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| 8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD | d820582d8k.htm |
 Endurance
Specialty Holdings Investor Presentation
September 30, 2014
Exhibit 99.1 |
 Forward looking
statements & regulation G disclaimer 2
Safe Harbor for Forward Looking Statements
Regulation G Disclaimer
Some of the statements in this presentation may include forward-looking statements which
reflect our current views with respect to future events and financial performance. Such
statements 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 presentation for purposes of the U.S. federal securities laws or
otherwise. We intend these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in the Private Securities Litigation
Reform Act of 1995.
All forward-looking statements address matters that involve risks and uncertainties.
Accordingly, there are or may be important factors that could cause actual results to
differ materially from those indicated in the forward-looking statements. These
factors include, but are not limited to, the effects of competitors’ pricing policies, greater
frequency or severity of claims and loss activity, changes in market conditions in the
agriculture insurance industry, termination of or changes in the terms of the U.S.
multiple peril crop insurance program, a decreased demand for property and casualty insurance
or reinsurance, changes in the availability, cost or quality of reinsurance or
retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our
inability to effectively integrate acquired operations, uncertainties in our reserving
process, changes to our tax status, changes in insurance regulations, reduced
acceptance of our existing or new products and services, a loss of business from and credit
risk related to our broker counterparties, assessments for high risk or otherwise
uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel,
political conditions, changes in insurance regulation, changes in accounting policies,
our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments
in the world’s financial and capital markets and our access to such markets, government
intervention in the insurance and reinsurance industry, illiquidity in the credit
markets, changes in general economic conditions and other factors described in our most
recently filed Annual Report on Form 10-K and our Quarterly Report on Form
10-Q for the periods ended June 30, 2014.
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.
In this presentation, 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 Company's results of operations in a manner
that allows for a more complete understanding of the underlying trends in the Company's
business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. For a complete description of
non-GAAP measures and reconciliations, please review the Investor Financial Supplement on
our web site at The combined ratio is the sum of the loss, acquisition expense and general and administrative
expense ratios. Endurance presents the combined ratio as a measure that is
commonly recognized as a standard of performance by investors, analysts, rating agencies and
other users of its financial information. The combined ratio, excluding prior year
net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of
underwriting activities in a manner similar to how management analyzes Endurance’s
underlying business performance. The combined ratio, excluding prior year net loss
reserve development, should not be viewed as a substitute for the combined ratio. Net premiums
written is a non-GAAP internal performance measure used by Endurance in the management of its operations. Net premiums written represents net
premiums written and deposit premiums, which are premiums on contracts that are deemed as
either transferring only significant timing risk or transferring only significant
underwriting risk and thus are required to be accounted for under GAAP as deposits. Endurance believes these amounts are significant to its business and
underwriting process and excluding them distorts the analysis of its premium trends. In
addition to presenting gross premiums written determined in accordance with GAAP,
Endurance believes that net premiums written enables investors, analysts, rating agencies and other users of its financial information to more easily analyze
Endurance’s results of underwriting activities in a manner similar to how management
analyzes Endurance’s underlying business performance. Net premiums written
should not be viewed as a substitute for gross premiums written determined in accordance with
GAAP.
Return on Equity (ROE) is comprised using the average common equity calculated as the
arithmetic average of the beginning and ending common equity balances 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.
www.endurance.bm. |
 •
“A”
ratings from AM Best and S&P
•
$3.6 billion of total capital
•
Conservative, short-duration, AA-
rated investment portfolio
•
Prudent reserves
•
Diversified and efficient capital
structure
•
Since inception, returned nearly
$2.1 billion to investors through
dividends and share repurchases
Endurance Has Strong Foundation to Build on
Strong balance sheet, diversified portfolio and robust infrastructure
3
Strategic Initiatives
•
Substantially expanded global
underwriting and leadership talent
•
Optimized balance of insurance and
reinsurance portfolios to lower
volatility and improve profitability
•
Increased strategic purchases of
reinsurance and retrocession to
support growth and manage cycle
•
Streamlined support operations to
generate significant savings to fund
underwriting additions
•
Financial results reflect
transformation initiatives
Diversified Portfolio of Businesses
•
Portfolio of $2.8 billion in annual
gross premiums written on a
trailing 12 month basis
•
Diversified book of business
containing insurance and
reinsurance exposures as well as
short tail and long tail lines of
business
•
Proven leader in the U.S.
