percentage points of catastrophe losses partially offset by the benefit of 7.9 percentage points of favorable prior year loss reserve development;
- Net investment income of $14.1 million, a decrease of $39.6 million over the same period in 2010;
- An operating loss, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $24.7 million and $0.83 per diluted common share;
- An operating loss on average common equity for the quarter of 1.5%; and
- Book value of $51.63 per diluted common share, down 1.1% from June 30, 2011.
Operating highlights for the nine months ended September 30, 2011 were as follows:
- Net premiums written of $1,792.0 million, an increase of 11.6 % over the same period in 2010;
- Combined ratio of 113.0%, which included 24.9 percentage points of catastrophe losses partially offset by the benefit of 9.6 percentage points of favorable prior year loss reserve development;
- Net investment income of $106.4 million, a decrease of $37.0 million over the same period in 2010;
- An operating loss, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $96.9 million and $2.83 per diluted common share;
- An operating loss on average common equity for the first nine months of the year of 4.6%; and
- Book value of $51.63 per diluted common share, down 2.1% from December 31, 2010.
David Cash, Chief Executive Officer, commented, "The third quarter was a tough one for the industry, as we saw continued frequency of severe catastrophe events and adverse weather conditions, combined with historically low interest rates, global economic uncertainty and a competitive marketplace. Endurance has been able to withstand these challenges, and continues to maintain a very strong balance sheet with prudent reserves and a high quality, short duration investment portfolio. We have selectively expanded our business within profitable niches while reducing those business lines where returns were below our targets."
Insurance Segment
Operating highlights for Endurance's Insurance segment for the quarter ended September 30, 2011 were as follows:
- Net premiums written of $303.2 million, an increase of 48.4% from the third quarter of 2010;
- Combined ratio of 96.8%, an increase of 6.7 percentage points from the third quarter of 2010; and
- Favorable prior year loss reserve development of 3.9 percentage points during the current period, level with the third quarter of 2010.
Operating highlights for Endurance's Insurance segment for the nine months ended September 30, 2011 were as follows:
- Net premiums written of $909.0 million, an increase of 21.5 % from the same period in 2010;
- Combined ratio of 96.3%, an increase of 4.3 percentage points from the same period in 2010; and
- Favorable prior year loss reserve development of 9.6 percentage points during the current period, compared to 5.7 percentage points of favorable prior year loss reserve development in the same period in 2010.
Third quarter net premiums written in the Insurance segment grew within the agriculture and casualty lines of business, partially offset by declines in the property and professional lines. The growth in the agriculture line resulted from positive adjustments to spring crop premiums, as well as commodity prices being higher than a year ago for winter crops. The increase in the casualty line was driven by the continued successful rollout of our contract binding authority business line which we launched in November 2010. The decline in net premiums written in the property, healthcare and professional lines of business was driven by increased competition, which led to either non-renewing business or a move to higher policy attachment points. For the nine months ended September 30, 2011, net premiums written increased primarily as a result of increased commodity prices in the agriculture line and growth in casualty premiums, partially offset by declines in the property, healthcare and professional lines of business.
The increase in the Insurance segment combined ratios in the third quarter and first nine months of 2011 compared to the same periods in 2010 resulted from higher net loss ratios, partially offset by improvements in the acquisition expense ratio and, in the third quarter, an improvement in the general and administrative expense ratio. The 2011 Insurance segment net loss ratios were higher than the net loss ratios in the corresponding 2010 periods primarily due to storm and flood losses in the property insurance line of business, including net losses of $7.5 million from Hurricane Irene in the current periods. The higher 2011 Insurance segment net loss ratios also resulted from higher losses in our agriculture line of business due to the current drought in the Southwest United States and the excess moisture in the Midwest United States in the spring. These losses were partially offset by higher levels of favorable prior year reserve development for the current nine months. The current quarter combined ratio benefitted from 3.9 percentage points of favorable loss reserve development, the same as the third quarter of 2010. For the first nine months of 2011, the combined ratio benefitted from 9.6 percentage points of favorable loss development compared to 5.7 percentage points for the first nine months of 2010. Favorable development for the current nine months was experienced in the short tail, long tail and other lines of business, as claims did not occur as originally expected.
