PEMBROKE, Bermuda, July 28, 2009 (GLOBE NEWSWIRE) -- Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income of $149.1 million and $2.42 per diluted common share for the second quarter of 2009 versus net income of $103.3 million and $1.54 per diluted common share in the second quarter of 2008.
For the six months ended June 30, 2009, net income was $227.4 million and $3.65 per diluted common share versus net income of $181.1 million and $2.67 per diluted common share for the six months ended June 30, 2008.
Operating highlights for the quarter ended June 30, 2009 were as follows:
* Gross premiums written of $559.2 million, an increase of 7.9% over the same period in 2008; * Net premiums written of $480.0 million, an increase of 2.3% over the same period in 2008; * Combined ratio of 89.6%, which included 8.3 percentage points of favorable prior year loss reserve development; * Net investment income of $88.8 million, an increase of $28.4 million over the same period in 2008; * Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $130.8 million and $2.11 per diluted common share; and * Operating return on average common equity for the quarter of 5.9%, or 23.5% on an annualized basis.
Operating highlights for the six months ended June 30, 2009 were as follows:
* Gross premiums written of $1,342.5 million, a decrease of 3.2% over the same period in 2008; * Net premiums written of $1,062.9 million, a decrease of 4.3% over the same period in 2008; * Combined ratio of 90.8%, which included 9.3 percentage points of favorable prior year loss reserve development; * Net investment income of $153.4 million, an increase of $46.0 million over the same period in 2008; * Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $219.0 million and $3.51 per diluted common share; * Operating return on average common equity for the first half of the year of 9.9%, or 19.7% on an annualized basis; and * Book value of $38.07 per diluted common share, up 15.2% from December 31, 2008.
Kenneth J. LeStrange, Chairman and Chief Executive Officer, commented, "Endurance generated outstanding operating results and growth in book value this quarter, with solid contributions from both of our business segments and very strong investment portfolio results. In the second quarter, we were able to grow our business in several areas due to the strong market position of our insurance and reinsurance operations, the quality of our balance sheet, the continued transition of business to Endurance from larger distressed competitors, and improved pricing in several lines of business. Although markets remain competitive, our short tailed property and catastrophe lines of business have seen strong rate increases, and we continue to see unique opportunities to grow selectively."
Insurance Segment
Operating highlights for Endurance's Insurance segment for the quarter ended June 30, 2009 were as follows:
* Gross premiums written of $230.8 million, a decrease of 15.1% from the second quarter of 2008; * Net premiums written of $153.8 million, a decrease of 34.4% from the second quarter of 2008; * Combined ratio of 94.9%, an improvement of 3.8 percentage points from the second quarter of 2008; and * Favorable prior year loss reserve development of 8.9 percentage points during the current period, compared to 10.4 percentage points of favorable prior year loss reserve development in the second quarter of 2008.
Operating highlights for Endurance's Insurance segment for the six months ended June 30, 2009 were as follows:
* Gross premiums written of $753.0 million, a decrease of 12.1% from the same period in 2008; * Net premiums written of $476.2 million, a decrease of 19.4% from the same period in 2008; * Combined ratio of 90.4%, an improvement of 10.4 percentage points from the same period in 2008; and * Favorable prior year loss reserve development of 14.0 percentage points during the current period, compared to 7.1 percentage points of favorable prior year loss reserve development in the same period in 2008.
Gross and net premium declines in the Insurance segment were driven by reductions in workers' compensation and property lines as a result of Endurance's exit from the California workers' compensation and U.K. property insurance markets in the first quarter of 2009. These lines contributed $73.2 million and $159.5 million of net written premiums in the second quarter and first half of 2008. Net premium declines in the current periods in the Insurance segment were also driven by reductions in the agriculture insurance line due to lower commodity prices and in the casualty insurance line, primarily due to the impact of a new reinsurance treaty for this line that incepted in the fourth quarter of 2008, resulting in reduced retentions. The decreases in net premiums written in the Insurance segment were partially offset by growth in net premiums written in the professional line of business in the three and six months ended June 30, 2009 compared to the same period in 2008, primarily from a small risk environmental program that incepted in the second half of 2008.
