John R. Charman, Endurance Chairman & CEO
John R. Charman, Endurance Chairman & CEO

Endurance Specialty Holdings Ltd. reported a mixed 2014 third quarter stemming from big investments in underwriting and also some remnants from its failed push to snatch up Bermuda reinsurance rival Aspen Insurance Holdings earlier this year.

Net income hit $68 million ($1.52 per diluted common share), dropping 9.5 percent from $75.2 million ($1.70 per diluted common share) in the 2013 third quarter.

Gross premiums written climbed to $626.1 million, a 15 percent jump over $544.36 million generated during the same period in 2013. Net premiums written came in at $390.1 million, down from $395.3 million a year ago. Net investment income is booked at $25.4 million, but that’s a huge drop (33 percent) over $38 million produced in the 2013 third quarter.

Chairman and CEO John Charman insisted that progress is continuing as far as “the transformation of Endurance.”

“Despite the significant and increasing competition throughout the global insurance and reinsurance industry that we had anticipated, we have meaningfully improved the underwriting quality across our lines of business,” Charman said in a statement. “The core of our underwriting talent is now largely in place, and our market leading teams of underwriters are successfully growing attractive, sustainable new specialty business for Endurance based on their relevance and their value to their longstanding client and distribution partner relationships.”

Cost relating to the unsuccessful, three-month M&A bid took a bite out of operating income and the operating return on average common equity for the quarter, according to financial results released on Nov. 3. The company reported $6.4 million of expenses for the quarter relating to its failed Aspen bid.

Charman asserted that the company has reduced its catastrophe exposures and diversified its underwriting portfolio “backstopped by very strong reinsurance protection across our businesses.” In other words, while gains aren’t apparent yet, the investment and pieces are in place for better days down the line, for when the company’s “major transformation” reaches fruition.

Maybe so, but Endurance’s insurance segment combined ratio for the quarter climbed to 103.2, including 8 percentage points of favorable prior year loss reserve development and 4.8 percentage points of hail losses in its agriculture line of business. The number is 6.3 points higher than the same period in 2013, a factor that Endurance blamed on higher acquisition and general administrative expenses, and a lower earned premium base.

Costs also climbed due to greater investment in staffing and bonuses, Endurance said, touching on Charman’s “major transformation” theme.

Endurance’s reinsurance arm reported a combined ratio of 77.6 for the quarter, up only slightly from 77.4 the same period a year ago. That number also ticked higher because of acquisition and general/administrative expenses such as higher incentive pay and strategic investment in the company’s global special insurance business. The number was offset, in part, by 15.4 percentage points of favorable prior year loss reserve development, but hit, in turn, by $12.2 million in net catastrophe losses from 2014 events.

Here are more detailed results from each division:


Gross premiums written landed at $420.3 million, nearly 22 percent higher than the same period in 2013. Net premiums written came close to $198 million, however, down almost 12 percent from the year-ago period. Endurance blamed the drop, in part, on the need to buy more reinsurance for individual lines, and loss of reinsurance protection for its agriculture insurance business.


The segment produced $205.8 million in gross premiums written, 3.1 percent higher than the 2013 third quarter. Net premiums written reached $192.5 million, 12.6 percent higher than the same period last year, Endurance said. This bright spot in gross premiums written stemmed from increases in the specialty and catastrophe lines of business, though drops in the property, casualty and professional lines of business offset some gains.

Source: Endurance Specialty Holdings