News Column

CORRECTION: Endurance Reports Fourth Quarter 2013 Financial Results

February 6, 2014

This is a correction of the announcement from 16:15 06.02.2014 EST. Reason for the correction: Correction to net income PEMBROKE, Bermuda - February 6, 2014 - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $59.0 million and $1.33 per diluted common share for the fourth quarter of 2013 compared to a net loss attributable to common shareholders of $40.8 million and $0.96 per diluted common share for the fourth quarter of 2012. For the year ended December 31, 2013, Endurance reported net income available to common shareholders of $279.2 million and $6.37 per diluted common share versus net income available to common shareholders of $129.8 million and $3.00 per diluted common share for the year ended December 31, 2012.  Book value per diluted share was $55.18 at December 31, 2013, an increase of 4.3% from year end 2012. Operating highlights for the quarter ended December 31, 2013 were as follows: * Gross premiums written of $370.8 million, an increase of 41.5% from the same period in 2012; * Net premiums written of $280.1 million, an increase of 49.0% from the same period in 2012; * Combined ratio of 93.0%, which included 12.2 percentage points of favorable prior year loss reserve development and 1.2 percentage points of catastrophe losses from 2013 events; * Net investment income of $46.3 million, an increase of $7.7 million from the same period in 2012; * Operating income, which excludes after-tax realized investment gains and foreign exchange gains and losses, of $59.9 million and $1.35 per diluted common share; and * An operating return on average common equity for the quarter of 2.5% or 9.9% on an annualized basis. Operating highlights for the year ended December 31, 2013 were as follows: * Gross premiums written of $2,665.2 million, an increase of 4.6% from the same period in 2012; * Net premiums written of $2,048.9 million, an increase of 1.0% from the same period in 2012; * Combined ratio of 90.2%, which included 11.0 percentage points of favorable prior year loss reserve development and 3.7 percentage points of current year catastrophe losses; * Net investment income of $166.2 million, a decrease of $7.1 million from 2012; * Operating income, which excludes after-tax realized investment gains and foreign exchange gains and losses, of $281.0 million and $6.41 per diluted common share; and * An operating return on average common equity of 11.9%. John R. Charman, Chairman and Chief Executive Officer, commented, "Against the backdrop of the strategic re-underwriting and rebalancing of our underwriting portfolios, Endurance generated solid financial results in the fourth quarter and full year of 2013, with a full year operating return on equity of 11.9% and a combined ratio of 90.2%.  Our results benefitted from lower levels of catastrophe losses and strong favorable reserve development, and we are just beginning to see the positive impact of the significant underwriting investments we have made over the last year.    Strategically, we have made great progress in the transformation of Endurance into a leading diversified global specialty insurer and reinsurer and I am very pleased with the positive impact of the high quality, market leading underwriting teams that we have quickly and effectively integrated into Endurance.  Last autumn, our strategic forward planning envisaged our underwriting activity taking place in a soft market environment for the next couple of years; critically, we now have the leadership, underwriting experience and expertise to profitably align and direct Endurance through these exceptionally challenging times.  My colleagues and I are excited about our prospects for 2014 and are determined to reward our shareholders accordingly."  Insurance Segment Operating highlights for Endurance's Insurance segment for the quarter ended December 31, 2013 were as follows: * Gross premiums written of $200.7 million, an increase of 13.3% from the fourth quarter of 2012; * Net premiums written of $112.0 million, an increase of 5.0% from the fourth quarter of 2012; * Combined ratio of 123.0%, 3.9 percentage points higher than the fourth quarter of 2012; and * Favorable prior year loss reserve development of 2.0 percentage points during the current period, compared to 3.0 percentage points of favorable prior year loss reserve development in the fourth quarter of 2012. Operating highlights for Endurance's Insurance segment for the year ended December 31, 2013 were as follows: * Gross premiums written of $1,475.4 million, an increase of 3.2% from 2012; * Net premiums written of $932.5 million, a decrease of 1.0% from 2012; * Combined ratio of 105.3%, an improvement of 5.3 percentage points from 2012; and * Favorable prior year loss reserve development of 3.6 percentage points during the current period, compared to 4.8 percentage points of favorable prior year loss reserve development in 2012. The fourth quarter increase in gross premiums written in the Insurance segment was driven by the improved positioning and expanded underwriting talent in the Company's professional and casualty and other specialty lines of business.  