Attached files
file | filename |
---|---|
8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD | d297812d8k.htm |
EX-99.1 - EXHIBIT 99.1 - ENDURANCE SPECIALTY HOLDINGS LTD | d297812dex991.htm |
Exhibit 99.2
Endurance Specialty Holdings Ltd.
INVESTOR FINANCIAL SUPPLEMENT
FOURTH QUARTER 2011
Endurance Specialty Holdings Ltd.
Wellesley House, 90 Pitts Bay Rd.
Pembroke HM 08, Bermuda
Investor Relations
Phone: (441) 278-0988
Fax: (441) 278-0493
email: investorrelations@endurance.bm
This report is for information purposes only. It should be read in conjunction with other documents filed by Endurance Specialty Holdings Ltd. pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
Financial Supplement Table of Contents
Page | ||||
i. Basis of Presentation |
i | |||
I. Consolidated Financial Highlights |
1 | |||
II. Consolidated Financial Statements |
||||
a. Consolidated Statements of (Loss) IncomeQuarterly |
2 | |||
b. Consolidated Statements of (Loss) IncomeYTD |
3 | |||
c. Consolidated Balance Sheets |
4 | |||
III. Other Financial Information |
||||
a. Probable Maximum Loss by Zone and Peril |
5 | |||
b. Segment Distribution |
6 | |||
c. Consolidated Segment Data |
7 | |||
d. Return on Equity Analysis |
19 | |||
e. ROE Component AnalysisAnnualized Premium and Investment Leverage |
20 | |||
f. Investment Portfolio Information |
21 | |||
g. Structured Securities Detail |
22 | |||
h. Largest Twenty-Five Corporate Holdings |
23 | |||
IV. Loss Reserve Analysis |
||||
a. Activity in Reserve for Losses and Loss Expenses |
24 | |||
b. Prior Year Reserve Development by Segment |
25 | |||
c. Prior Year Reserve Development by Development Tail |
26 | |||
d. Analysis of Unpaid Losses and Loss Expenses |
27 | |||
V. Shareholder Return Analysis |
||||
a. Shareholder Return Analysis |
28 | |||
b. Weighted Average Dilutive Shares Outstanding |
29 | |||
c. (Losses) Earnings per ShareTwo Class Method |
30 | |||
d. Operating (Loss) Income ReconciliationTwo Class Method |
31 | |||
e. Dilutive Shares Sensitivity Analysis |
32 | |||
f. Book Value Per Share Analysis |
33 | |||
VI. Regulation G |
34 |
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
Some of the statements in this financial supplement 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 financial supplement 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 worlds 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, as amended, for the year ended December 31, 2010 and in our most recent Quarterly Report on Form 10-Q.
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.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
| All financial information contained herein is unaudited, except the balance sheet and/or income statement data for the years ended December 31, 2010 and 2009 which was derived from the Companys audited financial statements. |
| Unless otherwise noted, all data is in thousands, except for per share, percentage and ratio information. |
| As used in this financial supplement, common shares refers to our ordinary shares and class A shares, collectively. |
| Endurance Specialty Holdings Ltd., along with others in the industry, uses underwriting ratios as measures of performance. The loss ratio is the ratio of claims and claims adjustment expense to earned premiums. The acquisition expense ratio is the ratio of underwriting expenses (commissions, taxes, licenses and fees, as well as other underwriting expenses) to earned premiums. The general and administrative expense ratio is the ratio of general and administrative expenses to earned premiums. The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss. |
| NMNot meaningful. |
i
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL HIGHLIGHTS
QUARTER ENDED DECEMBER 31, |
FOR THE YEAR ENDED DECEMBER 31, |
Previous Quarter |
Previous Year to Date |
|||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | Change | Change | |||||||||||||||||||||
HIGHLIGHTS |
Net (loss) income | $ | (27,376 | ) | $ | 111,228 | $ | (93,734 | ) | $ | 364,738 | (124.6 | )% | (125.7 | )% | |||||||||||
Net (loss) income (attributable) available to common and participating common shareholders | (35,563 | ) | 107,353 | (117,859 | ) | 349,238 | (133.1 | )% | (133.7 | )% | ||||||||||||||||
Net (loss) income allocated to common shareholders | (35,784 | ) | 105,317 | (118,820 | ) | 342,643 | (134.0 | )% | (134.7 | )% | ||||||||||||||||
Operating (loss) income [a] | (31,303 | ) | 108,260 | (128,178 | ) | 345,535 | (128.9 | )% | (137.1 | )% | ||||||||||||||||
Operating (loss) income (attributable) available to common and participating common shareholders [a] | (39,490 | ) | 104,385 | (152,303 | ) | 330,035 | (137.8 | )% | (146.1 | )% | ||||||||||||||||
Operating (loss) income allocated to common shareholders [a] | (39,711 | ) | 102,405 | (153,264 | ) | 323,800 | (138.8 | )% | (147.3 | )% | ||||||||||||||||
Operating cash flow | (56,214 | ) | 16,594 | 281,285 | 407,174 | (438.8 | )% | (30.9 | )% | |||||||||||||||||
Net investment income | 40,594 | 56,874 | 147,037 | 200,358 | (28.6 | )% | (26.6 | )% | ||||||||||||||||||
Gross premiums written | 262,966 | 189,225 | 2,467,114 | 2,053,236 | 39.0 | % | 20.2 | % | ||||||||||||||||||
Net premiums written | 187,864 | 158,115 | 1,979,821 | 1,763,744 | 18.8 | % | 12.3 | % | ||||||||||||||||||
Net premiums earned | 500,489 | 449,736 | 1,931,393 | 1,741,113 | 11.3 | % | 10.9 | % | ||||||||||||||||||
Total assets | 8,292,615 | 7,979,405 | 8,292,615 | 7,979,405 | 3.9 | % | 3.9 | % | ||||||||||||||||||
Total shareholders equity | 2,611,165 | 2,848,153 | 2,611,165 | 2,848,153 | (8.3 | )% | (8.3 | )% | ||||||||||||||||||
PER SHARE AND SHARES DATA |
Basic (losses) earnings per common share | |||||||||||||||||||||||||
Net (loss) income (as reported) |
$ | (0.88 | ) | $ | 2.22 | $ | (2.95 | ) | $ | 6.73 | (139.6 | )% | (143.8 | )% | ||||||||||||
Operating (loss) income (as reported) [a] |
$ | (0.98 | ) | $ | 2.16 | $ | (3.81 | ) | $ | 6.36 | (145.4 | )% | (159.9 | )% | ||||||||||||
Diluted (losses) earnings per common share | ||||||||||||||||||||||||||
Net (loss) income (as reported) |
$ | (0.88 | ) | $ | 2.09 | $ | (2.95 | ) | $ | 6.38 | (142.1 | )% | (146.2 | )% | ||||||||||||
Operating (loss) income (as reported) [a] |
$ | (0.98 | ) | $ | 2.04 | $ | (3.81 | ) | $ | 6.03 | (148.0 | )% | (163.2 | )% | ||||||||||||
As Reported |
Weighted average common shares outstanding | 40,641 | 47,385 | 40,215 | 50,882 | (14.2 | )% | (21.0 | )% | |||||||||||||||||
Weighted average common shares outstanding and dilutive potential common shares [e] | 40,641 | 50,303 | 40,215 | 53,728 | (19.2 | )% | (25.2 | )% | ||||||||||||||||||
Common dividends paid per share | $ | 0.30 | $ | 0.25 | $ | 1.20 | $ | 1.00 | 20.0 | % | 20.0 | % | ||||||||||||||
Book Value Per |
Book value [b] | $ | 51.48 | $ | 57.25 | $ | 51.48 | $ | 57.25 | (10.1 | )% | (10.1 | )% | |||||||||||||
Common Share |
Diluted book value (treasury stock method) [b] | $ | 50.56 | $ | 52.74 | $ | 50.56 | $ | 52.74 | (4.1 | )% | (4.1 | )% | |||||||||||||
FINANCIAL RATIOS |
Return on average common equity (ROAE), net (loss) income [c] | (1.6 | )% | 4.0 | % | (4.9 | )% | 13.3 | % | (5.6 | ) | (18.2 | ) | |||||||||||||
ROAE, operating (loss) income [a] [c] | (1.8 | )% | 3.9 | % | (6.3 | )% | 12.6 | % | (5.7 | ) | (18.9 | ) | ||||||||||||||
Return on beg. common equity (ROBE), net (loss) income [d] | (1.6 | )% | 3.9 | % | (4.5 | )% | 13.5 | % | (5.5 | ) | (18.0 | ) | ||||||||||||||
ROBE, operating (loss) income [a] [d] | (1.8 | )% | 3.8 | % | (5.8 | )% | 12.8 | % | (5.6 | ) | (18.6 | ) | ||||||||||||||
Annualized ROAE, net (loss) income [c] | (6.5 | )% | 16.0 | % | (4.9 | )% | 13.3 | % | (22.5 | ) | (18.2 | ) | ||||||||||||||
Annualized ROAE, operating (loss) income [a] [c] | (7.2 | )% | 15.6 | % | (6.3 | )% | 12.6 | % | (22.8 | ) | (18.9 | ) | ||||||||||||||
Annualized ROBE, net (loss) income [d] | (6.4 | )% | 15.6 | % | (4.5 | )% | 13.5 | % | (22.0 | ) | (18.0 | ) | ||||||||||||||
Annualized ROBE, operating (loss) income [a] [d] | (7.2 | )% | 15.2 | % | (5.8 | )% | 12.8 | % | (22.4 | ) | (18.6 | ) | ||||||||||||||
Annualized investment yield | 2.6 | % | 3.3 | % | 2.4 | % | 3.3 | % | (0.7 | ) | (0.9 | ) | ||||||||||||||
GAAP |
Loss ratio | 82.4 | % | 54.8 | % | 84.6 | % | 59.6 | % | 27.6 | 25.0 | |||||||||||||||
Acquisition expense ratio | 15.4 | % | 14.7 | % | 14.6 | % | 15.2 | % | 0.7 | (0.6 | ) | |||||||||||||||
General and administrative expense ratio | 14.7 | % | 15.1 | % | 13.7 | % | 13.9 | % | (0.4 | ) | (0.2 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Combined ratio | 112.5 | % | 84.6 | % | 112.9 | % | 88.7 | % | 27.9 | 24.2 |
[a] | Operating (loss) income 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. Please see page 31 for a reconciliation to net (loss) income. |
[b] | For detailed calculations, please refer to page 33. |
[c] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the $430 million liquidation value of the preferred shares (year to date beginning liquidation value $200 million). |
[d] | Beginning common equity for the stated periods excludes the liquidation value of the preferred shares (quarter to date beginning liquidation value $430 million, year to date beginning liquidation value $200 million). |
[e] | Warrants and options that are anti-dilutive are not included in the calculation of diluted shares outstanding. Warrants and options are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected as additional treasury method repurchases. |
1
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF (LOSS) INCOMEQUARTERLY
QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
UNDERWRITING REVENUES |
||||||||||||||||||||||||
Gross premiums written |
$ | 262,966 | $ | 700,866 | $ | 502,924 | $ | 1,000,358 | $ | 189,225 | $ | 209,367 | ||||||||||||
Premiums ceded |
(75,102 | ) | (149,539 | ) | (61,166 | ) | (201,486 | ) | (31,110 | ) | (62,925 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums written |
$ | 187,864 | $ | 551,327 | $ | 441,758 | $ | 798,872 | $ | 158,115 | $ | 146,442 | ||||||||||||
Change in unearned premiums |
312,625 | 10,166 | 44,820 | (416,039 | ) | 291,621 | 247,501 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums earned |
$ | 500,489 | $ | 561,493 | $ | 486,578 | $ | 382,833 | $ | 449,736 | $ | 393,943 | ||||||||||||
Other underwriting (loss) income |
(1,425 | ) | (2,141 | ) | 1,088 | (1,069 | ) | 410 | (284 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting revenues |
$ | 499,064 | $ | 559,352 | $ | 487,666 | $ | 381,764 | $ | 450,146 | $ | 393,659 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING EXPENSES |
||||||||||||||||||||||||
Net losses and loss expenses |
$ | 412,152 | $ | 456,691 | $ | 361,970 | $ | 401,853 | $ | 246,424 | $ | 164,005 | ||||||||||||
Acquisition expenses |
77,157 | 72,249 | 67,887 | 65,618 | 66,133 | 72,821 | ||||||||||||||||||
General and administrative expenses |
73,731 | 58,574 | 65,886 | 65,961 | 67,756 | 57,932 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting expenses |
$ | 563,040 | $ | 587,514 | $ | 495,743 | $ | 533,432 | $ | 380,313 | $ | 294,758 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Underwriting (loss) income |