agriculture insurance industry
•
Focus on specialty lines of business,
with market recognized, industry-
leading talent
Strong Balance Sheet and Capital
Strong and seasoned franchise
•
Inception to date operating ROE of 11.0%
•
10 year book value per share plus dividends CAGR of 10.3%
•
Continuous improvement in performance and market positioning |
 Larger book of
business with
lower
volatility and
improved
return
characteristics
We Have Transformed Our Specialty Insurance and Reinsurance Businesses
Rebalanced our insurance and reinsurance portfolios while expanding our global
underwriting talent to enhance our positioning and relevance in the market
4
Restructured
business
•
Withdrawal from
unprofitable lines
and accounts
•
Management of
limits
•
Strategic purchases
of reinsurance and
retrocessional
coverages
Improved
underwriting talent
•
Attracted and
retained teams of high
quality underwriters
•
Expanded
underwriting and
product capabilities in
insurance and
reinsurance specialty
lines
•
Newly added teams
are generating strong
premium flows with
improved margins
Expanding our
operations in
Europe and Asia
•
Launched London
based international
insurance operations
and began writing in
January 2014
•
A Zurich based
marine reinsurance
team started in
August 2014
•
Expanded
catastrophe
reinsurance presence
in Singapore
Restructured
operations
•
Streamlined
leadership and
operations to
create
efficiencies
The core of our underwriting leadership and talent is now firmly embedded throughout our
organization. Our goal is to produce a more consistent level of profitability while
reducing volatility in order to deliver excellent sustainable results for our
shareholders.
|
 •
Inland marine
•
Excess casualty (E&S
and retail)
•
Ocean marine
•
Numerous professional
line underwriters
•
Misc.
commercial
classes
•
Financial
institutions
•
Lawyers
•
Commercial
management
liability
•
Surety
•
Healthcare
•
Property
•
Energy
5
•
Jack Kuhn
CEO , Global Insurance
•
Graham Evans
EVP & Head of
International Insurance
•
Doug Worman
EVP & Head of U.S.
Insurance
•
Richard Allen
EVP & Head of
Professional Lines
•
Richard Housley
EVP & General
Manager of London
Insurance
•
Cliff Easton
EVP & Global Head of
Energy
Specialty Insurance Strategic Direction
Expanded underwriting talent, refocused underwriting, rebalanced portfolio and improved
positioning and relevance in the market
Initial products include:
•
Energy
•
Property
•
Professional Lines
•
Misc. commercial
classes
•
Fin. institutions
Significantly enhanced
the leadership team
Opened an insurance office in
London in early 2014
Meaningfully expanded
our underwriting
capabilities in last 18
months
Increased
Market
Presence,
Diversity, and
Scale |
 Insurance GPW
(ex. Agriculture) Significant and tangible improvements to
increase market presence and diversity
–
Attracted and retained teams of high
quality underwriters
–
Expanded underwriting and product
capabilities
–
Active withdrawal from less profitable lines
Endurance Has an Attractive and Growing Specialty Insurance Franchise
Two pillars of a unique insurance platform with demonstrated improvement across specialty
lines to complement market-leading Agriculture franchise
6
Established Market Leader in Agriculture
ARMtech is a top 5 player in the attractive
multi peril crop insurance (MPCI) market
–
Favorable market dynamics with only 19
licensed companies
–
Federal government sponsored
reinsurance and loss sharing mitigates
downside risk
–
Newly passed Federal Farm Bill provides
stability going forward
–
Not correlated with broader P&C market
Attractive market characteristics
–
Inception to date combined ratio of 92.6%
–
High risk adjusted returns
Enhanced Specialty Insurance Franchise
+58%
Insurance Segment Has Significantly Expanded Over the Last 18 Months to Become More
Market Relevant With Increased Specialty Expertise
$MM
379
598
200
300
400
500
600
3Q13 YTD
3Q14 YTD
+58% |
 •
Improve profitability and consistency of results through
enhanced market presence, improved underwriting and
risk selection
•
Focus on profitable growth and diversification through
existing and new specialty reinsurance units
•
Manage volatility through improved portfolio management
and opportunistic retrocessional purchases
•
Eliminate substandard businesses with insufficient margins
Reinsurance Strategic Direction
Enhanced profitability by recruiting top flight underwriting talent, developing strategic
partnerships with key clients and brokers, and improving underwriting and risk
selection Reinsurance Segment is Focusing on Growing Profitable Specialty Lines of
Business With Less Volatile Exposures
7
Strategic Priorities for Global Reinsurance
•
Europe P&C Reinsurance
•
Reinsurance and team of underwriters
•
Team based in Bermuda
•
based in Zurich
Recent Key Hires
•
Reinsurance business has a demonstrated track record of profitability
–
$1.1 billion of gross written premiums and combined ratio of 76.6% in 2014 YTD
–
Generated over $1 billion of underwriting profits with a combined ratio of 91.0% since
inception Demonstrated Track Record of Profitability
August 2013 – Hired Peter Mills, Head of Global Specialty &
October 2013 – Hired Chris Donelan, Head of U.S.