The improvement in the Insurance segment combined ratio in the second quarter of 2009 compared to 2008 resulted from decreases in the acquisition expense ratio and the net loss ratio, partially offset by an increase in the general and administrative expense ratio. The acquisition expense ratio for the three months ended June 30, 2009 compared to 2008 declined due to a shift in premiums written from the workers' compensation line to the professional line, which generally has lower associated acquisition costs. The net loss ratio declined primarily as a result of lower current year loss activity. Partially offsetting these declines was a slight increase in the general and administrative expense ratio due to strategic employee additions and the reduction in third party commissions and expense reimbursement offsets, primarily in the Insurance segment's agriculture line.
For the six months ended June 30, 2009, the combined ratio improved compared to 2008 primarily from a decrease in the net loss ratio, which was driven predominantly by higher levels of favorable prior year loss reserve development recorded during the current period. Favorable loss reserve development emerged in both the second quarter and first six months of 2009 across each of the business lines in the Insurance segment as claims did not develop as originally estimated.
Reinsurance Segment
Operating highlights for Endurance's Reinsurance segment for the quarter ended June 30, 2009 were as follows:
* Gross premiums written of $328.4 million, an increase of 33.4% over the same period in 2008; * Net premiums written of $326.3 million, an increase of 38.8% from the second quarter of 2008; * Combined ratio of 84.1%, an increase of 6.5 percentage points from the second quarter of 2008; and * Favorable prior year loss reserve development of 7.7 percentage points during the current period, compared to 14.7 percentage points of favorable prior year loss reserve development in the second quarter of 2008.
Operating highlights for Endurance's Reinsurance segment for the six months ended June 30, 2009 were as follows:
* Gross premiums written of $589.5 million, an increase of 11.3% over the same period in 2008; * Net premiums written of $586.8 million, an increase of 12.9% from the same period in 2008; * Combined ratio of 91.2%, an increase of 18.2 percentage points from the same period in 2008; and * Favorable prior year loss reserve development of 4.6 percentage points during the current period, compared to 16.5 percentage points of favorable prior year loss reserve development in the same period in 2008.
The increase in gross and net premiums written in the Reinsurance segment resulted primarily from growth in new business written, as well as increased pricing on renewal contracts in Endurance's property and catastrophe lines. Growth in the Reinsurance segment's casualty line was mainly due to a few large professional lines and small risk casualty treaties that were newly written, partially offset by non-renewals of business not meeting our return requirements.
The combined ratios in the Reinsurance segment for the current periods increased generally as a result of higher net loss ratios due to the recognition of less favorable prior year loss reserve development in the current periods versus 2008. In addition, Endurance recorded a higher level of attritional loss reserves in the current periods to reflect the potential for increased claims from several smaller scale industry catastrophe events occurring in the second quarter and first six months of 2009.
The increases in the net loss ratios for the second quarter and first six months of 2009 were partially offset by decreases in the current periods' acquisition expense ratios compared to the same periods in 2008. The current periods' acquisition expense ratios declined primarily due to lower profit commissions in the property line from increased loss estimates.
Investments
Endurance's net investment income increased 46.9% or $28.4 million for the quarter ended June 30, 2009 and 42.9% or $46.0 million for the six months ended June 30, 2009 as compared to the same periods in 2008. During the second quarter and six months ended June 30, 2009, Endurance's net investment income included mark to market gains of $40.5 million and $51.0 million on its alternative investments and high yield loan funds included in other investments, as compared to losses of $0.5 million and $16.6 million in the second quarter and first six months of 2008. Investment income generated from Endurance's fixed maturity investments decreased by $10.1 million and $15.4 million for the three and six months ended June 30, 2009 compared to the same periods in 2008 due to lower reinvestment rates during the current periods and a higher allocation of investments to cash and cash equivalents and short duration securities. The ending book yield on Endurance's fixed maturity investments at June 30, 2009 was 3.51%, down from 4.45% at December 31, 2008 as a result of modest trading activity and lower reinvestment rates during the current periods.
Endurance's fixed maturity portfolio, which comprises approximately 91% of Endurance's investments as of June 30, 2009, maintained an average credit quality of AAA as of June 30, 2009. Endurance recorded net realized losses on investment sales of $1.5 million during the second quarter and $1.7 million of net realized gains on investment sales for the first six months of 2009 compared to net realized investment gains of $0.2 million and $3.0 million during the same periods in 2008.