Full year gross premiums written increased in the Company's agriculture and casualty and other specialty lines from successful expansion efforts that were partially offset by the termination of a large professional lines program in late 2012 and from the impact of non-renewals and re-underwriting actions taken earlier in 2013.  Net premiums written in the fourth quarter and full year were impacted by reduced retentions in the Company's agriculture, casualty and other specialty and professional lines as additional reinsurance protection was purchased on attractive terms. The increase in the Insurance segment combined ratio for the quarter ended December 31, 2013 compared to the same period in 2012 was driven by a higher general and administrative expense ratio partially offset by a lower net loss ratio. The general and administrative expense ratio was higher in the current quarter due to higher incentive compensation accruals reflecting the improved overall Company profitability in the current year.  In addition, the general and administrative expense ratio was higher in the current quarter due to greater levels of corporate expense, severance costs, and expenses associated with the hiring of new underwriting teams.  The net loss ratio was lower in the current quarter compared to a year ago predominantly due to improvements in the accident year loss ratios in the Company's property insurance line from lower catastrophe losses and in the casualty and other specialty and professional lines of business where the positive impacts of our expanded underwriting teams, our refocused underwriting and our active portfolio management strategies are becoming evident.  These improvements were partially offset by a higher net loss ratio in the fourth quarter in the Company's agriculture insurance business to reflect the impact of reduced commodity prices and modestly lower harvest yields in certain states, which led to a full year net loss ratio in our agriculture insurance business of 97.6%. The improved combined ratio for full year 2013 compared to full year 2012 was driven by a lower net loss ratio partially offset by a higher general and administrative expense ratio.  The net loss ratio for the twelve months ended December 31, 2013 declined primarily as a result of lower losses in the agriculture line of business, lower catastrophe losses in the property line of business and accident year loss ratio improvements in the professional and casualty and other specialty lines of business.  The general and administrative expense ratio was higher in 2013 due to higher incentive compensation accruals, reflecting improved overall Company profitability.  In addition, the general and administrative expense ratio was higher in 2013 due to severance costs and expenses associated with the hiring of new underwriting teams. Reinsurance Segment Operating highlights for Endurance's Reinsurance segment for the quarter ended December 31, 2013 were as follows: * Gross premiums written of $170.1 million, an increase of 100.3% from the fourth quarter of 2012; * Net premiums written of $168.1 million, an increase of 106.8% from the fourth quarter of 2012; * Combined ratio of 66.1%, an improvement of 53.1 percentage points from the fourth quarter of 2012; * Favorable prior year loss reserve development of 21.3 percentage points compared to 7.2 percentage points of favorable prior year loss reserve development in the fourth quarter of 2012; and * Net catastrophe losses from 2013 events of $6.7 million or 2.5 percentage points on the combined ratio compared to net catastrophe losses of $123.7 million or 44.1 percentage points in the fourth quarter of 2012. Operating highlights for Endurance's Reinsurance segment for the year ended December 31, 2013 were as follows: * Gross premiums written of $1,189.8 million, an increase of 6.3% from 2012; * Net premiums written of $1,116.4 million, an increase of 2.7% from 2012; * Combined ratio of 76.8%, an improvement of 17.9 percentage points from 2012; * Favorable prior year loss reserve development of 17.6 percentage points during the current period, compared to 7.0 percentage points of favorable prior year loss reserve development in 2012; and * Net catastrophe losses from 2013 events of $72.2 million or 7.1 percentage points on the combined ratio compared to net catastrophe losses of $171.4 million or 16.6 points in 2012. The increase in gross premiums written within the Reinsurance segment during the fourth quarter of 2013 compared to the fourth quarter of 2012 resulted primarily from growth in casualty and professional lines of business, which was partially offset by reductions within catastrophe and property lines of business.  The increase within the casualty and professional lines was generated by our recently expanded underwriting teams in our US reinsurance operation, which underwrote several new large quota share contracts.  The decline in catastrophe premiums for the current quarter reflects an absence of reinstatement premiums compared to a year ago, which included reinstatement premiums related to Superstorm Sandy.  The decline in property premiums from a year ago was caused by lower premium adjustments, certain contract renewal dates shifting to 2014 and the non-renewal of business that no longer met our profit targets.  