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PEMBROKE, Bermuda, Nov 3, 2015 - (ACN Newswire) - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $43.6 million and $0.73 per diluted common share for the third quarter of 2015 versus net income of $68.0 million and $1.52 per diluted common share for the third quarter of 2014.
For the nine months ended September 30, 2015, Endurance reported net income available to common shareholders of $219.9 million and $4.39 per diluted common share versus net income of $239.3 million and $5.36 per diluted common share for the nine months ended September 30, 2014. Book value per diluted share was $65.02 at September 30, 2015, up 6.0% from December 31, 2014.
Acquisition of Montpelier
Endurance completed its acquisition of Montpelier Re Holdings Ltd. ("Montpelier") on July 31, 2015. As a result of the acquisition, Endurance's consolidated results of operations for the third quarter of 2015 include those of Montpelier from August 1, 2015 through September 30, 2015. Endurance's third quarter and year to date results include $64.0 million and $68.5 million of one-time transaction and integration expenses associated with the acquisition of Montpelier. In addition, Endurance recognized $350.8 million of identifiable intangible assets and $87.6 million of goodwill in connection with the acquisition of Montpelier.
Operating Highlights
Operating highlights for the quarter ended September 30, 2015 were as follows:
- Gross premiums written of $642.6 million, an increase of 2.6% compared to the same period in 2014;
- Net premiums written of $336.7 million, a decrease of 13.7% compared to the same period in 2014;
- Combined ratio of 87.9%, which included 12.1 percentage points of favorable prior year loss reserve development, 3.8 percentage points of net catastrophe losses from 2015 events, and 11.5 percentage points of one-time corporate expenses related to the acquisition of Montpelier;
- Net investment income of $16.5 million, a decrease of $8.8 million from the same period in 2014;
- Operating income, excluding $64.0 million of one-time expenses related to the acquisition of Montpelier, of $111.6 million and $1.87 per diluted common share; and
- Operating return on average common equity for the quarter, excluding one-time expenses related to the acquisition of Montpelier, of 3.1% or 12.3% on an annualized basis.
Operating highlights for the nine months ended September 30, 2015 were as follows:
- Gross premiums written of $2,805.2 million, an increase of 13.4% over the same period in 2014;
- Net premiums written of $1,660.7 million, a decrease of 2.3% over the same period in 2014;
- Combined ratio of 85.6%, which included 13.0 percentage points of favorable prior year loss reserve development, 2.9 percentage points of current year catastrophe losses, 1.3 percentage points of large property and energy losses, and 4.9 percentage points of one-time corporate expenses related to the acquisition of Montpelier;
- Net investment income of $90.6 million, a decrease of $15.0 million over the same period in 2014;
- Operating income, excluding $68.5 million of expenses related to the acquisition of Montpelier, of $286.8 million and $5.73 per diluted common share; and
- Operating return on average common equity for the first nine months of the year, excluding expenses related to the acquisition of Montpelier, of 9.3% or 12.4% on an annualized basis.
John R. Charman, Chairman and Chief Executive Officer, commented, "Against a backdrop of relentless global competition coupled with extremely challenging investment market conditions, I am very pleased with our ability to generate an attractive third quarter annualized operating return on equity, excluding one-time transaction costs, of 12.3%. Our strong results ably reflect the high quality of our underwriting and risk management, our ongoing expense discipline as well as the benefits arising from a globally diversified specialty Insurance and Reinsurance platform.
In the third quarter we also completely integrated Montpelier's global staff and operations into Endurance and we are highly confident in our ability to materially exceed our originally planned expense savings. With the powerful combination of our two companies, we are very well positioned within the global marketplace to better serve our valued clients and distribution partners with both increased capacity and a larger, more diversified product offering across our wide distribution network. The absolute transformation of Endurance over the last three years uniquely positions us to generate continuous, superior value for our shareholders despite the challenging market conditions."
Insurance Segment
Operating highlights for Endurance's Insurance segment for the quarter ended September 30, 2015 were as follows:
- Gross premiums written of $448.6 million, an increase of 6.7% from the third quarter of 2014;
- Net premiums written of $174.9 million, a decrease of 11.5% from the third quarter of 2014; and
- Combined ratio of 83.5%, which included favorable prior year loss reserve development of 9.6 percentage points and net catastrophe losses from 2015 events of $5.1 million or 2.0 percentage points.
Operating highlights for Endurance's Insurance segment for the nine months ended September 30, 2015 were as follows:
- Gross premiums written of $1,653.6 million, an increase of 18.6% from the same period in 2014;
- Net premiums written of $669.3 million, a decrease of 7.0% from the same period in 2014; and
- Combined ratio of 88.6%, which included favorable prior year loss reserve development of 10.8 percentage points, net catastrophe losses from 2015 events of $10.8 million or 1.8 percentage points and large property and energy losses of $16.0 million or 3.1 percentage points.
