Exhibit 99.1
Endurance Reports Third Quarter 2012 Financial Results
PEMBROKE, Bermuda – October 31, 2012 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $31.9 million and $0.74 per diluted common share for the third quarter of 2012 versus a net loss of $28.2 million and $0.71 per diluted common share for the third quarter of 2011.
For the nine months ended September 30, 2012, Endurance reported net income available to common shareholders of $170.6 million and $3.94 per diluted common share versus a net loss of $82.3 million and $2.07 per diluted common share for the nine months ended September 30, 2011. Book value per diluted share was $54.95 at September 30, 2012, an increase of 2.7% for the quarter and 8.7% from year end 2011.
Operating highlights for the quarter ended September 30, 2012 were as follows:
| | • | | Net premiums written of $514.1 million, a decrease of 6.8% compared to the same period in 2011; |
| | • | | Combined ratio of 99.5%, which included 10.1 percentage points of favorable prior year loss reserve development, 2.4 percentage points of catastrophe losses from 2012 events and a $62.8 million net underwriting loss in our agriculture insurance line of business; |
| | • | | Net investment income of $45.9 million, an increase of $31.8 million from the same period in 2011; |
| | • | | Operating income, which excludes after-tax realized investment gains and foreign exchange losses and gains, of $25.7 million and $0.60 per diluted common share; and |
| | • | | Operating return on average common equity for the quarter of 1.1% or 4.5% on an annualized basis. |
Operating highlights for the nine months ended September 30, 2012 were as follows:
| | • | | Net premiums written of $1,841.5 million, an increase of 2.8% over the same period in 2011; |
| | • | | Combined ratio of 96.2%, which included 6.2 percentage points of favorable prior year loss reserve development, 3.4 percentage points of current year catastrophe losses and a $43.6 million net underwriting loss in our agriculture insurance line of business; |
| | • | | Net investment income of $134.7 million, an increase of $28.3 million over the same period in 2011; |
| | • | | Operating income, which excludes after-tax realized investment gains and foreign exchange gains, of $128.6 million and $3.02 per diluted common share; and |
| | • | | Operating return on average common equity for the first nine months of the year of 5.7%, or 7.6% on an annualized basis. |
David Cash, Chief Executive Officer, commented, “Strong investment portfolio performance, favorable reserve development and solid underwriting profits in several of our insurance and reinsurance lines meaningfully offset our drought related agriculture insurance losses this quarter, which enabled us to generate a modest underwriting profit, illustrating the benefits of our diversified insurance and reinsurance business model. Looking forward, we believe the heavy agriculture claims volumes and service requirements stemming from the Midwestern drought will present us with an additional opportunity to showcase our industry leading service and technology in agriculture insurance.”
- 1 -
Insurance Segment
Operating highlights for Endurance’s Insurance segment for the quarter ended September 30, 2012 were as follows:
| | • | | Net premiums written of $221.3 million, a decrease of 27.0% from the third quarter of 2011; |
| | • | | Combined ratio of 121.0%, an increase of 24.2 percentage points from the third quarter of 2011; |
| | • | | Favorable prior year loss reserve development of 6.2 percentage points during the current period, compared to 3.9 percentage points of favorable prior year loss reserve development in the third quarter of 2011; and |
| | • | | A net underwriting loss of $62.8 million in our agriculture business line due to the Midwest drought. |
Operating highlights for Endurance’s Insurance segment for the nine months ended September 30, 2012 were as follows:
| | • | | Net premiums written of $835.7 million, a decrease of 8.1% from the same period in 2011; |
| | • | | Combined ratio of 107.7%, an increase of 11.4 percentage points from the same period in 2011; |
| | • | | Favorable prior year loss reserve development of 5.5 percentage points during the current period, compared to 9.6 percentage points of favorable prior year loss reserve development in the same period in 2011; and |
| | • | | A net underwriting loss of $43.6 million in our agriculture business line due to the Midwest drought. |
Net premiums written in the Insurance segment decreased $81.9 million and $73.3 million for the third quarter and nine months ended September 30, 2012, respectively, compared to the same periods in the prior year due to declines in agriculture, property and casualty premiums, offset in part by growth in professional lines premiums. Within the agriculture line of business, net premiums declined due to a lack of positive premium adjustments compared to the significant positive premium adjustments in the third quarter of 2011, decreases in commodity prices for spring crops and greater cession of premiums compared to 2011. The declines in property insurance premiums in the current periods compared to the same periods a year ago were driven by the Company’s decision to reallocate capital to lines of business with greater profit potential. Casualty insurance premiums declined in the current periods compared to the same periods a year ago due to reductions in large account premiums, which were partially offset by increases in smaller account casualty lines where rate increases are being realized. The growth in the professional lines of business was largely driven by growth in smaller account business written in the U.S. partially offset by declines in larger account business written in Bermuda, which experienced greater competitive pressures.
The increase in the Insurance segment combined ratio for the quarter ended September 30, 2012 compared to the same period in 2011 was driven by higher net loss, acquisition expense and general and administrative expense ratios. The net loss ratio increased as a result of agriculture insurance losses from the Midwest drought. The acquisition expense ratio was higher in the current quarter compared to a year ago due to the Company’s contract binding insurance operation, which has higher commission rates and represented a greater portion of earned premiums than a year ago. The general and administrative expense ratio was modestly higher in the current quarter due to the smaller earned premium base. For the nine months ended September 30, 2012, the combined ratio was 11.4 percentage points higher than the same period a year ago as higher net loss and acquisition expense ratios were partially offset by a lower general and administrative expense ratio. The net loss ratio for the nine months increased as a result of losses in the agriculture insurance line from the Midwest drought.