During the second quarter of 2009, Endurance adopted new accounting guidance regarding the recognition and reporting requirements for other-than-temporary impairments ("OTTI") on its debt securities. The adoption of the new OTTI accounting guidance had the following effects on Endurance's financial statements for the period prior to the second quarter of 2009:
* Of the $93.4 million of OTTI recorded by Endurance prior to the second quarter of 2009 for securities owned at April 1, 2009, $60.1 million was determined to relate to specific credit events and $33.3 million was determined to relate to all other factors; * The $60.1 million of OTTI determined to relate to specific credit events had previously been written down by Endurance and had no effect on Endurance's income statement or balance sheet in the current quarter; and * The $33.3 million of OTTI determined to relate to all other factors had no effect on Endurance's income statement, but caused an increase in retained earnings and an offsetting increase in accumulated other comprehensive loss, with no effect on total shareholders' equity.
The adoption of the new OTTI accounting guidance had the following effects on Endurance's financial statements for the second quarter of 2009:
* Of the $37.8 million of OTTI recorded by Endurance in the second quarter of 2009, $6.6 million was determined to relate to specific credit events and $31.2 million was determined to relate to all other factors; * The $6.6 million of OTTI determined to relate to specific credit events was recorded in Endurance's income statement as a reduction in its second quarter earnings; and * The $31.2 million of OTTI determined to relate to all other factors was recorded in Endurance's balance sheet within accumulated other comprehensive loss.
The OTTI recognized by Endurance in the second quarter of 2009 primarily resulted from reductions in expected recovery values on structured securities (mortgage and asset-backed) during the period, along with certain credit related downgrades in corporate securities.
Endurance ended the second quarter of 2009 with cash and invested assets of $5.7 billion, which represents a 7.0% increase from December 31, 2008. Net operating cash flow was $225.8 million for the six months ended June 30, 2009 versus $269.8 million for the same period in 2008.
Capitalization and Shareholders' Equity
At June 30, 2009, Endurance's shareholders' equity was $2.5 billion or $38.07 per diluted common share versus $2.2 billion or $33.06 per diluted common share at December 31, 2008. During the three months ended June 30, 2009, Endurance repurchased 602,448 of its common shares and share equivalents in private and open market transactions for an aggregate repurchase price of $16.7 million. Year-to-date, Endurance has repurchased 1.0 million shares and share equivalents in private and open market transactions for an aggregate repurchase price of $25.8 million.
Earnings Call
Endurance will host a conference call on July 29, 2009 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (877) 672-9216 or (706) 634-9637 (international) and entering pass code: 68800514. 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 12, 2009 by dialing (800) 642-1687 or (706) 645-9291 (international) and entering the pass code: 68800514.
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 2009 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 dilutive common share, operating 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 "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, developments in the world's financial and capital markets that could adversely affect the performance of Endurance's investment portfolio or access to capital, changes in the composition of Endurance's investment portfolio, competition, possible terrorism or the outbreak of war, the frequency or severity of unpredictable catastrophic events, changes in demand for insurance or reinsurance, rating agency actions, uncertainties in our reserving process, a change in our tax status, acceptance of our products, the availability of reinsurance or retrocessional coverage, retention of key personnel, political conditions, the impact of current regulatory investigations, changes in accounting policies, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2008 as amended on May 8, 2009.