July 2014 – Hired International Agriculture Reinsurance
August 2014 – Hired Marine and Energy Reinsurance Team |
 Portfolio
Diversified by Product, Distribution Source and Geography The transformation of Endurance
has expanded product and geography diversification 8
Trailing Twelve Months Net Premiums Written as of September 30, 2014: $2.0 Billion
Reinsurance
Insurance
Casualty
Professional Liability
Property Per Risk
Small Business
Surety
Clash
Americas Property Catastrophe
Asia Property Catastrophe
Europe Property Catastrophe
Workers Compensation Catastrophe
ARMtech
Professional Lines
Property
Casualty
Miscellaneous E&O
Healthcare
Ocean/Inland Marine
Healthcare
Excess Casualty
Professional Lines
Europe P&C
4%
Bermuda
4%
U.S. Specialty
13%
Global
Catastrophe
13%
North America
29%
Casualty
Property
Agriculture
23%
Global Specialty
9%
Aviation & Space
Marine & Energy
Agriculture (International)
Trade Credit, Surety and Political Risk
Structured Reinsurance
Weather
Personal Accident
Asia P&C
3%
Casualty
Property
International
2%
Property
Professional Lines
Energy |
 Endurance’s
Financial Results Diluted book value per common share has grown strongly
9
Growth in Diluted Book Value Per Common Share ($)
From
December
31,
2001
–
September
30,
2014
•
2005 –
Hurricanes Katrina, Rita
and Wilma
•
2008 –
Credit crisis and related
impact of marking assets to
market
•
2011 –
High frequency of
global catastrophes
•
2012 –
Superstorm Sandy and
Midwest drought
Significant Impacts to Book Value
19.37
21.73
24.03
27.91
23.17
28.87
35.05
33.06
44.61
52.74
50.56
52.88
55.18
59.98
0.32
1.13
2.13
3.13
4.13
5.13
6.13
7.13
8.33
9.57
10.85
11.87
$0
$10
$20
$30
$40
$50
$60
$70
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
3Q2014
Book Value Per Share
Cumulative Dividends |
 Growing and
Diversified Capital Base Organically generated capital will support current global
growth initiatives
Endurance has proven its ability to generate capital which has allowed for the return to its
shareholders of nearly $2.1
billion
through
share
repurchases
and
dividends
while
also
supporting
organic
growth.
More
recently,
our
capital levels have grown while we have also shrunk our net catastrophe exposures . The
additional available capital can be used to fund global growth opportunities.
10
Nearly $2.1 Billion of Capital Cumulatively Returned to
Shareholders
Returned 69% of inception to date
net income to common
shareholders
Endurance has a Diversified and Growing Capital Base
200
200
200
200
200
200
430
430
430
430
103
391
447
447
449
447
448
528
528
527
527
528
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
3Q
2014
Common Equity
Preferred Equity
Debt
20
112
164
174
486
637
755
133
199
263
323
378
428
477
531
586
632
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
3Q
2014
Cumulative Share Repurchases
Cumulative Dividends |
 Fixed
maturity portfolio duration is 2.8 years in order to balance investment yield and
interest rate risk
Investment
quality
(AA-
average)
has
remained
high
as the portfolio is conservatively managed in a
challenging economy
36.9% of investments are cash/short term
or US backed
Minimal exposure to sovereign debt or
bank debt of European peripheral countries
Increased allocations to equities and alternatives to
diversify portfolio and reduce interest rate risk
Other investments of $658.7 million consist of
alternative funds (75.9%) and specialty funds
(24.1%)
Alternative funds include hedge funds and
private equity funds
Specialty funds include high yield loan and
convertible debt funds
Conservatively Positioned Investment Portfolio
Endurance maintains a high quality, short duration investment portfolio
11
$6.5 Billion Investment Portfolio at September 30, 2014
Cash and
Short Term
10.3%
U.S. Government /
and U.S. Government
Backed –
26.6%
Municipals and Foreign
Government
3.7%
Other
Investments
10.2%
Asset Backed and
Non Agency Mortgage
Backed –
25.2%
Corporate
Securities
19.9%
Equities
4.1%
Investment Portfolio Highlights
•
•
–
–
•
•
–
– |
 •
Endurance is undergoing a fundamental transformation
–
Since
John
Charman
joined
Endurance
in
late
May
2013
as
Chairman
and
CEO
Endurance
has
meaningfully expanded its global specialty insurance and reinsurance capabilities
–
Endurance has rebalanced its insurance and reinsurance portfolios to lower volatility and
improve profitability
•
Benefits
are
emerging
from
the
4
th
quarter