The Insurance segment’s net loss ratio in the third quarter of 2012 benefited from $17.4 million, or 6.2 percentage points of favorable prior year loss reserve development, compared to $12.4 million, or 3.9 percentage points, for the same period a year ago. For the current quarter, the improved favorable development was driven predominantly by the other and long tail lines of business. For the nine months ended September 30, 2012, the net loss ratio benefited from 5.5 percentage points of favorable prior year loss reserve development compared to 9.6 percentage points for the first nine months of
- 2 -
2011. The lower level of favorable prior year loss reserve development in the first nine months of 2012 compared to the same period in 2011 was driven predominantly by the agriculture line of business, as the prior period was impacted by the combination of a very strong 2010 crop year with a delayed harvest that extended claims settlements until the first two quarters of 2011 compared to the 2011 crop year, which did not experience the same level of harvest delays or extension of claim settlements into the first two quarters of 2012.
Reinsurance Segment
Operating highlights for Endurance’s Reinsurance segment for the quarter ended September 30, 2012 were as follows:
| | • | | Net premiums written of $292.8 million, an increase of 18.0% from the third quarter of 2011; |
| | • | | Combined ratio of 76.8%, an improvement of 38.2 percentage points from the third quarter of 2011; |
| | • | | Favorable prior year loss reserve development of 14.2 percentage points compared to 13.2 percentage points of favorable prior year loss reserve development in the third quarter of 2011; and |
| | • | | Net catastrophe losses from 2012 events of $13.2 million or 5.6 percentage points on the net loss ratio compared to net catastrophe losses of $96.3 million or 41.6 points in the third quarter of 2011. |
Operating highlights for Endurance’s Reinsurance segment for the nine months ended September 30, 2012 were as follows:
| | • | | Net premiums written of $1,005.8 million, an increase of 13.9% from the same period in 2011; |
| | • | | Combined ratio of 85.6%, an improvement of 44.7 percentage points from the same period in 2011; |
| | • | | Favorable prior year loss reserve development of 6.9 percentage points during the current period, compared to 9.7 percentage points of favorable prior year loss reserve development in the same period in 2011; and |
| | • | | Net catastrophe losses from 2012 events of $49.6 million or 6.9 percentage points on the net loss ratio compared to net catastrophe losses of $347.2 million or 50.8 points in the first nine months of 2011. |
The $44.7 million increase in net premiums written within the Reinsurance segment during the third quarter of 2012 compared to the third quarter of 2011 resulted primarily from increases within the property and casualty lines of business, partially offset by a modest decline in the catastrophe line of business. Growth in the property line of business in the current quarter was driven by higher renewal premiums and multiple new contracts generated by the U.S., Zurich and Singapore offices. An increase in the casualty line of business in the third quarter of 2012 was driven by higher levels of both new business and premium adjustments compared to a year ago. The catastrophe line of business declined from the same period a year ago due to non-renewal of select contracts and timing as several contracts’ renewal dates shifted out of the third quarter of 2012. For the nine months ended September 30, 2012, net premiums written increased $122.9 million, primarily due to increases within the property, catastrophe and casualty lines of business.
The combined ratio in the Reinsurance segment for the third quarter of 2012 improved compared to the same period in 2011, predominantly due to lower net loss and general and administrative expense ratios. The third quarter 2012 net loss ratio included 5.6 percentage points of catastrophe losses relating to Hurricane Isaac and a number of small loss events. The third quarter 2011 net loss ratio included 41.6 percentage points of catastrophe losses relating to Hurricane Irene, the Danish flood, Texas brushfires and multiple storms in the Midwest, which when accumulated triggered several aggregate loss contracts. The Reinsurance segment’s net loss ratio in the third quarter of 2012 benefited from $38.2 million, or 14.2 percentage points, of favorable prior year loss reserve development, compared to $32.0 million, or 13.2 percentage points, for the same period a year ago.
- 3 -
For the first nine months of 2012, the Reinsurance segment reported a combined ratio of 85.6% compared to 130.3% for the same period in 2011. The improvement in the combined ratio was largely attributable to an improvement in the net loss ratio as a result of the lower frequency and severity of catastrophe events in the first nine months of 2012, which added 6.9 percentage points to the net loss ratio compared to 50.8 percentage points in catastrophe losses in the first nine months of 2011. For the nine months ended September 30, 2012, the net loss ratio benefitted from 6.9 percentage points of favorable prior year loss reserve development compared to 9.7 percentage points in the first nine months of 2011.
