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Exhibit 99.1
[LOGO] Endurance
Contacts
Massa B. Cressall, Investor Relations
Phone: (441) 278-0988
Email: mcressall@endurance.bm
Marianne Walsh, Corporate Communications
Phone: (441) 278-0420
Email: mwalsh@endurance.bm
ENDURANCE SPECIALTY HOLDINGS EARNS $26.8 MILLION IN THIRD QUARTER OF 2004;
EXPECTS TO MEET OR EXCEED UPPER END OF ROE GUIDANCE FOR 2004
PEMBROKE, Bermuda - October 27, 2004 - Endurance Specialty Holdings Ltd.
(NYSE:ENH), today reported net income of $26.8 million or $0.40 per diluted
share for the third quarter of 2004 versus net income of $56.5 million or $0.83
per diluted share in the third quarter of 2003. In the third quarter of 2004,
operating income, which excludes after-tax realized investment gains and losses
and foreign exchange gains and losses, was $23.7 million or $0.36 per diluted
share versus $55.2 million or $0.81 per diluted share in the third quarter of
2003. For the nine months ended September 30, 2004, net income was $242.5
million or $3.58 per diluted share versus net income of $174.5 million or $2.68
per diluted share for the first half of 2003. Operating income for the first
nine months of 2004 was $240.0 million or $3.54 per diluted share, up 43.1% from
the first nine months of 2003.
Annualized operating return on average equity during the third quarter of 2004
was 5.4% and annualized operating return on average equity for the nine months
ended September 30, 2004 was 18.7%.
Kenneth J. LeStrange, Chairman and Chief Executive Officer, commented, "We are
pleased that we have produced a profitable overall result for our shareholders
this quarter, despite the magnitude of industry-wide catastrophe losses this
hurricane season. Our strategy of portfolio diversification and disciplined risk
management proved to be a particularly strong asset for Endurance this quarter.
Excluding catastrophe related losses, all segments of our business performed
extremely well. Given our strong performance to date, we expect to meet or
exceed the upper end of our return on equity guidance for the full year of 2004
of 15.5% to 17.5%, assuming normal catastrophic losses in the 4th quarter."
Mr. LeStrange continued, "Endurance continues to focus on identifying and
developing strong growth opportunities for our shareholders. In September, we
acquired the majority of XL Re's surety reinsurance business through a renewal
rights purchase agreement. In making this acquisition, we gained access to a
profitable line of business without being exposed to any historical liability
risk. In September, we also formed an Agricultural Reinsurance business unit,
and we see a significant, attractive opportunity in that segment. Recently, we
named Mike Fujii to lead our future insurance efforts in the United States. Each
of these growth opportunities is an excellent complement to our overall
portfolio and strategy."
Gross premiums written were $367.9 million for the quarter ended September 30,
2004, an increase of 13.2% from the $325.1 million in gross premiums written for
the third quarter of 2003. For the first nine months of 2004, Endurance had
gross premiums written of $1.4 billion, an increase of 7.4% from the $1.3
billion of gross premiums written and acquired in the first nine months of 2003.
Earned premiums in the quarter were $409.5 million, an increase of 21.9% from
the third quarter of 2003.
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The combined ratio was 103.0% in the third quarter of 2004 compared to 88.5% in
the third quarter of 2003. The loss ratio was 75.3% in the quarter compared to
59.2% in the third quarter of 2003. During the third quarter the company
incurred losses from Hurricanes Charley, Frances, Ivan and Jeanne, which
adversely affected our property catastrophe, property treaty, direct property,
and other specialty lines segments. As previously reported, estimated net losses
from the four hurricanes is expected to be approximately $115 million. The
Company benefited from $50.9 million in positive reserve development for the
third quarter of 2004 from prior years, compared to $11.5 million in the third
quarter of 2003.
At September 30, 2004, the Company's GAAP shareholder's equity was $1.8 billion
or $26.69 per diluted share, up 15.1% from September 30, 2003.