The current periods' general and administrative expense ratios improved in the current quarter compared to the same period a year ago and was flat for the first nine months of 2011 compared to a year ago. Investments in several new insurance lines of business, which require higher initial expenses compared to revenues, were offset by higher earned premiums within the agriculture line of business. The acquisition expense ratios in both periods in 2011 were lower than the same periods in 2010 as the agriculture line of business comprises a greater portion of 2011 earned premiums and has lower related acquisition costs.
Reinsurance Segment
Operating highlights for Endurance's Reinsurance segment for the quarter ended September 30, 2011 were as follows:
- Net premiums written of $248.1 million, an increase of 0.2% from the third quarter of 2010;
- Combined ratio of 115.0%, an increase of 38.1 percentage points from the third quarter of 2010;
- Favorable prior year loss reserve development of 13.2 percentage points during the current period, compared to 11.3 percentage points of favorable prior year loss reserve development in the third quarter of 2010; and
- Net catastrophe losses of $91.1 million or 37.6 percentage points on the combined ratio.
Operating highlights for Endurance's Reinsurance segment for the nine months ended September 30, 2011 were as follows:
- Net premiums written of $882.9 million, an increase of 3.0% from the same period in 2010;
- Combined ratio of 130.3%, an increase of 41.8 percentage points from the same period in 2010;
- Favorable prior year loss reserve development of 9.7 percentage points during the current period, compared to 10.1 percentage points of favorable prior year loss reserve development in the same period in 2010; and
- Net catastrophe losses of $347.2 million or 50.0 percentage points on the combined ratio.
The modest increases in net premiums written in the Reinsurance segment in the third quarter and first nine months of 2011 resulted primarily from growth in the property and catastrophe lines of business, partially offset by declines in the casualty line of business compared to 2010. Within the property line of business, growth primarily resulted from increased renewal premiums from one large contract and new business underwritten within our Singapore and Zurich offices. Growth in our catastrophe premiums was driven predominantly from price increases experienced on contract renewals and reinstatement premiums related to the various catastrophes. Current quarter casualty net premiums written declined 30.6% due to several contracts that were not renewed due to pricing, terms and conditions.
The Reinsurance segment's combined ratio in the third quarter of 2011 increased compared to the third quarter of 2010 primarily due to $91.0 million or 37.6 percentage points in losses net of reinsurance and reinstatement premiums from Hurricane Irene, the Danish flood, Texas brushfires and multiple storms in the Midwest which when accumulated triggered several aggregate catastrophe contracts. The current quarter's net loss ratio benefitted from 13.2 percentage points of favorable loss reserve development compared to 11.3 percentage points in the third quarter of 2010.
For the first nine months of 2011, the Reinsurance segment reported a combined ratio of 130.3% compared to 88.5% for the same period in 2010. The increase in the combined ratio was largely attributable to a greater frequency of catastrophe events in 2011, including the Australian floods, the Japan and New Zealand earthquakes, the spring tornadoes in the United States, and the third quarter events described above, which resulted in losses net of reinsurance and reinstatement premiums of $347.2 million or 50.0 percentage points to the combined ratio. For the nine months ended September 30, 2011, the net loss ratio benefitted from 9.7 percentage points of favorable loss reserve development compared to 10.1 percentage points in the first nine months of 2010.
Investments
Endurance's net investment income for the quarter ended September 30, 2011 was $14.1 million, a decrease of $39.6 million as compared to the same period in 2010. Endurance's net investment income for the nine months ended September 30, 2011 was $106.4 million, a decrease of $37.0 million or 25.8% as compared to the same period in 2010. During the third quarter and nine months ended September 30, 2011, Endurance's net investment income included mark to market losses of $22.5 million and $7.6 million, respectively, on its alternative investments and high yield loan funds included in other investments, as compared to mark to market gains of $13.8 million and $23.8 million in the third quarter and first nine months of 2010, respectively. Investment income generated from Endurance's fixed maturity investments decreased by $3.3 million and $6.5 million for the three and nine months ended September 30, 2011 compared to the same periods in 2010 due to lower reinvestment rates during the current periods and the short duration of the portfolio. The ending book yield on Endurance's fixed maturity investments at September 30, 2011 was 2.79%, down from 3.13% at December 31, 2010.
Endurance's fixed income investments, which comprised approximately 92.4% of Endurance's investments as of September 30, 2011, maintained an average credit quality of AA. Endurance recorded net realized investment gains of $1.0 million during the third quarter and $26.3 million of net realized gains for the first nine months of 2011 compared to net realized investment gains of $9.0 million and $15.2 million during the third quarter and first nine months of 2010.
