PEMBROKE, Bermuda, Feb. 9, 2012 (GLOBE NEWSWIRE) -- Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported a net loss of $27.4 million and $0.88 per diluted common share for the fourth quarter of 2011 versus net income of $111.2 million and $2.09 per diluted common share for the fourth quarter of 2010.
For the year ended December 31, 2011, the net loss was $93.7 million and $2.95 per diluted common share versus net income of $364.7 million and $6.38 per diluted common share for the year ended December 31, 2010.
Operating highlights for the quarter ended December 31, 2011 were as follows:
- Net premiums written of $187.9 million, an increase of 18.8% over the same period in 2010;
- Combined ratio of 112.5%, which included 8.4 percentage points of favorable prior year loss reserve development and 22.0 percentage points of catastrophe losses from 2011 events;
- Net investment income of $40.6 million, a decrease of $16.3 million from the same period in 2010;
- An operating loss, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $31.3 million and $0.98 per diluted common share;
- An operating loss on average common equity for the quarter of 1.8%; and
- Book value of $50.56 per diluted common share, down 2.1% from September 30, 2011.
Operating highlights for the year ended December 31, 2011 were as follows:
- Net premiums written of $1,979.8 million, an increase of 12.3% over 2010;
- Combined ratio of 112.9%, which included 9.3 percentage points of favorable prior year loss reserve development and 24.5 percentage points of catastrophe losses from 2011 events;
- Net investment income of $147.0 million, a decrease of $53.3 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 $128.2 million and $3.81 per diluted common share;
- An operating loss on average common equity of 6.3%; and
- Book value of $50.56 per diluted common share, down 4.1% from December 31, 2010.
David Cash, Chief Executive Officer, commented, "While 2011 was a challenging year with global industry catastrophe losses in excess of $100 billion, Endurance is well positioned to benefit from the improving underwriting conditions we are beginning to see in many of our businesses. I am pleased with the improved pricing we were able to achieve in our reinsurance portfolio at January 1, particularly in our catastrophe lines, and our insurance business is also starting to see positive pricing momentum in a number of places."
Insurance Segment
Operating highlights for Endurance's Insurance segment for the quarter ended December 31, 2011 were as follows:
- Net premiums written of $96.5 million, an increase of 18.2% from the fourth quarter of 2010;
- Combined ratio of 111.0%, an increase of 24.3 percentage points from the fourth quarter of 2010; and
- Favorable prior year loss reserve development of 0.2 percentage points during the current period, compared to 5.6 percentage points of favorable prior year loss reserve development in the fourth quarter of 2010.
Operating highlights for Endurance's Insurance segment for the year ended December 31, 2011 were as follows:
- Net premiums written of $1,005.5 million, an increase of 21.2% from the prior year;
- Combined ratio of 100.1%, an increase of 9.5 percentage points from 2010; and
- Favorable prior year loss reserve development of 7.2 percentage points during the current period, compared to 5.7 percentage points of favorable prior year loss reserve development in 2010.
The increase in net written premiums of $14.8 million in the Insurance segment in the fourth quarter of 2011 compared to the fourth quarter of 2010 resulted predominantly from increased business written within the agriculture, professional lines and casualty lines of business partially offset by modest reductions in the property and healthcare liability lines of business. For the year ended December 31, 2011, net written premiums increased $175.6 million compared to a year ago, principally due to growth within the agriculture and casualty lines, partially offset by declines in the professional, property and healthcare liability lines of business. For both the fourth quarter of 2011 and the full year 2011, growth in the agriculture line was driven by higher commodity prices compared to a year ago, while growth in the casualty line occurred in our contract binding authority business which was added in late 2010. The decline in net premiums written in the professional and healthcare liability lines for the full year 2011 was driven by increased competition, as contracts which did not meet Endurance's return requirements were non-renewed.
The increase in the Insurance segment combined ratio in the current quarter compared to a year ago was largely driven by increased net loss and acquisition expense ratios, partially offset by a lower general and administrative expense ratio. The increase in the net loss ratio largely reflects higher losses within the agriculture line of business due to adverse growing conditions compared to a year ago. Also impacting the current quarter net loss ratio were higher losses from the property line of business caused principally by two large fire claims. The decline in the general and administrative expense ratio for the fourth quarter of 2011 was due to lower variable incentive compensation compared to a year ago, partially offset by larger expenses related to write downs on leasehold improvements and expenses related to staffing changes made in the fourth quarter of 2011.
