Endurance Specialty Holdings Ltd. (ENH) reported third-quarter 2014 operating income of $1.32 per share, which missed the Zacks Consensus Estimate by 14.8% and decreased 30.1% year over year. The downside came on the back of a decline in the underwriting results in the reported quarter.
Net income in the reported quarter also fell 10.6% to $68 million or $1.52 per share from the prior-year quarter.
Revenues in the reported quarter came in at $552 million, down 5.4% year over year. Results also missed the Zacks Consensus Estimate of $591 million by 6.6%. The year-over-year decrease resulted from a decline in net premiums earned and investment income.
Endurance Specialty’ total expenses also fell 3.6% year over year to $480 million due to a decline in net losses and loss expenses as well as net foreign exchange losses.
Consolidated combined ratio (a measure of underwriting profitability) deteriorated 250 basis points (bps) year over year to 90.2%.
Segment Details
Insurance Segment: Gross premiums written in this segment increased 21.9% year over year to $420.3 million attributable to strong premium growth in the professional lines, casualty and other as well as property lines of business, partially offset by reduction in agriculture insurance premiums.
The net premiums written declined 11.9% to $197.6 million due to higher levels of reinsurance purchased in the quarter.
The combined ratio deteriorated 630 bps 103.2% due to higher acquisition and general and administrative expenses and a lower earned premium base. These were partially offset by a lower net loss ratio.
Reinsurance Segment: Gross premiums written in the segment increased 3.1% to $205.8 million driven by increase in the specialty and catastrophe lines of business.
The net premiums written rose 3.4% to $980.5 million in the quarter due to proportional and aggregate excess of loss retrocession purchases in the company’s catastrophe portfolio.
The combined ratio deteriorated by 20 bps to 77.6% due to higher acquisition and general and administrative expense ratios, partially offset by a lower net loss ratio.
Financial Update
Endurance Specialty exited third-quarter 2014 with cash and cash equivalents of $805.7 million, down 4.7% from Dec 31, 2013.
The company’s total assets of $10.14 billion increased 13% from 2013-end.
Total shareholders’ equity came in at $3.12 billion as of Sep 30, 2014, up 8.1% from the 2013-end level.
Book value per share increased 8.7% to $59.98 as of Sep 30, 2014 from $55.18 as of Dec 31, 2013.
Zacks Rank
Endurance Specialty now has a Zacks Rank #2 (Buy).
Performance of Other Property and Casualty Insurers
Everest Re Group Ltd. (RE) reported third-quarter 2014 operating earnings of $6.12 per share, way ahead of the Zacks Consensus Estimate of $4.97. Earnings were also up 45.7% year over year.
W.R. Berkley Corporation (WRB) posted third-quarter 2014 operating income of $1.06 per share, outperforming the Zacks Consensus Estimate by 16.5% and improving 37.7% year over year. The earnings beat came on the back of growth in premiums written, investment income and capital gains.
The Chubb Corporation’s (CB) third-quarter operating income of $2.17 per share surpassed the Zacks Consensus Estimate by 11.3% and improved 5% from the prior-year quarter.
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