For full year 2013, gross premiums written increased in casualty, professional and other specialty lines from business written by new underwriting teams that joined Endurance since late 2012.  This new business was offset by significant non- renewals and reduced participation on contracts in the property and catastrophe lines of business.  Gross premiums written in the catastrophe line of business were impacted by lower reinstatement premiums and reduced limits and lower rates on renewals.  Net premiums written for the fourth quarter and full year 2013 were impacted by increased purchases of retrocessional protection for the Company's catastrophe and property reinsurance lines of business. The combined ratio in the Reinsurance segment for the fourth quarter of 2013 improved compared to the same period in 2012, predominantly due to a lower net loss ratio partially offset by higher acquisition and general and administrative expense ratios.  The Reinsurance segment's net loss ratio in the fourth quarter of 2013 improved from lower catastrophe activity and higher levels of favorable prior year loss reserve development.  The current quarter's net loss ratio benefited from $56.1 million, or 21.3 percentage points, of favorable prior year loss reserve development, compared to $20.8 million, or 7.2 percentage points, for the same period a year ago, with the increase largely attributable to shorter tail lines of business where actual losses have been much lower than originally expected.  The Reinsurance segment's acquisition expense ratio increased in the current quarter compared to a year ago as a lower net loss ratio led to the payment of higher loss sensitive commissions compared to 2012 and from the professional line of business, which incurs higher acquisition costs generating a more meaningful portion of premiums in the current quarter.  General and administrative expenses increased in the current quarter due to higher corporate expenses and higher incentive compensation accruals, reflecting greater overall Company profitability. For the full year 2013, the Reinsurance segment reported a combined ratio of 76.8% compared to 94.7% for the full year 2012.  The improvement in the combined ratio was largely attributable to an improvement in the net loss ratio as a result of the lower frequency and severity of catastrophe events in 2013 and greater levels of prior year favorable development partially offset by higher acquisition and general and administrative expense ratios. Investments Endurance's net investment income for the quarter and year ended December 31, 2013 was $46.3 million and $166.2 million, an increase of $7.7 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 0.74% and 1.43% for the quarter and year ended December 31, 2013, respectively, compared to 0.60% and 4.70% for the quarter and year ended December 31, 2012, respectively.  Investment income generated from Endurance's available for sale investments decreased by $3.2 million and $22.8 million for the quarter and year ended December 31, 2013, respectively, compared to the same periods in 2012 due to lower reinvestment rates during 2013.  During the quarter and year ended December 31,  2013, Endurance's net investment income included gains of $21.2 million and $64.3 million, respectively, on our alternative investment funds and high yield loan funds, which are included in other investments, as compared to gains of $11.0 million and $49.1 million in the quarter and year ended December 31, 2012, respectively.  The ending book yield on Endurance's fixed maturity investments at December 31, 2013 was 2.05%, down from 2.35% at December 31, 2012. At December 31, 2013, Endurance's fixed maturity portfolio, which comprises 86.0% of Endurance's investments, had an average credit quality of AA and a duration of 3.11 years.  Endurance's fixed maturity portfolio was in a net unrealized gain position of $46.0 million at December 31, 2013, a decrease of $95.8 million from December 31, 2012.  Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $5.2 million and $13.5 million during the quarter and year ended December 31, 2013 compared to net realized investment gains of $41.8 million and $71.3 million during the quarter and year ended December 31, 2012. Endurance ended the fourth quarter of 2013 with cash and invested assets of $6.5 billion, which represents a 0.8% decrease from December 31, 2012.  Net operating cash flow was $157.9 million for the year ended December 31, 2013 versus $272.8 million for the same period in 2012.  The decrease in operating cash flows in 2013 was largely due to claim payments related to the 2011 and 2012 catastrophe losses and the settlement of 2012 agriculture insurance losses. Capitalization and Shareholders' Equity At December 31, 2013, Endurance's shareholders' equity was $2.89 billion, or $55.18 per diluted common share, versus $2.71 billion, or $52.88 per diluted common share, at December 31, 2012.  For the quarter and year ended December 31, 2013, Endurance declared and paid common dividends of $0.32 and $1.28 per share, respectively.  Total share repurchases amounted to $14.6 million for the year ended December 31, 2013.  