UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the period ended June 30, 2004, |
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or
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 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Commission file number 1-31599
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ENDURANCE SPECIALTY HOLDINGS LTD.
(Exact Name of Registrant as Specified in Its Charter)
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Bermuda
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98-0392908
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(State or other jurisdiction
of incorporation or organization) |
(I.R.S. Employer Identification No.)
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Wellesley House
90 Pitts Bay Road Pembroke HM 08, Bermuda |
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(Address of principal executive offices,
including postal code) |
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Registrant’s Telephone Number, Including Area Code: (441) 278-0400
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No
No Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Description of Class
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Shares Outstanding
as of August 10, 2004 |
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Ordinary Shares - $1.00 par value
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61,866,952
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Page
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Part I. FINANCIAL INFORMATION
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Item 1. Unaudited Condensed Consolidated Financial Statements
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1
ENDURANCE SPECIALTY HOLDINGS LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars except share amounts)
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JUNE 30,
2004 |
DECEMBER 31,
2003 |
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(UNAUDITED)
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ASSETS
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Cash and cash equivalents
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$
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247,977
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$
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150,923
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Fixed
maturity investments available for sale, at fair value (amortized cost:
$2,901,239 and $2,497,152 at June 30, 2004 and December 31, 2003, respectively)
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2,876,181
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2,523,309
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Premiums
receivable, net (includes $216 and $nil from related parties at June
30, 2004 and
December 31, 2003, respectively) |
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711,463
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518,539
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Deferred acquisition costs
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229,920
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183,387
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Securities lending collateral
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257,656
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—
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Prepaid reinsurance premiums
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3,595
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2,335
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Accrued investment income
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22,763
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20,434
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Intangible assets
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31,640
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32,407
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Other assets
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40,424
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27,630
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Total assets
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$
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4,421,619
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$
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3,458,964
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LIABILITIES
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Reserve for losses and loss expenses
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$
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1,170,296
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$
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833,158
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Reserve for unearned premiums
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1,082,096
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824,685
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Reinsurance balances payable
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25,567
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23,977
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Securities lending payable
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257,656
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—
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Bank debt
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103,029
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103,029
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Net payable for investments purchased
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17,289
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—
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Other liabilities
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34,415
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29,300
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Total liabilities
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2,690,348
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1,814,149
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SHAREHOLDERS’ EQUITY
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Common shares
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Ordinary – 61,989,152 issued and outstanding (2003 – 63,912,000)
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61,989
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63,912
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Additional paid-in capital
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1,132,083
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1,189,570
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Accumulated other comprehensive income
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992
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46,068
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Retained earnings
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536,207
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345,265
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Total shareholders’ equity
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1,731,271
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1,644,815
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Total liabilities and shareholders’ equity
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$
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4,421,619
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$
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3,458,964
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See accompanying notes to unaudited condensed consolidated financial statements.
2
ENDURANCE SPECIALTY HOLDINGS LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
(In thousands of United States dollars, except share and per share amounts)
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THREE MONTHS ENDED
JUNE 30, |
SIX MONTHS ENDED
JUNE 30, |
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2004
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2003
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2004
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2003
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Revenues
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Gross premiums written and acquired
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$ |
350,661
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$ |
652,656
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$ |
1,071,292
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$ |
1,014,771
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Net premiums written and acquired
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350,599
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652,349
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1,067,606
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1,012,403
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Change in unearned premiums
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45,388
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(359,883
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(255,793
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(530,284
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Net
premiums earned (includes $680 and $474 from related parties for the
six months ended June 30, 2004 and 2003, respectively)
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395,987
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292,466
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811,813
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482,119
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Net investment income
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28,944
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16,666
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53,619
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31,022
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Net realized (losses) gains on sales of investments
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(614
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3,513
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4,562
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7,917
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Total revenues
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424,317
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312,645
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869,994
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521,058
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Expenses
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Losses
and loss expenses (includes $495 and $234 from related parties for the
six months ended June 30, 2004 and 2003, respectively)
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189,208
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165,531
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411,217
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269,676
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Acquisition
expenses (includes $75 and $52 payable to related parties for the six
months ended June 30, 2004 and 2003, respectively)
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82,667
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57,481
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168,185
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92,041
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General and administrative expenses
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32,537
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23,077
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64,304
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42,543
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Amortization of intangibles
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944
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945
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1,888
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1,350
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Net foreign exchange losses (gains)
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2,879
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(2,088
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6,038
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(4,594
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Interest expense
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834
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1,173
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1,662
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2,380
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Total expenses
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309,069
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246,119
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653,294
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403,396
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Income before income taxes
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115,248
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66,526
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216,700
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117,662
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Income tax (expense) benefit
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(492
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265
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(1,072
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330
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Net income
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114,756
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66,791
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215,628
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117,992
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Other comprehensive (loss) income
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Holding
(losses) gains on investments arising during the period (2004: net of
applicable deferred income taxes of $6,405 – three month period;
$4,530 – six month period)
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(69,164
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13,742
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(43,042
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17,159
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Foreign currency translation adjustments
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(1,995
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6,944
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2,737
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3,922
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Net gain (loss) on derivatives designated as cash flow hedge
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(162
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(293
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(209
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(1,735
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Reclassification
adjustment for net realized losses (gains) included in net income
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614
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(3,513
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(4,562
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(7,917
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Other comprehensive (loss) income
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(70,707
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16,880
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(45,076
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11,429
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Comprehensive income
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$ |
44,049
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$ |
83,671
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$ |
170,552
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$ |
129,421
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Per share data
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Weighted
average number of common and common equivalent shares outstanding:
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Basic
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63,334,033
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64,733,238
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63,708,780
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61,613,563
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Diluted
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67,919,399
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67,657,667
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68,244,441
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63,770,814
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