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PEMBROKE, Bermuda, Feb 7, 2014 - (ACN Newswire) - 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 +1-888-455-2263 or +1-719-457-2689 (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 +1-888-203-1112 or +1-719-457-0820 (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 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, 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.
Contact:
Investor Relations
Phone: +1-441-278-0988
Email: investorrelations@endurance.bm
Press release: http://bit.ly/Mw3Eiz
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.
http://www.acnnewswire.com
From the Asia Corporate News Network
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