of
2013
through
the
3rd
quarter
of
2014
•
Endurance maintains excellent balance sheet strength and liquidity
–
High quality investment portfolio; fixed maturity investments have an average credit quality
of AA- –
Prudent reserving philosophy and strong reserve position; strong, consistent history of
favorable development
–
Capital levels meaningfully exceed rating agency minimums, providing support for growth
•
While market conditions are increasingly competitive, the outlook for Endurance remains
attractive –
Industry leading specialty underwriting talent driving growth and improved underwriting and
risk selection
–
Active management of exposures and reinsurance purchases has reduced expected portfolio
volatility –
Expanded footprint of our specialty insurance and reinsurance franchise is improving market
presence and relevance
Conclusion
Endurance is a compelling investment opportunity
12 |
 Appendix
|
 Overview of
ARMtech |
 •
Multi Peril Crop Insurance (MPCI) is an insurance product regulated by the USDA that provides
farmers with yield or revenue protection
–
Offered by 19 licensed companies
–
Pricing
is
set
by
the
government
and
agent
compensation
limits
are
also
imposed
-
no
pricing
cycle exists
–
Reduced downside risks due to Federally sponsored reinsurance and loss sharing
–
Agriculture insurance provides strong return potential, diversification in Endurance’s
portfolio of (re)insurance risks and is an efficient user of capital
•
ARMtech is a leading specialty crop insurance business
–
Approximate 8% market share in MPCI (with estimated 183,000 total agriculture policies in
force) and is 5th largest of 19 MPCI industry participants
–
MPCI 2014 crop year* estimated gross written premiums of $807 million**
–
Portfolio is well diversified by geography and by crop
•
ARMtech was founded by software developers and has maintained a strong focus on providing
industry leading service through leveraging technology
•
Endurance
purchased
ARMtech
in
December
2007
at
a
purchase
price
of
approximately
$125
million
–
ARMtech has grown MPCI policy count by 50.4% since 2007 and generated approximately $74.3
million of underwriting profits since acquisition
Overview of ARMtech
ARMtech has been a strong contributor to Endurance since its acquisition
15
* 2014 crop year is defined as July 1, 2013 through June 30, 2014
** Reflects cessions to the Federal Government as part of the MPCI Program and not third
party reinsurance purchases |
 •
ARMtech has built a market leading specialty crop
insurance business through its focus on offering
excellent service supported by industry leading
technology.
•
MPCI policy count has grown 50.4% over the past
seven years in a line of business not subject to the
property/casualty pricing cycle.
•
ARMtech is a leader in using technology to deliver
high quality service and to satisfy the intense
compliance and documentation standards imposed
on the industry by the U.S. Federal Government.
•
2014 industry premiums impacted by decline in
commodity prices
ARMtech is a Leader in Crop Insurance
ARMtech’s focus on technology and service has allowed it to steadily grow its
business 16
Written Premiums and Policy Counts by Crop Year
Using technology and service to expand
premiums
ARMtech has demonstrated its ability to grow market share and premiums over time through its
leading edge technology and superior delivery of service and compliance.
* Estimated 2014 crop year premiums and policy count
** Reflects cessions to the Federal Government as part of the MPCI Program and not third
party reinsurance purchases 103
108
134
244
378
363
372
526
488
534
469
106
98
134
140
187
220
157
276
332
380
337
0
20
40
60
80
100
120
140
160
180
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014*
Crop Hail and LRP Premium
Retained MPCI Premium**
Ceded MPCI Premium
Policy Count [000's] |
 •
2014 estimated crop year MPCI net written
premiums of $469.0 million*** are 12.1% lower
than crop year 2013
–
Commodity prices for spring crops declined
12% on average compared to a year ago
–
Estimated policy count growth of
approximately 4%
•
The portfolio of 2014 crop risk is balanced by crop
and geography
•
Purchased excess of loss reinsurance to reimburse
for losses from 85% to 96% on MPCI portfolio
•
The decline in estimated 2014 crop year MPCI net
written premiums is principally due to declines in
crop commodity prices.