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)
June 30, December 31,
2009 2008
------------ ------------
Assets
Cash and cash equivalents $ 1,234,900 $ 1,061,994
Fixed maturity investments, available for
sale, at fair value 4,059,327 3,875,137
Short term investments, available for sale,
at fair value 106,032 111,333
Preferred equity securities, available for
sale, at fair value 14,842 25,360
Other investments 318,729 284,263
Premiums receivable, net 1,052,662 609,387
Deferred acquisition costs 171,914 160,870
Securities lending collateral 174,846 112,940
Prepaid reinsurance premiums 223,267 149,591
Losses recoverable 361,605 557,834
Accrued investment income 26,668 30,872
Goodwill and intangible assets 195,873 200,791
Deferred tax assets 24,508 20,691
Receivable on pending investment sales 41,230 3,104
Other assets 72,942 68,303
------------ ------------
Total Assets $ 8,079,345 $ 7,272,470
============ ============
Liabilities
Reserve for losses and loss expenses $ 3,264,442 $ 3,235,456
Reserve for unearned premiums 1,212,474 885,488
Net deposit liabilities 51,787 58,622
Securities lending payable 175,431 115,603
Reinsurance balances payable 271,248 233,561
Debt 447,534 447,468
Payable on pending investment purchases 95,689 9
Other liabilities 85,143 88,980
------------ ------------
Total Liabilities 5,603,748 5,065,187
------------ ------------
Shareholders' Equity
Preferred shares
Series A, non-cumulative - 8,000,000
issued and outstanding (2008 - 8,000,000) 8,000 8,000
Common shares
57,090,980 issued and outstanding
(2008 - 57,203,454) 57,091 57,203
Additional paid-in capital 1,008,374 1,029,363
Accumulated other comprehensive loss (67,495) (132,665)
Retained earnings 1,469,627 1,245,382
------------ ------------
Total Shareholders' Equity 2,475,597 2,207,283
------------ ------------
Total Liabilities and Shareholders'
Equity $ 8,079,345 $ 7,272,470
============ ============
Book Value per Common Share
Dilutive common shares outstanding 59,779,890 60,718,312
Diluted book value per common share(a) $ 38.07 $ 33.06
============ ============
Note: All financial information contained herein is unaudited, except
the balance sheet data for the year ended December 31, 2008, which
was derived from Endurance's audited financial statements.
(a) Excludes the $200 million liquidation value of the preferred
shares.
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of United States dollars, except share and per share
amounts)
For the Six Months
Quarter Ended Ended
------------------ ----------------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
-------- -------- ---------- ----------
Revenues
Gross premiums written $559,155 $518,063 $1,342,461 $1,386,654
======== ======== ========== ==========
Net premiums written 480,027 469,385 1,062,942 1,110,172
Change in unearned premiums (45,807) (16,300) (250,447) (285,044)
-------- -------- ---------- ----------
Net premiums earned 434,220 453,085 812,495 825,128
Other underwriting income 596 1,933 4,193 1,193
Net investment income 88,834 60,482 153,384 107,360
Net realized (losses) gains
on investment sales (1,500) 224 1,741 3,047
Total other-than-temporary
impairment losses (37,809) (4,237) (49,935) (18,544)
Portion of loss recognized
in accumulated other
comprehensive loss 31,165 -- 31,165 --
-------- -------- ---------- ----------
Net impairment losses
recognized in earnings(1) (6,644) (4,237) (18,770) (18,544)
-------- -------- ---------- ----------
Total revenues 515,506 511,487 953,043 918,184
-------- -------- ---------- ----------
Expenses
Losses and loss expenses 270,816 275,325 490,952 464,827
Acquisition expenses 63,850 75,636 132,124 150,010
General and administrative
expenses 54,529 52,493 114,786 102,537
Amortization of intangibles 2,588 2,637 5,176 5,325
Net foreign exchange gains (27,723) (5,621) (27,785) (2,514)
Interest expense 7,538 7,534 15,093 15,068
-------- -------- ---------- ----------
Total expenses 371,598 408,004 730,346 735,253
-------- -------- ---------- ----------
Income before income taxes 143,908 103,483 222,697 182,931
Income tax benefit
(expense) 5,232 (145) 4,740 (1,782)
-------- -------- ---------- ----------
Net income 149,140 103,338 227,437 181,149
Preferred dividends (3,875) (3,875) (7,750) (7,750)
-------- -------- ---------- ----------
Net income available to
common and participating
common shareholders $145,265 $ 99,463 $ 219,687 $ 173,399
======== ======== ========== ==========
Per share data
Basic earnings per common
share(2) $ 2.53 $ 1.66 $ 3.83 $ 2.90
======== ======== ========== ==========
Diluted earnings per
common share(2) $ 2.42 $ 1.54 $ 3.65 $ 2.67
======== ======== ========== ==========
(1) Effective April 1, 2009, the Company adopted FSP FAS No. 115-2
and FAS 124-2, "Recognition and Presentation of
Other-Than-Temporary Impairments," which required the Company to
identify whether an investment was in an unrealized loss position
due to credit or noncredit related factors. Only credit related
impairments are recognized in earnings.