No common shares were repurchased during the fourth quarter of 2013. Earnings Call Endurance will host a conference call on February 7, 2014 at 8:30 a.m. Eastern time to discuss its financial results.  The conference call can be accessed via telephone by dialing (888) 455-2263 or (719) 457-2689 (international) and entering pass code: 3198923.  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 21, 2014 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 3198923. 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 2013 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings. Operating income (loss), operating return (loss) on average common equity, operating income (loss) per diluted common share, operating income (loss) allocated (attributable) 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 HoldingsEndurance 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, professional lines 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. ENDURANCE SPECIALTY HOLDINGS LTD. CONSOLIDATED BALANCE SHEETS  (In thousands of United States dollars, except share and per share amounts)         December 31,     December 31,         2013      2012 ---------------- ------------------------------- Assets Cash and cash equivalents $  845,851    $  1,124,019 Fixed maturity investments, available for sale, at fair value    4,840,251       4,868,150 Short-term investments, available for sale, at fair value    35,028       42,230 Equity securities, available for sale, at fair value    252,466       86,997 Other investments    617,478       517,546 Premiums receivable, net    669,198       601,952 Insurance and reinsurance  127,722   105,663 balances receivable Deferred acquisition costs    186,027       168,252 Prepaid reinsurance premiums    187,209       166,702 Reinsurance recoverable on  593,755   691,783 unpaid losses Reinsurance recoverable on  164,220   83,159 paid losses Accrued investment income    24,104       27,166 Goodwill and intangible assets    165,378       172,000 Deferred tax asset    51,703       43,501 Net receivable on sales of  54,910   9,144 investments Other assets    162,822       86,708 ---------------- ------------------------------- Total Assets $  8,978,122    $  8,794,972 ---------------- ------------------------------- Liabilities Reserve for losses and loss  4,002,259   4,240,876 expenses $   $ Reserve for unearned premiums    1,018,851       965,244 Deposit liabilities    19,458       22,220 Reinsurance balances payable    181,061       110,843 Debt    527,478       527,339 Net payable on purchases of  129,047   81,469 investments Other liabilities    213,419       136,384 ---------------- ------------------------------- Total Liabilities    6,091,573       6,084,375 ---------------- ------------------------------- Shareholders' Equity Preferred shares Series A, non-cumulative - 8,000,000 issued and outstanding (2012 -   8,000,000)    8,000       8,000 Series B, non-cumulative - 9,200,000 issued and outstanding (2012 -   9,200,000)    9,200       9,200 Common shares 44,368,742 issued and outstanding (2012 -   43,116,394)    44,369       43,116 Additional paid-in capital    569,116       527,915 Accumulated other comprehensive income    62,731       152,463 Retained earnings    2,193,133       1,969,903 ---------------- ------------------------------- Total Shareholders' Equity    2,886,549       2,710,597 ---------------- ------------------------------- Total Liabilities and Shareholders' Equity $ 8,978,122    $  8,794,972 ---------------- ------------------------------- Book Value per Common Share Dilutive common shares outstanding    44,518,210       43,130,075 Diluted book value per common share [a] $  55.18    $  52.88 ---------------- ------------------------------- Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2012, which was derived     from Endurance's audited financial statements. [a] Excludes the $430 million liquidation value of the preferred shares     (2012 - $430 million). ENDURANCE SPECIALTY HOLDINGS LTD. CONSOLIDATED STATEMENTS OF INCOME (LOSS) (In thousands of United States dollars, except share and per share amounts)       Quarter Ended   For the Year Ended --------------------------- --------------- --------------       December   December   December 31,   December 31, 31, 31,       2013      2012    2013    2012 ------------- ------------- --------------- -------------- Revenues Gross premiums written $  370,809    $  262,046    $  2,665,244    $  2,549,026 ------------- ------------- --------------- -------------- Net premiums written $  280,064    $  187,946    $  2,048,933    $  2,029,495 Change in unearned    219,423       343,107       (32,449)      (15,595) premiums ------------- ------------- --------------- -------------- Net premiums earned    499,487       531,053       2,016,484       2,013,900 Other underwriting loss    (2,740)      (520)    (2,046)    (2,183) Net investment income    46,346       38,603     166,216     173,326 Net realized and    5,197       41,881       15,164       72,139 unrealized gains Total other-than-    (41)      (90)      (1,616)      (364) temporary   impairment losses Portion of loss    -       -       -       (483) recognized in other comprehensive   (loss) income ------------- ------------- --------------- -------------- Net