ARMtech is Increasing Market Share and Geographic Diversification
2012 through 2014 were very strong marketing years for ARMtech
ARMtech continues to focus on diversifying its business geographically while managing its
exposure to Texas through active use of available reinsurance protections.
17
Estimated 2014 Net Written Crop Year
Premiums
* Group One States –
IL, IN, IA, MN, NE
Group Two States –
States other than Group One and Group Three states
Group Three States –
CT, DE, MA, MD, NV, NH, NJ, NY, PA, UT, WY, WV
Reflects cessions to the Federal Government
as part of the MPCI Program and not
third party reinsurance purchases
MPCI Net Written Premiums
by Crop Year and State Grouping*
62.5
100.5
104.6
77.2
129.9
149.9
163.4
136.4
126.2
202.3
189.9
200.6
257.1
228.1
265.5
217.4
52.0
68.8
58.8
82.2
131.8
105.1
99.4
108.0
$0
$100
$200
$300
$400
$500
$600
2007
2008
2009
2010
2011
2012
2013
2014**
Group One States
Group Two States (Excl. Texas)
Texas
Group Three States
**
***
Estimated 2014 crop year premiums |
 •
While individual states can produce large loss
ratios, the U.S. Federal reinsurance program has
historically reduced loss ratio volatility.
•
ARMtech’s business has historically produced stable
profits over time after reflecting the reinsurance
terms set out in the current standard crop
reinsurance agreement
–
Historic average loss ratio post U.S. Federal
cessions has been 82.8% (adjusted for the
2011 Federal reinsurance terms)
–
The best year was 2007 with a 69.8% net loss
ratio and the worst was 2012 with a 104.0%
net MPCI loss ratio
–
ARMtech’s current expense run rate after the
A&O subsidy is approximately 7% -
8%
Agriculture Insurance is Not Correlated with the P&C Cycle
FCIC reinsurance lowers volatility
18
Stable Results in Volatile Times
Historic MPCI Crop Year Loss Ratio Results
(Pre and Post Federal Reinsurance)
While individual states can produce highly varied gross loss ratios on a year to year basis,
the U.S. Federal reinsurance program has historically mitigated that volatility and
leaves ARMtech with a business which is not correlated to the traditional P&C
pricing cycle and has high risk adjusted return potential. 0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
220%
240%
2005
2006
2007
2008
2009
2010
2011
2012
2013
Gross L/R Group 1 States
Gross L/R Group 2 States
Gross L/R Group 3 States
Gross L/R Texas
Avg. Net L/R
Net L/R All States |
 Overview of
ARMtech ARMtech’s
recognition
of
premiums
and
earnings
are
influenced
by
growing
seasons
19
Seasonality of MPCI Business
First Quarter
Third Quarter
Second Quarter
Recognition of
annual written
premiums
60% -
65%
Spring crops
20% -
25%
Spring crop acreage
report adjustments
Winter crops
10% -
15%
Spring crop
adjustments due to
actual cessions
5% -
10%
Winter crop
adjustments
Recognition of
annual earned
premiums
10%-15%
Largely driven by
winter crops
30% -
35%
Largely driven by
spring crops
25% -
30%
Driven by spring
crops and winter
crops
25% -
30%
Largely driven by
spring crops
Harvest
Harvest of winter
crops
Harvest of spring
crops
Fourth Quarter
Commodity
price setting
Setting of base prices
for spring crops
(forward commodity
price for fourth
quarter)
Setting of base prices
for winter crops