(2) Effective January 1, 2009, the Company adopted Emerging Issues
Task Force Issue No. 03-6-1, "Participating Securities and the
Two-Class Method" ("EITF 03-6-1"), which requires basic and
diluted earnings per share to be calculated under the two-class
method if there are participating securities. Participating
securities include unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents. The Company's unvested restricted shares issued
under its stock compensation plans receive nonforfeitable cash
dividends and thus are participating securities as defined by
EITF 03-6-1. Amounts for the periods ended June 30, 2008 have
been restated to reflect this change. For more information on
EITF 03-6-1 and its effect on the Company's financial statements,
please refer to our most recently filed Quarterly Report on
Form 10-Q.
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars)
For the quarter ended June 30, 2009
------------------------------------------------------
Total Deposit
Company Accounting Reported
Insurance Reinsurance Subtotal (1) Totals
------------------------------------------------------
Revenues
Gross premiums
written $ 230,792 $ 328,593 $559,385 $ (230) $559,155
Ceded premiums
written (77,030) (2,098) (79,128) -- (79,128)
--------- ----------- -------- ---------- --------
Net premiums
written 153,762 326,495 480,257 (230) 480,027
--------- ----------- -------- ---------- --------
Net premiums
earned 223,588 211,453 435,041 (821) 434,220
Other
underwriting
income 103 -- 103 493 596
--------- ----------- -------- ---------- --------
Total
underwriting
revenues 223,691 211,453 435,144 (328) 434,816
--------- ----------- -------- ---------- --------
Expenses
Net losses and
loss expenses 166,046 105,844 271,890 (1,074) 270,816
Acquisition
expenses 20,855 42,628 63,483 367 63,850
General and
administrative
expenses 25,179 29,350 54,529 -- 54,529
--------- ----------- -------- ---------- --------
212,080 177,822 389,902 (707) 389,195
--------- ----------- -------- ---------- --------
Underwriting
income $ 11,611 $ 33,631 $ 45,242 $ 379 $ 45,621
========= =========== ======== ========== ========
Net loss ratio 74.3% 50.0% 62.5% 62.4%
Acquisition
expense ratio 9.3% 20.2% 14.6% 14.7%
General and
administrative
expense ratio 11.3% 13.9% 12.5% 12.5%
--------- ----------- -------- --------
Combined ratio 94.9% 84.1% 89.6% 89.6%
========= =========== ======== ========
(1) Reconciles the Company's underwriting results by segment to the
Company's financial statement presentation.
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars)
For the quarter ended June 30, 2008
------------------------------------------------------
Total Deposit
Company Accounting Reported
Insurance Reinsurance Subtotal (1) Totals
------------------------------------------------------
Revenues
Gross premiums
written $ 271,973 $ 246,386 $518,359 $ (296) $518,063
Ceded premiums
written (37,583) (11,095) (48,678) -- (48,678)
--------- ----------- -------- ---------- --------
Net premiums
written 234,390 235,291 469,681 (296) 469,385
--------- ----------- -------- ---------- --------
Net premiums
earned 245,383 210,001 455,384 (2,299) 453,085
Other
underwriting
income -- -- -- 1,933 1,933
--------- ----------- -------- ---------- --------
Total
underwriting
revenues 245,383 210,001 455,384 (366) 455,018
--------- ----------- -------- ---------- --------
Expenses
Net losses and
loss expenses 188,171 86,737 274,908 417 275,325
Acquisition
expenses 29,000 47,499 76,499 (863) 75,636
General and
administrative
expenses 25,071 27,422 52,493 -- 52,493
--------- ----------- -------- ---------- --------
242,242 161,658 403,900 (446) 403,454
--------- ----------- -------- ---------- --------
Underwriting
income $ 3,141 $ 48,343 $ 51,484 $ 80 $ 51,564
========= =========== ======== ========== ========
Net loss ratio 76.7% 41.3% 60.4% 60.7%
Acquisition
expense ratio 11.8% 22.6% 16.8% 16.7%
General and
administrative
expense ratio 10.2% 13.1% 11.5% 11.6%
--------- ----------- -------- --------
Combined ratio 98.7% 77.0% 88.7% 89.0%
========= =========== ======== ========
(1) Reconciles the Company's underwriting results by segment to the
Company's financial statement presentation.