$ | (63,976 | ) | $ | (28,162 | ) | $ | (8,077 | ) | $ | (151,668 | ) | $ | 69,833 | $ | 98,901 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
OTHER OPERATING REVENUE |
||||||||||||||||||||||||
Net investment income |
$ | 40,594 | $ | 14,100 | $ | 39,842 | $ | 52,501 | $ | 56,874 | $ | 59,257 | ||||||||||||
Interest expense |
(9,088 | ) | (9,055 | ) | (9,057 | ) | (9,054 | ) | (9,053 | ) | (7,541 | ) | ||||||||||||
Amortization of intangibles |
(2,413 | ) | (2,976 | ) | (3,026 | ) | (2,798 | ) | (2,696 | ) | (2,699 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other operating revenue |
$ | 29,093 | $ | 2,069 | $ | 27,759 | $ | 40,649 | $ | 45,125 | $ | 49,017 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(LOSS) INCOME BEFORE OTHER ITEMS |
$ | (34,883 | ) | $ | (26,093 | ) | $ | 19,682 | $ | (111,019 | ) | $ | 114,958 | $ | 147,918 | |||||||||
OTHER |
||||||||||||||||||||||||
Net foreign exchange (losses) gains |
$ | (233 | ) | $ | 4,085 | $ | (3,348 | ) | $ | 6,918 | $ | (3,476 | ) | $ | (1,008 | ) | ||||||||
Net realized and unrealized investment gains |
5,331 | 1,033 | 21,532 | 3,775 | 7,314 | 3,166 | ||||||||||||||||||
Total other-than-temporary impairment losses |
(751 | ) | (168 | ) | (484 | ) | (1,256 | ) | (48 | ) | (561 | ) | ||||||||||||
Portion of loss recognised in other comprehensive income |
50 | (72 | ) | (448 | ) | (391 | ) | (663 | ) | (423 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net impairment losses recognised in (losses) earnings [a] |
(701 | ) | (240 | ) | (932 | ) | (1,647 | ) | (711 | ) | (984 | ) | ||||||||||||
Income tax benefit (expense) |
3,110 | 1,197 | 4,143 | 14,556 | (6,857 | ) | 5,733 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
NET (LOSS) INCOME |
$ | (27,376 | ) | $ | (20,018 | ) | $ | 41,077 | $ | (87,417 | ) | $ | 111,228 | $ | 154,825 | |||||||||
Preferred dividends |
(8,187 | ) | (8,188 | ) | (3,875 | ) | (3,875 | ) | (3,875 | ) | (3,875 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS |
$ | (35,563 | ) | $ | (28,206 | ) | $ | 37,202 | $ | (91,292 | ) | $ | 107,353 | $ | 150,950 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
KEY RATIOS/PER SHARE DATA |
||||||||||||||||||||||||
Loss ratio |
82.4 | % | 81.3 | % | 74.4 | % | 105.0 | % | 54.8 | % | 41.6 | % | ||||||||||||
Acquisition expense ratio |
15.4 | % | 12.9 | % | 14.0 | % | 17.1 | % | 14.7 | % | 18.5 | % | ||||||||||||
General and administrative expense ratio |
14.7 | % | 10.4 | % | 13.5 | % | 17.2 | % | 15.1 | % | 14.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio |
112.5 | % | 104.6 | % | 101.9 | % | 139.3 | % | 84.6 | % | 74.8 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Basic (losses) earnings per common share |
$ | (0.88 | ) | $ | (0.71 | ) | $ | 0.92 | $ | (2.25 | ) | $ | 2.22 | $ | 2.69 | |||||||||
Diluted (losses) earnings per common share |
$ | (0.88 | ) | $ | (0.71 | ) | $ | 0.87 | $ | (2.25 | ) | $ | 2.09 | $ | 2.56 | |||||||||
ROAE, net (loss) income [b] |
(1.6 | )% | (1.3 | )% | 1.7 | % | (3.8 | )% | 4.0 | % | 5.9 | % |
[a] | Effective April 1, 2009, the Company adopted new accounting guidance related to the recognition and presentation of other-than-temporary impairments, which required the Company to identify whether an investment was in an unrealized loss position due to credit or non-credit related factors. Only credit related impairments are recognized in earnings. |
[b] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares of $430 million. |
2
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF (LOSS) INCOMEYTD
YEAR ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
UNDERWRITING REVENUES |
||||||||||||
Gross premiums written |
$ | 2,467,114 | $ | 2,053,236 | $ | 2,021,450 | ||||||
Premiums ceded |
(487,293 | ) | (289,492 | ) | (415,400 | ) | ||||||
|
|
|
|
|
|
|||||||
Net premiums written |
$ | 1,979,821 | $ | 1,763,744 | $ | 1,606,050 | ||||||
Change in unearned premiums |
(48,428 | ) | (22,631 | ) | 27,142 | |||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 1,931,393 | $ | 1,741,113 | $ | 1,633,192 | ||||||
Other underwriting (loss) income |
(3,547 | ) | (1,636 | ) | 3,914 | |||||||
|
|
|
|
|
|
|||||||
Total underwriting revenues |
$ | 1,927,846 | $ | 1,739,477 | $ | 1,637,106 | ||||||
|
|
|
|
|
|
|||||||
UNDERWRITING EXPENSES |
||||||||||||
Net losses and loss expenses |
$ | 1,632,666 | $ | 1,038,100 | $ | 866,640 | ||||||
Acquisition expenses |
282,911 | 264,228 | 267,971 | |||||||||
General and administrative expenses |
264,152 | 241,920 | 237,154 | |||||||||
|
|
|
|
|
|
|||||||
Total underwriting expenses |
$ | 2,179,729 | $ | 1,544,248 | $ | 1,371,765 | ||||||
|
|
|
|
|
|
|||||||
Underwriting (loss) income |
$ | (251,883 | ) | $ | 195,229 | $ | 265,341 | |||||
|
|
|
|
|
|
|||||||
OTHER OPERATING REVENUE |
||||||||||||
Net investment income |
$ | 147,037 | $ | 200,358 | $ | 284,200 | ||||||
Interest expense |
(36,254 | ) | (34,762 | ) | (30,174 | ) | ||||||
Amortization of intangibles |
(11,213 | ) | (10,460 | ) | (10,463 | ) | ||||||
|
|
|
|
|
|
|||||||
Total other operating revenue |
$ | 99,570 | $ | 155,136 | $ | 243,563 | ||||||
|
|
|
|
|
|
|||||||
(LOSS) INCOME BEFORE OTHER ITEMS |
$ | (152,313 | ) | $ | 350,365 | $ | 508,904 | |||||
OTHER |
||||||||||||
Net foreign exchange gains |
$ | 7,422 | $ | 2,989 | $ | 29,740 | ||||||
Net realized and unrealized investment gains |
31,671 | 22,488 | 6,303 | |||||||||
Total other-than-temporary impairment losses |
(2,659 | ) | (2,695 | ) | (50,993 | ) | ||||||
Portion of loss recognised in other comprehensive income |
(861 | ) | (1,249 | ) | 30,742 | |||||||
|
|
|
|
|
|
|||||||
Net impairment losses recognised in (losses) earnings [a] |
(3,520 | ) | (3,944 | ) | (20,251 | ) | ||||||
Income tax benefit (expense) |
23,006 | (7,160 | ) | 11,408 | ||||||||
|
|
|
|
|
|
|||||||
NET (LOSS) INCOME |
$ | (93,734 | ) | $ | 364,738 | $ | 536,104 | |||||
Preferred dividends |
(24,125 | ) | (15,500 | ) | (15,500 | ) | ||||||
|
|
|
|
|
|
|||||||
NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS |
$ | (117,859 | ) | $ | 349,238 | $ | 520,604 | |||||
|
|
|
|
|
|
|||||||
KEY RATIOS/PER SHARE DATA |
||||||||||||
Loss ratio |
84.6 | % | 59.6 | % | 53.1 | % | ||||||
Acquisition expense ratio |
14.6 | % | 15.2 | % | 16.4 | % | ||||||
General and administrative expense ratio |
13.7 | % | 13.9 | % | 14.5 | % | ||||||
|
|
|
|
|
|
|||||||
Combined ratio |
112.9 | % | 88.7 | % | 84.0 | % | ||||||
|
|
|
|
|
|
|||||||
Basic (losses) earnings per common share |
$ | (2.95 | ) | $ | 6.73 | $ | 9.14 | |||||
Diluted (losses) earnings per common share |
$ | (2.95 | ) | $ | 6.38 | $ | 8.69 | |||||
ROAE, net (loss) income [b] |
(4.9 | )% | 13.3 | % | 22.7 | % |
[a] | Effective April 1, 2009, the Company adopted new accounting guidance related to the recognition and presentation of other-than-temporary impairments, which required the Company to identify whether an investment was in an unrealized loss position due to credit or non-credit related factors. Only credit related impairments are recognized in earnings. |
[b] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares (liquidation value of $200 million as of December 31, 2010 and 2009, liquidation value of $430 million as of December 31, 2011). |
3
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | ||||||||||||||||
ASSETS |
||||||||||||||||||||
Cash and cash equivalents |
$ | 890,914 | $ | 623,944 | $ | 750,844 | $ | 568,770 | $ | 609,852 | ||||||||||
Fixed maturity investments available for sale, at fair value |
4,831,966 | 4,998,142 | 4,961,948 | 5,014,226 | 5,116,702 | |||||||||||||||
Short term investments available for sale, at fair value |
67,802 | 323,119 | 303,895 | 48,186 | 70,444 | |||||||||||||||
Equity securities available for sale, at fair value |
59,767 | 49,323 | 32,322 | 25,333 | 13,565 | |||||||||||||||
Other investments |
432,658 | 386,785 | 395,078 | 401,450 | 376,652 | |||||||||||||||
Premiums receivable, net |
636,727 | 1,192,455 | 1,154,480 | 1,049,129 | 827,609 | |||||||||||||||
Deferred acquisition costs |
166,049 | 203,455 | 182,870 | 178,486 | 154,484 | |||||||||||||||
Securities lending collateral |
| | 84,652 | 72,657 | 59,886 | |||||||||||||||
Prepaid reinsurance premiums |
149,670 | 204,961 | 198,708 | 248,275 | 107,977 | |||||||||||||||
Losses recoverable |
666,928 | 479,132 | 369,081 | 340,908 | 319,349 | |||||||||||||||
Accrued investment income |
29,708 | 30,851 | 31,189 | 29,164 | 32,934 | |||||||||||||||
Goodwill and intangible assets |
181,828 | 183,857 | 186,835 | 189,501 | 181,954 | |||||||||||||||
Deferred tax assets |
33,355 | 40,253 | 38,144 | 49,370 | 33,684 | |||||||||||||||
Receivable on pending investment sales |
77,821 | 37,947 | 3,685 | 128,867 | 602 | |||||||||||||||
Other assets |
67,422 | 80,013 | 66,309 | 71,859 | 73,711 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL ASSETS |
$ | 8,292,615 | $ | 8,834,237 | $ | 8,760,040 | $ | 8,416,181 | $ | 7,979,405 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
LIABILITIES |
||||||||||||||||||||
Reserve for losses and loss expenses |
$ | 3,824,224 | $ | 3,910,537 | $ | 3,748,124 | $ | 3,566,198 | $ | 3,319,927 | ||||||||||
Reserve for unearned premiums |
932,108 | 1,299,864 | 1,304,146 | 1,398,610 | 842,154 | |||||||||||||||
Deposit liabilities |
26,887 | 28,860 | 30,300 | 32,768 | 32,505 | |||||||||||||||
Reinsurance balances payable |
189,488 | 244,769 | 209,548 | 143,305 | 228,860 | |||||||||||||||
Securities lending payable |
| | 84,652 | 72,657 | 59,886 | |||||||||||||||
Debt |
528,118 | 528,664 | 528,540 | 528,569 | 528,411 | |||||||||||||||
Payable on pending investment purchases |
55,243 | 56,496 | 80,532 | 164,744 | | |||||||||||||||
Other liabilities |
125,382 | 129,097 | 103,922 | 101,066 | 119,509 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES |
$ | 5,681,450 | $ | 6,198,287 | $ | 6,089,764 | $ | 6,007,917 | $ | 5,131,252 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
SHAREHOLDERS EQUITY |
||||||||||||||||||||
Preferred shares |
||||||||||||||||||||
Series A, non-cumulative |
$ | 8,000 | $ | 8,000 | $ | 8,000 | $ | 8,000 | $ | 8,000 | ||||||||||
Series B, non-cumulative |
9,200 | 9,200 | 9,200 | | | |||||||||||||||
Common shares |
43,087 | 40,517 | 40,509 | 40,325 | 47,218 | |||||||||||||||
Additional paid-in capital |
526,910 | 512,323 | 509,165 | 289,920 | 613,915 | |||||||||||||||
Accumulated other comprehensive income |
169,130 | 162,584 | 159,720 | 151,386 | 157,151 | |||||||||||||||
Retained earnings |
1,854,838 | 1,903,326 | 1,943,682 | 1,918,633 | 2,021,869 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL SHAREHOLDERS EQUITY |
$ | 2,611,165 | $ | 2,635,950 | $ | 2,670,276 | $ | 2,408,264 | $ | 2,848,153 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 8,292,615 | $ | 8,834,237 | $ | 8,760,040 | $ | 8,416,181 | $ | 7,979,405 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Book value per common share |
$ | 51.48 | $ | 55.47 | $ | 56.35 | $ | 55.91 | $ | 57.25 | ||||||||||
Diluted book value per common share (treasury stock method) |
$ | 50.56 | $ | 51.63 | $ | 52.20 | $ | 51.52 | $ | 52.74 | ||||||||||
RATIOS |
||||||||||||||||||||
Debt-to-capital |
16.8 | % | 16.7 | % | 16.5 | % | 18.0 | % | 15.6 | % |
4
ENDURANCE SPECIALTY HOLDINGS LTD.