(forward commodity
price for second
quarter)
Harvest price
determined for
winter crops
Harvest price
determined for
spring crops |
 2.3%
0.5%
0.6%
1.5%
0.6%
0.7%
5.1%
3.4%
5.3%
1.3%
3.3%
21.9%
1.7%
1.6%
0.8%
3.3%
9.5%
6.8%
0.6%
1.9%
0.8%
3.7%
2.9%
1.3%
2.4%
3.2%
1.5%
3.9%
3.6%
2.0%
0.6%
Geographic Diversification of Crop Insurance Business
ARMtech maintains a geographically diversified portfolio of risk
20 |
 Diversification
of Crops Within ARMtech’s Portfolio Underwritten risks diversified by geography and
commodity type 21
ARMtech’s 2014 Estimated Crop Year MPCI Net Written Premiums
Iowa
–
6.3%
Nebraska
–
3.5%
Minnesota
–
2.9%
Indiana
–
2.2%
Texas
–
1.9%
South
Dakota
–
1.7%
Missouri
–
1.6%
North
Dakota
–
1.3%
Illinois
–
1.2%
Colorado
–
1.0%
Kentucky
–
0.9%
Ohio
–
0.6%
Tennessee
–
0.6%
Mississippi
–
0.5%
South
Carolina
–
0.4%
Wisconsin
–
0.4%
Kansas
–
0.4%
Arkansas
–
0.2%
All
other
states
–
1.4%
Corn
(29.0%)
Texas
–
12.0%
Georgia
–
1.9%
Alabama
–
0.7%
Mississippi
–
0.6%
South
Carolina
–
0.5%
All
other
states
–
1.0%
Cotton
(16.7%)
Iowa
–
3.2%
Minnesota
–
2.6%
Mississippi
–
1.9%
Nebraska
–
1.5%
Indiana
–1.4%
Missouri
–
1.4%
Kentucky
–
1.4%
Soybeans
(20.8%)
Other Crops
(20.2%)
Wheat
(13.3%)
Texas –
3.4%
Colorado –
1.6%
North Dakota –
1.4%
Oklahoma –
1.2%
Idaho –
0.9%
Montana
–
0.7%
All
other
states
–
4.1%
Pasture,
Rangeland,
Forage
–
2.6%
Citrus,
Nursery
&
Orange
Trees
-
2.5%
Grain
Sorghum
–
2.2%
Peanuts
–
1.5%
Apples
–
1.4%
Potatoes
–
1.1%
Tobacco
–
1.0%
Dry
Beans
–
0.8%
Barley
–
0.6%
Rice
–
0.6%
All
other
crops
–
5.9%
North
Dakota
–
1.2%
Tennessee
–
1.1%
Arkansas
–
0.8%
South
Dakota
–
0.7%
Ohio
–
0.6%
Illinois
–
0.6%
All
other
states
–
2.4% |
 Agriculture
Insurance Contains Four Layers of Risk Mitigation Farmers retention, ceding premiums to
the U.S. Federal Government, limitations on losses and gains and purchase of stop loss
protection 22
41.8% of MPCI Premiums Ceded to U.S. Federal Government
Assigned Risk Fund
“Higher Risk Policies”
Commercial Fund
“Lower Risk Policies”
2014 Crop Year
Gross Liability
33.4% of first dollar risk retained by
farmers
14.1% of 2014 Crop Year NWP
85.9% of 2014 Crop Year NWP
Loss Sharing
(% of loss retained by
Loss Ratio
Loss Ratio
Group 1 States
Group 2 & 3 States
ARMtech within each
100 -
160
7.5%
100 -
160
65.0%
42.5%
applicable band when
160 -
220
6.0%
160 -
220
45.0%
20.0%
the loss ratio is above 100%.)
220 -
500
3.0%
220 -
500
10.0%
5.0%
Gain Sharing
(% of gain retained by
Loss Ratio
Loss Ratio
Group 1 States
Group 2 & 3 States
ARMtech within each
65 -
100
22.5%
65 -
100
75.0%
97.5%
applicable band when
50 -
65
13.5%
50 -
65
40.0%
40.0%
the loss ratio is below 100%.)
0 -
50
3.0%
0 -
50
5.0%
5.0%
66.6% of risk retained by ARMtech |
  ARMtech Has Grown
Market Share Over Time Superior service and technology has driven growth in stable
market 23
Crop Year Market Share
% Change in
Market Share
MPCI Certified Companies (Owners)
2013
2012
2011
2010
2009
2008
2007
2007 - 2013
Rain and Hail (ACE)
(1)
20.8%
21.3%
21.8%
22.6%
24.3%
24.1%
25.0%
-4.2%
Rural Community Insurance Company (Wells Fargo)
20.6%
22.1%
21.8%
22.9%
24.7%
25.2%
25.1%
-4.5%
NAU Country Insurance Company (QBE)
(1)
13.1%
13.3%
14.8%
14.4%
13.7%
13.8%
13.3%
-0.2%
Great American Insurance Co.