Gross premiums written in the Insurance segment increased $28.2 million and $259.5 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014 as underwriting investments made over the past 30 months continue to drive growth within casualty and other specialty, professional lines and property, marine and energy lines of business. Partially offsetting this growth was a decline in the agriculture insurance line of business primarily due to lower commodity prices.
The non-agriculture insurance net premiums written increased $51.2 million and $125.8 million for the quarter and nine months ended September 30, 2015, compared to the same periods in 2014. Net premiums written growth lagged that of gross premiums written due to greater levels of reinsurance purchased, which included quota share protection for individual lines of business as well as protection purchased across the entire portfolio of non-agriculture insurance business lines. Within agriculture insurance, greater cessions to the federal government and increased purchases of third party reinsurance led to a decline in net premiums written of $73.9 million and $176.2 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014.
The Insurance segment combined ratio for the quarter ended September 30, 2015 improved 17.9 percentage points compared to the same period in 2014, driven by lower net loss and general and administrative expense ratios partially offset by a higher acquisition expense ratio. The improvement in the net loss ratio largely reflects lower losses within agriculture insurance as the prior year was adversely impacted by significantly higher crop hail losses. The current quarter's net loss ratio also benefited from 9.6 percentage points of favorable loss reserve development compared to 8.0 percentage points in the third quarter of 2014. The current quarter's decline in the general and administrative expense ratio reflects higher ceding commissions received as a result of increased quota share reinsurance purchases. The acquisition expense ratio increased in the current quarter as business lines with higher related acquisition costs accounted for a greater percentage of earned premiums than a year ago. For the nine months ended September 30, 2015 compared to the same period in 2014, the combined ratio improved as lower net loss and general and administrative expense ratios were partially offset by a higher acquisition expense ratio.
Reinsurance Segment
Operating highlights for Endurance's Reinsurance segment for the quarter ended September 30, 2015 were as follows:
- Gross premiums written of $194.0 million, a decrease of 5.7% from the third quarter of 2014;
- Net premiums written of $161.8 million, a decrease of 16.0% from the third quarter of 2014; and
- Combined ratio of 68.1%, which included favorable prior year loss reserve development of 13.9 percentage points and net catastrophe losses from 2015 events of $16.2 million or 5.1 percentage points.
Operating highlights for Endurance's Reinsurance segment for the nine months ended September 30, 2015 were as follows:
- Gross premiums written of $1,151.6 million, an increase of 6.7% from the same period in 2014;
- Net premiums written of $991.5 million, an increase of 1.1% from the same period in 2014; and
- Combined ratio of 71.6%, which included favorable prior year loss reserve development of 14.6 percentage points and net catastrophe losses from 2015 events of $29.4 million or 3.6 percentage points.
Gross premiums written in the Reinsurance segment declined $11.7 million and grew $72.7 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014. For the third quarter of 2015, the decline was driven by reductions in property, catastrophe and specialty lines of business, partially offset by growth in casualty and professional lines. The reduction in the catastrophe and property lines of business was driven by rate declines and by targeted non-renewals and line size reductions in response to the current competitive market. Specialty lines declined due to targeted non-renewals and due to the timing of the recognition of premiums as the third quarter of 2014 included premium adjustments in agriculture with no similar premium adjustments in the third quarter of 2015. Growth in the professional lines and casualty business lines predominantly resulted from new business, expansion of existing contracts at renewal and positive premium adjustments. For the nine months ended September 30, 2015, the growth in gross premiums was driven by growth in the casualty, specialty and professional lines of business, partially offset by declines in the catastrophe and property lines of business.
For the quarter ended September 30, 2015, net premiums written decreased $30.7 million from a year ago as greater levels of proportional and aggregate excess of loss retrocessional coverage were purchased for the Company's catastrophe line of business and a whole account quota share retrocession contract was purchased for the majority of the specialty line of business. For the nine months ended September 30, 2015, net premiums written increased $10.9 million from a year ago as growth in the casualty, specialty and professional lines of business, was largely offset by declines in catastrophe and property lines of business.
The combined ratio in the Reinsurance segment for the third quarter of 2015 improved by 6.7 percentage points compared to the same period in 2014, due to lower acquisition and general and administrative expense ratios partially offset by a higher net loss ratio. The 7.5 percentage point improvement in the current quarter's acquisition expense ratio was largely attributed to the earning of premiums acquired from Montpelier that do not have related acquisition costs. The general and administrative expense ratio improved 2.0 percentage points in the third quarter of 2015 primarily as a result of expenses remaining flat on a higher earned premium base.