For the full year 2011 compared to a year ago, the combined ratio increased due to a higher net loss ratio, partially offset by modestly lower acquisition and general and administrative expense ratios. The net loss ratio for the full year was higher than a year ago predominantly due to higher losses in the agriculture line of business stemming from adverse growing conditions, as well as losses within the property line of business related to Hurricane Irene. Partially offsetting the higher level of losses was a larger amount of favorable prior year loss reserve development, predominantly driven by improved 2010 results in the agriculture line of business.
Reinsurance Segment
Operating highlights for Endurance's Reinsurance segment for the quarter ended December 31, 2011 were as follows:
- Net premiums written of $91.4 million, an increase of 19.5% from the fourth quarter of 2010;
- Combined ratio of 114.0%, an increase of 31.2 percentage points from the fourth quarter of 2010; and
- Favorable prior year loss reserve development of 16.6 percentage points during the fourth quarter of 2011, compared to 4.9 percentage points of favorable prior year loss reserve development in the fourth quarter of 2010; and
- Net catastrophe losses from 2011 events of $109.9 million or 43.8 percentage points on the combined ratio.
Operating highlights for Endurance's Reinsurance segment for the year ended December 31, 2011 were as follows:
- Net premiums written of $974.3 million, an increase of 4.3% from 2010;
- Combined ratio of 126.0%, an increase of 39.1 percentage points from the prior year;
- Favorable prior year loss reserve development of 11.5 percentage points during the current period, compared to 8.7 percentage points of favorable prior year loss reserve development in 2010; and
- Net catastrophe losses from 2011 events of $457.1 million or 49.2 percentage points on the combined ratio.
The $14.9 million increase in net premiums written in the Reinsurance segment during the fourth quarter of 2011 over the fourth quarter of 2010 resulted primarily from growth in the casualty, property and surety and other specialty lines of business. Partially offsetting this growth were declines in net premiums written within the catastrophe and aerospace and marine lines of business. The largest change in net premiums written in the current quarter compared to fourth quarter 2010 was experienced in the casualty line of business due to favorable premium adjustments and increased participation on a renewing contract in 2011. For full year 2011, net premiums written increased $40.5 million compared to full year 2010 driven by growth across the catastrophe, property and the aerospace and marines lines of business, partially offset by declines in casualty and surety and other specialty lines.
The combined ratios in the Reinsurance segment for the quarter and year ended December 31, 2011 increased compared to the same periods in 2010 due to higher net loss ratios. The higher net loss ratios resulted from a greater frequency of large loss events during 2011, including the earthquakes in New Zealand and Japan and the Queensland floods in Australia during the first quarter, spring tornadoes in the United States in the second quarter, Hurricane Irene, the Danish flood, Texas brushfires and multiple storms in the Midwest in the third quarter and the Thailand flood in the fourth quarter. Partially offsetting the increase in the net loss ratios in the current periods was the recognition of greater favorable prior year loss reserve development within the short and long tail lines of business compared to the same periods in 2010, as claims within those lines of business did not emerge as anticipated.
Investments
Endurance's net investment income decreased 28.6% or $16.3 million for the quarter ended December 31, 2011 and 26.6% or $53.3 million for the year ended December 31, 2011 compared to the same periods in 2010. During the fourth quarter and year ended December 31, 2011, Endurance's net investment income included mark to market gains of $6.9 million and losses of $0.7 million, respectively, on its alternative investment funds and high yield loan funds which are included in other investments, as compared to gains of $16.4 million and $40.3 million in the fourth quarter and year ended December 31, 2010. Investment income generated from Endurance's available for sale investments declined by $7.4 million and $13.9 million for the quarter and year ended December 31, 2011 compared to the same periods in 2010. This decrease resulted from lower reinvestment rates during 2011 and the short duration of Endurance's fixed maturity portfolio. The ending book yield on Endurance's fixed maturity investments at December 31, 2011 was 2.68%, down from 3.13% at December 31, 2010.