Endurance ended the third quarter of 2011 with cash and invested assets of $6.4 billion, which represents a 3.1% increase from December 31, 2010. Net operating cash flow was $337.5 million for the nine months ended September 30, 2011 versus $390.6 million for the same period in 2010.
Capitalization and Shareholders' Equity
At September 30, 2011, Endurance's shareholders' equity was $2.64 billion or $51.63 per diluted common share versus $2.85 billion or $52.74 per diluted common share at December 31, 2010. For the quarter and nine months ended September 30, 2011, Endurance declared and paid dividends of $0.30 and $0.90 per share, respectively.
Earnings Call
Endurance will host a conference call on October 28, 2011 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 631-5913 (toll free) or (913) 312-1447 (international) and entering pass code: 2144344. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 11, 2011 by dialing (888) 203-1112 (toll-free) or (719) 457-0820 (international) and entering the pass code: 2144344.
The public may access a live broadcast of the conference call at the "Investors" section of Endurance's website, www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance's website.
A copy of Endurance's financial supplement for the third quarter of 2011 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings.
Operating (loss) income, operating return on average common equity, operating (loss) income per dilutive common share, operating (loss) income allocated to common shareholders and 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 property, casualty, healthcare liability, agriculture, workers' compensation, professional lines of insurance and property, catastrophe, casualty, agriculture, marine, aerospace, and surety 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, as amended, for the year ended December 31, 2010 and in our most recent Quarterly Report on Form 10-Q.
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.
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||
| CONSOLIDATED BALANCE SHEETS | ||
| (in thousands of United States dollars, except share and per share amounts) | ||
|
September 30, 2011 |
December 31, 2010 |
|
| Assets | ||
| Cash and cash equivalents | $623,944 | $609,852 |
| Fixed maturity investments, available for sale, at fair value | 4,998,142 | 5,116,702 |
| Short term investments, available for sale, at fair value | 323,119 | 70,444 |
| Equity securities, available for sale, at fair value | 49,323 | 13,565 |
| Other investments | 386,785 | 376,652 |
| Premiums receivable, net | 1,192,455 | 827,609 |
| Deferred acquisition costs | 203,455 | 154,484 |
| Securities lending collateral | -- | 59,886 |
| Prepaid reinsurance premiums | 204,961 | 107,977 |
| Losses recoverable | 479,132 | 319,349 |
| Accrued investment income | 30,851 | 32,934 |
| Goodwill and intangible assets | 183,857 | 181,954 |
| Deferred tax assets | 40,253 | 33,684 |
| Receivable on pending investment sales | 37,947 | 602 |
| Other assets | 80,013 | 73,711 |
| Total Assets | $8,834,237 | $7,979,405 |
| Liabilities | ||
| Reserve for losses and loss expenses | $3,910,537 | $3,319,927 |
| Reserve for unearned premiums | 1,299,864 | 842,154 |
| Net deposit liabilities | 28,860 | 32,505 |
| Securities lending payable | -- | 59,886 |
| Reinsurance balances payable | 244,769 | 228,860 |
| Debt | 528,664 | 528,411 |
| Payable on pending investment purchases | 56,496 | -- |
| Other liabilities | 129,097 | 119,509 |
| Total Liabilities | 6,198,287 | 5,131,252 |
| Shareholders' Equity | ||
| Preferred shares | ||
| Series A, non-cumulative – 8,000,000 issued and outstanding (2010 – 8,000,000) | 8,000 | 8,000 |
| Series B, non-cumulative – 9,200,000 issued and outstanding (2010 – Nil) | 9,200 | -- |
| Common shares | ||
| 40,517,222 issued and outstanding (2010 –47,218,468) | 40,517 | 47,218 |
| Additional paid-in capital | 512,323 | 613,915 |
| Accumulated other comprehensive income | 144,004 | 138,571 |
| Retained earnings | 1,921,906 | 2,040,449 |
