6 May 2014 Insurance

Endurance results stable amid wider re-positioning

Endurance Specialty posted stable results in the first quarter of 2014 amid a period of change for the business as it looks to re-balance its underwriting portfolio, seek greater diversification and buy more reinsurance protection across its business.

The company made a net profit of $96.3 million in the first quarter, a small increase on the $92.1 million in the same period the year before. Its gross premiums written were $1.15 billion, a decrease of 1.7 percent from the same period in 2013 while its net premiums written of $798.7 million represented a decrease of 12.1 percent from the same period in 2013.

The company’s combined ratio of 81.3 percent included 12.7 percentage points of favourable prior year loss reserve development. Its net investment income was $41 million, a decrease of $8.3 million from the same period in 2013.

The company’s insurance unit’s gross premiums written were virtually unchanged at $652.3 million but its net premiums written of $343 million, represented a decrease of 15.2 percent from the first quarter of 2013.

The company said strong growth in professional lines and casualty and other specialty products in this segment were offset by declines in the agriculture line of business. Driven by new global teams of specialty underwriters, gross written premiums for professional lines grew 85 percent while its casualty and other specialty lines of business expanded 32.6 percent compared with a year ago.

It said the decline in net premiums written was due to it buying significantly greater reinsurance protection at very attractive terms, including a 10 percent whole account quota share across its entire insurance segment's portfolio and stop loss protection on its agriculture insurance business.

Its reinsurance unit’s gross premiums written declined by 3.7 percent to $505.2 million while its net premiums written fell by 9.6 percent to $455.7 million.

It said the decrease in gross premiums written resulted primarily from a continued rebalancing of the portfolio as selected non-renewals and price declines in catastrophe and casualty lines of business were partially offset by growth in property, professional lines and specialty lines of business.

Catastrophe gross premiums written declined compared with a year ago reflecting lower pricing due to increased competition as well as its decision to reduce our participation on select contracts.  A 34.3 percent reduction in the casualty line of business compared to the first quarter of 2013 was the result of the non-renewal of UK motor treaties and other non-renewals of business that did not meet its profitability targets.

The bigger decline in net premiums written was because the company ceded a greater portion of its catastrophe line of business and purchased aggregate excess of loss reinsurance covering its global catastrophe portfolio.

John Charman, chairman and chief executive, said: “During the first quarter we generated strong financial results as evidenced by our annualised operating return on equity of 15 percent. The transformation of Endurance began 12 months ago and as we promised, the much improved financial and operating performance is now emerging.

“This quarter our London insurance underwriting platform is now fully staffed and we have realised significant, attractive, across-the-board premium growth from all our newly added US specialty underwriting teams. We successfully expanded our global specialty business whilst at the same time continuing the overall rebalancing and repositioning of our global reinsurance portfolio. From a strategic perspective we significantly increased our reinsurance purchasing activity across both our insurance and reinsurance portfolios to optimise the risk/ reward characteristics of our business.

“Whilst we have planned for market conditions on both sides of our balance sheet to remain extremely challenging over the next couple of years, we have deliberately positioned Endurance to outperform in this environment. We remain dedicated to achieving superior returns for our valued shareholders.”

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