At December 31, 2011, Endurance's fixed maturity portfolio, which comprises 90.5% of Endurance's investments, had an average credit quality of AA and a duration of 2.39 years. Endurance's fixed maturity portfolio was in an unrealized gain position of $161.6 million at December 31, 2011, an improvement of $13.2 million from December 31, 2010. Endurance recorded net realized gains on investment sales, including impairment losses recognized in earnings, of $4.6 million and $28.2 million during the fourth quarter and year ended December 31, 2011 compared to net realized investment gains of $6.6 million and $18.5 million during the same periods in 2010.
Endurance ended the fourth quarter of 2011 with cash and invested assets of $6.3 billion, which represents a 1.9% increase from December 31, 2010. Net operating cash flow was $281.3 million for the year ended December 31, 2011 versus $407.2 million for the year ended December 31, 2010.
Capitalization and Shareholders' Equity
At December 31, 2011, Endurance's shareholders' equity was $2.61 billion or $50.56 per diluted common share versus $2.85 billion or $52.74 per diluted common share at December 31, 2010. For the quarter and year ended December 31, 2011, Endurance declared and paid dividends of $0.30 and $1.20 per share, respectively. During 2011, Endurance repurchased 7.6 million of its common shares for $340.8 million and issued 9.2 million perpetual preferred shares for net proceeds of $224.0 million.
Earnings Call
Endurance will host a conference call on February 10, 2012 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 695-0608 or (719) 457-2636 (international) and entering pass code: 8149681. 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 24, 2012 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 8149681.
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 2011 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings.
Operating (loss) income, operating (loss) return on average common equity, operating (loss) income per diluted common share, operating (loss) income (attributable) available 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 property, casualty, healthcare liability, agriculture, professional lines and surety and other specialty 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) | ||
| December 31, 2011 | December 31, 2010 | |
| Assets | ||
| Cash and cash equivalents | $890,914 | $609,852 |
| Fixed maturity investments, available for sale, at fair value | 4,831,966 | 5,116,702 |
| Short term investments, available for sale, at fair value | 67,802 | 70,444 |
| Equity securities, available for sale, at fair value | 59,767 | 13,565 |
| Other investments | 432,658 | 376,652 |
| Premiums receivable, net | 636,727 | 827,609 |
| Deferred acquisition costs | 166,049 | 154,484 |
| Securities lending collateral | -- | 59,886 |
| Prepaid reinsurance premiums | 149,670 | 107,977 |
| Losses recoverable | 666,928 | 319,349 |
| Accrued investment income | 29,708 | 32,934 |
| Goodwill and intangible assets | 181,828 | 181,954 |
| Deferred tax assets | 33,355 | 33,684 |
| Receivable on pending investment sales | 77,821 | 602 |
| Other assets | 67,422 | 73,711 |
| Total Assets | $8,292,615 | $7,979,405 |
| Liabilities | ||
| Reserve for losses and loss expenses | $3,824,224 | $3,319,927 |
| Reserve for unearned premiums | 932,108 | 842,154 |
| Deposit liabilities | 26,887 | 32,505 |
| Securities lending payable | -- | 59,886 |
| Reinsurance balances payable | 189,488 | 228,860 |
| Debt | 528,118 | 528,411 |