Probable Maximum Loss by Zone and Peril
(in millions of dollars)
Largest 1 in 100 year PML as of January 1, 2012 is equal to 22.0% of Shareholders Equity as of December 31, 2011
Estimated Occurrence Net Loss as of January 1, 2012 | Jan. 1, 2011 | Jan. 1, 2010 | ||||||||||||||||||||||||||||
Zone |
Peril | 10 Year Return Period |
25 Year Return Period |
50 Year Return Period |
100 Year Return Period |
250 Year Return Period |
100 Year Return Period |
100 Year Return Period |
||||||||||||||||||||||
United States |
Hurricane* | $ | 288 | $ | 401 | $ | 484 | $ | 574 | $ | 703 | $ | 567 | $ | 592 | |||||||||||||||
Europe |
Windstorm | 118 | 213 | 294 | 384 | 508 | 463 | 486 | ||||||||||||||||||||||
California |
Earthquake | 46 | 227 | 337 | 409 | 539 | 456 | 430 | ||||||||||||||||||||||
Japan |
Windstorm | 51 | 160 | 234 | 317 | 365 | 363 | 348 | ||||||||||||||||||||||
Northwest U.S. |
Earthquake | 1 | 10 | 64 | 206 | 369 | 238 | 235 | ||||||||||||||||||||||
Japan |
Earthquake | 32 | 110 | 147 | 189 | 279 | 143 | 142 | ||||||||||||||||||||||
United States |
Tornado/Hail | 52 | 78 | 100 | 123 | 157 | 84 | 88 | ||||||||||||||||||||||
Australia |
Earthquake | | 3 | 23 | 73 | 164 | 71 | 65 | ||||||||||||||||||||||
New Zealand |
Earthquake | | 2 | 11 | 29 | 58 | 44 | 32 | ||||||||||||||||||||||
Australia |
Windstorm | 1 | 8 | 23 | 48 | 90 | 36 | 39 | ||||||||||||||||||||||
New Madrid |
Earthquake | | | 1 | 12 | 102 | 12 | 11 |
The net loss estimates by zone above represent estimated losses related to our property, catastrophe and aerospace and marine lines of business, based upon our catastrophe models and assumptions regarding the location, size, magnitude, and frequency of the catastrophe events utilized to determine the above estimates. The net loss estimates are presented on an occurrence basis, before income tax and net of reinsurance recoveries, if applicable. Return period refers to the frequency with which the related size of a catastrophic event is expected to occur.
Actual realized catastrophic losses could differ materially from our net loss estimates and our net loss estimates should not be considered as representative of the actual losses that we may incur in connection with any particular catastrophic event. The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by managements assumptions regarding event characteristics, construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurances underwriting portfolio risk control mechanisms and other factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to Endurance and its future performance, please see Risk Factors in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 and our most recent Quarterly Report on Form 10-Q.
* | United States Windstorm estimated net losses as of January 1, 2012 are based on RMS version 11.0 |
5
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT DISTRIBUTION
FOR THE YEAR ENDED DECEMBER 31, 2011
Net Premiums Written = $1,980 million
[a] | Other specialty includes the agriculture line in the Insurance segment and aerospace and marine and surety and other specialty lines in the Reinsurance segment. |
6
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | |||||||||||||||||||||||
Insurance | Reinsurance | Totals | Insurance | Reinsurance | Totals | |||||||||||||||||||
UNDERWRITING REVENUES |
||||||||||||||||||||||||
Gross premiums written |
$ | 167,766 | $ | 95,200 | $ | 262,966 | $ | 112,664 | $ | 76,561 | $ | 189,225 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums written |
$ | 96,478 | $ | 91,386 | $ | 187,864 | $ | 81,643 | $ | 76,472 | $ | 158,115 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums earned |
$ | 251,101 | $ | 249,388 | $ | 500,489 | $ | 205,528 | $ | 244,208 | $ | 449,736 | ||||||||||||
Other underwriting (loss) income |
(493 | ) | (932 | ) | (1,425 | ) | 4 | 406 | 410 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting revenues |
$ | 250,608 | $ | 248,456 | $ | 499,064 | $ | 205,532 | $ | 244,614 | $ | 450,146 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING EXPENSES |
||||||||||||||||||||||||
Net losses and loss expenses |
$ | 214,681 | $ | 197,471 | $ | 412,152 | $ | 129,168 | $ | 117,256 | $ | 246,424 | ||||||||||||
Acquisition expenses |
20,388 | 56,769 | 77,157 | 12,220 | 53,913 | 66,133 | ||||||||||||||||||
General and administrative expenses |
43,754 | 29,977 | 73,731 | 36,812 | 30,944 | 67,756 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expenses |
$ | 278,823 | $ | 284,217 | $ | 563,040 | $ | 178,200 | $ | 202,113 | $ | 380,313 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING (LOSS) INCOME |
$ | (28,215 | ) | $ | (35,761 | ) | $ | (63,976 | ) | $ | 27,332 | $ | 42,501 | $ | 69,833 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
GAAP RATIOS |
||||||||||||||||||||||||
Loss ratio |
85.5 | % | 79.2 | % | 82.4 | % | 62.9 | % | 48.0 | % | 54.8 | % | ||||||||||||
Acquisition expense ratio |
8.1 | % | 22.8 | % | 15.4 | % | 5.9 | % | 22.1 | % | 14.7 | % | ||||||||||||
General and administrative expense ratio |
17.4 | % | 12.0 | % | 14.7 | % | 17.9 | % | 12.7 | % | 15.1 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio AS REPORTED |
111.0 | % | 114.0 | % | 112.5 | % | 86.7 | % | 82.8 | % | 84.6 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of favorable prior accident year reserve development |
0.2 | % | 16.6 | % | 8.4 | % | 5.6 | % | 4.9 | % | 5.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio net of prior accident year reserve development |
111.2 | % | 130.6 | % | 120.9 | % | 92.3 | % | 87.7 | % | 89.8 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
7
ENDURANCE SPECIALTY HOLDINGS LTD.
INSURANCE SEGMENT DATA
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
UNDERWRITING REVENUES |
||||||||||||||||||||||||
Gross premiums written |
$ | 167,766 | $ | 450,451 | $ | 225,750 | $ | 625,831 | $ | 112,664 | $ | 150,471 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums written |
$ | 96,478 | $ | 303,210 | $ | 173,506 | $ | 432,296 | $ | 81,643 | $ | 88,432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums earned |
$ | 251,101 | $ | 318,602 | $ | 249,397 | $ | 162,492 | $ | 205,528 | $ | 191,151 | ||||||||||||
Other underwriting (loss) income |
(493 | ) | (2,875 | ) | | | 4 | 89 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting revenues |
$ | 250,608 | $ | 315,727 | $ | 249,397 | $ | 162,492 | $ | 205,532 | $ | 191,240 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING EXPENSES |
||||||||||||||||||||||||
Net losses and loss expenses |
$ | 214,681 | $ | 260,206 | $ | 191,396 | $ | 98,836 | $ | 129,168 | $ | 119,297 | ||||||||||||
Acquisition expenses |
20,388 | 18,738 | 15,861 | 16,308 | 12,220 | 18,619 | ||||||||||||||||||
General and administrative expenses |
43,754 | 29,328 | 36,227 | 36,806 | 36,812 | 28,813 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expenses |
$ | 278,823 | $ | 308,272 | $ | 243,484 | $ | 151,950 | $ | 178,200 | $ | 166,729 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING (LOSS) INCOME |
$ | (28,215 | ) | $ | 7,455 | $ | 5,913 | $ | 10,542 | $ | 27,332 | $ | 24,511 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
GAAP RATIOS |
||||||||||||||||||||||||
Loss ratio |
85.5 | % | 81.7 | % | 76.7 | % | 60.8 | % | 62.9 | % | 62.4 | % | ||||||||||||
Acquisition expense ratio |
8.1 | % | 5.9 | % | 6.4 | % | 10.0 | % | 5.9 | % | 9.7 | % | ||||||||||||
General and administrative expense ratio |
17.4 | % | 9.2 | % | 14.5 | % | 22.7 | % | 17.9 | % | 15.1 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio AS REPORTED |
111.0 | % | 96.8 | % | 97.6 | % | 93.5 | % | 86.7 | % | 87.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of favorable prior accident year reserve development |
0.2 | % | 3.9 | % | 9.3 | % | 21.3 | % | 5.6 | % | 11.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio net of prior accident year reserve development |
111.2 | % | 100.7 | % | 106.9 | % | 114.8 | % | 92.3 | % | 98.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
8
ENDURANCE SPECIALTY HOLDINGS LTD.