Investments
Endurance’s net investment income for the quarter and nine months ended September 30, 2012 was $45.9 million and $134.7 million, an increase of $31.8 million and $28.3 million, respectively, compared to the same periods in 2011. The total return of Endurance’s investment portfolio was 1.75% and 4.08% for the quarter and nine months ended September 30, 2012, respectively, compared to 0.37% and 2.60% for the quarter and nine months ended September 30, 2011, respectively. Investment income generated from Endurance’s fixed maturity investments declined by $5.9 million and $18.3 million for the three and nine months ended September 30, 2012, respectively, compared to the same period in 2011 due to lower reinvestment rates during 2012 and the short duration of Endurance’s fixed maturity portfolio. During the third quarter and nine months ended September 30, 2012, Endurance’s net investment income included gains of $15.1 million and $38.1 million, respectively, on its alternative investment funds and high yield loan funds, which are included in other investments, as compared to losses of $22.5 million and $7.6 million in the third quarter and first nine months of 2011, respectively. The ending book yield on Endurance’s fixed maturity investments at September 30, 2012 was 2.38%, down from 2.68% at December 31, 2011 and 2.79% at September 30, 2011.
At September 30, 2012, Endurance’s fixed maturity portfolio, which comprises 90.5% of Endurance’s investments, had an average credit quality of AA and a duration of 2.52 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $183.5 million at September 30, 2012, an improvement of $60.7 million from December 31, 2011. Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $10.0 million and $29.5 million during the third quarter and first nine months of 2012 compared to net realized investment gains of $0.8 million and $23.5 million during the third quarter and first nine months of 2011.
Endurance ended the third quarter of 2012 with cash and invested assets of $6.5 billion, which represents a 3.8% increase from December 31, 2011. Net operating cash flow was $211.4 million for the nine months ended September 30, 2012 versus $337.5 million for the same period in 2011.
Capitalization and Shareholders’ Equity
At September 30, 2012, Endurance’s shareholders’ equity was $2.81 billion or $54.95 per diluted common share versus $2.61 billion or $50.56 per diluted common share at December 31, 2011. For the quarter and nine months ended September 30, 2012, Endurance declared and paid common dividends of $0.31 and $0.93 per share, respectively.
Subsequent Event
On October 29, 2012, Hurricane Sandy made landfall in the Northeastern United States. Preliminary information indicates that this storm has the potential to cause significant losses within the insurance industry generally. To date, reported claims as a result of this storm have been limited. Accordingly, while losses emanating from the storm cannot be accurately estimated at this time, the Company may need to establish appropriate loss reserves related to Hurricane Sandy in the fourth quarter of 2012, which may have a negative impact on its results of operations.
- 4 -
Earnings Call
Endurance will host a conference call on November 1, 2012 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 337-8259 or (719) 325-2180 (international) and entering pass code: 2498170. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 15, 2012 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 2498170.
The public may access a live broadcast of the conference call at the “Investors” section of Endurance’s website,www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance’s website.
A copy of Endurance’s financial supplement for the third quarter of 2012 will be available on Endurance’s website atwww.endurance.bm shortly after the release of earnings.
Operating income (loss), operating return (loss) on average common equity, operating income (loss) per diluted common share, operating income (loss) allocated (attributable) to common shareholders and the combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables.
About Endurance Specialty Holdings
Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes property, casualty, healthcare liability, agriculture, professional lines and surety and other specialty lines of insurance and property, catastrophe, casualty, agriculture, marine, aerospace, and surety and other specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor’s on our principal operating subsidiaries. Endurance’s headquarters are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visitwww.endurance.bm.
Safe Harbor for Forward-Looking Statements
Some of the statements in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “should,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2011.
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.
- 5 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars, except share and per share amounts)
| | | | | | | | |
| | | September 30,
2012 | | | December 31,
2011 | |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 895,776 | | | $ | 890,914 | |
Fixed maturity investments, available for sale, at fair value | | | 5,052,963 | | | | 4,831,966 | |
Short-term investments, available for sale, at fair value | | | 62,713 | | | | 67,802 | |
Equity securities, available for sale, at fair value | | | 83,085 | | | | 59,767 | |
Other investments | | | 478,911 | | | | 432,658 | |
Premiums receivable, net | | | 1,136,130 | | | | 544,017 | |
Insurance and reinsurance balances receivable | | | 112,926 | | | | 92,710 | |
Deferred acquisition costs | | | 215,811 | | | | 166,049 | |
Prepaid reinsurance premiums | | | 228,854 | | | | 149,670 | |
Losses recoverable | | | 1,076,647 | | | | 666,928 | |
Accrued investment income | | | 23,937 | | | | 29,708 | |
Goodwill and intangible assets | | | 174,309 | | | | 181,828 | |
Deferred tax asset | | | 36,092 | | | | 33,355 | |
Net receivable on sales of investments | | | 76,907 | | | | 77,821 | |
Other assets | | | 99,294 | | | | 67,422 | |
| | | | | | | | |
Total Assets | | $ | 9,754,355 | | | $ | 8,292,615 | |
| | | | | | | | |
Liabilities | | | | | | | | |
Reserve for losses and loss expenses | | $ | 4,509,442 | | | $ | 3,824,224 | |
Reserve for unearned premiums | | | 1,370,491 | | | | 932,108 | |
Deposit liabilities | | | 23,557 | | | | 26,887 | |
Reinsurance balances payable | | | 256,674 | | | | 189,488 | |
Debt | | | 527,341 | | | | 528,118 | |
Net payable on purchases of investments | | | 102,874 | | | | 55,243 | |
Other liabilities | | | 153,102 | | | | 125,382 | |
| | | | | | | | |
Total Liabilities | | | 6,943,481 | | | | 5,681,450 | |
| | | | | | | | |
Shareholders’ Equity | | | | | | | | |
Preferred shares | | | | | | | | |
Series A, non-cumulative - 8,000,000 issued and outstanding (2011 - 8,000,000) | | | 8,000 | | | | 8,000 | |
Series B, non-cumulative - 9,200,000 issued and outstanding (2011 - 9,200,000) | | | 9,200 | | | | 9,200 | |
Common shares | | | | | | | | |
43,294,300 issued and outstanding (2011 – 43,086,834) | | | 43,294 | | | | 43,087 | |
Additional paid-in capital | | | 533,284 | | | | 526,910 | |
Accumulated other comprehensive income | | | 193,239 | | | | 130,392 | |
Retained earnings | | | 2,023,857 | | | | 1,893,576 | |
| | | | | | | | |
Total Shareholders’ Equity | | | 2,810,874 | | | | 2,611,165 | |
| | | | | | | | |
Total Liabilities and Shareholders’ Equity | | $ | 9,754,355 | | | $ | 8,292,615 | |
| | | | | | | | |
Book Value per Common Share | | | | | | | | |
Dilutive common shares outstanding | | | 43,326,122 | | | | 43,142,277 | |
Diluted book value per common share[a] | | $ | 54.95 | | | $ | 50.56 | |
| | | | | | | | |
Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2011, which was derived from Endurance’s audited financial statements.