Total assets were $4.9 billion and net cash and invested assets were $3.6
billion, an increase of 47.2% from the third quarter of 2003. Net operating cash
flow was $306.7 million in the third quarter of 2004 versus $286.8 million in
the third quarter of 2003.
Endurance will host a conference call on Thursday, October 28, 2004 at 8:30 AM
Eastern to discuss its financial results. The conference call can be accessed
via telephone by dialing (888) 873-8496 (toll-free) or (973) 935-8507
(international). A telephone replay of the conference call will be available
through November 11, 2004 by dialing (877) 519-4471 (toll-free) or (973)
341-3080 (international) and entering the pass code: 5204311.
The public may access a live broadcast of the conference call at the "Investors"
section of Endurance's website, www.endurance.bm.
A copy of the Company's financial supplement for the third quarter of 2004 will
be available on the Company's website at http://www.endurance.bm shortly after
the release of earnings.
Operating income and annualized operating return on average equity are non-GAAP
measures. A reconciliation of these measures to net income is provided on the
attached table entitled "Reconciliation".
About Endurance Specialty Holdings
Endurance Specialty Holdings Ltd. is a global provider of property and casualty
insurance and reinsurance. Through its operating subsidiaries, Endurance
currently writes property per risk treaty reinsurance, property catastrophe
reinsurance, casualty treaty reinsurance, property individual risks, casualty
individual risks, and other specialty lines. Endurance's operating subsidiaries
have been assigned a group rating of A (Excellent) from A.M. Best, A2 by Moody's
and A- from Standard & Poor's. Endurance's headquarters are located at Wellesley
House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is
Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road,
Hamilton HM 11, Bermuda. For more information about Endurance, please visit
http://www.endurance.bm.
Safe Harbor for Forward-Looking Statements
Some of the statements in this press release may include forward-looking
statements which reflect our current views with respect to future events and
financial performance. Such statements may include forward-looking statements
both with respect to us in general and the insurance and reinsurance sectors
specifically, both as to underwriting and investment matters. Statements which
include the words "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, competition, possible
terrorism or the outbreak of war, the frequency or severity of unpredictable
catastrophic events, changes in demand for insurance or reinsurance, rating
agency actions, uncertainties in our reserving process, a change in our tax
status, acceptance of our products, the availability of reinsurance or
retrocessional coverage, retention of key personnel, political conditions,
changes in accounting policies, changes in general economic conditions and other
factors described in our Annual Report on Form 10-K for the year ended December
31, 2003.
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.
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ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
AT SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(in thousands of United States dollars, except per share amounts)
September 30, December 31,
2004 2003
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Assets (UNAUDITED) (AUDITED)
Cash and cash equivalents $ 358,785 $ 150,923
Fixed maturity investments available for sale, at fair value 3,210,428 2,523,309
Investments in other ventures, under equity method 78,608 --
Premiums receivable, net 647,427 518,539
Deferred acquisition costs 217,078 183,387
Securities lending collateral 284,450 --
Prepaid reinsurance premiums 7,057 2,335
Losses recoverable 22,627 1,442
Accrued investment income 27,787 20,434
Intangible assets 31,405 32,407
Other assets 41,651 26,188
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Total Assets $4,927,303 $3,458,964
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Liabilities
Reserve for losses and loss expenses $1,448,962 $ 833,158
Reserve for unearned premiums 1,033,341 824,685
Securities lending payable 284,450 --
Reinsurance balances payable 25,517 23,977
Long term debt 247,775 103,029
Net payable for investments purchased 76,375 --
Other liabilities 40,059 29,300
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Total Liabilities 3,156,479 1,814,149
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Shareholders' Equity
Common shares
61,680 issued and outstanding (2003 - 63,912) 61,680 63,912
Additional paid-in capital 1,123,280 1,189,570
Accumulated other comprehensive income 35,846 46,068
Retained earnings 550,018 345,265
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Total Shareholders' Equity 1,770,824 1,644,815
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Total Liabilities and Shareholders' Equity $4,927,303 $3,458,964
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Book Value per Common Share
Dilutive common shares outstanding 66,344 68,445
