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PEMBROKE, Bermuda, Aug 6, 2013 - (ACN Newswire) - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $52.8 million and $1.21 per diluted common share for the second quarter of 2013 versus net income of $64.3 million and $1.48 per diluted common share for the second quarter of 2012.
For the six months ended June 30, 2013, Endurance reported net income available to common shareholders of $144.9 million and $3.34 per diluted common share versus net income of $138.6 million and $3.20 per diluted common share for the six months ended June 30, 2012. Book value per diluted share was $51.95 at June 30, 2013, a decline of 1.8% from year end 2012.
Operating highlights for the quarter ended June 30, 2013 were as follows:
-- Net premiums written of $464.6 million, a decrease of 4.1% compared to the same period in 2012;
-- Combined ratio of 94.3%, which included 11.6 percentage points of favorable prior year loss reserve development and 8.9 percentage points of catastrophe losses from 2013 events;
-- Net investment income of $32.5 million, an increase of $0.7 million from the same period in 2012;
-- Operating income, which excludes after-tax realized investment gains and foreign exchange losses and gains, of $47.3 million and $1.09 per diluted common share; and
-- Operating return on average common equity for the quarter of 2.0% or 8.2% on an annualized basis.
Operating highlights for the six months ended June 30, 2013 were as follows:
-- Net premiums written of $1,373.5 million, an increase of 3.5% over the same period in 2012;
-- Combined ratio of 90.2%, which included 11.8 percentage points of favorable prior year loss reserve development and 5.0 percentage points of current year catastrophe losses;
-- Net investment income of $81.8 million, a decrease of $7.1 million over the same period in 2012;
-- Operating income, which excludes after-tax realized investment gains and foreign exchange gains, of $137.1 million and $3.16 per diluted common share; and
-- Operating return on average common equity for the first six months of the year of 6.0%, or 12.0% on an annualized basis.
John R. Charman, Chairman and Chief Executive Officer, commented, "Endurance generated positive operating results in the second quarter against a backdrop of volatile investment markets, numerous catastrophe loss events and an increasingly competitive reinsurance market. We have immediately refocused our global underwriting and are now adopting a very controlled, coordinated, disciplined and profit driven approach. As rates have declined we have deliberately reduced our exposures. I am absolutely committed to Endurance becoming a leading low expense, medium volatility but very high performance insurance and reinsurance international carrier."
"During the past month, I have streamlined our Executive leadership team as well as completely restructured and reduced the overly inflated size of our organization. The substantial savings arising will be used to fund the very necessary build out of our global underwriting operations. To protect our shareholders earnings, we have had to cut hard and deeply from our own resources in order to finance our future growth. Importantly, we already have a great pipeline of very high quality market leading underwriters who will join us over the next twelve months. Market conditions on both sides of the balance sheet will remain challenging over the next few years and with that scenario in mind, I will continue to relentlessly drive substantial improvements, effectiveness and cost efficiency throughout our organization. As well as planning a pan-Asia joint venture strategy, our new, revitalised specialty Insurance operations in the US, Bermuda and London will lead the oncoming Endurance revolution."
Insurance Segment
Operating highlights for Endurance's Insurance segment for the quarter ended June 30, 2013 were as follows:
-- Net premiums written of $191.5 million, an increase of 2.6% from the second quarter of 2012;
-- Combined ratio of 102.4%, an increase of 5.1 percentage points from the second quarter of 2012; and
-- Favorable prior year loss reserve development of 2.1 percentage points during the current period, compared to 5.1 percentage points of favorable prior year loss reserve development in the second quarter of 2012.
Operating highlights for Endurance's Insurance segment for the six months ended June 30, 2013 were as follows:
-- Net premiums written of $596.2 million, a decrease of 3.0% from the same period in 2012;
-- Combined ratio of 101.2%, an increase of 2.3 percentage points from the same period in 2012; and
-- Favorable prior year loss reserve development of 5.5 percentage points during the current period, compared to 5.0 percentage points of favorable prior year loss reserve development in the same period in 2012.