| [a] | Excludes the $430 million liquidation value of the preferred shares (2011—$430 million). |
- 6 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands of United States dollars, except share and per share amounts)
| | | | | | | | | | | | | | | | |
| | | Quarter Ended | | | For the Nine Months Ended | |
| | | September 30,
2012 | | | September 30,
2011 | | | September 30,
2012 | | | September 30,
2011 | |
Revenues | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 621,255 | | | $ | 700,866 | | | $ | 2,286,980 | | | $ | 2,204,148 | |
| | | | | | | | | | | | | | | | |
Net premiums written | | $ | 514,080 | | | $ | 551,327 | | | $ | 1,841,549 | | | $ | 1,791,957 | |
Change in unearned premiums | | | 37,792 | | | | 10,166 | | | | (358,702 | ) | | | (361,053 | ) |
| | | | | | | | | | | | | | | | |
Net premiums earned | | | 551,872 | | | | 561,493 | | | | 1,482,847 | | | | 1,430,904 | |
Other underwriting loss | | | (1,347 | ) | | | (2,141 | ) | | | (1,663 | ) | | | (2,122 | ) |
Net investment income | | | 45,882 | | | | 14,100 | | | | 134,723 | | | | 106,443 | |
Net realized and unrealized gains | | | 10,097 | | | | 1,033 | | | | 30,258 | | | | 26,340 | |
Total other-than-temporary impairment losses | | | (126 | ) | | | (168 | ) | | | (274 | ) | | | (1,908 | ) |
Portion of loss recognized in other comprehensive income (loss) | | | (5 | ) | | | (72 | ) | | | (483 | ) | | | (911 | ) |
| | | | | | | | | | | | | | | | |
Net impairment losses recognized in earnings (losses) | | | (131 | ) | | | (240 | ) | | | (757 | ) | | | (2,819 | ) |
| | | | | | | | | | | | | | | | |
Total revenues | | | 606,373 | | | | 574,245 | | | | 1,645,408 | | | | 1,558,746 | |
| | | | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | | | | |
Net losses and loss expenses | | | 407,523 | | | | 456,691 | | | | 1,016,187 | | | | 1,220,514 | |
Acquisition expenses | | | 88,782 | | | | 72,249 | | | | 229,399 | | | | 205,754 | |
General and administrative expenses | | | 52,715 | | | | 58,574 | | | | 181,365 | | | | 190,421 | |
Amortization of intangibles | | | 2,434 | | | | 2,976 | | | | 7,988 | | | | 8,800 | |
Net foreign exchange losses (gains) | | | 3,774 | | | | (4,085 | ) | | | (14,699 | ) | | | (7,655 | ) |
Interest expense | | | 9,041 | | | | 9,055 | | | | 27,132 | | | | 27,166 | |
| | | | | | | | | | | | | | | | |
Total expenses | | | 564,269 | | | | 595,460 | | | | 1,447,372 | | | | 1,645,000 | |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 42,104 | | | | (21,215 | ) | | | 198,036 | | | | (86,254 | ) |
Income tax (expense) benefit | | | (1,986 | ) | | | 1,197 | | | | (2,893 | ) | | | 19,896 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | | 40,118 | | | | (20,018 | ) | | | 195,143 | | | | (66,358 | ) |
Preferred dividends | | | (8,188 | ) | | | (8,188 | ) | | | (24,564 | ) | | | (15,938 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) available (attributable) to common and participating common shareholders | | $ | 31,930 | | | $ | (28,206 | ) | | $ | 170,579 | | | $ | (82,296 | ) |
| | | | | | | | | | | | | | | | |
Per share data | | | | | | | | | | | | | | | | |
Basic earnings (losses) per common share | | $ | 0.74 | | | $ | (0.71 | ) | | $ | 3.94 | | | $ | (2.07 | ) |
| | | | | | | | | | | | | | | | |
Diluted earnings (losses) per common share | | $ | 0.74 | | | $ | (0.71 | ) | | $ | 3.94 | | | $ | (2.07 | ) |
| | | | | | | | | | | | | | | | |
- 7 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
| | | | | | | | | | | | |
| | | For the quarter ended September 30, 2012 | |
| | | Insurance | | | Reinsurance | | | Reported
Totals | |
Revenues | | | | | | | | | | | | |
Gross premiums written | | $ | 324,808 | | | $ | 296,447 | | | $ | 621,255 | |
Ceded premiums written | | | (103,543 | ) | | | (3,632 | ) | | | (107,175 | ) |
| | | | | | | | | | | | |