Diluted book value per common share $ 26.69 $ 24.03
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ENDURANCE SPECIALTY HOLDINGS LTD.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of United States dollars, except per share amounts)
Quarter Ended Nine Months Ended
------------------------- -----------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
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Revenues
Gross premiums written and acquired $ 367,865 $ 325,070 $ 1,439,157 $ 1,339,841
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Net premiums written and acquired $ 357,700 $ 324,405 $ 1,425,306 $ 1,336,808
Change in unearned premiums 51,787 11,425 (204,006) (518,859)
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Net premiums earned 409,487 335,830 1,221,300 817,949
Net investment income 30,978 18,736 84,597 49,758
Net realized gains (losses) on sales 814 (932) 5,376 6,985
of investments
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Total revenues 441,279 353,634 1,311,273 874,692
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Expenses
Losses and loss expenses 308,255 198,665 719,472 468,341
Acquisition expenses 81,147 69,382 249,332 161,423
General and administrative expenses 32,533 28,905 96,837 71,448
Amortization of intangibles 882 944 2,770 2,294
Net foreign exchange (gains) losses (3,089) (2,123) 2,949 (6,717)
Interest expense 3,771 1,013 5,433 3,393
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Total expenses 423,499 296,786 1,076,793 700,182
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Income before income taxes 17,780 56,848 234,480 174,510
Income tax benefit (expense) 9,068 (305) 7,996 25
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Net income $ 26,848 $ 56,543 $ 242,476 $ 174,535
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Per share data
Weighted average number of common and
common equivalent shares outstanding:
Basic 62,043 64,414 63,149 62,557
Diluted 66,476 67,795 67,708 65,166
Basic earnings per share $ 0.43 $ 0.88 $ 3.84 $ 2.79
========= ========= =========== ===========
Diluted earnings per share $ 0.40 $ 0.83 $ 3.58 $ 2.68
========= ========= =========== ===========
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ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
Quarter Ended Nine Months Ended
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Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
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GAAP Ratios
Loss ratio 75.3% 59.2% 58.9% 57.3%
Acquisition expense ratio 19.8% 20.7% 20.4% 19.7%
General and administrative expense ratio 7.9% 8.6% 7.9% 8.7%
-------- -------- -------- --------
Combined ratio 103.0% 88.5% 87.2% 85.7%
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ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATION
(in thousands of United States dollars)
The following is a reconciliation of the Company's net income to operating
income and annualized operating return on average equity (both of which are
non-GAAP measures) for the quarter and nine months ended September 30, 2004 and
2003:
Quarter Ended Nine Months Ended
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Sept 30, Sept 30, Sept 30, Sept 30,
2004 2003 2004 2003
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Net Income $ 26,848 $ 56,543 $ 242,476 $ 174,535
Add (Less) after-tax items:
Net foreign exchange (gains) losses (2,522) (1,882) 2,586 (6,306)
Net realized (gains) losses on investments (614) 584 (5,056) (6,815)
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Operating Income $ 23,712 $ 55,245 $ 240,006 $ 161,414
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Average equity [a] $ 1,751,048 $ 1,556,224 $ 1,707,820 $ 1,391,073
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Operating return on average equity 1.4% 3.5% 14.1% 11.6%
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Annualized operating return on average equity 5.4% 14.2% 18.7% 15.5%
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[a] Average equity is calculated as the arithmetic average of the beginning and
ending equity balances for the stated period.
In presenting the Company's 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
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.
Operating income is an internal performance measure used by the Company in the
management of its operations. Operating 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
income determined in accordance with GAAP, the Company believes that showing
operating income enables investors, analysts, rating agencies and other users of
its financial information to more easily analyze the Company's results of
operations in a manner similar to how management analyzes the Company's
underlying business performance. Operating income should not be viewed as a
substitute for GAAP net income.
The Company presents ROE as a measure that it is commonly recognized as a
standard of performance by investors, analysts, rating agencies and other users
of its financial information.
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