Net premiums written in the Insurance segment increased $4.8 million for the second quarter and declined $18.2 million for the six months ended June 30, 2013, compared to the same periods in 2012. Increases within the agriculture and property lines of business were offset by a decline in the professional line of business. Within the agriculture line of business, net premiums written increased from new business, which was partially offset by higher cessions to the U.S. Government and third parties. The increase in property net premiums written reflects a combination of new business and higher retentions. The decline in net premiums written in the professional line of business resulted from the termination of a program relationship in late 2012 that was partially offset by new business.
The increase in the Insurance segment combined ratio for the quarter ended June 30, 2013 compared to the same period in 2012 was primarily driven by higher net loss and general and administrative expense ratios. The net loss ratio increased as a result of a more difficult start to the crop year with challenging winter wheat harvests and a higher level of prevented planting claims, which increased the initial expected loss ratio in the agriculture insurance line of business. Also impacting the current quarter's loss ratio was lower levels of prior period favorable reserve development, offset by improved loss ratios in the non-agriculture lines of business. The general and administrative expense ratio was higher in the current quarter due to a greater level of allocated corporate expenses related to the CEO transition and higher expenses associated with recently added underwriting teams. For the six months ended June 30, 2013, the combined ratio was 2.3 percentage points higher than the same period a year ago as a higher general and administrative expense ratio was partially offset by a lower acquisition expense ratio.
Reinsurance Segment
Operating highlights for Endurance's Reinsurance segment for the quarter ended June 30, 2013 were as follows:
-- Net premiums written of $273.1 million, a decrease of 8.3% from the second quarter of 2012;
-- Combined ratio of 86.4%, an improvement of 1.2 percentage points from the second quarter of 2012;
-- Favorable prior year loss reserve development of 20.8 percentage points compared to 2.3 percentage points of favorable prior year loss reserve development in the second quarter of 2012; and
-- Net catastrophe losses from 2013 events of $47.4 million or 18.0 percentage points on the combined ratio compared to net catastrophe losses of $14.4 million or 5.6 points in the second quarter of 2012.
Operating highlights for Endurance's Reinsurance segment for the six months ended June 30, 2013 were as follows:
-- Net premiums written of $777.3 million, an increase of 9.0% from the same period in 2012;
-- Combined ratio of 81.8%, an improvement of 8.6 percentage points from the same period in 2012;
-- Favorable prior year loss reserve development of 16.6 percentage points during the current period, compared to 3.0 percentage points of favorable prior year loss reserve development in the same period in 2012; and
-- Net catastrophe losses from 2013 events of $47.4 million or 9.0 percentage points on the combined ratio compared to net catastrophe losses of $36.9 million or 7.5 points in the first six months of 2012.
The $24.6 million decrease in net premiums written within the Reinsurance segment during the second quarter of 2013 compared to the second quarter of 2012 resulted primarily from decreases in catastrophe and property lines of business, partially offset by an increase within the casualty line of business. The decline in catastrophe premiums in the current quarter reflects the impact of lower pricing and a more competitive market in which the Company chose to reduce limits deployed in Florida. The property line of business also declined in the current quarter as the Company non-renewed business and reduced line sizes where price weakening led to profitability being below target levels. Growth in the casualty line of business in the second quarter of 2013 compared to a year ago was primarily driven by a single new treaty written in the quarter. For the six months ended June 30, 2013, net premiums written increased $64.3 million due to increases within the property, casualty and other specialty lines, partially offset by a decline in catastrophe premiums.
The combined ratio in the Reinsurance segment for the second quarter of 2013 improved compared to the same period in 2012, predominantly due to a lower net loss ratio, partially offset by a higher general and administrative expense ratio. The net loss ratio in the second quarter of 2013 benefited from $57.2 million, or 20.8 percentage points, of favorable prior year loss reserve development, compared to $5.9 million, or 2.3 percentage points, for the same period a year ago. The favorable development in the current quarter was predominantly driven by short tail lines of business and includes a reduction in estimated reserves for losses related to prior year catastrophes. The current quarter's combined ratio included 18.0 percentage points of catastrophe losses related to flooding in Canada and Europe and various tornadoes occurring in the United States, while the second quarter 2012 included 5.6 percentage points of catastrophe losses. The higher general and administrative expenses were predominantly linked to higher allocated corporate expenses related to costs associated with the CEO transition.