8.5%
8.5%
8.7%
8.7%
9.1%
10.1%
10.6%
-2.1%
American Agri-Business Ins. Co. (Endurance)
7.7%
7.4%
6.7%
7.0%
6.5%
5.7%
5.9%
1.8%
Producers Ag. Ins. Co. (CUNA Mutual)
4.9%
5.5%
6.4%
6.3%
5.3%
5.2%
4.8%
0.2%
Guide One Mutual (CGB Diversified Services)
4.6%
4.0%
2.7%
2.0%
1.2%
1.2%
1.1%
3.4%
Farmers Mutual Hail Ins. of Iowa
4.3%
4.4%
4.5%
4.2%
3.8%
4.0%
4.0%
0.3%
John Deere Risk Protection, Inc.
3.8%
3.3%
3.3%
3.8%
4.0%
3.3%
3.0%
0.7%
Agrinational Insurance Company (ADM)
3.1%
2.5%
2.1%
1.5%
0.9%
1.0%
1.1%
2.1%
Heartland (Everest Re)
2.4%
2.3%
2.4%
3.0%
3.4%
3.3%
3.2%
-0.9%
Hudson Insurance Company
(1)
2.0%
1.6%
1.2%
1.2%
0.8%
0.6%
0.4%
1.6%
AgriLogic (Occidental Firs & Casualty Co)
1.6%
1.8%
1.4%
0.1%
0.0%
0.0%
0.0%
1.6%
American Agricultural Ins. Co (Amer. Farm Bureau)
1.2%
1.3%
1.3%
1.3%
1.4%
1.4%
1.2%
0.0%
Country Mutual Insurance Company
0.9%
0.9%
0.9%
1.0%
1.1%
1.2%
1.4%
-0.5%
Global Ag (XL Reinsurance)
0.4%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.4%
International Ag (Starr Indemnity)
0.3%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.3%
Source - National Crop Insurance Services (NCIS)
(1) 2007 Crop Year Market Share was increased to reflect the acquisition of a company between
2007 and 2013. |
 Other
Miscellaneous Information |
 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. 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 management’s assumptions regarding event characteristics,
construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in
Endurance’s 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 for the year ended December 31, 2013 and our Quarterly Report
on Form 10-Q for the periods ended June 30, 2014.
Probable Maximum Loss by Zone and Peril
Largest
1
in
100
year
PML
as
of
July
1,
2014
is
equal
to
11.1%
of
Shareholders’
Equity
as
of
September 30, 2014
25
Estimated Occurrence Net Loss as of July 1, 2014
July 1, 2013
July 1, 2012
Zone
Peril
10
Year
Return
Period
25
Year
Return
Period
50Year
Return
Period
100
Year
Return
Period
250Year
Return
Period
100Year
Return
Period
100Year
Return
Period
United States
Hurricane
$123
$176
$232
$284
$362
$350
$468
Europe
Windstorm
98
202
276
345
422
331
344
California
Earthquake
36
147
205
250
329
284
412
Japan
Windstorm
33
100
140
158
175
230
247
Northwest U.S.
Earthquake
—
5
36
91
185
89
184
Japan
Earthquake
10
83
127
163
205
137
138
United States
Tornado/Hail
35
50
63
78
99
89
96
Australia
Earthquake
1
11
44
121
218
87
83
New Zealand
Earthquake
1
5
14
35
87
23
22
Australia
Windstorm
7
24
51
88
155
58
37
New Madrid
Earthquake
—
—
—
6
72
7
11
The net loss estimates by zone above represent estimated losses related
to our property, catastrophe and other specialty 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 and reinstatement premiums, if applicable. Return period refers to the frequency with
which the related size of a catastrophic event is expected to
occur. The net loss estimates above rely significantly on computer models
created to |
 •
Book value per common share, adjusted for dividends, expanded 10.5% during the first nine
months of 2014 –
Net income attributable to common shareholders of $239.3 million
•
Improved accident year loss ratios in both segments
•
General and administrative expenses were higher due to the hiring of numerous global
underwriting teams,
expenses
related
to
the
proposed
acquisition
of
Aspen
and
higher
performance
based
incentive
compensation
•
Lighter catastrophe activity than the first nine months of 2013
•
Gross written premiums of $2.47 billion were 7.8% higher than first nine months of 2013 while
we continued to rebalance our portfolios
–
Insurance gross written premiums of $1.39 billion were 9.4% higher than the first nine months
of 2013 •
Strong growth from newly hired teams in our U.S. specialty operations and London were offset
