Endurance Issues Preliminary Q3 Earnings Analysis

Bermuda-based Endurance Specialty Holdings joined the growing list of the island’s (re)insurers who have issued statements giving preliminary details concerning their third quarter results.

In discussing the impact of the “volatile conditions in the world’s financial markets,” Endurance said its “book value per diluted common share at September 30, 2008 is expected to be within a range of $33.30 to $33.80. The decline in book value per share from December 31, 2007, excluding dividends paid in 2008, is anticipated to be between 1.4 and 2.9 percent. The anticipated decline in book value is predominantly due to losses from third quarter hurricanes as well as year to date realized and unrealized investment losses partially offset by year to date earnings.”

Endurance also indicated that it “expects to report a third quarter 2008 operating loss in a range of $0.96 to $1.15 per diluted common share. The estimated third quarter operating loss is predominantly the result of previously announced expected net losses from Hurricanes Gustav and Ike of approximately $145 million. The estimated third quarter operating loss is also expected to include previously announced mark to market losses of approximately $33 million on Endurance’s alternative investment portfolio, which are included in net investment income.

“Endurance also anticipates that its net income for the third quarter will be impacted by approximately $15 million of foreign exchange losses and net realized investment losses ranging from $30 million to $35 million. Endurance’s anticipated third quarter 2008 net realized investment losses are expected to emanate largely from other-than-temporary impairments resulting from spread widening experienced in the fixed income markets in the third quarter of 2008.”

Concerning its investments, Endurance said its “fixed maturity portfolio continues to have an average credit quality of ‘AAA’, and to date has not been materially impacted by downgrades or defaults. Endurance estimates that its fixed maturity portfolio experienced an increase in net unrealized investment losses of approximately $70 million to $75 million during the third quarter of 2008, or less than 1.4 percent of Endurance’s anticipated cash and invested assets as of September 30, 2008. The expected increase in unrealized investment losses primarily results from spread widening experienced in the fixed income markets in the third quarter of 2008.

“During the three months ended September 30, 2008, Endurance repurchased approximately 2.2 million of its common shares and share equivalents in private and open market transactions for an aggregate repurchase price of $70.1 million. For the nine months ended September 30, 2008, Endurance has repurchased approximately 3.9 million shares and share equivalents in private and open market transactions for an aggregate repurchase price of $134.6 million.”

Chairman and CEO Kenneth J. LeStrange commented: “The primary focus of our capital and investment management activities has always been to maintain strong levels of risk based capital, liquidity and financial flexibility. This focus, along with excellent execution by our investment and finance teams, has enabled Endurance to withstand the current market volatility while maintaining a secure balance sheet.

“Endurance has excellent liquidity and flexibility, supported by strong operating and investment portfolio cash flows and additional access to committed capital and liquidity through our multi year credit facility and forward equity sale. We have the capacity, the financial strength and enterprise risk management capabilities to take advantage of the opportunities presented by the current market dislocations and to assist our clients in managing the challenges in this more volatile environment.”

In addition to the bulletin Endurance noted that it is also “releasing a supplemental presentation that highlights our financial strength and provides additional details of our investment portfolio composition. This presentation will be available on Endurance’s web site at www.endurance.bm.”

Source: Endurance Specialty Holdings