| Total Shareholders' Equity | 2,635,950 | 2,848,153 |
| Total Liabilities and Shareholders' Equity | $8,834,237 | $7,979,405 |
| Book Value per Common Share | ||
| Dilutive common shares outstanding | 42,728,320 | 50,210,614 |
| Diluted book value per common share[a] | $51.63 | $52.74 |
|
Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2010, which was derived from Endurance's audited financial statements. |
||
| [a] Excludes the $430 million liquidation value of the preferred shares (2010 : $200 million). | ||
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||
| CONSOLIDATED STATEMENTS OF (LOSS) INCOME | ||||
| (in thousands of United States dollars, except share and per share amounts) | ||||
| Quarter Ended | For the Nine Months Ended | |||
| September 30, | September 30, | September 30, | September 30, | |
| 2011 | 2010 | 2011 | 2010 | |
| Revenues | ||||
| Gross premiums written | $700,866 | $555,574 | $2,204,148 | $1,864,011 |
| Net premiums written | $551,327 | $451,884 | $1,791,957 | $1,605,629 |
| Change in unearned premiums | 10,166 | 17,909 | (361,053) | (314,252) |
| Net premiums earned | 561,493 | 469,793 | 1,430,904 | 1,291,377 |
| Other underwriting (loss) income | (2,141) | 322 | (2,122) | (2,046) |
| Net investment income | 14,100 | 53,654 | 106,443 | 143,484 |
| Net realized gains on investment sales | 1,033 | 8,973 | 26,340 | 15,174 |
| Total other-than-temporary impairment losses | (168) | (1,140) | (1,908) | (2,647) |
|
Portion of loss recognized in accumulated other comprehensive income |
(72) | (240) | (911) | (586) |
| Net impairment losses recognized in earnings | (240) | (1,380) | (2,819) | (3,233) |
| Total revenues | 574,245 | 531,362 | 1,558,746 | 1,444,756 |
| Expenses | ||||
| Net losses and loss expenses | 456,691 | 266,132 | 1,220,514 | 791,676 |
| Acquisition expenses | 72,249 | 67,443 | 205,754 | 198,095 |
| General and administrative expenses | 58,574 | 59,523 | 190,421 | 174,164 |
| Amortization of intangibles | 2,976 | 2,588 | 8,800 | 7,764 |
| Net foreign exchange gains | (4,085) | (12,565) | (7,655) | (6,465) |
| Interest expense | 9,055 | 9,051 | 27,166 | 25,709 |
| Total expenses | 595,460 | 392,172 | 1,645,000 | 1,190,943 |
| (Loss) Income before income taxes | (21,215) | 139,190 | (86,254) | 253,813 |
| Income tax benefit (expense) | 1,197 | (62) | 19,896 | (303) |
| Net (loss) income | (20,018) | 139,128 | (66,358) | 253,510 |
| Preferred dividends | (8,188) | (3,875) | (15,938) | (11,625) |
|
Net (loss) income (attributable) available to common and participating common shareholders |
$(28,206) | $135,253 | $(82,296) | $241,885 |
| Per share data | ||||
| Basic (losses) earnings per common share | $(0.71) | $2.64 | ($(2.07) | $4.56 |
| Diluted (losses) earnings per common share | $(0.71) | $2.51 | ($(2.07) | $4.33 |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the quarter ended September 30, 2011 | |||
| Insurance | Reinsurance | Totals | |
| Revenues | |||
| Gross premiums written | $450,451 | $250,415 | $700,866 |
| Ceded premiums written | (147,241) | (2,298) | (149,539) |
| Net premiums written | 303,210 | 248,117 | 551,327 |
| Net premiums earned | 318,602 | 242,891 | 561,493 |
| Other underwriting (loss) income | (2,875) | 734 | (2,141) |
| Total underwriting revenues | 315,727 | 243,625 | 559,352 |
| Expenses | |||
| Net losses and loss expenses | 260,206 | 196,485 | 456,691 |
| Acquisition expenses | 18,738 | 53,511 | 72,249 |
| General and administrative expenses | 29,328 | 29,246 | 58,574 |
| 308,272 | 279,242 | 587,514 | |
| Underwriting income (loss) | $7,455 | $(35,617) | $(28,162) |
| Net loss ratio | 81.7% | 81.0% | 81.3% |
| Acquisition expense ratio | 5.9% | 22.0% | 12.9% |
| General and administrative expense ratio | 9.2% | 12.0% | 10.4% |
| Combined ratio | 96.8% | 115.0% | 104.6% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the quarter ended September 30, 2010 | |||
| Insurance | Reinsurance | Totals | |
| Revenues | |||