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars)
For the six months ended June 30, 2009
----------------------------------------------------
Total Deposit
Reinsur- Company Accoun- Reported
Insurance ance Subtotal ting(1) Totals
----------------------------------------------------
Revenues
Gross premiums
written $ 753,006 $591,971 $1,344,977 $(2,516) $1,342,461
Ceded premiums
written (276,814) (2,705) (279,519) -- (279,519)
--------- -------- ---------- ------- ----------
Net premiums
written 476,192 589,266 1,065,458 (2,516) 1,062,942
--------- -------- ---------- ------- ----------
Net premiums
earned 404,262 409,928 814,190 (1,695) 812,495
Other
underwriting
income 3,062 -- 3,062 1,131 4,193
--------- -------- ---------- ------- ----------
Total
underwriting
revenues 407,324 409,928 817,252 (564) 816,688
--------- -------- ---------- ------- ----------
Expenses
Net losses and
loss expenses 264,850 227,266 492,116 (1,164) 490,952
Acquisition
expenses 45,696 85,568 131,264 860 132,124
General and
administrative
expenses 54,938 59,848 114,786 -- 114,786
--------- -------- ---------- ------- ----------
365,484 372,682 738,166 (304) 737,862
--------- -------- ---------- ------- ----------
Underwriting
income (loss) $ 41,840 $ 37,246 $ 79,086 $ (260) $ 78,826
========= ======== =================== ==========
Net loss ratio 65.5% 55.4% 60.5% 60.4%
Acquisition
expense ratio 11.3% 20.9% 16.1% 16.3%
General and
administrative
expense ratio 13.6% 14.6% 14.1% 14.1%
--------- -------- ---------- ----------
Combined ratio 90.4% 90.9% 90.7% 90.8%
========= ======== ========== ==========
(1) Reconciles the Company's underwriting results by segment to the
Company's financial statement presentation.
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars)
For the six months ended June 30, 2008
----------------------------------------------------
Total Deposit
Reinsur- Company Accoun- Reported
Insurance ance Subtotal ting(1) Totals
----------------------------------------------------
Revenues
Gross premiums
written $ 857,107 $531,864 $1,388,971 $(2,317) $1,386,654
Ceded premiums
written (266,576) (9,906) (276,482) -- (276,482)
--------- -------- ---------- ------- ----------
Net premiums
written 590,531 521,958 1,112,489 (2,317) 1,110,172
--------- -------- ---------- ------- ----------
Net premiums
earned 413,364 415,737 829,101 (3,973) 825,128
Other
underwriting
income -- -- -- 1,193 1,193
--------- -------- ---------- ------- ----------
Total
underwriting
revenues 413,364 415,737 829,101 (2,780) 826,321
--------- -------- ---------- ------- ----------
Expenses
Net losses and
loss expenses 319,122 147,937 467,059 (2,232) 464,827
Acquisition
expenses 52,117 98,655 150,772 (762) 150,010
General and
administrative
expenses 45,632 56,905 102,537 -- 102,537
--------- -------- ---------- ------- ----------
416,871 303,497 720,368 (2,994) 717,374
--------- -------- ---------- ------- ----------
Underwriting
(loss) income $ (3,507) $112,240 $ 108,733 $ 214 $ 108,947
========= ======== ========== ======= ==========
Net loss ratio 77.2% 35.6% 56.3% 56.3%
Acquisition
expense ratio 12.6% 23.7% 18.2% 18.2%
General and
administrative
expense ratio 11.0% 13.7% 12.4% 12.4%
--------- -------- ---------- ----------
Combined ratio 100.8% 73.0% 86.9% 86.9%
========= ======== ========== ==========
(1) Reconciles the Company's underwriting results by segment to the
Company's financial statement presentation.