impairment    (41)      (90)      (1,616)      (847) losses recognized in earnings (losses) ------------- ------------- --------------- -------------- Total revenues    548,249       610,927       2,194,202       2,256,335 ------------- ------------- --------------- -------------- Expenses Net losses and loss expenses    302,620       504,808     1,219,684     1,520,995 Acquisition expenses    82,151       73,780       304,430       303,179 General and administrative expenses    79,599       54,324     294,906     235,689 Amortization of intangibles    1,634       2,359     7,012     10,347 Net foreign exchange losses (gains)    5,718       (1,212)    14,214     (15,911) Interest expense    9,050       9,042       36,188       36,174 ------------- ------------- --------------- -------------- Total expenses    480,772       643,101       1,876,434       2,090,473 ------------- ------------- --------------- -------------- Income (loss) before income taxes    67,477       (32,174)    317,768     165,862 Income tax expense    (296)      (453)      (5,853)      (3,346) ------------- ------------- --------------- -------------- Net income (loss)    67,181       (32,627)      311,915       162,516 Preferred dividends    (8,186)      (8,186)      (32,750)      (32,750) ------------- ------------- --------------- -------------- Net income (loss) available (attributable) to common and participating common shareholders $  58,995    $  (40,813)   $  279,165    $  129,766 ------------- ------------- --------------- -------------- Per share data Basic earnings (losses) per common share $  1.33  $  (0.96) $  6.37  $  3.00 ------------- ------------- --------------- -------------- Diluted earnings (losses) per common share $  1.33  $  (0.96)   $  6.37  $  3.00 ------------- ------------- --------------- --------------     ENDURANCE SPECIALTY HOLDINGS LTD.     RESULTS BY SEGMENT     (in thousands of United States dollars, except ratios) For the quarter ended December 31,            2013 ----------------------------------------     Reported       Insurance   Reinsurance   Totals ------------- ------------- ------------     Revenues     Gross premiums written   $  200,726    $  170,083    $  370,809     Ceded premiums written      (88,750)      (1,995)      (90,745) ------------- ------------- ------------     Net premiums written      111,976       168,088       280,064 ------------- ------------- ------------     Net premiums earned      235,967       263,520       499,487     Other underwriting loss      -       (2,740)      (2,740) ------------- ------------- ------------     Total underwriting revenues      235,967       260,780       496,747 ------------- ------------- ------------     Expenses     Net losses and loss expenses      230,708       71,912       302,620     Acquisition expenses      16,754       65,397       82,151 General and administrative     expenses  42,804     36,795     79,599 ------------- ------------- ------------              290,266       174,104       464,370 ------------- ------------- ------------     Underwriting (loss) income   $  (54,299)   $  86,676    $  32,377 ------------- ------------- ------------     Net loss ratio     97.8  %     27.3  %     60.7  %     Acquisition expense ratio     7.1  %     24.8  %     16.4  % General and administrative     expense ratio 18.1  %   14.0  %   15.9  % ------------- ------------- ------------     Combined ratio     123.0  %     66.1  %     93.0  % ------------- ------------- ------------     ENDURANCE SPECIALTY HOLDINGS LTD.     RESULTS BY SEGMENT     (in thousands of United States dollars, except ratios)           For the quarter ended December 31,  2012 -----------------------------------------     Reported       Insurance   Reinsurance   Totals ------------- ------------- -------------     Revenues     Gross premiums written   $  177,116    $  84,930    $  262,046     Ceded premiums written      (70,464)      (3,636)      (74,100) ------------- ------------- -------------     Net premiums written      106,652       81,294       187,946 ------------- ------------- -------------     Net premiums earned      244,101       286,952       531,053     Other underwriting loss      -       (520)      (520) ------------- ------------- -------------     Total underwriting revenues      244,101       286,432       530,533 ------------- ------------- -------------     Expenses     Net losses and loss expenses      244,985       259,823       504,808     Acquisition expenses      17,332       56,448       73,780 General and administrative     expenses  28,445     25,879     54,324 ------------- ------------- -------------              290,762       342,150       632,912 ------------- ------------- -------------     Underwriting loss   $  (46,661)   $  (55,718)   $  (102,379) ------------- ------------- -------------     Net loss ratio     100.3  %     90.5  %     95.1  %     Acquisition expense ratio     7.1  %     19.7  %     13.9  % General and administrative     expense ratio 11.7  %   9.0  %   10.2  % ------------- ------------- -------------     Combined ratio     119.1  %     119.2  %     119.2  % ------------- ------------- -------------     ENDURANCE SPECIALTY HOLDINGS LTD.     