Net premiums written | | | 221,265 | | | | 292,815 | | | | 514,080 | |
| | | | | | | | | | | | |
Net premiums earned | | | 283,273 | | | | 268,599 | | | | 551,872 | |
Other underwriting (loss) income | | | (1,384 | ) | | | 37 | | | | (1,347 | ) |
| | | | | | | | | | | | |
Total underwriting revenues | | | 281,889 | | | | 268,636 | | | | 550,525 | |
| | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Net losses and loss expenses | | | 288,750 | | | | 118,773 | | | | 407,523 | |
Acquisition expenses | | | 24,506 | | | | 64,276 | | | | 88,782 | |
General and administrative expenses | | | 29,409 | | | | 23,306 | | | | 52,715 | |
| | | | | | | | | | | | |
| | | 342,665 | | | | 206,355 | | | | 549,020 | |
| | | | | | | | | | | | |
Underwriting (loss) income | | $ | (60,776 | ) | | $ | 62,281 | | | $ | 1,505 | |
| | | | | | | | | | | | |
Net loss ratio | | | 101.9 | % | | | 44.2 | % | | | 73.8 | % |
Acquisition expense ratio | | | 8.7 | % | | | 23.9 | % | | | 16.1 | % |
General and administrative expense ratio | | | 10.4 | % | | | 8.7 | % | | | 9.6 | % |
| | | | | | | | | | | | |
Combined ratio | | | 121.0 | % | | | 76.8 | % | | | 99.5 | % |
| | | | | | | | | | | | |
- 8 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
| | | | | | | | | | | | |
| | | For the quarter ended September 30, 2011 | |
| | | Insurance | | | Reinsurance | | | Reported
Totals | |
Revenues | | | | | | | | | | | | |
Gross premiums written | | $ | 450,451 | | | $ | 250,415 | | | $ | 700,866 | |
Ceded premiums written | | | (147,241 | ) | | | (2,298 | ) | | | (149,539 | ) |
| | | | | | | | | | | | |
Net premiums written | | | 303,210 | | | | 248,117 | | | | 551,327 | |
| | | | | | | | | | | | |
Net premiums earned | | | 318,602 | | | | 242,891 | | | | 561,493 | |
Other underwriting (loss) income | | | (2,875 | ) | | | 734 | | | | (2,141 | ) |
| | | | | | | | | | | | |
Total underwriting revenues | | | 315,727 | | | | 243,625 | | | | 559,352 | |
| | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Net losses and loss expenses | | | 260,206 | | | | 196,485 | | | | 456,691 | |
Acquisition expenses | | | 18,738 | | | | 53,511 | | | | 72,249 | |
General and administrative expenses | | | 29,328 | | | | 29,246 | | | | 58,574 | |
| | | | | | | | | | | | |
| | | 308,272 | | | | 279,242 | | | | 587,514 | |
| | | | | | | | | | | | |
Underwriting income (loss) | | $ | 7,455 | | | $ | (35,617 | ) | | $ | (28,162 | ) |
| | | | | | | | | | | | |
Net loss ratio | | | 81.7 | % | | | 81.0 | % | | | 81.3 | % |
Acquisition expense ratio | | | 5.9 | % | | | 22.0 | % | | | 12.9 | % |
General and administrative expense ratio | | | 9.2 | % | | | 12.0 | % | | | 10.4 | % |
| | | | | | | | | | | | |
Combined ratio | | | 96.8 | % | | | 115.0 | % | | | 104.6 | % |
| | | | | | | | | | | | |
- 9 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
| | | | | | | | | | | | |
| | | For the nine months ended September 30, 2012 | |
| | | Insurance | | | Reinsurance | | | Reported
Totals | |
Revenues | | | | | | | | | | | | |
Gross premiums written | | $ | 1,252,814 | | | $ | 1,034,166 | | | $ | 2,286,980 | |
Ceded premiums written | | | (417,109 | ) | | | (28,322 | ) | | | (445,431 | ) |
| | | | | | | | | | | | |
Net premiums written | | | 835,705 | | | | 1,005,844 | | | | 1,841,549 | |
| | | | | | | | | | | | |
Net premiums earned | | | 710,988 | | | | 771,859 | | | | 1,482,847 | |
Other underwriting (loss) income | | | (2,684 | ) | | | 1,021 | | | | (1,663 | ) |
| | | | | | | | | | | | |
Total underwriting revenues | | | 708,304 | | | | 772,880 | | | | 1,481,184 | |
| | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Net losses and loss expenses | | | 610,956 | | | | 405,231 | | | | 1,016,187 | |
Acquisition expenses | | | 58,265 | | | | 171,134 | | | | 229,399 | |
General and administrative expenses | | | 96,663 | | | | 84,702 | | | | 181,365 | |