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported
-------------------------------------------
For the quarter ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 74.3% 76.7% 49.8% 42.0% 62.4% 60.7%
Acquisition expense ratio 9.3% 11.8% 20.4% 22.4% 14.7% 16.7%
General and administrative
expense ratio 11.3% 10.2% 13.9% 13.2% 12.5% 11.6%
------ ------ ------ ------ ------ ------
Combined ratio 94.9% 98.7% 84.1% 77.6% 89.6% 89.0%
====== ====== ====== ====== ====== ======
Effect of Prior Year Net Loss Reserve Development
Favorable / (Unfavorable)
-------------------------------------------
For the quarter ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 8.9% 10.4% 7.7% 14.7% 8.3% 12.4%
====== ====== ====== ====== ====== ======
Net of Prior Year Net Loss Reserve Development
-------------------------------------------
For the quarter ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 83.2% 87.1% 57.5% 56.7% 70.7% 73.1%
Acquisition expense ratio 9.3% 11.8% 20.4% 22.4% 14.7% 16.7%
General and administrative
expense ratio 11.3% 10.2% 13.9% 13.2% 12.5% 11.6%
------ ------ ------ ------ ----- ------
Combined ratio 103.8% 109.1% 91.8% 92.3% 97.9% 101.4%
====== ====== ====== ====== ===== ======
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.
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported
-------------------------------------------
For the six months ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 65.5% 77.2% 55.4% 35.4% 60.4% 56.3%
Acquisition expense ratio 11.3% 12.6% 21.2% 23.8% 16.3% 18.2%
General and administrative
expense ratio 13.6% 11.0% 14.6% 13.8% 14.1% 12.4%
------ ------ ------ ------ ------ ------
Combined ratio 90.4% 100.8% 91.2% 73.0% 90.8% 86.9%
====== ====== ====== ====== ====== ======
Effect of Prior Year Net Loss Reserve Development
Favorable / (Unfavorable)
-------------------------------------------
For the six months ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 14.0% 7.1% 4.6% 16.5% 9.3% 11.8%
====== ====== ====== ====== ====== ======
Net of Prior Year Net Loss Reserve Development
-------------------------------------------
For the six months ended June 30
-------------------------------------------
Insurance Reinsurance Total
------------- ------------- -------------
2009 2008 2009 2008 2009 2008
Net loss ratio 79.5% 84.3% 60.0% 51.9% 69.7% 68.1%
Acquisition expense ratio 11.3% 12.6% 21.2% 23.8% 16.3% 18.2%
General and administrative
expense ratio 13.6% 11.0% 14.6% 13.8% 14.1% 12.4%
------ ------ ------ ------ ------ ------
Combined ratio 104.4% 107.9% 95.8% 89.5% 100.1% 98.7%
====== ====== ====== ====== ====== ======
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.
RECONCILIATION
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 six months ended June 30, 2009 and 2008:
Quarter Ended Quarter Ended
June 30, 2009 June 30, 2008
------------------ ------------------
Gross Net Gross Net
Premiums Premiums Premiums Premiums
Written Written Written Written
------------------ ------------------
Insurance
Property $ 40,084 $ 22,125 $ 52,360 $ 36,641
Casualty 50,605 28,291 38,737 34,953
Healthcare liability 23,202 22,871 25,485 25,169
Workers' compensation (1,413) (2,608) 69,888 63,482
Agriculture 56,235 28,713 50,921 44,193
Professional lines 62,079 54,370 34,582 29,952
-------- -------- -------- --------
Subtotal Insurance $230,792 $153,762 $271,973 $234,390
-------- -------- -------- --------
Reinsurance
Casualty $ 83,813 $ 83,805 $ 36,258 $ 36,287
Property 55,245 55,245 34,604 34,604
Catastrophe 148,380 148,380 130,217 122,231
Agriculture 2,917 2,917 5,822 5,187
Aerospace and Marine 23,568 21,540 24,250 21,916
Surety and other specialty 14,440 14,378 14,939 14,770
-------- -------- -------- --------
Subtotal Reinsurance $328,363 $326,265 $246,090 $234,995
-------- -------- -------- --------
Total $559,155 $480,027 $518,063 $469,385
======== ======== ======== ========
ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATION
GROSS AND NET PREMIUMS WRITTEN BY SEGMENT
(in thousands of United States dollars)
Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
---------------------- ----------------------
Gross Net Gross Net
Premiums Premiums Premiums Premiums
Written Written Written Written
---------------------- ----------------------
Insurance
Property $ 67,835 $ 39,612 $ 83,542 $ 51,644
Casualty 81,229 46,171 63,861 50,066
Healthcare liability 42,915 40,080 41,978 41,661