REINSURANCE SEGMENT DATA
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
UNDERWRITING REVENUES |
||||||||||||||||||||||||
Gross premiums written |
$ | 95,200 | $ | 250,415 | $ | 277,174 | $ | 374,527 | $ | 76,561 | $ | 58,896 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums written |
$ | 91,386 | $ | 248,117 | $ | 268,252 | $ | 366,576 | $ | 76,472 | $ | 58,010 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums earned |
$ | 249,388 | $ | 242,891 | $ | 237,181 | $ | 220,341 | $ | 244,208 | $ | 202,792 | ||||||||||||
Other underwriting (loss) income |
(932 | ) | 734 | 1,088 | (1,069 | ) | 406 | (373 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting revenues |
$ | 248,456 | $ | 243,625 | $ | 238,269 | $ | 219,272 | $ | 244,614 | $ | 202,419 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING EXPENSES |
||||||||||||||||||||||||
Net losses and loss expenses |
$ | 197,471 | $ | 196,485 | $ | 170,574 | $ | 303,017 | $ | 117,256 | $ | 44,708 | ||||||||||||
Acquisition expenses |
56,769 | 53,511 | 52,026 | 49,310 | 53,913 | 54,202 | ||||||||||||||||||
General and administrative expenses |
29,977 | 29,246 | 29,659 | 29,155 | 30,944 | 29,119 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expenses |
$ | 284,217 | $ | 279,242 | $ | 252,259 | $ | 381,482 | $ | 202,113 | $ | 128,029 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING (LOSS) INCOME |
$ | (35,761 | ) | $ | (35,617 | ) | $ | (13,990 | ) | $ | (162,210 | ) | $ | 42,501 | $ | 74,390 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
GAAP RATIOS |
||||||||||||||||||||||||
Loss ratio |
79.2 | % | 81.0 | % | 71.9 | % | 137.5 | % | 48.0 | % | 22.0 | % | ||||||||||||
Acquisition expense ratio |
22.8 | % | 22.0 | % | 22.0 | % | 22.4 | % | 22.1 | % | 26.7 | % | ||||||||||||
General and administrative expense ratio |
12.0 | % | 12.0 | % | 12.5 | % | 13.2 | % | 12.7 | % | 14.4 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio AS REPORTED |
114.0 | % | 115.0 | % | 106.4 | % | 173.1 | % | 82.8 | % | 63.1 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of favorable prior accident year reserve development |
16.6 | % | 13.2 | % | 9.1 | % | 6.4 | % | 4.9 | % | 9.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio net of prior accident year reserve development |
130.6 | % | 128.2 | % | 115.5 | % | 179.5 | % | 87.7 | % | 72.8 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
9
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
INSURANCE SEGMENT |
||||||||||||||||||||||||
Agriculture |
$ | 46,260 | $ | 289,656 | $ | 57,125 | $ | 508,705 | $ | 6,930 | $ | 33,430 | ||||||||||||
Professional lines |
45,110 | 39,559 | 49,181 | 35,469 | 36,690 | 49,915 | ||||||||||||||||||
Casualty |
46,370 | 57,520 | 63,178 | 38,882 | 37,377 | 31,680 | ||||||||||||||||||
Property |
18,669 | 30,049 | 35,904 | 24,690 | 22,134 | 26,479 | ||||||||||||||||||
Healthcare liability |
10,276 | 33,652 | 20,454 | 18,137 | 10,811 | 9,650 | ||||||||||||||||||
Surety and other specialty |
1,081 | 15 | (92 | ) | (52 | ) | (1,278 | ) | (683 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL INSURANCE |
$ | 167,766 | $ | 450,451 | $ | 225,750 | $ | 625,831 | $ | 112,664 | $ | 150,471 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REINSURANCE SEGMENT |
||||||||||||||||||||||||
Catastrophe |
$ | 15,250 | $ | 46,275 | $ | 146,249 | $ | 138,247 | $ | 17,896 | $ | 13,939 | ||||||||||||
Casualty |
59,231 | 56,293 | 45,619 | 116,352 | 47,970 | 34,543 | ||||||||||||||||||
Property |
15,087 | 129,203 | 52,185 | 70,087 | 8,628 | 9,710 | ||||||||||||||||||
Aerospace and Marine |
1,119 | 5,891 | 26,743 | 20,838 | 2,380 | 1,716 | ||||||||||||||||||
Surety and other specialty |
4,513 | 12,753 | 6,378 | 29,003 | (313 | ) | (1,012 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL REINSURANCE |
$ | 95,200 | $ | 250,415 | $ | 277,174 | $ | 374,527 | $ | 76,561 | $ | 58,896 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REPORTED TOTALS |
$ | 262,966 | $ | 700,866 | $ | 502,924 | $ | 1,000,358 | $ | 189,225 | $ | 209,367 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
10
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
INSURANCE SEGMENT |
||||||||||||||||||||||||
Agriculture |
$ | 9,121 | $ | 185,017 | $ | 46,049 | $ | 346,472 | $ | 2,372 | $ | 697 | ||||||||||||
Professional lines |
38,402 | 30,812 | 37,624 | 31,124 | 33,171 | 44,456 | ||||||||||||||||||
Casualty |
30,139 | 37,664 | 43,811 | 25,759 | 25,536 | 19,875 | ||||||||||||||||||
Property |
8,668 | 17,681 | 25,996 | 12,585 | 11,895 | 14,932 | ||||||||||||||||||
Healthcare liability |
9,067 | 32,021 | 20,115 | 16,406 | 9,946 | 9,129 | ||||||||||||||||||
Surety and other specialty |
1,081 | 15 | (89 | ) | (50 | ) | (1,277 | ) | (657 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL INSURANCE |
$ | 96,478 | $ | 303,210 | $ | 173,506 | $ | 432,296 | $ | 81,643 | $ | 88,432 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REINSURANCE SEGMENT |
||||||||||||||||||||||||
Catastrophe |
$ | 14,753 | $ | 43,868 | $ | 139,337 | $ | 131,123 | $ | 17,896 | $ | 12,753 | ||||||||||||
Casualty |
59,234 | 56,292 | 45,617 | 115,554 | 47,965 | 34,537 | ||||||||||||||||||
Property |
15,087 | 129,203 | 52,185 | 70,087 | 8,628 | 9,710 | ||||||||||||||||||
Aerospace and Marine |
768 | 6,002 | 24,726 | 20,839 | 2,380 | 1,721 | ||||||||||||||||||
Surety and other specialty |
1,544 | 12,752 | 6,387 | 28,973 | (397 | ) | (711 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL REINSURANCE |
$ | 91,386 | $ | 248,117 | $ | 268,252 | $ | 366,576 | $ | 76,472 | $ | 58,010 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REPORTED TOTALS |
$ | 187,864 | $ | 551,327 | $ | 441,758 | $ | 798,872 | $ | 158,115 | $ | 146,442 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
11
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS
FOR THE QUARTERS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | |||||||||||||||||||
INSURANCE SEGMENT |
||||||||||||||||||||||||
Agriculture |
$ | 146,068 | $ | 215,830 | $ | 142,952 | $ | 59,808 | $ | 100,177 | $ | 81,065 | ||||||||||||
Professional lines |
37,580 | 34,343 | 37,788 | 36,175 | 37,167 | 39,948 | ||||||||||||||||||
Casualty |
30,765 | 32,343 | 28,735 | 29,742 | 28,415 | 23,525 | ||||||||||||||||||
Property |
16,735 | 16,636 | 19,566 | 16,593 | 20,362 | 16,929 | ||||||||||||||||||
Healthcare liability |
19,168 | 19,435 | 20,445 | 20,224 | 20,684 | 19,943 | ||||||||||||||||||
Surety and other specialty |
785 | 15 | (89 | ) | (50 | ) | (1,277 | ) | 9,741 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL INSURANCE |
$ | 251,101 | $ | 318,602 | $ | 249,397 | $ | 162,492 | $ | 205,528 | $ | 191,151 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REINSURANCE SEGMENT |
||||||||||||||||||||||||
Catastrophe |
$ | 82,197 | $ | 86,395 | $ | 81,747 | $ | 76,335 | $ | 79,617 | $ | 75,937 | ||||||||||||
Casualty |
73,838 | 68,882 | 70,441 | 64,953 | 74,702 | 55,805 | ||||||||||||||||||
Property |
67,911 | 62,519 | 58,643 | 52,452 | 64,229 | 46,829 | ||||||||||||||||||
Aerospace and Marine |
13,052 | 12,236 | 13,154 | 13,587 | 11,312 | 11,155 | ||||||||||||||||||
Surety and other specialty |
12,390 | 12,859 | 13,196 | 13,014 | 14,348 | 13,066 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL REINSURANCE |
$ | 249,388 | $ | 242,891 | $ | 237,181 | $ | 220,341 | $ | 244,208 | $ | 202,792 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REPORTED TOTALS |
$ | 500,489 | $ | 561,493 | $ | 486,578 | $ | 382,833 | $ | 449,736 | $ | 393,943 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
12
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE YEARS ENDED | ||||||||||||||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | |||||||||||||||||||||||
Insurance | Reinsurance | Totals | Insurance | Reinsurance | Totals | |||||||||||||||||||
UNDERWRITING REVENUES |
||||||||||||||||||||||||
Gross premiums written |
$ | 1,469,798 | $ | 997,316 | $ | 2,467,114 | $ | 1,112,192 | $ | 941,044 | $ | 2,053,236 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums written |
$ | 1,005,490 | $ | 974,331 | $ | 1,979,821 | $ | 829,864 | $ | 933,880 | $ | 1,763,744 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net premiums earned |
$ | 981,592 | $ | 949,801 | $ | 1,931,393 | $ | 821,828 | $ | 919,285 | $ | 1,741,113 | ||||||||||||
Other underwriting (loss) income |
(3,368 | ) | (179 | ) | (3,547 | ) | 475 | (2,111 | ) | (1,636 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total underwriting revenues |
$ | 978,224 | $ | 949,622 | $ | 1,927,846 | $ | 822,303 | $ | 917,174 | $ | 1,739,477 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING EXPENSES |
||||||||||||||||||||||||
Net losses and loss expenses |
$ | 765,119 | $ | 867,547 | $ | 1,632,666 | $ | 558,040 | $ | 480,060 | $ | 1,038,100 | ||||||||||||
Acquisition expenses |
71,295 | 211,616 | 282,911 | 63,556 | 200,672 | 264,228 | ||||||||||||||||||
General and administrative expenses |
146,115 | 118,037 | 264,152 | 123,335 | 118,585 | 241,920 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total expenses |
$ | 982,529 | $ | 1,197,200 | $ | 2,179,729 | $ | 744,931 | $ | 799,317 | $ | 1,544,248 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
UNDERWRITING (LOSS) INCOME |
$ | (4,305 | ) | $ | (247,578 | ) | $ | (251,883 | ) | $ | 77,372 | $ | 117,857 | $ | 195,229 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
GAAP RATIOS |
||||||||||||||||||||||||
Loss ratio |
77.9 | % | 91.3 | % | 84.6 | % | 67.9 | % | 52.2 | % | 59.6 | % | ||||||||||||
Acquisition expense ratio |
7.3 | % | 22.3 | % | 14.6 | % | 7.7 | % | 21.8 | % | 15.2 | % | ||||||||||||
General and administrative expense ratio |
14.9 | % | 12.4 | % | 13.7 | % | 15.0 | % | 12.9 | % | 13.9 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio AS REPORTED |
100.1 | % | 126.0 | % | 112.9 | % | 90.6 | % | 86.9 | % | 88.7 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Effect of favorable prior accident year reserve development |
7.2 | % | 11.5 | % | 9.3 | % | 5.7 | % | 8.7 | % | 7.3 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Combined ratio net of prior accident year reserve development |
107.3 | % | 137.5 | % | 122.2 | % | 96.3 | % | 95.6 | % | 96.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
13
ENDURANCE SPECIALTY HOLDINGS LTD.