| Gross premiums written | $303,561 | $252,013 | $555,574 |
| Ceded premiums written | (99,268) | (4,422) | (103,690) |
| Net premiums written | 204,293 | 247,591 | 451,884 |
| Net premiums earned | 242,766 | 227,027 | 469,793 |
| Other underwriting income (loss) | 473 | (151) | 322 |
| Total underwriting revenues | 243,239 | 226,876 | 470,115 |
| Expenses | |||
| Net losses and loss expenses | 172,015 | 94,117 | 266,132 |
| Acquisition expenses | 17,356 | 50,087 | 67,443 |
| General and administrative expenses | 29,256 | 30,267 | 59,523 |
| 218,627 | 174,471 | 393,098 | |
| Underwriting income | $24,612 | $52,405 | $77,017 |
| Net loss ratio | 70.9% | 41.5% | 56.6% |
| Acquisition expense ratio | 7.1% | 22.1% | 14.4% |
| General and administrative expense ratio | 12.1% | 13.3% | 12.7% |
| Combined ratio | 90.1% | 76.9% | 83.7% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the nine months ended September 30, 2011 | |||
| Insurance | Reinsurance | Totals | |
| Revenues | |||
| Gross premiums written | $1,302,032 | $902,116 | $2,204,148 |
| Ceded premiums written | (393,020) | (19,171) | (412,191) |
| Net premiums written | 909,012 | 882,945 | 1,791,957 |
| Net premiums earned | 730,491 | 700,413 | 1,430,904 |
| Other underwriting (loss) income | (2,875) | 753 | (2,122) |
| Total underwriting revenues | 727,616 | 701,166 | 1,428,782 |
| Expenses | |||
| Net losses and loss expenses | 550,438 | 670,076 | 1,220,514 |
| Acquisition expenses | 50,907 | 154,847 | 205,754 |
| General and administrative expenses | 102,361 | 88,060 | 190,421 |
| 703,706 | 912,983 | 1,616,689 | |
| Underwriting income (loss) | $23,910 | ($211,817) | ($187,907) |
| Net loss ratio | 75.3% | 95.6% | 85.3% |
| Acquisition expense ratio | 7.0% | 22.1% | 14.4% |
| General and administrative expense ratio | 14.0% | 12.6% | 13.3% |
| Combined ratio | 96.3% | 130.3% | 113.0% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the nine months ended September 30, 2010 | |||
| Insurance | Reinsurance | Totals | |
| Revenues | |||
| Gross premiums written | $999,528 | $864,483 | $1,864,011 |
| Ceded premiums written | (251,307) | (7,075) | (258,382) |
| Net premiums written | 748,221 | 857,408 | 1,605,629 |
| Net premiums earned | 616,300 | 675,077 | 1,291,377 |
| Other underwriting income (loss) | 471 | (2,517) | (2,046) |
| Total underwriting revenues | 616,771 | 672,560 | 1,289,331 |
| Expenses | |||
| Net losses and loss expenses | 428,872 | 362,804 | 791,676 |
| Acquisition expenses | 51,336 | 146,759 | 198,095 |
| General and administrative expenses | 86,523 | 87,641 | 174,164 |
| 566,731 | 597,204 | 1,163,935 | |
| Underwriting income | $50,040 | $75,356 | $125,396 |
| Net loss ratio | 69.6% | 53.7% | 61.3% |
| Acquisition expense ratio | 8.4% | 21.8% | 15.3% |
| General and administrative expense ratio | 14.0% | 13.0% | 13.5% |
| Combined ratio | 92.0% | 88.5% | 90.1% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||||
| CONSOLIDATED FINANCIAL RATIOS | ||||||
| As Reported | ||||||
| For the quarter ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 81.7% | 70.9% | 81.0% | 41.5% | 81.3% | 56.6% |
| Acquisition expense ratio | 5.9% | 7.1% | 22.0% | 22.1% | 12.9% | 14.4% |
| General and administrative expense ratio | 9.2% | 12.1% | 12.0% | 13.3% | 10.4% | 12.7% |
| Combined ratio | 96.8% | 90.1% | 115.0% | 76.9% | 104.6% | 83.7% |
| Effect of Prior Year Net Loss Reserve Development | ||||||
| Favorable / (Unfavorable) | ||||||
| For the quarter ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 3.9% | 3.9% | 13.2% | 11.3% | 7.9% | 7.5% |
| Net of Prior Year Net Loss Reserve Development | ||||||
| For the quarter ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 85.6% | 74.8% | 94.2% | 52.8% | 89.2% | 64.1% |
| Acquisition expense ratio | 5.9% | 7.1% | 22.0% | 22.1% | 12.9% | 14.4% |
| General and administrative expense ratio | 9.2% | 12.1% | 12.0% | 13.3% | 10.4% | 12.7% |
| Combined ratio | 100.7% | 94.0% | 128.2% | 88.2% | 112.5% | 91.2% |
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.