Workers' compensation 29,166 14,321 153,367 139,387
Agriculture 434,645 252,016 464,340 266,593
Professional lines 97,216 83,992 50,019 41,180
---------- ---------- ---------- ----------
Subtotal Insurance $ 753,006 $ 476,192 $ 857,107 $ 590,531
---------- ---------- ---------- ----------
Reinsurance
Casualty $ 159,205 $ 158,974 $ 105,223 $ 106,453
Property 90,032 90,032 69,222 69,195
Catastrophe 257,829 257,829 235,451 227,386
Agriculture 7,776 7,776 16,734 16,099
Aerospace and Marine 35,795 33,670 60,785 58,542
Surety and other
Specialty 38,818 38,469 42,132 41,966
---------- ---------- ---------- ----------
Subtotal Reinsurance $ 589,455 $ 586,750 $ 529,547 $ 519,641
---------- ---------- ---------- ----------
Total $1,342,461 $1,062,942 $1,386,654 $1,110,172
========== ========== ========== ==========
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 income, net
income per diluted common share, net income allocated to common
shareholders under the two-class method and annualized return on
average common equity to operating income, operating income per
diluted common share, operating income allocated to common
shareholders under the two-class method and operating return on
average common equity (all non-GAAP measures) for the quarters and
six months ended June 30, 2009 and 2008:
Quarter Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Net income $ 149,140 $ 103,338 $ 227,437 $ 181,149
Add (Less) after-tax
items:
Net foreign exchange
gains (26,804) (4,071) (26,853) (4,081)
Net realized (losses)
gains on investments
sales 1,800 (826) (378) (3,407)
Net impairment losses
recognized in
earnings 6,644 4,237 18,770 18,544
---------- ---------- ---------- ----------
Operating income before
preferred dividends 130,780 102,678 218,976 192,205
Preferred dividends (3,875) (3,875) (7,750) (7,750)
---------- ---------- ---------- ----------
Operating income
available to common
and participating
common shareholders $ 126,905 $ 98,803 $ 211,226 $ 184,455
========== ========== ========== ==========
Operating income
allocated to common
shareholders under
the two-class method $ 124,516 $ 96,732 $ 207,278 $ 180,902
========== ========== ========== ==========
Weighted average
dilutive common
shares 58,895,178 63,155,699 58,984,177 63,690,828
========== ========== ========== ==========
Operating income per
diluted common share $ 2.11 $ 1.53 $ 3.51 $ 2.84
========== ========== ========== ==========
Average common
equity(a) $2,164,569 $2,336,035 $2,141,440 $2,323,077
Operating return on
average common equity 5.9% 4.2% 9.9% 7.9%
---------- ---------- ---------- ----------
Annualized operating
return on average
common equity 23.5% 16.9% 19.7% 15.9%
========== ========== ========== ==========
Net income $ 149,140 $ 103,338 $ 227,437 $ 181,149
Preferred dividends (3,875) (3,875) (7,750) (7,750)
---------- ---------- ---------- ----------
Net income available
to common and
participating common
shareholders $ 145,265 $ 99,463 $ 219,687 $ 173,399
---------- ---------- ---------- ----------
Net income allocated to
common shareholders
under the two-class
method $ 142,532 $ 97,378 $ 215,581 $ 170,056
========== ========== ========== ==========
Net income per diluted
common share $ 2.42 $ 1.54 $ 3.65 $ 2.67
========== ========== ========== ==========
Return on average
common equity, Net
income 6.7% 4.3% 10.3% 7.5%
========== ========== ========== ==========
Annualized return on
average common equity,
Net income 26.8% 17.0% 20.5% 14.9%
========== ========== ========== ==========
(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 $200 million liquidation value of the
preferred shares.
Operating income and operating income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating income represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Endurance believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income and net income per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income and operating income per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance's results of operations in a manner similar to how management analyzes Endurance's underlying business performance. Operating income and operating income per dilutive common share should not be viewed as substitutes for GAAP net income and net income per dilutive common share, respectively.
Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.