INSURANCE SEGMENT DATA
FOR THE YEARS ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
UNDERWRITING REVENUES |
||||||||||||
Gross premiums written |
$ | 1,469,798 | $ | 1,112,192 | $ | 1,152,150 | ||||||
|
|
|
|
|
|
|||||||
Net premiums written |
$ | 1,005,490 | $ | 829,864 | $ | 740,310 | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 981,592 | $ | 821,828 | $ | 823,703 | ||||||
Other underwriting (loss) income |
(3,368 | ) | 475 | 3,533 | ||||||||
|
|
|
|
|
|
|||||||
Total underwriting revenues |
$ | 978,224 | $ | 822,303 | $ | 827,236 | ||||||
|
|
|
|
|
|
|||||||
UNDERWRITING EXPENSES |
||||||||||||
Net losses and loss expenses |
$ | 765,119 | $ | 558,040 | $ | 553,008 | ||||||
Acquisition expenses |
71,295 | 63,556 | 84,724 | |||||||||
General and administrative expenses |
146,115 | 123,335 | 119,766 | |||||||||
|
|
|
|
|
|
|||||||
Total expenses |
$ | 982,529 | $ | 744,931 | $ | 757,498 | ||||||
|
|
|
|
|
|
|||||||
UNDERWRITING (LOSS) INCOME |
$ | (4,305 | ) | $ | 77,372 | $ | 69,738 | |||||
|
|
|
|
|
|
|||||||
GAAP RATIOS |
||||||||||||
Loss ratio |
77.9 | % | 67.9 | % | 67.1 | % | ||||||
Acquisition expense ratio |
7.3 | % | 7.7 | % | 10.3 | % | ||||||
General and administrative expense ratio |
14.9 | % | 15.0 | % | 14.6 | % | ||||||
|
|
|
|
|
|
|||||||
Combined ratio AS REPORTED |
100.1 | % | 90.6 | % | 92.0 | % | ||||||
|
|
|
|
|
|
|||||||
Effect of favorable prior accident year reserve development |
7.2 | % | 5.7 | % | 11.2 | % | ||||||
|
|
|
|
|
|
|||||||
Combined ratio net of prior accident year reserve development |
107.3 | % | 96.3 | % | 103.2 | % | ||||||
|
|
|
|
|
|
14
ENDURANCE SPECIALTY HOLDINGS LTD.
REINSURANCE SEGMENT DATA
FOR THE YEARS ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
UNDERWRITING REVENUES |
||||||||||||
Gross premiums written |
$ | 997,316 | $ | 941,044 | $ | 869,300 | ||||||
|
|
|
|
|
|
|||||||
Net premiums written |
$ | 974,331 | $ | 933,880 | $ | 865,740 | ||||||
|
|
|
|
|
|
|||||||
Net premiums earned |
$ | 949,801 | $ | 919,285 | $ | 809,489 | ||||||
Other underwriting (loss) income |
(179 | ) | (2,111 | ) | 381 | |||||||
|
|
|
|
|
|
|||||||
Total underwriting revenues |
$ | 949,622 | $ | 917,174 | $ | 809,870 | ||||||
|
|
|
|
|
|
|||||||
UNDERWRITING EXPENSES |
||||||||||||
Net losses and loss expenses |
$ | 867,547 | $ | 480,060 | $ | 313,632 | ||||||
Acquisition expenses |
211,616 | 200,672 | 183,247 | |||||||||
General and administrative expenses |
118,037 | 118,585 | 117,388 | |||||||||
|
|
|
|
|
|
|||||||
Total expenses |
$ | 1,197,200 | $ | 799,317 | $ | 614,267 | ||||||
|
|
|
|
|
|
|||||||
UNDERWRITING (LOSS) INCOME |
$ | (247,578 | ) | $ | 117,857 | $ | 195,603 | |||||
|
|
|
|
|
|
|||||||
GAAP RATIOS |
||||||||||||
Loss ratio |
91.3 | % | 52.2 | % | 38.8 | % | ||||||
Acquisition expense ratio |
22.3 | % | 21.8 | % | 22.6 | % | ||||||
General and administrative expense ratio |
12.4 | % | 12.9 | % | 14.5 | % | ||||||
|
|
|
|
|
|
|||||||
Combined ratio AS REPORTED |
126.0 | % | 86.9 | % | 75.9 | % | ||||||
|
|
|
|
|
|
|||||||
Effect of favorable prior accident year reserve development |
11.5 | % | 8.7 | % | 7.3 | % | ||||||
|
|
|
|
|
|
|||||||
Combined ratio net of prior accident year reserve development |
137.5 | % | 95.6 | % | 83.2 | % | ||||||
|
|
|
|
|
|
15
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS
FOR THE YEARS ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
INSURANCE SEGMENT |
||||||||||||
Agriculture |
$ | 901,746 | $ | 567,461 | $ | 572,096 | ||||||
Professional lines |
169,319 | 170,146 | 193,799 | |||||||||
Casualty |
205,950 | 167,549 | 152,580 | |||||||||
Property |
109,312 | 122,110 | 124,621 | |||||||||
Healthcare liability |
82,519 | 87,593 | 82,955 | |||||||||
Surety and other specialty |
952 | (2,667 | ) | 26,099 | ||||||||
|
|
|
|
|
|
|||||||
TOTAL INSURANCE |
$ | 1,469,798 | $ | 1,112,192 | $ | 1,152,150 | ||||||
|
|
|
|
|
|
|||||||
REINSURANCE SEGMENT |
||||||||||||
Catastrophe |
$ | 346,021 | $ | 309,886 | $ | 303,404 | ||||||
Casualty |
277,495 | 294,030 | 255,142 | |||||||||
Property |
266,562 | 224,544 | 215,085 | |||||||||
Aerospace and Marine |
54,591 | 48,761 | 44,696 | |||||||||
Surety and other specialty |
52,647 | 63,823 | 50,973 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL REINSURANCE |
$ | 997,316 | $ | 941,044 | $ | 869,300 | ||||||
|
|
|
|
|
|
|||||||
REPORTED TOTALS |
$ | 2,467,114 | $ | 2,053,236 | $ | 2,021,450 | ||||||
|
|
|
|
|
|
16
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS
FOR THE YEARS ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
INSURANCE SEGMENT |
||||||||||||
Agriculture |
$ | 586,659 | $ | 404,767 | $ | 324,480 | ||||||
Professional lines |
137,962 | 148,717 | 167,091 | |||||||||
Casualty |
137,373 | 107,801 | 91,071 | |||||||||
Property |
64,930 | 88,299 | 68,011 | |||||||||
Healthcare liability |
77,609 | 82,893 | 78,284 | |||||||||
Surety and other specialty |
957 | (2,613 | ) | 11,373 | ||||||||
|
|
|
|
|
|
|||||||
TOTAL INSURANCE |
$ | 1,005,490 | $ | 829,864 | $ | 740,310 | ||||||
|
|
|
|
|
|
|||||||
REINSURANCE SEGMENT |
||||||||||||
Catastrophe |
$ | 329,081 | $ | 305,617 | $ | 302,218 | ||||||
Casualty |
276,697 | 293,222 | 254,897 | |||||||||
Property |
266,562 | 224,544 | 215,085 | |||||||||
Aerospace and Marine |
52,335 | 46,696 | 42,563 | |||||||||
Surety and other specialty |
49,656 | 63,801 | 50,977 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL REINSURANCE |
$ | 974,331 | $ | 933,880 | $ | 865,740 | ||||||
|
|
|
|
|
|
|||||||
REPORTED TOTALS |
$ | 1,979,821 | $ | 1,763,744 | $ | 1,606,050 | ||||||
|
|
|
|
|
|
17
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS
FOR THE YEARS ENDED | ||||||||||||
DEC. 31, 2011 | DEC. 31, 2010 | DEC. 31, 2009 | ||||||||||
INSURANCE SEGMENT |
||||||||||||
Agriculture |
$ | 564,658 | $ | 397,643 | $ | 331,960 | ||||||
Professional lines |
145,886 | 154,484 | 152,547 | |||||||||
Casualty |
121,585 | 105,070 | 89,340 | |||||||||
Property |
69,530 | 86,308 | 76,245 | |||||||||
Healthcare liability |
79,272 | 81,100 | 80,219 | |||||||||
Surety and other specialty |
661 | (2,777 | ) | 93,392 | ||||||||
|
|
|
|
|
|
|||||||
TOTAL INSURANCE |
$ | 981,592 | $ | 821,828 | $ | 823,703 | ||||||
|
|
|
|
|
|
|||||||
REINSURANCE SEGMENT |
||||||||||||
Catastrophe |
$ | 326,674 | $ | 315,708 | $ | 296,982 | ||||||
Casualty |
278,114 | 272,968 | 208,865 | |||||||||
Property |
241,525 | 227,282 | 198,606 | |||||||||
Aerospace and Marine |
52,029 | 44,918 | 49,088 | |||||||||
Surety and other specialty |
51,459 | 58,409 | 55,948 | |||||||||
|
|
|
|
|
|
|||||||
TOTAL REINSURANCE |
$ | 949,801 | $ | 919,285 | $ | 809,489 | ||||||
|
|
|
|
|
|
|||||||
REPORTED TOTALS |
$ | 1,931,393 | $ | 1,741,113 | $ | 1,633,192 | ||||||
|
|
|
|
|
|
18
ENDURANCE SPECIALTY HOLDINGS LTD.
RETURN ON EQUITY ANALYSIS
FOR THE YEAR | ||||
ENDED DEC. 31, 2011 | ||||
Average common equity [a] |
$ | 2,414,659 | ||
Net premiums earned |
$ | 1,931,393 | ||
Combined ratio |
112.9 | % | ||
Operating margin |
(12.9 | )% | ||
Premium leverage |
0.80 | x | ||
|
|
|||
Implied ROAE from underwriting activity |
(10.3 | )% | ||
|
|
|||
Average cash and invested assets at amortized cost |
$ | 6,091,780 | ||
Investment leverage |
2.52 | x | ||
Year to date investment income yield, pretax |
2.4 | % | ||
|
|
|||
Implied ROAE from investment activity |
6.0 | % | ||
|
|
|||
Financing Costs [b] |
(2.5 | )% | ||
|
|
|||
Implied Pre-tax Operating ROAE, for period [c] |
(6.8 | )% | ||
|
|
[a] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares (beginning liquidation value of $200 million, ending liquidation value of $430 million). |
[b] | Financing costs include interest expense and preferred dividends. |
[c] | Implied pre-tax Operating ROAE considers only the main components of the Companys return on equity underwriting and investment returns. As such, it differs from operating ROE primarily due to the exclusion of tax on underwriting, financing and investment activites and the tax-effected impact of amortization expense. |
19
ENDURANCE SPECIALTY HOLDINGS LTD.
ANNUALIZED PREMIUM & INVESTMENT LEVERAGE
FOR THE QUARTERS ENDED | YEARS ENDED DECEMBER 31, | |||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | 2011 | 2010 | |||||||||||||||||||
Average common equity [a] |
$ | 2,193,558 | $ | 2,223,113 | $ | 2,224,270 | $ | 2,428,209 | $ | 2,414,659 | $ | 2,617,718 | ||||||||||||
Net premiums earned |
$ | 500,489 | $ | 561,493 | $ | 486,578 | $ | 382,833 | $ | 1,931,393 | $ | 1,741,113 | ||||||||||||
Premium leverage |
0.23 | x | 0.25 | x | 0.22 | x | 0.16 | x | 0.80 | x | 0.67 | x | ||||||||||||
Annualized premium leverage |
0.92 | x | 1.00 | x | 0.88 | x | 0.64 | x | 0.80 | x | 0.67 | x | ||||||||||||
Average cash and invested assets at amortized cost |
$ | 6,175,592 | $ | 6,213,420 | $ | 6,050,968 | $ | 5,960,786 | $ | 6,091,780 | $ | 5,978,909 | ||||||||||||
Investment leverage |
2.82 | x | 2.79 | x | 2.72 | x | 2.45 | x | 2.52 | x | 2.28 | x |
[a] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares outstanding at the beginning and end of each period. |
20
ENDURANCE SPECIALTY HOLDINGS LTD.