| Payable on pending investment purchases | 55,243 | -- |
| Other liabilities | 125,382 | 119,509 |
| Total Liabilities | 5,681,450 | 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 | ||
| 43,086,834 issued and outstanding (2010 – 47,218,468) | 43,087 | 47,218 |
| Additional paid-in capital | 526,910 | 613,915 |
| Accumulated other comprehensive income | 169,130 | 157,151 |
| Retained earnings | 1,854,838 | 2,021,869 |
| Total Shareholders' Equity | 2,611,165 | 2,848,153 |
| Total Liabilities and Shareholders' Equity | $8,292,615 | $7,979,405 |
| Book Value per Common Share | ||
| Dilutive common shares outstanding | 43,142,277 | 50,210,614 |
| Diluted book value per common share[a] | $50.56 | $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 Year Ended | |||
| December 31, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |
| Revenues | ||||
| Gross premiums written | $ 262,966 | $ 189,225 | $ 2,467,114 | $ 2,053,236 |
| Net premiums written | $ 187,864 | $ 158,115 | $ 1,979,821 | $ 1,763,744 |
| Change in unearned premiums | 312,625 | 291,621 | (48,428) | (22,631) |
| Net premiums earned | 500,489 | 449,736 | 1,931,393 | 1,741,113 |
| Other underwriting (loss) income | (1,425) | 410 | (3,547) | (1,636) |
| Net investment income | 40,594 | 56,874 | 147,037 | 200,358 |
| Net realized and unrealized gains | 5,331 | 7,314 | 31,671 | 22,488 |
| Total other-than-temporary impairment losses | (751) | (48) | (2,659) | (2,695) |
| Portion of loss recognized in accumulated other comprehensive income | 50 | (663) | (861) | (1,249) |
| Net impairment losses recognized in earnings | (701) | (711) | (3,520) | (3,944) |
| Total revenues | 544,288 | 513,623 | 2,103,034 | 1,958,379 |
| Expenses | ||||
| Net losses and loss expenses | 412,152 | 246,424 | 1,632,666 | 1,038,100 |
| Acquisition expenses | 77,157 | 66,133 | 282,911 | 264,228 |
| General and administrative expenses | 73,731 | 67,756 | 264,152 | 241,920 |
| Amortization of intangibles | 2,413 | 2,696 | 11,213 | 10,460 |
| Net foreign exchange losses (gains) | 233 | 3,476 | (7,422) | (2,989) |
| Interest expense | 9,088 | 9,053 | 36,254 | 34,762 |
| Total expenses | 574,774 | 395,538 | 2,219,774 | 1,586,481 |
| (Loss) Income before income taxes | (30,486) | 118,085 | (116,740) | 371,898 |
| Income tax benefit (expense) | 3,110 | (6,857) | 23,006 | (7,160) |
| Net (loss) income | (27,376) | 111,228 | (93,734) | 364,738 |
| Preferred dividends | (8,187) | (3,875) | (24,125) | (15,500) |
| Net (loss) income (attributable) available to common and participating common shareholders | $ (35,563) | $ 107,353 | $ (117,859) | $ 349,238 |
| Per share data | ||||
| Basic (losses) earnings per common share | $ (0.88) | $ 2.22 | $ (2.95) | $ 6.73 |
| Diluted (losses) earnings per common share | $ (0.88) | $ 2.09 | $ (2.95) | $ 6.38 |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the quarter ended December 31, 2011 | |||
| Insurance | Reinsurance | Reported Totals | |
| Revenues | |||
| Gross premiums written | $ 167,766 | $ 95,200 | $ 262,966 |
| Ceded premiums written | (71,288) | (3,814) | (75,102) |
| Net premiums written | 96,478 | 91,386 | 187,864 |
| Net premiums earned | 251,101 | 249,388 | 500,489 |
| Other underwriting loss | (493) | (932) | (1,425) |
| Total underwriting revenues | 250,608 | 248,456 | 499,064 |
| Expenses | |||
| Net losses and loss expenses | 214,681 | 197,471 | 412,152 |
| Acquisition expenses | 20,388 | 56,769 | 77,157 |
| General and administrative expenses | 43,754 | 29,977 | 73,731 |
| 278,823 | 284,217 | 563,040 | |
| Underwriting loss | $ (28,215) | $ (35,761) | $ (63,976) |