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||||
| CONSOLIDATED FINANCIAL RATIOS | ||||||
| As Reported | ||||||
| For the nine months ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 75.3% | 69.6% | 95.6% | 53.7% | 85.3% | 61.3% |
| Acquisition expense ratio | 7.0% | 8.4% | 22.1% | 21.8% | 14.4% | 15.3% |
| General and administrative expense ratio | ||||||
| 14.0% | 14.0% | 12.6% | 13.0% | 13.3% | 13.5% | |
| Combined ratio | 96.3% | 92.0% | 130.3% | 88.5% | 113.0% | 90.1% |
| Effect of Prior Year Net Loss Reserve Development | ||||||
| Favorable / (Unfavorable) | ||||||
| For the nine months ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 9.6% | 5.7% | 9.7% | 10.1% | 9.6% | 8.0% |
| Net of Prior Year Net Loss Reserve Development | ||||||
| For the nine months ended September 30 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 84.9% | 75.3% | 105.3% | 63.8% | 94.9% | 69.3% |
| Acquisition expense ratio | 7.0% | 8.4% | 22.1% | 21.8% | 14.4% | 15.3% |
| General and administrative expense ratio | ||||||
| 14.0% | 14.0% | 12.6% | 13.0% | 13.3% | 13.5% | |
| Combined ratio | 105.9% | 97.7% | 140.0% | 98.6% | 122.6% | 98.1% |
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, excluding prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.
| 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 and nine months ended September 30, 2011 and 2010: |
||||
| Quarter Ended | Quarter Ended | |||
| September 30, 2011 | September 30, 2010 | |||
|
Gross Premiums Written |
Net Premiums Written |
Gross Premiums Written |
Net Premiums Written |
|
| Insurance | ||||
| Agriculture | $289,656 | $185,017 | $156,162 | $89,119 |
| Professional lines | 39,559 | 30,812 | 43,381 | 38,522 |
| Casualty | 57,520 | 37,664 | 40,538 | 23,700 |
| Property | 30,049 | 17,681 | 30,295 | 21,366 |
| Healthcare liability | 33,652 | 32,021 | 34,024 | 32,393 |
| Workers' compensation | 15 | 15 | (839) | (807) |
| Subtotal Insurance | $450,451 | $303,210 | $303,561 | $204,293 |
| Reinsurance | ||||
| Catastrophe | $46,275 | $43,868 | $45,513 | $41,154 |
| Casualty | 56,293 | 56,292 | 81,167 | 81,163 |
| Property | 129,203 | 129,203 | 111,395 | 111,395 |
| Aerospace and Marine | 5,891 | 6,002 | 4,184 | 4,184 |
| Surety and other specialty | 12,753 | 12,752 | 9,754 | 9,695 |
| Subtotal Reinsurance | $250,415 | $248,117 | $252,013 | $247,591 |
| Total | $700,866 | $551,327 | $555,574 | $451,884 |
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||
| GROSS AND NET PREMIUMS WRITTEN BY SEGMENT | ||||
| (in thousands of United States dollars) | ||||
| Nine Months Ended | Nine Months Ended | |||
| September 30, 2011 | September 30, 2010 | |||
|
Gross Premiums Written |
Net Premiums Written |
Gross Premiums Written |
Net Premiums Written |
|
| Insurance | ||||
| Agriculture | $855,486 | $577,538 | $560,531 | $402,395 |
| Professional lines | 124,209 | 99,560 | 133,456 | 115,546 |
| Casualty | 159,580 | 107,234 | 130,172 | 82,265 |
| Property | 90,643 | 56,262 | 99,976 | 76,404 |
| Healthcare liability | 72,243 | 68,542 | 76,782 | 72,947 |
| Workers' compensation | (129) | (124) | (1,389) | (1,336) |
| Subtotal Insurance | $1,302,032 | $909,012 | $999,528 | $748,221 |
| Reinsurance | ||||
| Catastrophe | $330,771 | $314,328 | $291,990 | $287,721 |
| Casualty | 218,264 | 217,463 | 246,060 | 245,257 |
| Property | 251,475 | 251,475 | 215,916 | 215,916 |
| Aerospace and Marine | 53,472 | 51,567 | 46,381 | 44,316 |
| Surety and other specialty | 48,134 | 48,112 | 64,136 | 64,198 |
| Subtotal Reinsurance | $902,116 | $882,945 | $864,483 | $857,408 |
| Total | $2,204,148 | $1,791,957 | $1,864,011 | $1,605,629 |
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||||||
| RECONCILIATIONS | ||||||||
| (in thousands of United States dollars, except share and per share amounts) | ||||||||