RESULTS BY SEGMENT     (in thousands of United States dollars, except ratios)           For the year ended December 31,  2013 ----------------------------------------------     Reported       Insurance   Reinsurance   Totals --------------- --------------- --------------     Revenues     Gross premiums written   $  1,475,429    $  1,189,815    $  2,665,244     Ceded premiums written      (542,919)      (73,392)      (616,311) --------------- --------------- --------------     Net premiums written      932,510       1,116,423       2,048,933 --------------- --------------- --------------     Net premiums earned      946,474       1,070,010       2,016,484     Other underwriting loss      -       (2,046)      (2,046) --------------- --------------- -------------- Total underwriting     revenues  946,474     1,067,964     2,014,438 --------------- --------------- --------------     Expenses Net losses and loss     expenses  774,425     445,259     1,219,684     Acquisition expenses      64,778       239,652       304,430 General and administrative     expenses  157,596     137,310     294,906 --------------- --------------- --------------              996,799       822,221       1,819,020 --------------- --------------- --------------     Underwriting (loss) income   $  (50,325)   $  245,743    $  195,418 --------------- --------------- --------------     Net loss ratio     81.8  %     41.6  %     60.5  %     Acquisition expense ratio     6.8  %     22.4  %     15.1  % General and administrative     expense ratio 16.7  %   12.8  %   14.6  % --------------- --------------- --------------     Combined ratio     105.3  %     76.8  %     90.2  % --------------- --------------- --------------     ENDURANCE SPECIALTY HOLDINGS LTD.     RESULTS BY SEGMENT     (in thousands of United States dollars, except ratios)           For the year ended December 31,  2012 ----------------------------------------------     Reported       Insurance   Reinsurance   Totals --------------- --------------- --------------     Revenues     Gross premiums written   $  1,429,930    $  1,119,096    $  2,549,026     Ceded premiums written      (487,573)      (31,958)      (519,531) --------------- --------------- --------------     Net premiums written      942,357       1,087,138       2,029,495 --------------- --------------- --------------     Net premiums earned      955,089       1,058,811       2,013,900 Other underwriting (loss)     income  (2,684)    501     (2,183) --------------- --------------- -------------- Total underwriting     revenues  952,405     1,059,312     2,011,717 --------------- --------------- --------------     Expenses Net losses and loss     expenses  855,941     665,054     1,520,995     Acquisition expenses      75,597       227,582       303,179 General and administrative     expenses  125,108     110,581     235,689 --------------- --------------- --------------              1,056,646       1,003,217       2,059,863 --------------- --------------- --------------     Underwriting (loss) income   $  (104,241)   $  56,095    $  (48,146) --------------- --------------- --------------     Net loss ratio     89.6  %     62.8  %     75.5  %     Acquisition expense ratio     7.9  %     21.5  %     15.1  % General and administrative     expense ratio 13.1  %   10.4  %   11.7  % --------------- --------------- --------------     Combined ratio     110.6  %     94.7  %     102.3  % --------------- --------------- --------------     ENDURANCE SPECIALTY HOLDINGS LTD.     CONSOLIDATED FINANCIAL RATIOS   As Reported ---------------------------------------------------------------           For the quarter ended December 31, ---------------------------------------------------------------           Insurance   Reinsurance   Total --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   97.8  %   100.3  %   27.3  %   90.5  %   60.7  %   95.1  % Acquisition     expense ratio 7.1  %   7.1  %   24.8  %   19.7  %   16.4  %   13.9  % General and administrative     expense ratio 18.1  %   11.7  %   14.0  %   9.0  %   15.9  %   10.2  % ---------- ---------- --------- ---------- ---------- ---------     Combined ratio   123.0  %   119.1  %   66.1  %   119.2  %   93.0  %   119.2  % ---------- ---------- --------- ---------- ---------- --------- Effect of Prior Year Net   Loss Reserve Development Favorable /   (Unfavorable) ---------------------------------------------------------------           For the quarter ended December 31, ---------------------------------------------------------------           Insurance   Reinsurance   Total --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   2.0  %   3.0  %   21.3  %   7.2  %   12.2  %   5.3  % ---------- ---------- --------- ---------- ---------- --------- Net of Prior Year Net Loss   Reserve Development           For the quarter ended December 31, ---------------------------------------------------------------           Insurance   Reinsurance   Total --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   99.8  %   103.3  %   48.6  %   97.7  %   72.9  %   100.4  % Acquisition     expense ratio 7.1  %   7.1  %   24.8  %   19.7  %   16.4  %   13.9  % General and administrative     expense ratio 18.1  %   11.7  %   14.0  %   9.0  %   15.9  %   10.2  % ---------- ---------- --------- ---------- ---------- ---------     Combined ratio   125.0  %   122.1  %   87.4  %   126.4  %   105.2  %   124.5  % ---------- ---------- --------- ---------- ---------- --------- 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 --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   81.8  %   89.6  %   41.6  %   62.8  %   60.5  %   75.5  % Acquisition     expense ratio 6.8  %   7.9  %   22.4  %   21.5  %   15.1  %   15.1  % General and administrative     expense ratio 16.7  %   13.1  %   12.8  %   10.4  %   14.6  %   11.7  % ---------- ---------- --------- ---------- ---------- ---------     Combined ratio   105.3  %   110.6  %   76.8  %   94.7  %   90.2  %   102.3  % ---------- ---------- --------- ---------- ---------- --------- Effect of Prior Year Net   Loss Reserve Development Favorable /   (Unfavorable) ---------------------------------------------------------------           For the year ended December 31, ---------------------------------------------------------------           Insurance   Reinsurance   Total --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   3.6  %   4.8  %   17.6  %   7.0  %   11.0  %   6.0  % ---------- ---------- --------- ---------- ---------- --------- Net of Prior Year Net Loss   Reserve Development           For the year ended December 31, ---------------------------------------------------------------           Insurance   Reinsurance   Total --------------------- -------------------- --------------------           2013    2012    2013    2012    2013    2012     Net loss ratio   85.4  %   94.4  %   59.2  %   69.8  %   71.5  %   81.5  % Acquisition     expense ratio 6.8  %   7.9  %   22.4  %   21.5  %   15.1  %   15.1  % General and administrative     expense ratio 16.7  %   13.1  %   12.8  %   10.4  %   14.6  %   11.7  % ---------- ---------- --------- ---------- ---------- ---------     Combined ratio   108.9  %   115.4  %   94.4  %   101.7  %   101.2  %   108.3  % ---------- ---------- --------- ---------- ---------- --------- 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.   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 ended December 31, 2013 and 2012: Quarter Ended December Quarter Ended December       31, 2013   31, 2012 ----------------------------- ----------------------------- Gross Net Premiums Gross Net Premiums Premiums   Written   Premiums   Written       Written Written ----------------------------- -----------------------------   Insurance     Agriculture $  58,220    $  24,454    $  64,798    $  25,413 Casualty and    76,666       50,022       59,942       43,683 other     specialty Professional    55,056       32,138       39,242       30,044     lines     Property    10,784       5,362       13,134       7,512 -------------- -------------- -------------- -------------- Subtotal $  200,726    $  111,976    $  177,116    $  106,652     Insurance -------------- -------------- -------------- --------------   Reinsurance     Catastrophe $  13,778    $  12,270    $  24,112    $  22,073     Property    9,358       9,417       31,065       31,065     Casualty    30,066       29,661       16,112       16,111 Professional    113,089       113,089       8,849       8,849     lines Other    3,792       3,651       4,792       3,196     specialty -------------- -------------- -------------- -------------- Subtotal $  170,083    $  168,088    $  84,930    $  81,294     Reinsurance -------------- -------------- -------------- --------------   Total $  370,809    $  280,064    $  262,046    $  187,946 -------------- -------------- -------------- --------------   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   years ended December 31, 2013 and 2012:       Year Ended December 31, 2013   Year Ended December 31, 2012 ------------------------------- ------------------------------- Gross Net Premiums Gross Net Premiums Premiums   Written   Premiums   Written       Written Written ------------------------------- -------------------------------   Insurance     Agriculture $  954,389    $  570,738    $  903,730    $  553,762 Casualty and    316,609       229,087       296,325       216,780 other     specialty Professional    148,537       95,101       169,815       137,885     lines     Property    55,894       37,584       60,060       33,930 --------------- --------------- --------------- --------------- Subtotal $  1,475,429    $  932,510    $  1,429,930    $  942,357     Insurance --------------- --------------- --------------- ---------------   Reinsurance     Catastrophe $  355,751    $  294,260    $  378,387    $  351,140     Property    297,806       292,872       349,579       349,586     Casualty    252,163       250,330       224,237       222,997 Professional    163,594       163,594       59,076       59,076     lines Other    120,501       115,367       107,817       104,339     specialty --------------- --------------- --------------- --------------- Subtotal $  1,189,815    $  1,116,423    $  1,119,096    $  1,087,138     Reinsurance --------------- --------------- --------------- ---------------   Total $  2,665,244    $  2,048,933    $  2,549,026    $  2,029,495 --------------- --------------- --------------- --------------- ENDURANCE SPECIALTY HOLDINGS