| Net loss ratio | 85.5% | 79.2% | 82.4% |
| Acquisition expense ratio | 8.1% | 22.8% | 15.4% |
| General and administrative expense ratio | 17.4% | 12.0% | 14.7% |
| Combined ratio | 111.0% | 114.0% | 112.5% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the quarter ended December 31, 2010 | |||
| Insurance | Reinsurance | Reported Totals | |
| Revenues | |||
| Gross premiums written | $ 112,664 | $ 76,561 | $ 189,225 |
| Ceded premiums written | (31,021) | (89) | (31,110) |
| Net premiums written | 81,643 | 76,472 | 158,115 |
| Net premiums earned | 205,528 | 244,208 | 449,736 |
| Other underwriting income | 4 | 406 | 410 |
| Total underwriting revenues | 205,532 | 244,614 | 450,146 |
| Expenses | |||
| Net losses and loss expenses | 129,168 | 117,256 | 246,424 |
| Acquisition expenses | 12,220 | 53,913 | 66,133 |
| General and administrative expenses | 36,812 | 30,944 | 67,756 |
| 178,200 | 202,113 | 380,313 | |
| Underwriting income | $ 27,332 | $ 42,501 | $ 69,833 |
| Net loss ratio | 62.9% | 48.0% | 54.8% |
| Acquisition expense ratio | 5.9% | 22.1% | 14.7% |
| General and administrative expense ratio | 17.9% | 12.7% | 15.1% |
| Combined ratio | 86.7% | 82.8% | 84.6% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the year ended December 31, 2011 | |||
| Insurance | Reinsurance | Reported Totals | |
| Revenues | |||
| Gross premiums written | $ 1,469,798 | $ 997,316 | $ 2,467,114 |
| Ceded premiums written | (464,308) | (22,985) | (487,293) |
| Net premiums written | 1,005,490 | 974,331 | 1,979,821 |
| Net premiums earned | 981,592 | 949,801 | 1,931,393 |
| Other underwriting loss | (3,368) | (179) | (3,547) |
| Total underwriting revenues | 978,224 | 949,622 | 1,927,846 |
| Expenses | |||
| Net losses and loss expenses | 765,119 | 867,547 | 1,632,666 |
| Acquisition expenses | 71,295 | 211,616 | 282,911 |
| General and administrative expenses | 146,115 | 118,037 | 264,152 |
| 982,529 | 1,197,200 | 2,179,729 | |
| Underwriting loss | $ (4,305) | $ (247,578) | $ (251,883) |
| Net loss ratio | 77.9% | 91.3% | 84.6% |
| Acquisition expense ratio | 7.3% | 22.3% | 14.6% |
| General and administrative expense ratio | 14.9% | 12.4% | 13.7% |
| Combined ratio | 100.1% | 126.0% | 112.9% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | |||
| RESULTS BY SEGMENT | |||
| (in thousands of United States dollars) | |||
| For the year ended December 31, 2010 | |||
| Insurance | Reinsurance | Reported Totals | |
| Revenues | |||
| Gross premiums written | $ 1,112,192 | $ 941,044 | $ 2,053,236 |
| Ceded premiums written | (282,328) | (7,164) | (289,492) |
| Net premiums written | 829,864 | 933,880 | 1,763,744 |
| Net premiums earned | 821,828 | 919,285 | 1,741,113 |
| Other underwriting income (loss) | 475 | (2,111) | (1,636) |
| Total underwriting revenues | 822,303 | 917,174 | 1,739,477 |
| Expenses | |||
| Net losses and loss expenses | 558,040 | 480,060 | 1,038,100 |
| Acquisition expenses | 63,556 | 200,672 | 264,228 |
| General and administrative expenses | 123,335 | 118,585 | 241,920 |
| 744,931 | 799,317 | 1,544,248 | |
| Underwriting income | $ 77,372 | $ 117,857 | $ 195,229 |
| Net loss ratio | 67.9% | 52.2% | 59.6% |
| Acquisition expense ratio | 7.7% | 21.8% | 15.2% |
| General and administrative expense ratio | 15.0% | 12.9% | 13.9% |
| Combined ratio | 90.6% | 86.9% | 88.7% |
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||||
| CONSOLIDATED FINANCIAL RATIOS | ||||||
| As Reported | ||||||
| For the quarter ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 85.5% | 62.9% | 79.2% | 48.0% | 82.4% | 54.8% |