| | | | | | | | | | | | |
| | | 765,884 | | | | 661,067 | | | | 1,426,951 | |
| | | | | | | | | | | | |
Underwriting (loss) income | | $ | (57,580 | ) | | $ | 111,813 | | | $ | 54,233 | |
| | | | | | | | | | | | |
Net loss ratio | | | 85.9 | % | | | 52.4 | % | | | 68.5 | % |
Acquisition expense ratio | | | 8.2 | % | | | 22.2 | % | | | 15.5 | % |
General and administrative expense ratio | | | 13.6 | % | | | 11.0 | % | | | 12.2 | % |
| | | | | | | | | | | | |
Combined ratio | | | 107.7 | % | | | 85.6 | % | | | 96.2 | % |
| | | | | | | | | | | | |
- 10 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)
| | | | | | | | | | | | |
| | | For the nine months ended September 30, 2011 | |
| | | Insurance | | | Reinsurance | | | Reported
Totals | |
Revenues | | | | | | | | | | | | |
Gross premiums written | | $ | 1,302,032 | | | $ | 902,116 | | | $ | 2,204,148 | |
Ceded premiums written | | | (393,020 | ) | | | (19,171 | ) | | | (412,191 | ) |
| | | | | | | | | | | | |
Net premiums written | | | 909,012 | | | | 882,945 | | | | 1,791,957 | |
| | | | | | | | | | | | |
Net premiums earned | | | 730,491 | | | | 700,413 | | | | 1,430,904 | |
Other underwriting (loss) income | | | (2,875 | ) | | | 753 | | | | (2,122 | ) |
| | | | | | | | | | | | |
| | | 727,616 | | | | 701,166 | | | | 1,428,782 | |
| | | | | | | | | | | | |
Expenses | | | | | | | | | | | | |
Net losses and loss expenses | | | 550,438 | | | | 670,076 | | | | 1,220,514 | |
Acquisition expenses | | | 50,907 | | | | 154,847 | | | | 205,754 | |
General and administrative expenses | | | 102,361 | | | | 88,060 | | | | 190,421 | |
| | | | | | | | | | | | |
| | | 703,706 | | | | 912,983 | | | | 1,616,689 | |
| | | | | | | | | | | | |
Underwriting income (loss) | | $ | 23,910 | | | $ | (211,817 | ) | | $ | (187,907 | ) |
| | | | | | | | | | | | |
Net loss ratio | | | 75.3 | % | | | 95.6 | % | | | 85.3 | % |
Acquisition expense ratio | | | 7.0 | % | | | 22.1 | % | | | 14.4 | % |
General and administrative expense ratio | | | 14.0 | % | | | 12.6 | % | | | 13.3 | % |
| | | | | | | | | | | | |
Combined ratio | | | 96.3 | % | | | 130.3 | % | | | 113.0 | % |
| | | | | | | | | | | | |
- 11 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the quarter ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 101.9 | % | | | 81.7 | % | | | 44.2 | % | | | 81.0 | % | | | 73.8 | % | | | 81.3 | % |
Acquisition expense ratio | | | 8.7 | % | | | 5.9 | % | | | 23.9 | % | | | 22.0 | % | | | 16.1 | % | | | 12.9 | % |
General and administrative expense ratio | | | 10.4 | % | | | 9.2 | % | | | 8.7 | % | | | 12.0 | % | | | 9.6 | % | | | 10.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 121.0 | % | | | 96.8 | % | | | 76.8 | % | | | 115.0 | % | | | 99.5 | % | | | 104.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Effect of Prior Year Net Loss Reserve Development
Favorable / (Unfavorable)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the quarter ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 6.2 | % | | | 3.9 | % | | | 14.2 | % | | | 13.2 | % | | | 10.1 | % | | | 7.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net of Prior Year Net Loss Reserve Development
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the quarter ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 108.1 | % | | | 85.6 | % | | | 58.4 | % | | | 94.2 | % | | | 83.9 | % | | | 89.2 | % |
Acquisition expense ratio | | | 8.7 | % | | | 5.9 | % | | | 23.9 | % | | | 22.0 | % | | | 16.1 | % | | | 12.9 | % |
General and administrative expense ratio | | | 10.4 | % | | | 9.2 | % | | | 8.7 | % | | | 12.0 | % | | | 9.6 | % | | | 10.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 127.2 | % | | | 100.7 | % | | | 91.0 | % | | | 128.2 | % | | | 109.6 | % | | | 112.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.