For the first six months of 2013, the Reinsurance segment reported a combined ratio of 81.8% compared to 90.4% for the same period in 2012 principally due to a lower loss ratio that included a greater level of favorable prior year loss reserve development, partially offset by a higher level of catastrophe losses.
Investments
Endurance's net investment income for the quarter and six months ended June 30, 2013 was $32.5 million and $81.8 million, an increase of $0.7 million and a decrease of $7.1 million, respectively, compared to the same periods in 2012. The total return of Endurance's investment portfolio was (1.22%) and (0.62%) for the quarter and six months ended June 30, 2013, respectively, compared to 0.90% and 2.29% for the quarter and six months ended June 30, 2012, respectively. Investment income generated from Endurance's available for sale investments declined by $6.0 million and $13.5 million for the three and six months ended June 30, 2013, respectively, compared to the same period in 2012 due to lower reinvestment rates during 2013 and the short duration of Endurance's fixed maturity portfolio. During the second quarter and six months ended June 30, 2013, Endurance's net investment income included gains of $6.8 million and $29.8 million, respectively, on its alternative investment funds and high yield loan funds, which are included in other investments, as compared to losses of $0.1 million and gains of $23.1 million in the second quarter and first six months of 2012, respectively. The ending book yield on Endurance's fixed maturity investments at June 30, 2013 was 2.15%, down from 2.57% at June 30, 2012.
At June 30, 2013, Endurance's fixed maturity portfolio, which comprises 87.2% of Endurance's investments, had an average credit quality of AA and a duration of 3.05 years. Endurance's fixed maturity portfolio was in a net unrealized gain position of $30.6 million at June 30, 2013, a decrease of $111.1 million from December 31, 2012. Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $9.8 million and $15.2 million during the second quarter and first six months of 2013 compared to net realized investment gains of $14.6 million and $19.5 million during the second quarter and first six months of 2012.
Endurance ended the second quarter of 2013 with cash and invested assets of $6.4 billion, which represents a 2.4% decrease from December 31, 2012. Net operating cash flow was $42.7 million for the six months ended June 30, 2013 versus $70.3 million for the same period in 2012.
Capitalization and Shareholders' Equity
At June 30, 2013, Endurance's shareholders' equity was $2.74 billion or $51.95 per diluted common share versus $2.71 billion or $52.88 per diluted common share at December 31, 2012. For the quarter and six months ended June 30, 2013, Endurance declared and paid common dividends of $0.32 and $0.64 per share, respectively. During the quarter and six months ended June 30, 2013, the Company repurchased 95,100 and 318,252 common shares at an average cost of $48.16 and $45.83, respectively. Total share repurchases amounted to $4.6 million and $14.6 million, respectively, for the quarter and six months ended June 30, 2013.
Earnings Call
Endurance will host a conference call on August 6, 2013 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing +1-888-778-8914 or +1-913-905-3226 (international) and entering pass code: 4212284. 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 20, 2013 by dialing +1-888-203-1112 or +1-719-457-0820 (international) and entering the pass code: 4212284.
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 2013 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings.
Operating income, operating return on average common equity, operating income per diluted common share, operating income allocated to common shareholders and the combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables.
About Endurance Specialty Holdings
Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes agriculture, casualty and other specialty, professional lines and property lines of insurance and catastrophe, property, casualty, and other specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor's on our principal operating subsidiaries. Endurance's headquarters are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit www.endurance.bm.
Safe Harbor for Forward-Looking Statements
Some of the statements in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words "should," "expect," "intend," "plan," "believe," "project," "anticipate," "seek," "will," and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors' pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world's financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2012.
Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation publicly to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Contact:
Investor Relations
Phone: +1-441-278-0988
Email: investorrelations@endurance.bm
Press release: http://bit.ly/12VEzVr
This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Endurance Specialty Holdings Ltd via Thomson Reuters ONE
Topic: Earnings
Source: Endurance Specialty Holdings Ltd.
https://www.acnnewswire.com
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