INVESTMENT PORTFOLIO
AS OF DECEMBER 31, 2011 AND 2010
December 31, 2011 | December 31, 2010 | |||||||||||||||
Type of Investment |
Fair Value | Percentage | Fair Value | Percentage | ||||||||||||
Cash and equivalents [a] |
$ | 913,492 | 14.5 | % | $ | 610,454 | 9.9 | % | ||||||||
Short-term investments |
67,802 | 1.1 | % | 70,444 | 1.1 | % | ||||||||||
U.S. government and government agencies notes |
1,269,123 | 20.1 | % | 1,010,819 | 16.3 | % | ||||||||||
Government and agency guaranteed corporates |
351,825 | 5.6 | % | 671,150 | 10.8 | % | ||||||||||
U.S. government agency residential mortgage-backed securities |
965,019 | 15.3 | % | 883,948 | 14.3 | % | ||||||||||
U.S. government agency commercial mortgage-backed securities |
28,807 | 0.5 | % | 22,889 | 0.4 | % | ||||||||||
Municipals |
53,517 | 0.8 | % | 29,979 | 0.5 | % | ||||||||||
Foreign government |
74,997 | 1.2 | % | 140,461 | 2.3 | % | ||||||||||
Corporate securities |
1,139,899 | 18.1 | % | 1,232,511 | 19.9 | % | ||||||||||
Non-agency residential mortgage-backed securities |
114,662 | 1.8 | % | 246,410 | 4.0 | % | ||||||||||
Non-agency commercial mortgage-backed securities |
518,483 | 8.2 | % | 604,820 | 9.8 | % | ||||||||||
Asset-backed securities |
315,634 | 5.0 | % | 273,715 | 4.4 | % | ||||||||||
Equity securities |
59,767 | 0.9 | % | 13,565 | 0.2 | % | ||||||||||
Other investments [b] |
432,658 | 6.9 | % | 376,652 | 6.1 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 6,305,685 | 100.0 | % | $ | 6,187,817 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
Ratings [e] |
Fair Value | Percentage | Fair Value | Percentage | ||||||||||||
U.S. government and government agencies notes |
$ | 1,269,123 | 23.5 | % | $ | 1,010,819 | 18.1 | % | ||||||||
AAA/Aaa |
941,500 | 17.6 | % | 2,639,682 | 47.4 | % | ||||||||||
AA/Aa |
1,665,593 | 30.9 | % | 465,315 | 8.3 | % | ||||||||||
A/A |
776,251 | 14.4 | % | 793,980 | 14.2 | % | ||||||||||
BBB |
130,864 | 2.4 | % | 50,733 | 0.9 | % | ||||||||||
Below BBB |
114,716 | 2.1 | % | 221,848 | 4.0 | % | ||||||||||
Not Rated |
1,721 | | 4,769 | 0.1 | % | |||||||||||
Equity securities |
59,767 | 1.1 | % | 13,565 | 0.2 | % | ||||||||||
Other investments [b] |
432,658 | 8.0 | % | 376,652 | 6.8 | % | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 5,392,193 | 100.0 | % | $ | 5,577,363 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
Performance |
December 31, 2011 |
December 31, 2010 |
||||||
Yield [c] |
2.4 | % | 3.3 | % | ||||
Duration in years [d] |
2.39 | 2.39 |
Year Ended | Quarter Ended | Quarter Ended | Quarter Ended | Quarter Ended | ||||||||||||||||
Investment Income |
Dec. 31, 2011 | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | Mar. 31, 2011 | |||||||||||||||
Cash and fixed income securities |
$ | 147,731 | $ | 33,705 | $ | 36,622 | $ | 38,661 | $ | 38,744 | ||||||||||
Other Investments |
(694 | ) | 6,889 | (22,522 | ) | 1,181 | 13,757 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total net investment income |
$ | 147,037 | $ | 40,594 | $ | 14,100 | $ | 39,842 | $ | 52,501 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Note: [a] | Cash and equivalents, including operating cash, are shown net of investments pending settlement. |
[b] | Other investments includes investments in alternative and specialty funds. |
[c] | Earned yield for the twelve months ending 12/31/11 and twelve months ending 12/31/10 excludes realized and unrealized gains and losses on fixed maturity investments. |
[d] | Duration excludes other investments and operating cash. |
[e] | Excludes cash and equivalents. |
21
ENDURANCE SPECIALTY HOLDINGS LTD.
STRUCTURED SECURITIES DETAIL
AS OF DEC. 31, 2011
Percentage of | ||||||||||||
Structured (RMBS, CMBS, ABS, CDO and CLO) securities ratings |
Fair Value | Percentage | Investment Portfolio | |||||||||
U.S. Government and agencies |
$ | 993,826 | 51.2 | % | 15.8 | % | ||||||
AAA/Aaa |
669,536 | 34.5 | % | 10.6 | % | |||||||
AA/Aa |
101,792 | 5.2 | % | 1.6 | % | |||||||
A/A |
83,472 | 4.3 | % | 1.3 | % | |||||||
BBB |
34,905 | 1.8 | % | 0.6 | % | |||||||
Below BBB |
58,852 | 3.0 | % | 0.9 | % | |||||||
Not Rated |
222 | | | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 1,942,605 | 100.0 | % | 30.8 | % | ||||||
|
|
|
|
|
|
Percentage of | ||||||||||||||||
Structured securities sectors (RMBS, CMBS, ABS, CDO and CLO) |
Fair Value | Percentage | Investment Portfolio | |||||||||||||
Commercial |
||||||||||||||||
Agency |
$ | 28,807 | 1.5 | % | 0.5 | % | ||||||||||
Non Agency |
537,920 | 27.7 | % | 8.5 | % | |||||||||||
Residential |
||||||||||||||||
Agency |
965,019 | 49.7 | % | 15.3 | % | |||||||||||
Non Agency |
115,304 | 5.9 | % | 1.8 | % | |||||||||||
Consumer |
246,649 | 12.7 | % | 3.9 | % | |||||||||||
Collateralized Loan Obligations (CLO) |
48,906 | 2.5 | % | 0.8 | % | |||||||||||
|
|
|
|
|
|
|||||||||||
Total |
$ | 1,942,605 | 100.0 | % | 30.8 | % | ||||||||||
|
|
|
|
|
|
|||||||||||
Spread Duration | 3.00 years |
22
ENDURANCE SPECIALTY HOLDINGS LTD.
LARGEST TWENTY-FIVE CORPORATE HOLDINGS
AS OF DEC. 31, 2011
December 31, 2011 | ||||||||||||||
Amortized | Unrealized | Credit | ||||||||||||
ISSUER (1) (2) (4) |
Cost | Fair Value | Gain (Loss) | Quality (3) | ||||||||||
JPMORGAN CHASE & CO |
$ | 38,053 | $ | 38,253 | $ | 200 | A | |||||||
METLIFE INC |
30,545 | 30,996 | 451 | A | ||||||||||
WAL-MART STORES INC |
26,370 | 27,428 | 1,057 | AA | ||||||||||
INTERNATIONAL BUSINESS MACHINES CORP |
27,093 | 27,331 | 238 | A+ | ||||||||||
VERIZON COMMUNICATIONS INC |
24,867 | 26,203 | 1,336 | A- | ||||||||||
NOVARTIS AG |
23,647 | 25,000 | 1,354 | AA- | ||||||||||
US BANCORP |
21,675 | 22,311 | 637 | A | ||||||||||
CREDIT SUISSE GROUP AG |
22,129 | 21,875 | (254 | ) | A+ | |||||||||
HSBC HOLDINGS PLC |
20,678 | 20,620 | (58 | ) | A+ | |||||||||
PEPSICO INC/NC |
18,288 | 19,687 | 1,399 | A | ||||||||||
EDISON INTERNATIONAL |
16,978 | 17,791 | 813 | A | ||||||||||
MORGAN STANLEY |
18,807 | 17,400 | (1,408 | ) | A- | |||||||||
BANK OF AMERICA CORP |
17,922 | 16,409 | (1,513 | ) | A- | |||||||||
NEW YORK LIFE INSURANCE COMPANY |
15,533 | 16,098 | 564 | AA+ | ||||||||||
BANK OF NOVA SCOTIA |
15,550 | 15,746 | 195 | AA- | ||||||||||
NATIONAL GRID PLC |
13,916 | 15,279 | 1,363 | A- | ||||||||||
CITIGROUP INC |
15,769 | 15,252 | (517 | ) | A- | |||||||||
PHILIP MORRIS INTERNATIONAL INC |
14,418 | 15,202 | 784 | A | ||||||||||
ROYAL DUTCH SHELL PLC |
14,199 | 14,841 | 642 | AA | ||||||||||
AT&T INC |
14,095 | 14,719 | 625 | A- | ||||||||||
MEDTRONIC INC |
13,399 | 13,988 | 589 | AA- | ||||||||||
BANK OF NEW YORK MELLON CORP/THE |
12,174 | 12,581 | 407 | A+ | ||||||||||
TOTAL SA |
12,382 | 12,434 | 52 | AA- | ||||||||||
GENERAL ELECTRIC CO |
12,472 | 12,206 | (265 | ) | AA+ | |||||||||
ROYAL BANK OF SCOTLAND GROUP PLC |
12,574 | 12,009 | (566 | ) | A |
(1) | Corporate issuers exclude government-backed, government-sponsored enterprises, covered bonds and cash and cash equivalents. |
(2) | Credit exposures represent only direct exposure to fixed maturities and short term investments of the parent issuer and its major subsidiaries. |
(3) | Represents weighted average credit quality of underlying issues. |
(4) | Includes preferred equity securities. |
23
ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES
THREE MONTHS ENDED DEC. 31, 2011 | YEAR ENDED DEC. 31, 2011 | |||||||||||||||||||||||
GROSS | RECOVERIES | NET | GROSS | RECOVERIES | NET | |||||||||||||||||||
Reserve for losses and loss expenses |
||||||||||||||||||||||||
Balance, beginning of period |
$ | 3,910,537 | $ | (479,132 | ) | $ | 3,431,405 | $ | 3,319,927 | $ | (319,349 | ) | $ | 3,000,578 | ||||||||||
Incurred related to: |
||||||||||||||||||||||||
Current year |
667,310 | (213,079 | ) | 454,231 | 2,523,501 | (710,857 | ) | 1,812,644 | ||||||||||||||||
Prior years |
(26,475 | ) | (15,604 | ) | (42,079 | ) | (224,297 | ) | 44,319 | (179,978 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Incurred |
640,835 | (228,683 | ) | 412,152 | 2,299,204 | (666,538 | ) | 1,632,666 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Paid related to: |
||||||||||||||||||||||||
Current year |
(601,534 | ) | 72,465 | (529,069 | ) | (1,194,480 | ) | 344,348 | (850,132 | ) | ||||||||||||||
Prior years |
(124,414 | ) | (31,615 | ) | (156,029 | ) | (594,663 | ) | (25,468 | ) | (620,131 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Paid |
(725,948 | ) | 40,850 | (685,098 | ) | (1,789,143 | ) | 318,880 | (1,470,263 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Foreign currency translation |
(1,200 | ) | 37 | (1,163 | ) | (5,764 | ) | 79 | (5,685 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance, end of period |
$ | 3,824,224 | $ | (666,928 | ) | $ | 3,157,296 | $ | 3,824,224 | $ | (666,928 | ) | $ | 3,157,296 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
24
ENDURANCE SPECIALTY HOLDINGS LTD.
PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2011
Total | ||||||||||||
Insurance | Reinsurance | Company | ||||||||||
Incurred related to prior years |
||||||||||||
Quarter ended March 31, 2011 |
$ | (34,612 | ) | $ | (14,093 | ) | $ | (48,705 | ) | |||
Quarter ended June 30, 2011 |
(23,190 | ) | (21,591 | ) | (44,781 | ) | ||||||
Quarter ended September 30, 2011 |
(12,411 | ) | (32,002 | ) | (44,413 | ) | ||||||
Quarter ended December 31, 2011 |
(566 | ) | (41,513 | ) | (42,079 | ) | ||||||
|
|
|
|
|
|
|||||||
Year ended December 31, 2011 |
$ | (70,779 | ) | $ | (109,199 | ) | $ | (179,978 | ) | |||
|
|
|
|
|
|
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2010
Total | ||||||||||||
Insurance | Reinsurance | Company | ||||||||||
Incurred related to prior years |
||||||||||||
Quarter ended March 31, 2010 |
$ | (17,679 | ) | $ | (20,915 | ) | $ | (38,594 | ) | |||
Quarter ended June 30, 2010 |
(8,099 | ) | (21,379 | ) | (29,478 | ) | ||||||
Quarter ended September 30, 2010 |
(9,568 | ) | (25,566 | ) | (35,134 | ) | ||||||
Quarter ended December 31, 2010 |
(11,525 | ) | (12,071 | ) | (23,596 | ) | ||||||
|
|
|
|
|
|
|||||||
Year ended December 31, 2010 |
$ | (46,871 | ) | $ | (79,931 | ) | $ | (126,802 | ) | |||
|
|
|
|
|
|
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2009
Total | ||||||||||||
Insurance | Reinsurance | Company | ||||||||||
Incurred related to prior years |
||||||||||||
Quarter ended March 31, 2009 |
$ | (36,798 | ) | $ | (2,520 | ) | $ | (39,318 | ) | |||
Quarter ended June 30, 2009 |
(19,842 | ) | (16,132 | ) | (35,974 | ) | ||||||
Quarter ended September 30, 2009 |
(13,952 | ) | (20,449 | ) | (34,401 | ) | ||||||
Quarter ended December 31, 2009 |
(21,486 | ) | (19,710 | ) | (41,196 | ) | ||||||
|
|
|
|
|
|
|||||||
Year ended December 31, 2009 |
$ | (92,078 | ) | $ | (58,811 | ) | $ | (150,889 | ) | |||
|
|
|
|
|
|
25
ENDURANCE SPECIALTY HOLDINGS LTD.
PRIOR YEAR RESERVE DEVELOPMENT BY DEVELOPMENT TAIL
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT
FOR THE QUARTERS ENDED | FOR THE YEAR ENDED | |||||||||||||||||||||||
DEC. 31, 2011 | SEPT. 30, 2011 | JUNE 30, 2011 | MAR. 31, 2011 | DEC. 31, 2011 | DEC. 31, 2010 | |||||||||||||||||||
INSURANCE SEGMENT |
||||||||||||||||||||||||
Short tail[a] |
$ | (132 | ) | $ | (4,182 | ) | $ | (5,150 | ) | $ | (9,274 | ) | $ | (18,738 | ) | $ | (21,349 | ) | ||||||
Long tail[b] |
(916 | ) | (8,501 | ) | (5,490 | ) | (2,560 | ) | (17,467 | ) | (11,649 | ) | ||||||||||||
Other[c] |
482 | 272 | (12,550 | ) | (22,778 | ) | (34,574 | ) | (13,873 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL INSURANCE |
(566 | ) | (12,411 | ) | (23,190 | ) | (34,612 | ) | (70,779 | ) | (46,871 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REINSURANCE SEGMENT |
||||||||||||||||||||||||
Short tail[a] |
(37,014 | ) | (19,342 | ) | (19,245 | ) | (14,163 | ) | (89,764 | ) | (68,865 | ) | ||||||||||||
Long tail[b] |
(4,917 | ) | (11,234 | ) | 335 | 275 | (15,541 | ) | (7,700 | ) | ||||||||||||||
Other[c] |
418 | (1,426 | ) | (2,681 | ) | (205 | ) | (3,894 | ) | (3,366 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
TOTAL REINSURANCE |
(41,513 | ) | (32,002 | ) | (21,591 | ) | (14,093 | ) | (109,199 | ) | (79,931 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
REPORTED TOTALS |
$ | (42,079 | ) | $ | (44,413 | ) | $ | (44,781 | ) | $ | (48,705 | ) | $ | (179,978 | ) | $ | (126,802 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
[a] | Short tail business is that for which development typically emerges within a period of several quarters. The Companys short tail line of business in the Insurance segment includes its property line of business. The Companys short tail lines in its Reinsurance segment include property, catastrophe, aerospace and marine and surety. |
[b] | Long tail business is that for which development emerges over many years. The Companys long tail lines of business in the Insurance segment includes casualty, healthcare liability, workers compensation and professional lines. The Companys long tail line of business in the Reinsurance segment includes its casualty line of business and some units included in its surety and other specialty line of business. |
[c] | The Company writes certain specialty lines of business for which the loss emergence is considered to be unique in nature and thus, has been included as other. The Companys other lines of business included in the Insurance segment is agriculture and in the Reinsurance segment is the agriculture unit included in its surety and other specialty line of business. |
26
ENDURANCE SPECIALTY HOLDINGS LTD.
ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES
Reported | ||||||||||||||||||||||||||||||||||||
Insurance | Reinsurance | Totals | ||||||||||||||||||||||||||||||||||
Short Tail | Long Tail | Other | Total | Short Tail | Long Tail | Other | Total | |||||||||||||||||||||||||||||
AT DEC. 31, 2011 |
||||||||||||||||||||||||||||||||||||
Case reserves |
$ | 31,408 | $ | 404,377 | $ | 203,844 | $ | 639,629 | $ | 497,218 | $ | 284,619 | $ | 403 | $ | 782,240 | $ | 1,421,869 | ||||||||||||||||||
Total reserves |
$ | 57,721 | $ | 1,624,221 | $ | 255,601 | $ | 1,937,543 | $ | 902,492 | $ | 979,407 | $ | 4,782 | $ | 1,886,681 | $ | 3,824,224 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Case reserves / Total reserves |
54.4 | % | 24.9 | % | 79.8 | % | 33.0 | % | 55.1 | % | 29.1 | % | 8.4 | % | 41.5 | % | 37.2 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
IBNR / Total reserves |
45.6 | % | 75.1 | % | 20.2 | % | 67.0 | % | 44.9 | % | 70.9 | % | 91.6 | % | 58.5 | % | 62.8 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
AT SEPT. 30, 2011 |
||||||||||||||||||||||||||||||||||||
Case reserves |
$ | 28,669 | $ | 387,942 | $ | 370,589 | $ | 787,200 | $ | 488,768 | $ | 268,058 | $ | 573 | $ | 757,399 | $ | 1,544,599 | ||||||||||||||||||
Total reserves |
$ | 53,598 | $ | 1,582,357 | $ | 396,681 | $ | 2,032,636 | $ | 912,592 | $ | 957,963 | $ | 7,346 | $ | 1,877,901 | $ | 3,910,537 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Case reserves / Total reserves |
53.5 | % | 24.5 | % | 93.4 | % | 38.7 | % | 53.6 | % | 28.0 | % | 7.8 | % | 40.3 | % | 39.5 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
IBNR / Total reserves |
46.5 | % | 75.5 | % | 6.6 | % | 61.3 | % | 46.4 | % | 72.0 | % | 92.2 | % | 59.7 | % | 60.5 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
AT JUNE 30, 2011 |
||||||||||||||||||||||||||||||||||||
Case reserves |
$ | 19,410 | $ | 375,869 | $ | 247,145 | $ | 642,424 | $ | 431,972 | $ | 268,802 | $ | 1,187 | $ | 701,961 | $ | 1,344,385 | ||||||||||||||||||
Total reserves |
$ | 48,268 | $ | 1,568,198 | $ | 276,347 | $ | 1,892,813 | $ | 893,835 | $ | 950,506 | $ | 10,970 | $ | 1,855,311 | $ | 3,748,124 | ||||||||||||||||||
Case reserves / Total reserves |
40.2 | % | 24.0 | % | 89.4 | % | 33.9 | % | 48.3 | % | 28.3 | % | 10.8 | % | 37.8 | % | 35.9 | % | ||||||||||||||||||
IBNR / Total reserves |
59.8 | % | 76.0 | % | 10.6 | % | 66.1 | % | 51.7 | % | 71.7 | % | 89.2 | % | 62.2 | % | 64.1 | % | ||||||||||||||||||
AT MAR. 31, 2011 |
||||||||||||||||||||||||||||||||||||
Case reserves |
$ | 18,089 | $ | 378,010 | $ | 73,374 | $ | 469,473 | $ | 322,587 | $ | 255,397 | $ | 455 | $ | 578,439 | $ | 1,047,912 | ||||||||||||||||||
Total reserves |
$ | 45,739 | $ | 1,539,977 | $ | 187,017 | $ | 1,772,733 | $ | 861,084 | $ | 919,839 | $ | 12,542 | $ | 1,793,465 | $ | 3,566,198 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Case reserves / Total reserves |
39.5 | % | 24.5 | % | 39.2 | % | 26.5 | % | 37.5 | % | 27.8 | % | 3.6 | % | 32.3 | % | 29.4 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
IBNR / Total reserves |
60.5 | % | 75.5 | % | 60.8 | % | 73.5 | % | 62.5 | % | 72.2 | % | 96.4 | % | 67.7 | % | 70.6 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
AT DEC. 31, 2010 |
||||||||||||||||||||||||||||||||||||
Case reserves |
$ | 14,730 | $ | 325,750 | $ | 116,687 | $ | 457,167 | $ | 319,322 | $ | 248,870 | $ | 990 | $ | 569,182 | $ | 1,026,349 | ||||||||||||||||||
Total reserves |
$ | 45,330 | $ | 1,493,398 | $ | 190,865 | $ | 1,729,593 | $ | 670,750 | $ | 907,384 | $ | 12,200 | $ | 1,590,334 | $ | 3,319,927 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Case reserves / Total reserves |
32.5 | % | 21.8 | % | 61.1 | % | 26.4 | % | 47.6 | % | 27.4 | % | 8.1 | % | 35.8 | % | 30.9 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
IBNR / Total reserves |
67.5 | % | 78.2 | % | 38.9 | % | 73.6 | % | 52.4 | % | 72.6 | % | 91.9 | % | 64.2 | % | 69.1 | % | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
ENDURANCE SPECIALTY HOLDINGS LTD.
SHAREHOLDER RETURN ANALYSIS
YEARS ENDED DECEMBER 31, | INCEPTION TO | |||||||||||||||||
2011 | 2010 | 2009 | DEC. 31, 2011 | |||||||||||||||
(Loss) Income and Return on Equity: |
||||||||||||||||||
Net (loss) income (attributable) available to common and participating common shareholders |
$ | (117,859 | ) | $ | 349,238 | $ | 520,604 | $ | 2,302,643 | |||||||||
Operating (loss) income (attributable) available to common and participating common shareholders |
(152,303 | ) | 330,035 | 505,202 | 2,349,233 | |||||||||||||
Average Shareholders equity [a] |
2,414,659 | 2,617,718 | 2,297,283 | 1,972,190 | ||||||||||||||
Net (loss) income return on average equity |
(4.9 | )% | 13.3 | % | 22.7 | % | 11.7 | % | [c] | |||||||||
Operating return on average equity |
(6.3 | )% | 12.6 | % | 22.0 | % | 11.9 | % | [c] | |||||||||
Book value and dividends per share: |
||||||||||||||||||
Dilutive book value per common share (treasury stock method) |
$ | 50.56 | $ | 52.74 | $ | 44.61 | $ | 50.56 | ||||||||||
Dividends paid per share |
1.20 | 1.00 | 1.00 | 8.33 | ||||||||||||||
Change in diluted book value per common share |
(4.1 | )% | 18.2 | % | 34.9 | % | 16.1 | % | [c] | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total return to common shareholders [b] |
(1.9 | )% | 20.5 | % | 38.0 | % | 20.4 | % | [c] | |||||||||
|
|
|
|
|
|
|
|
|
[a] | Excludes the $430 million (2010 and earlier$200 million) liquidation value of the preferred shares. |
[b] | Total return to common shareholders is calculated as the change in diluted book value per common share plus dividends paid divided by beginning diluted book value per share. |
[c] | Represents average non-compounded annual returns since December 31, 2001. |
28
ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES FOR EPS CALCULATIONTWO CLASS METHOD
QUARTERS ENDED |
YEARS ENDED | |||||||||||||||||
DEC. 31, | DEC. 3, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
DILUTIVE SHARES OUTSTANDING: |
Average market price per share | $ | 36.21 | $ | 43.49 | $ | 40.93 | $ | 39.04 | |||||||||
AS REPORTED |
Basic weighted average common shares outstanding [a] | 40,641 | 47,385 | 40,215 | 50,882 | |||||||||||||
Add: weighted avg. unvested restricted share units | 10 | 18 | 11 | 18 | ||||||||||||||
Weighted average exercise price per share |
| | | | ||||||||||||||
Proceeds from unrecognized restricted share unit expense |
$ | 100 | $ | 239 | $ | 100 | $ | 239 | ||||||||||
Less: restricted share units bought back via treasury method | (10 | ) | (5 | ) | (11 | ) | (7 | ) | ||||||||||
Add: weighted avg. dilutive warrants outstanding | 1,944 | 2,986 | 2,670 | 2,990 | ||||||||||||||
Weighted average exercise price per share |
$ | 11.67 | $ | 12.87 | $ | 11.67 | $ | 12.87 | ||||||||||
Less: warrants bought back via treasury method | (1,944 | ) | (884 | ) | (2,670 | ) | (986 | ) | ||||||||||
Add: weighted avg. dilutive options outstanding | 369 | 1,294 | 673 | 1,424 | ||||||||||||||
Weighted average exercise price per share |
$ | 15.44 | $ | 16.50 | $ | 15.04 | $ | 16.27 | ||||||||||
Proceeds from unrecognized option expense |
| | | | ||||||||||||||
Less: options bought back via treasury method | (369 | ) | (491 | ) | (673 | ) | (593 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Weighted average dilutive shares outstanding [b] | 40,641 | 50,303 | 40,215 | 53,728 | ||||||||||||||
|
|
|
|
|
|
|
|
Notes: | [a] Excludes unvested restricted shares outstanding which are considered participating securities under the two-class method for calculation of EPS. |
[b] Warrants and options that are anti-dilutive are not included in the calculation of diluted shares outstanding. Warrants and options are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected in the calculations above as additional treasury method repurchases. |
29
ENDURANCE SPECIALTY HOLDINGS LTD.