- 12 -
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
As Reported
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the nine months ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 85.9 | % | | | 75.3 | % | | | 52.4 | % | | | 95.6 | % | | | 68.5 | % | | | 85.3 | % |
Acquisition expense ratio | | | 8.2 | % | | | 7.0 | % | | | 22.2 | % | | | 22.1 | % | | | 15.5 | % | | | 14.4 | % |
General and administrative expense ratio | | | 13.6 | % | | | 14.0 | % | | | 11.0 | % | | | 12.6 | % | | | 12.2 | % | | | 13.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 107.7 | % | | | 96.3 | % | | | 85.6 | % | | | 130.3 | % | | | 96.2 | % | | | 113.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Effect of Prior Year Net Loss Reserve Development
Favorable / (Unfavorable)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the nine months ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 5.5 | % | | | 9.6 | % | | | 6.9 | % | | | 9.7 | % | | | 6.2 | % | | | 9.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net of Prior Year Net Loss Reserve Development
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | For the nine months ended September 30, | |
| | | Insurance | | | Reinsurance | | | Total | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net loss ratio | | | 91.4 | % | | | 84.9 | % | | | 59.3 | % | | | 105.3 | % | | | 74.7 | % | | | 94.9 | % |
Acquisition expense ratio | | | 8.2 | % | | | 7.0 | % | | | 22.2 | % | | | 22.1 | % | | | 15.5 | % | | | 14.4 | % |
General and administrative expense ratio | | | 13.6 | % | | | 14.0 | % | | | 11.0 | % | | | 12.6 | % | | | 12.2 | % | | | 13.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 113.2 | % | | | 105.9 | % | | | 92.5 | % | | | 140.0 | % | | | 102.4 | % | | | 122.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.
- 13 -
ENDURANCE SPECIALTY HOLDINGS LTD.
GROSS AND NET PREMIUMS WRITTEN BY SEGMENT
(in thousands of United States dollars)
The following tables show Endurance’s gross and net premiums written for the quarters ended September 30, 2012 and 2011:
| | | | | | | | | | | | | | | | |
| | | Quarter Ended September 30, 2012 | | | Quarter Ended September 30, 2011 | |
| | | Gross Premiums
Written | | | Net Premiums
Written | | | Gross Premiums
Written | | | Net Premiums
Written | |
Insurance | | | | | | | | | | | | | | | | |
Agriculture | | $ | 171,826 | | | $ | 106,180 | | | $ | 289,656 | | | $ | 185,017 | |
Professional lines | | | 43,209 | | | | 34,804 | | | | 39,559 | | | | 30,812 | |
Casualty | | | 54,704 | | | | 32,397 | | | | 57,520 | | | | 37,664 | |
Property | | | 18,900 | | | | 13,595 | | | | 30,049 | | | | 17,681 | |
Healthcare liability | | | 34,076 | | | | 32,196 | | | | 33,652 | | | | 32,021 | |
Surety and other specialty | | | 2,093 | | | | 2,093 | | | | 15 | | | | 15 | |
| | | | | | | | | | | | | | | | |
Subtotal Insurance | | $ | 324,808 | | | $ | 221,265 | | | $ | 450,451 | | | $ | 303,210 | |
| | | | | | | | | | | | | | | | |
Reinsurance | | | | | | | | | | | | | | | | |
Catastrophe | | $ | 38,871 | | | $ | 36,484 | | | $ | 46,275 | | | $ | 43,868 | |
Casualty | | | 77,781 | | | | 77,781 | | | | 56,293 | | | | 56,292 | |
Property | | | 157,742 | | | | 157,742 | | | | 129,203 | | | | 129,203 | |
Aerospace and marine | | | 9,914 | | | | 9,914 | | | | 5,891 | | | | 6,002 | |
Surety and other specialty | | | 12,139 | | | | 10,894 | | | | 12,753 | | | | 12,752 | |
| | | | | | | | | | | | | | | | |
Subtotal Reinsurance | | $ | 296,447 | | | $ | 292,815 | | | $ | 250,415 | | | $ | 248,117 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 621,255 | | | $ | 514,080 | | | $ | 700,866 | | | $ | 551,327 | |
| | | | | | | | | | | | | | | | |
- 14 -
ENDURANCE SPECIALTY HOLDINGS LTD.
GROSS AND NET PREMIUMS WRITTEN BY SEGMENT
(in thousands of United States dollars)
The following tables show Endurance’s gross and net premiums written for the nine months ended September 30, 2012 and 2011:
| | | | | | | | | | | | | | | | |
| | | Nine Months Ended
September 30, 2012 | | | Nine Months Ended
September 30, 2011 | |
| | | Gross Premiums
Written | | | Net Premiums
Written | | | Gross Premiums
Written | | | Net Premiums
Written | |
Insurance | | | | | | | | | | | | | | | | |
Agriculture | | $ | 838,932 | | | $ | 528,349 | | | $ | 855,486 | | | $ | 577,538 | |
Professional lines | | | 130,573 | | | | 107,841 | | | | 124,209 | | | | 99,560 | |
Casualty | | | 160,619 | | | | 102,409 | | | | 159,580 | | | | 107,234 | |
Property | | | 46,926 | | | | 26,418 | | | | 90,643 | | | | 56,262 | |
Healthcare liability | | | 70,651 | | | | 65,575 | | | | 72,243 | | | | 68,542 | |
Surety and other specialty | | | 5,113 | | | | 5,113 | | | | (129 | ) | | | (124 | ) |
| | | | | | | | | | | | | | | | |
Subtotal Insurance | | $ | 1,252,814 | | | $ | 835,705 | | | $ | 1,302,032 | | | $ | 909,012 | |
| | | | | | | | | | | | | | | | |
Reinsurance | | | | | | | | | | | | | | | | |
Catastrophe | | $ | 354,275 | | | $ | 329,067 | | | $ | 330,771 | | | $ | 314,328 | |
Casualty | | | 258,352 | | | | 257,113 | | | | 218,264 | | | | 217,463 | |
Property | | | 318,514 | | | | 318,521 | | | | 251,475 | | | | 251,475 | |
Aerospace and marine | | | 53,831 | | | | 53,794 | | | | 53,472 | | | | 51,567 | |
Surety and other specialty | | | 49,194 | | | | 47,349 | | | | 48,134 | | | | 48,112 | |