The net loss ratio increased by 2.8 percentage points in the current quarter compared to a year ago due to lower levels of favorable reserve development as the current quarter benefited from 13.9 percentage points of favorable reserve development compared to 15.4 percentage points a year ago. In addition the current quarter's net loss ratio included 5.1 percentage points of attritional catastrophe losses while the third quarter of 2014 included 4.7 percentage points of catastrophe losses.
Investments
Endurance's net investment income for the quarter and nine months ended September 30, 2015 was $16.5 million and $90.6 million, a decrease of $8.8 million and $15.0 million, respectively, compared to the same periods in 2014. The total return of Endurance's investment portfolio was (0.22)% and 0.59% for the quarter and nine months ended September 30, 2015, compared to (0.39)% and 2.38% for the quarter and nine months ended September 30, 2014. Investment income generated from Endurance's trading and available for sale investments increased by $8.0 million and $9.4 million for the three and nine months ended September 30, 2015, compared to the same periods in 2014 due to an increase in invested assets. During the quarter and nine months ended September 30, 2015, Endurance's net investment income on its alternative investment funds and high yield loan funds, which are included in other investments, included losses of $17.7 million and $1.8 million, as compared to losses of $1.8 million and gains of $22.5 million in the third quarter and the first nine months of 2014. The ending book yield on Endurance's fixed maturity investments at September 30, 2015 was 2.03%, down from 2.22% at September 30, 2014.
At September 30, 2015, Endurance's fixed maturity and short term investments, which comprises 82.7% of Endurance's investments, had an average credit quality of AA- and a duration of 2.63 years. Endurance's available for sale portfolio was in a net unrealized gain position of $13.7 million at September 30, 2015, a decrease of $72.4 million from December 31, 2014. Endurance recorded net realized and unrealized investment gains, net of impairments, of $5.0 million and $31.8 million during the third quarter and first nine months of 2015, compared to $9.7 million and $17.7 million during the third quarter and first nine months of 2014.
Endurance ended the third quarter of 2015 with cash and invested assets of $8.9 billion, which represents a 34.8% increase from December 31, 2014. Net operating cash outflow was $74.0 million for the nine months ended September 30, 2015 versus an inflow of $52.2 million for the same period in 2014.
Capitalization and Shareholders' Equity
At September 30, 2015, Endurance's shareholders' equity was $5.06 billion or $65.02 per diluted common share versus $3.19 billion or $61.33 per diluted common share at December 31, 2014. For the quarter and nine months ended September 30, 2015, Endurance declared and paid common dividends of $0.35 and $1.05 per share, respectively. Subsequent to September 30, 2015, Endurance repaid $198.5 million in senior notes that matured on October 15, 2015.
Earnings Call
Endurance will host a conference call on November 3, 2015 at 9:00 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 220-8451 or (913) 312-1482 (international) and entering pass code: 1907382. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 17, 2015 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 1907382.
The public may access a live broadcast of the conference call at the "Investors" section of Endurance's website, www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance's website.
A copy of Endurance's financial supplement for the third quarter of 2015 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings.
Operating income, operating return on average common equity, operating income per diluted common share, operating income allocated to common shareholders and each of these operating metrics excluding one-time expenses related to the acquisition of Montpelier, and the combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables.
About Endurance Specialty Holdings
Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes agriculture, casualty and other specialty, professional lines and property, marine and energy lines of insurance and catastrophe, property, casualty, professional lines and specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor's on our principal operating subsidiaries. Endurance's headquarters are located at Waterloo House, 100 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit www.endurance.bm.
Safe Harbor for Forward-Looking Statements
Some of the statements in this press release may include, and Endurance may make related oral forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words "should," "would," "expect," "intend," "plan," "believe," "project," "target," "anticipate," "seek," "will," "deliver," and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ materially from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors' pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world's financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2014 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Endurance's most recent reports on Form 10-K and Form 10-Q and other documents of Endurance on file with the Securities and Exchange Commission. Any forward-looking statements made in this material are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Endurance will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Endurance or its business or operations. Except as required by law, Endurance undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
The contents of any website referenced in this press release are not incorporated by reference herein.
Press release: http://ir.endurance.bm/phoenix.zhtml?c=137754&p=irol-newsArticle&ID=2105466
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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Endurance Specialty Holdings Ltd via Globenewswire
Topic: Earnings
Source: Endurance Specialty Holdings Ltd.
https://www.acnnewswire.com
From the Asia Corporate News Network
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