(LOSSES) EARNINGS PER SHARE INFORMATIONTWO CLASS METHOD
QUARTERS ENDED DEC. 31, | YEARS ENDED DEC. 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net (loss) income |
$ | (27,376 | ) | $ | 111,228 | $ | (93,734 | ) | $ | 364,738 | ||||||
Less preferred dividends |
(8,187 | ) | (3,875 | ) | (24,125 | ) | (15,500 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income (attributable) available to common and participating common shareholders |
$ | (35,563 | ) | $ | 107,353 | $ | (117,859 | ) | $ | 349,238 | ||||||
Less amount allocated to participating common shareholders [a] |
(221 | ) | (2,036 | ) | (961 | ) | (6,595 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net (loss) income (attributable) available allocated to common shareholders |
$ | (35,784 | ) | $ | 105,317 | $ | (118,820 | ) | $ | 342,643 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Denominator: |
||||||||||||||||
Weighted average sharesbasic |
||||||||||||||||
Outstanding |
40,641 | 47,385 | 40,215 | 50,880 | ||||||||||||
Vested restricted share units |
| | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
40,641 | 47,385 | 40,215 | 50,882 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Share Equivalents |
||||||||||||||||
Warrants |
| 2,102 | | 2,004 | ||||||||||||
Options |
| 803 | | 831 | ||||||||||||
Restricted share units |
| 13 | | 11 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average sharesdiluted |
40,641 | 50,303 | 40,215 | 53,728 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic (losses) earnings per common share |
$ | (0.88 | ) | $ | 2.22 | $ | (2.95 | ) | $ | 6.73 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted (losses) earnings per common share [b] |
$ | (0.88 | ) | $ | 2.09 | $ | (2.95 | ) | $ | 6.38 | ||||||
|
|
|
|
|
|
|
|
[a] | Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Companys stock compensation plans that are considered participating securities related to the calculation of (losses) earnings per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders. |
[b] | Represents diluted (losses) earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method. |
30
ENDURANCE SPECIALTY HOLDINGS LTD.
OPERATING (LOSS) INCOME RECONCILIATION
(LOSSES) EARNINGS PER SHARE INFORMATIONTWO CLASS METHOD
Two-Class Method | Two-Class Method | |||||||||||||||
QUARTERS ENDED DEC. 31, | YEARS ENDED DEC. 31, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net (loss) income |
$ | (27,376 | ) | $ | 111,228 | $ | (93,734 | ) | $ | 364,738 | ||||||
Add (less) after-tax items: |
||||||||||||||||
Net foreign exchange gains |
208 | 3,496 | (7,614 | ) | (2,967 | ) | ||||||||||
Net realized and unrealized investment gains |
(4,836 | ) | (7,176 | ) | (30,350 | ) | (20,180 | ) | ||||||||
Net impairment losses recognized in (losses) earnings |
701 | 712 | 3,520 | 3,944 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income before preferred dividends |
$ | (31,303 | ) | $ | 108,260 | $ | (128,178 | ) | $ | 345,535 | ||||||
Preferred dividends |
(8,187 | ) | (3,875 | ) | (24,125 | ) | (15,500 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income (attributable) available to common and participating common shareholders |
$ | (39,490 | ) | $ | 104,385 | $ | (152,303 | ) | $ | 330,035 | ||||||
Less amount allocated to participating common shareholders [a] |
(221 | ) | (1,980 | ) | (961 | ) | (6,235 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income allocated to common shareholders |
$ | (39,711 | ) | $ | 102,405 | $ | (153,264 | ) | $ | 323,800 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding |
||||||||||||||||
Basic |
40,641 | 47,385 | 40,215 | 50,882 | ||||||||||||
Dilutive |
40,641 | 50,303 | 40,215 | 53,728 | ||||||||||||
Basic per common share data |
||||||||||||||||
Net (loss) income allocated to common shareholders |
$ | (0.88 | ) | $ | 2.22 | $ | (2.95 | ) | $ | 6.73 | ||||||
Add (less) after-tax items: |
||||||||||||||||
Net foreign exchange gains |
0.01 | 0.07 | (0.19 | ) | (0.05 | ) | ||||||||||
Net realized and unrealized investment gains |
(0.12 | ) | (0.15 | ) | (0.76 | ) | (0.40 | ) | ||||||||
Net impairment losses recognized in (losses) earnings |
0.01 | 0.02 | 0.09 | 0.08 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income allocated to common shareholders |
$ | (0.98 | ) | $ | 2.16 | $ | (3.81 | ) | $ | 6.36 | ||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted per common share data |
||||||||||||||||
Net (loss) income allocated to common shareholders |
$ | (0.88 | ) | $ | 2.09 | $ | (2.95 | ) | $ | 6.38 | ||||||
Add (less) after-tax items: |
||||||||||||||||
Net foreign exchange gains |
0.01 | 0.07 | (0.19 | ) | (0.05 | ) | ||||||||||
Net realized and unrealized investment gains |
(0.12 | ) | (0.14 | ) | (0.76 | ) | (0.37 | ) | ||||||||
Net impairment losses recognized in (losses) earnings |
0.01 | 0.02 | 0.09 | 0.07 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income allocated to common shareholders [b] |
$ | (0.98 | ) | $ | 2.04 | $ | (3.81 | ) | $ | 6.03 | ||||||
|
|
|
|
|
|
|
|
[a] | Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Companys stock compensation plans that are considered participating securities related to the calculation of (losses) earnings per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders. |
[b] | Represents diluted (losses) earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method. |
31
ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES SENSITIVITY ANALYSIS
DILUTIVE SHARES OUSTANDING | ||||||||||||||||||||||||||||||||||||||||
Market Price per Share | ||||||||||||||||||||||||||||||||||||||||
$33.00 | $ | 34.00 | $ | 35.00 | $ | 36.00 | $ | 37.00 | $ | 38.00 | $ | 39.00 | $ | 40.00 | $ | 41.00 | $ | 42.00 | $ | 43.00 | ||||||||||||||||||||
43,131 | 43,134 | 43,136 | 43,138 | 43,140 | 43,142 | 43,144 | 43,145 | 43,147 | 43,149 | 43,150 |
32
ENDURANCE SPECIALTY HOLDINGS LTD.
BOOK VALUE PER SHARE
DEC. 31, | ||||||||||
2011 | 2010 | |||||||||
DILUTIVE COMMON SHARES OUTSTANDING: |
Price per share at period end | $ | 38.25 | $ | 46.07 | |||||
AS-IF CONVERTED [a] |
Basic common shares outstanding | 42,367 | 46,259 | |||||||
Add: unvested restricted shares and restricted share units | 730 | 980 | ||||||||
Add: dilutive warrants outstanding | | 2,986 | ||||||||
Weighted average exercise price per share |
| $ | 12.87 | |||||||
Add: dilutive options outstanding | 115 | 1,278 | ||||||||
Weighted average exercise price per share |
$ | 23.14 | $ | 16.50 | ||||||
Book Value [b] | $ | 2,181,165 | $ | 2,648,153 | ||||||
Add: proceeds from converted warrants | | 38,430 | ||||||||
Add: proceeds from converted options | 2,661 | 21,087 | ||||||||
|
|
|
|
|||||||
Pro forma book value |
$ | 2,183,826 | $ | 2,707,670 | ||||||
Dilutive shares outstanding | 43,212 | 51,503 | ||||||||
Basic book value per common share | $ | 51.48 | $ | 57.25 | ||||||
Diluted book value per common share | $ | 50.54 | $ | 52.57 | ||||||
DILUTIVE COMMON SHARES OUTSTANDING: |
Price per share at period end | $ | 38.25 | $ | 46.07 | |||||
TREASURY STOCK METHOD |
Basic common shares outstanding | 42,367 | 46,259 | |||||||
Add: unvested restricted shares and restricted share units | 730 | 980 | ||||||||
Add: dilutive warrants outstanding | | 2,986 | ||||||||
Weighted average exercise price per share |
| $ | 12.87 | |||||||
Less: warrants bought back via treasury method | | (834 | ) | |||||||
Add: dilutive options outstanding | 115 | 1,278 | ||||||||
Weighted average exercise price per share |
$ | 23.14 | $ | 16.50 | ||||||
Less: options bought back via treasury method | (70 | ) | (458 | ) | ||||||
|
|
|
|
|||||||
Dilutive shares outstanding | 43,142 | 50,211 | ||||||||
Basic book value per common share | $ | 51.48 | $ | 57.25 | ||||||
Diluted book value per common share | $ | 50.56 | $ | 52.74 |
[a] | The as-if converted method assumes that the proceeds received upon exercise of options and warrants will be retained by the Company and the resulting common shares from exercise will remain outstanding |
[b] | Excludes the $430 million (2010$200 million) liquidation value of the preferred shares. |
33
ENDURANCE SPECIALTY HOLDINGS LTD.
REGULATION G
In presenting the Companys results, management has included and discussed certain non-GAAP measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Companys results of operations in a manner that allows for a more complete understanding of the underlying trends in the Companys business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.
Operating (loss) income is an internal performance measure used by the Company in the management of its operations. Operating (loss) income 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. The Company 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 (loss) income determined in accordance with GAAP, the Company believes that showing operating (loss) income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Companys results of operations in a manner similar to how management analyzes the Companys underlying business performance. Operating (loss) income should not be viewed as a substitute for GAAP net (loss) income. Please see page 31 for a reconciliation of operating (loss) income to net (loss) income.
Return on Average Equity (ROAE) is comprised using the average common equity calculated as the arithmetic average of the beginning and ending common equity balances for stated periods. Return on Beginning Equity (ROBE) is comprised using the beginning common equity for stated periods. The Company presents various measures of Return on Equity that are commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
Investment yield is provided by the Companys investment managers and is calculated by dividing net investment income by average invested assets at amortized cost. The Company utilizes and presents the investment yield in order to better disclose the performance of the Companys investments and to show the components of the Companys ROE.
The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share. Please see page 33 for a reconciliation of diluted book value per common share to basic book value per common share.
34