LTD. RECONCILIATIONS (in thousands of United States dollars, except share, per share amounts and ratios) The following is a reconciliation of Endurance's net income (loss), net income (loss) per diluted common share, net income (loss) allocated to common shareholders under the two-class method and annualized return on average common equity to operating income (loss), operating income (loss) per diluted common   share, operating income (loss) allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the quarters and years ended   December 31, 2013 and 2012:       Quarter Ended   Year Ended       December 31,   December 31, --------------------------------- ---------------------------------       2013      2012    2013    2012 ---------------- ---------------- ---------------- ---------------- Net income   (loss) $  67,181    $  (32,627)   $  311,915    $  162,516 Add (less) after-tax   items: Net foreign exchange losses     (gains)    5,708       (1,220)      14,352       (14,077) Net realized and unrealized     gains    (4,808)      (34,500)      (14,064)      (62,208) Net impairment losses recognized in earnings     (losses)    26       89       1,568       814 ---------------- ---------------- ---------------- ---------------- Operating income (loss) before preferred   dividends $  68,107    $  (68,258)   $  313,771    $  87,045 Preferred     dividends    (8,186)      (8,186)      (32,750)      (32,750) ---------------- ---------------- ---------------- ---------------- Operating income (loss) allocated (attributable)   to common and participating common     shareholders $  59,921    $  (76,444)   $  281,021    $  54,295 ---------------- ---------------- ---------------- ---------------- Operating income (loss) allocated (attributable)   to common shareholders under the two-class     method $  58,267    $  (76,650)   $  274,534    $  53,411 ---------------- ---------------- ---------------- ---------------- Weighted average diluted   common    43,120,449       42,603,831       42,818,207       42,601,835 ---------------- ---------------- ---------------- ---------------- Operating income (loss) per diluted common share   [b] $  1.35    $  (1.80)   $  6.41    $  1.25 ---------------- ---------------- ---------------- ---------------- Average common   equity [a] $  2,432,780    $  2,330,736    $  2,368,573    $  2,230,881 Operating return on average common   equity   2.5  %     (3.3) %     11.9  %     2.4  % ---------------- ---------------- ---------------- ---------------- Annualized operating return on average common   equity   9.9  %     (13.1) %     11.9  %     2.4  % ---------------- ---------------- ---------------- ---------------- Net income   (loss) $  67,181    $  (32,627)   $  311,915    $  162,516 Preferred     dividends    (8,186)      (8,186)      (32,750)      (32,750) ---------------- ---------------- ---------------- ---------------- Net income (loss) available (attributable)   to common and participating common     shareholders $  58,995    $  (40,813)   $  279,165    $  129,766 ---------------- ---------------- ---------------- ---------------- Net income (loss) available (attributable)   to common shareholders under the two-class     method $  57,367    $  (41,019)   $  272,721    $  127,653 ---------------- ---------------- ---------------- ---------------- Net income (loss) per diluted common   share $  1.33    $  (0.96)   $  6.37    $  3.00 ---------------- ---------------- ---------------- ---------------- Return (loss) on average common equity,   Net     income (loss)    2.4  %      (1.8) %      11.8  %      5.8  % ---------------- ---------------- ---------------- ---------------- Annualized return (loss) on average common equity,   Net     income (loss)    9.7  %      (7.0) %      11.8  %      5.8  % ---------------- ---------------- ---------------- ---------------- [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 (2012: $430 million) [b] Represents diluted losses per share calculated under the two-class method   which was the lower of the treasury stock method and the two-class method. Operating income (loss) and operating income (loss) per diluted common share are internal performance measures used by Endurance in the management of its operations.  Operating income (loss) allocated (attributable) to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income (loss) divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP.  Operating income (loss) 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 (loss) and net income (loss) per dilutive common share determined in accordance with the two- class method under GAAP, Endurance believes that showing operating income (loss) and operating income (loss) 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 (loss) and operating income (loss) per dilutive common share should not be viewed as substitutes for GAAP net income (loss) and net income (loss) 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. Contact: Investor Relations Phone: +1 441 278 0988 Email: investorrelations@endurance.bm # # # This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire 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 GlobeNewswire [HUG#1760008]


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