by lower agriculture premiums. Professional lines grew 88.3% while the casualty
and other specialty lines of business expanded 52.7% compared to the first nine months
of 2013. Year to date agriculture gross premiums written declined 11.1% as the
impact from reduced commodity prices were partially offset by a 4% increase in policy
counts. –
Reinsurance gross written premiums of $1.08 billion an increase of 5.8% compared to first nine
months of 2013 •
Rebalancing of the reinsurance portfolio continued as catastrophe and casualty products were
selectively non-renewed, which was partially offset by growth in specialty and
professional lines of business. •
Net written premiums declined 3.9% compared to the first nine months of 2013 as significant
reinsurance/retrocessional protection has been purchased to reduce potential
volatility Year To Date September 30, 2014 Highlights
Results were driven by strong underwriting margins supported by light catastrophe losses
and favorable development
26 |
 Financial
Results for the First Nine Months of 2014 and 2013 27
Financial highlights
Key operating ratios
$MM (except per share data and %)
Sep. 30,
2014
Sep. 30,
2013
$
Change
%
Change
Net premiums written
1,700.2
1,768.9
(68.7)
-3.9%
Net premiums earned
1,392.7
1,517.0
(124.3)
-8.2%
Net investment income
105.6
119.9
(14.3)
-11.9%
Net underwriting income
177.7
163.0
14.7
9.0%
Net income to common shareholders
239.3
220.2
19.1
8.7%
Operating income to common
shareholders
225.5
221.0
4.5
2.0%
Fully diluted net income EPS
5.36
5.04
0.32
6.3%
Fully diluted operating income EPS
5.05
5.06
(0.01)
-0.2%
Sep. 30,
2014
Sep. 30,
2013
Operating ROE (annualized)
11.7%
12.6%
Net loss ratio
52.2%
60.4%
Acquisition expense ratio
17.5%
14.7%
General and administrative expense ratio
17.3%
14.2%
Combined ratio
87.0%
89.3%
Diluted book value per share
$59.98
$54.33
Investment leverage
2.49
2.71 |
 Gross Written
Premiums for the First Nine Months of 2014 and 2013 28
Insurance Segment
Reinsurance Segment
In $MM
Sep. 30,
2014
Sep. 30,
2013
$
Change
%
Change
Professional lines
131.3
50.5
80.8
160.0%
Casualty
139.3
211.5
-72.2
-34.1%
Catastrophe
332.2
342.0
-9.8
-2.9%
Property
283.1
288.4
-5.3
-1.8%
Specialty
193.1
127.3
65.8
51.7%
Total reinsurance
1,079.0
1,019.7
59.3
5.8%
In $MM
Sep. 30,
2014
Sep. 30,
2013
$
Change
%
Change
Casualty and other specialty
366.3
239.9
126.4
52.7%
Agriculture
796.4
896.2
-99.8
-11.1%
Professional lines
176.1
93.5
82.6
88.3%
Property
55.3
45.1
10.2
22.6%
Total insurance
1,394.1
1,274.7
119.4
9.4% |
 Financial
Overview: Inception to Date Financial Performance 29
In $MM
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sep 30,
2014
Inception
to date
Net premiums
written
765
1,598
1,697
1,619
1,586
1,575
1,784
1,606
1,764
1,980
2,029
2,049
1,700
21,752
Net premiums
earned
369
1,174
1,633
1,724
1,639
1,595
1,766
1,633
1,741
1,931
2,014
2,016
1,393
20,628
Net underwriting
income (loss)
51
179
232
-410
304
322
111
265
195
-252
-48
195
178
1,322
Net investment
income
43
71
122
180
257
281
130
284
200
147
173
166
106
2,160
Net income (loss)
before preferred
dividend
102
263
356
-220
498
521
100
555
365
-94
163
312
264
3,185
Net income (loss)
available to
common
shareholders
102
263
356
-223
483
506
85
539
349
-118
130
279
239
2,990
Diluted EPS
$1.73
$4.00
$5.28
($3.60)
$6.73
$7.17
$1.33
$9.00
$6.38
($2.95)
$3.00
$6.37
$5.36
$49.80
Financial highlights from 2002 through September 30, 2014
Key Operating
Ratios
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Sep. 30,
2014
Inception
to date
Combined ratio
86.2%
84.7%
85.8%
123.5%
81.5%
79.9%
93.5%
84.0%
88.7%
112.9%
102.3%
90.2%
87.0%
93.5%
Operating ROE
7.8%
17.3%
19.9%
(11.9%)
25.7%
23.8%
8.5%
22.0%
12.6%
(6.3%)
2.4%
11.9%
11.7%
11.0%
Book value per
share
$21.73
$24.03
$27.91
$23.17
$28.87
$35.05
$33.06
$44.61
$52.74
$50.56
$52.88
$55.18
$59.98 |