| | | | | | | | | | | | | | | | |
Subtotal Reinsurance | | $ | 1,034,166 | | | $ | 1,005,844 | | | $ | 902,116 | | | $ | 882,945 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 2,286,980 | | | $ | 1,841,549 | | | $ | 2,204,148 | | | $ | 1,791,957 | |
| | | | | | | | | | | | | | | | |
- 15 -
ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATIONS
(in thousands of United States dollars, except share, per share amounts and ratios)
The following is a reconciliation of Endurance’s net income (loss), net income (loss) per diluted common share, net income (loss) allocated to common shareholders under the two-class method and annualized return on average common equity to operating income (loss), operating income (loss) per diluted common share, operating income (loss) allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the three and nine months ended September 30, 2012 and 2011:
| | | | | | | | | | | | | | | | |
| | | Quarter Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net income (loss) | | $ | 40,118 | | | $ | (20,018 | ) | | $ | 195,143 | | | $ | (66,358 | ) |
Add (less) after-tax items: | | | | | | | | | | | | | | | | |
Net foreign exchange losses (gains) | | | 3,767 | | | | (4,153 | ) | | | (12,857 | ) | | | (7,822 | ) |
Net realized and unrealized gains | | | (9,691 | ) | | | (775 | ) | | | (27,708 | ) | | | (25,514 | ) |
Net impairment losses recognized in earnings (losses) | | | 131 | | | | 240 | | | | 737 | | | | 2,819 | |
| | | | | | | | | | | | | | | | |
Operating income (loss) before preferred dividends | | $ | 34,325 | | | $ | (24,706 | ) | | $ | 155,315 | | | $ | (96,875 | ) |
Preferred dividends | | | (8,188 | ) | | | (8,188 | ) | | | (24,564 | ) | | | (15,938 | ) |
| | | | | | | | | | | | | | | | |
Operating income (loss) allocated (attributable) to common and participating common shareholders | | $ | 26,137 | | | $ | (32,894 | ) | | $ | 130,751 | | | $ | (112,813 | ) |
| | | | | | | | | | | | | | | | |
Operating income (loss) allocated (attributable) to common shareholders under the two-class method | | $ | 25,733 | | | $ | (33,118 | ) | | $ | 128,583 | | | $ | (113,553 | ) |
| | | | | | | | | | | | | | | | |
Weighted average diluted common | | | 42,657,906 | | | | 39,764,756 | | | | 42,594,293 | | | | 40,071,340 | |
| | | | | | | | | | | | | | | | |
Operating income (loss) per diluted common share[b] | | $ | 0.60 | | | $ | (0.83 | ) | | $ | 3.02 | | | $ | (2.83 | ) |
| | | | | | | | | | | | | | | | |
Average common equity [a] | | $ | 2,349,058 | | | $ | 2,223,113 | | | $ | 2,281,020 | | | $ | 2,427,052 | |
Operating return on average common equity | | | 1.1 | % | | | (1.5 | )% | | | 5.7 | % | | | (4.6 | )% |
| | | | | | | | | | | | | | | | |
Annualized operating return on average common equity | | | 4.5 | % | | | (5.9 | )% | | | 7.6 | % | | | (6.2 | )% |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 40,118 | | | $ | (20,018 | ) | | $ | 195,143 | | | $ | (66,358 | ) |
Preferred dividends | | | (8,188 | ) | | | (8,188 | ) | | | (24,564 | ) | | | (15,938 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) available (attributable) to common and participating common shareholders | | $ | 31,930 | | | $ | (28,206 | ) | | $ | 170,579 | | | $ | (82,296 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) available (attributable) to common shareholders under the two-class method | | $ | 31,436 | | | $ | (28,430 | ) | | $ | 167,751 | | | $ | (83,036 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) per diluted common share | | $ | 0.74 | | | $ | (0.71 | ) | | $ | 3.94 | | | $ | (2.07 | ) |
| | | | | | | | | | | | | | | | |
Return (loss) on average common equity, Net income (loss) | | | 1.4 | % | | | (1.3 | )% | | | 7.5 | % | | | (3.4 | )% |
| | | | | | | | | | | | | | | | |
Annualized return (loss) on average common equity, Net income (loss) | | | 5.4 | % | | | (5.1 | )% | | | 10.0 | % | | | (4.5 | )% |
| | | | | | | | | | | | | | | | |
| [a] | Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated period, which excludes the $430 million liquidation value of the preferred shares (2011: $430 million; 2010: $200 million) |
| [b] | Represents diluted losses per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method. |
- 16 -
Operating income (loss) and operating income (loss) per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income (loss) allocated (attributable) to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income (loss) divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating income (loss) represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Endurance believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income (loss) and net income (loss) per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income (loss) and operating income (loss) per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of operations in a manner similar to how management analyzes Endurance’s underlying business performance. Operating income (loss) and operating income (loss) per dilutive common share should not be viewed as substitutes for GAAP net income (loss) and net income (loss) per dilutive common share, respectively.
Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
Contact:
Investor Relations
Phone: +1 441 278 0988
Email: investorrelations@endurance.bm
# # #
- 17 -