| The following is a reconciliation of Endurance's net (loss) income, net (loss) income per diluted common share, net (loss) income allocated to common shareholders under the two-class method and annualized (loss) return on average common equity to operating (loss) income, operating (loss) income per diluted common share, operating (loss) income allocated to common shareholders under the two-class method and annualized operating (loss) return on average common equity (all non-GAAP measures) for the quarters and nine months ended September 30, 2011 and 2010: | ||||||||
| Quarter Ended | Nine Months Ended | |||||||
| September 30, | September 30, | |||||||
| 2011 | 2010 | 2011 | 2010 | |||||
| Net (loss) income | $(20,018) | $139,128 | $(66,358) | $253,510 | ||||
| Add (Less) after-tax items: | ||||||||
| Net foreign exchange gains | (4,153) | (12,433) | (7,822) | (6,463) | ||||
| Net realized and unrealized investment gains | (775) | (8,687) | (25,514) | (13,004) | ||||
| Net impairment losses recognized in earnings | 240 | 1,380 | 2,819 | 3,233 | ||||
| Operating (loss) income before preferred dividends | $(24,706) | $119,388 | $(96,875) | $237,276 | ||||
| Preferred dividends | (8,188) | (3,875) | (15,938) | (11,625) | ||||
|
Operating (loss) income (attributable ) available to common and participating common shareholders |
(32,894) | $115,513 | (112,813) | $225,651 | ||||
|
Operating (loss) income allocated to common shareholders under the two-class method |
$(33,118) | $113,404 | $(113,553) | $221,390 | ||||
| Weighted average dilutive common shares | 39,764,756 | 52,997,120 | 40,071,340 | 54,851,248 | ||||
| Operating (loss) income per diluted common share [b] | $(0.83) | $2.14 | $(2.83) | $4.04 | ||||
| Average common equity [a] | $2,223,113 | $2,681,895 | $2,427,052 | $2,653,484 | ||||
| Operating (loss) return on average common equity | (1.5)% | 4.3% | (4.6)% | 8.5% | ||||
| Annualized operating (loss) return on average common equity | (5.9)% | 17.2% | (6.2)% | 11.3% | ||||
| Net (loss) income | $(20,018) | $139,128 | $(66,358) | $253,510 | ||||
| Preferred dividends | (8,188) | (3,875) | (15,938) | (11,625) | ||||
|
Net (loss) income (attributable) available to common and participating common shareholders |
$(28,206) | $135,253 | $(82,296) | $241,885 | ||||
|
Net (loss) income allocated to common shareholders under the two-class method |
$(28,430) | $132,785 | $(83,036) | $237,320 | ||||
| Net (loss) income per diluted common share | $(0.71) | $2.51 | $(2.07) | $4.33 | ||||
|
(Loss) return on average common equity, Net (loss) income |
(1.3)% | 5.0% | (3.4)% | 9.1% | ||||
|
Annualized (loss) return on average common equity, Net (loss) income |
(5.1)% | 20.2% | (4.5)% | 12.2% | ||||
|
[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 (2010: $200 million). |
||||||||
|
[b] Represents diluted (loss) income per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method. |
||||||||
Operating (loss) income and operating (loss) income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating (loss) income allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating (loss) income divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating (loss) 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 (loss) income and net (loss) income per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating (loss) income and operating (loss) income per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance's results of operations in a manner similar to how management analyzes Endurance's underlying business performance. Operating (loss) income and operating (loss) income per dilutive common share should not be viewed as substitutes for GAAP net (loss) income and net (loss) 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.