| Acquisition expense ratio | 8.1% | 5.9% | 22.8% | 22.1% | 15.4% | 14.7% |
| General and administrative expense ratio | ||||||
| 17.4% | 17.9% | 12.0% | 12.7% | 14.7% | 15.1% | |
| Combined ratio | 111.0% | 86.7% | 114.0% | 82.8% | 112.5% | 84.6% |
| Effect of Prior Year Net Loss Reserve Development | ||||||
| Favorable / (Unfavorable) | ||||||
| For the quarter ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 0.2% | 5.6% | 16.6% | 4.9% | 8.4% | 5.2% |
| Net of Prior Year Net Loss Reserve Development | ||||||
| For the quarter ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 85.7% | 68.5% | 95.8% | 52.9% | 90.8% | 60.0% |
| Acquisition expense ratio | 8.1% | 5.9% | 22.8% | 22.1% | 15.4% | 14.7% |
| General and administrative expense ratio | ||||||
| 17.4% | 17.9% | 12.0% | 12.7% | 14.7% | 15.1% | |
| Combined ratio | 111.2% | 92.3% | 130.6% | 87.7% | 120.9% | 89.8% |
| 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 year ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 77.9% | 67.9% | 91.3% | 52.2% | 84.6% | 59.6% |
| Acquisition expense ratio | 7.3% | 7.7% | 22.3% | 21.8% | 14.6% | 15.2% |
| General and administrative expense ratio | ||||||
| 14.9% | 15.0% | 12.4% | 12.9% | 13.7% | 13.9% | |
| Combined ratio | 100.1% | 90.6% | 126.0% | 86.9% | 112.9% | 88.7% |
| Effect of Prior Year Net Loss Reserve Development | ||||||
| Favorable / (Unfavorable) | ||||||
| For the year ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 7.2% | 5.7% | 11.5% | 8.7% | 9.3% | 7.3% |
| Net of Prior Year Net Loss Reserve Development | ||||||
| For the year ended December 31 | ||||||
| Insurance | Reinsurance | Total | ||||
| 2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |
| Net loss ratio | 85.1% | 73.6% | 102.8% | 60.9% | 93.9% | 66.9% |
| Acquisition expense ratio | 7.3% | 7.7% | 22.3% | 21.8% | 14.6% | 15.2% |
| General and administrative expense ratio | ||||||
| 14.9% | 15.0% | 12.4% | 12.9% | 13.7% | 13.9% | |
| Combined ratio | 107.3% | 96.3% | 137.5% | 95.6% | 122.2% | 96.0% |
| 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 years ended December 31, 2011 and 2010: | ||||
| Quarter Ended December 31, 2011 | Quarter Ended December 31, 2010 | |||
| Gross Premiums Written | Net Premiums Written | Gross Premiums Written | Net Premiums Written | |
| Insurance | ||||
| Agriculture | $ 46,260 | $ 9,121 | $ 6,930 | $ 2,372 |
| Professional lines | 45,110 | 38,402 | 36,690 | 33,171 |
| Casualty | 46,370 | 30,139 | 37,377 | 25,536 |
| Property | 18,669 | 8,668 | 22,134 | 11,895 |
| Healthcare liability | 10,276 | 9,067 | 10,811 | 9,946 |
| Surety and other specialty | 1,081 | 1,081 | (1,278) | (1,277) |
| Subtotal Insurance | $ 167,766 | $ 96,478 | $ 112,664 | $ 81,643 |
| Reinsurance | ||||
| Catastrophe | $ 15,250 | $ 14,753 | $ 17,896 | $ 17,896 |
| Casualty | 59,231 | 59,234 | 47,970 | 47,965 |
| Property | 15,087 | 15,087 | 8,628 | 8,628 |
| Aerospace and Marine | 1,119 | 768 | 2,380 | 2,380 |
| Surety and other specialty | 4,513 | 1,544 | (313) | (397) |
| Subtotal Reinsurance | $ 95,200 | $ 91,386 | $ 76,561 | $ 76,472 |
| Total | $ 262,966 | $ 187,864 | $ 189,225 | $ 158,115 |
| ENDURANCE SPECIALTY HOLDINGS LTD. | ||||
| GROSS AND NET PREMIUMS WRITTEN BY SEGMENT | ||||
| (in thousands of United States dollars) | ||||
| Year Ended December 31, 2011 | Year Ended December 31, 2010 | |||
| Gross Premiums Written | Net Premiums Written | Gross Premiums Written | Net Premiums Written | |
| Insurance | ||||
| Agriculture | $ 901,746 | $ 586,659 | $ 567,461 | $ 404,767 |
| Professional lines | 169,319 | 137,962 | 170,146 | 148,717 |
| Casualty | 205,950 | 137,373 | 167,549 | 107,801 |
| Property | 109,312 | 64,930 | 122,110 | 88,299 |
| Healthcare liability | 82,519 | 77,609 | 87,593 | 82,893 |
| Surety and other specialty | 952 | 957 | (2,667) | (2,613) |
| Subtotal Insurance | $ 1,469,798 | $ 1,005,490 | $ 1,112,192 | $ 829,864 |
| Reinsurance | ||||
| Catastrophe | $ 346,021 | $ 329,081 | $ 309,886 | $ 305,617 |
| Casualty | 277,495 | 276,697 | 294,030 | 293,222 |
| Property | 266,562 | 266,562 | 224,544 | 224,544 |
| Aerospace and Marine | 54,591 | 52,335 | 48,761 | 46,696 |
| Surety and other specialty | 52,647 | 49,656 | 63,823 | 63,801 |
| Subtotal Reinsurance | $ 997,316 | $ 974,331 | $ 941,044 | $ 933,880 |
| Total | $ 2,467,114 | $ 1,979,821 | $ 2,053,236 | $ 1,763,744 |
| 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 (attributable) available allocated to common shareholders under the two-class method and annualized return on average common equity to operating (loss) income, operating (loss) income per diluted common share, operating (loss) income (attributable) available 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 years ended December 31, 2011 and 2010: | ||||
| Quarter Ended December 31, | Year Ended December 31, | |||
| 2011 | 2010 | 2011 | 2010 | |
| Net (loss) income | $ (27,376) | $ 111, 228 | $ (93,734) | $ 364,738 |
| Add (Less) after-tax items: | ||||
| Net foreign exchange losses (gains) | 208 | 3,496 | (7,614) | (2,967) |
| Net realized and unrealized investment gains | (4,836) | (7,176) | (30,350) | (20,180) |
| Net impairment losses recognized in earnings | 701 | 712 | 3,520 | 3,944 |
| Operating (loss) income before preferred dividends | $ (31,303) | $ 108,260 | $ (128,178) | $ 345,535 |
| Preferred dividends | (8,187) | (3,875) | (24,125) | (15,500) |
| Operating (loss) income (attributable) available to common and participating common shareholders | $ (39,490) | $ 104,385 | $ (152,303) | $ 330,035 |
| Operating (loss) income (attributable) available allocated to common shareholders under the two-class method | $ (39,711) | $ 102,405 | $ (153,264) | $ 323,800 |
| Weighted average dilutive common shares | 40,641,211 | 50,302,939 | 40,214,979 | 53,728,459 |
| Operating (loss) income per diluted common share [b] | $ (0.98) | $ 2.04 | $ (3.81) | $ 6.03 |
| Average common equity [a] | $2,193,558 | $2,683,919 | $2,414,659 | $2,617,718 |
| Operating (loss) return on average common equity | (1.8)% | 3.9% | (6.3)% | 12.6% |
| Annualized operating (loss) return on average common equity | (7.2)% | 15.6% | (6.3)% | 12.6% |
| Net (loss) income | $ (27,376) | $ 111,228 | $ (93,734) | $ 364,738 |
| Preferred dividends | (8,187) | (3,875) | (24,125) | (15,500) |
| Net (loss) income (attributable) available to common and participating common shareholders | $ (35,563) | $ 107,353 | $ (117,859) | $ 349,238 |
| Net (loss) income (attributable) available allocated to common shareholders under the two-class method | $ (35,784) | $ 105,317 | $ (118,820) | $ 342,643 |
| Net (loss) income per diluted common share | $ (0.88) | $ 2.09 | $ (2.95) | $ 6.38 |
| (Loss) Return on average common equity, Net (loss) income | (1.6)% | 4.0% | (4.9)% | 13.3% |
| Annualized (loss) return on average common equity, Net (loss) income | (6.5)% | 16.0% | (4.9)% | 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 (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 (attributable) available 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. | ||||