Endurance Specialty Holdings Ltd. (NYSE:ENH) Q4 2014 Earnings Conference Call - Final Transcript

Feb 06, 2015 • 09:00 am ET


Endurance Specialty Holdings Ltd. (NYSE:ENH) Q4 2014 Earnings Conference Call - Final Transcript


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Good morning everyone, and welcome to the Endurance Specialty Holdings' Fourth Quarter Earnings Results Conference Call. This call is being recorded. Your lines will be in listen-only mode during the presentation. You'll have an opportunity to ask questions after the presentation. Instructions will be given at that time.

I would like to now turn the call over to Gregg Schroeder, Senior Vice President of Investor Relations and Corporate Development. Please go ahead, sir.

Gregg Schroeder

Thank you, Christy, and welcome to our call. John Charman, Chairman and Chief Executive Officer; and Mike McGuire, Chief Financial Officer will deliver our prepared remarks. (Forward-Looking Cautionary Statements)

I would now like to turn the call over to John Charman.

John Charman

Thank you, Gregg and ladies and gentlemen a very good morning to you all. Welcome to our fourth quarter earnings call. As we have reported last night, Endurance generated fourth quarter net income to common shareholders of $76.4 million and $1.70 per share, with a combined ratio of 83.2%.

For the full year of 2014, we generated net income of $315.7 million, and $7.06 per share, a combined ratio of 86%, and an annualized operating return on equity of 11.7%. Our book value per share ended the year at $61.33, up 13.6% for the year when adding back dividends paid. These strong results were achieved against a backdrop of intensifying competition and extremely low investment deals. Importantly, they were generated as we continue to make substantial investments in our global underwriting platforms.

John Charman

Strategically, 2014 was a year of great progress in the continuing transformation of endurance. We've been extremely successful in attracting and retaining some of the best talent in the industry. We now have the core of our underwriting leadership in place across our insurance and reinsurance businesses and we have substantially improved the balance, scale and quality of our underwriting portfolio.

Despite the headwinds of intensifying competition, our expanded market leading underwriting capabilities enabled us to attract new specialty business to Endurance. Gross premiums written were up 18.5% in 2014, excluding agriculture insurance, which faced declining commodity price. Net premiums written were impacted by our increased utilization of reinsurances and retrocession as we wanted to ensure we were well protected during this period of transformation and strong growth.

Going forward, we anticipate our retention levels to stabilize. The expected strong growth in gross premiums should become increasingly visible in our net writings as was seen in our insurance segment in the fourth quarter. Our focus on profitability remains steadfast. As we expand our underwriting portfolios and geographies whilst achieving greater scale and market relevance. We will continue to target more attractive specialty business while shrinking less attractive lines.

This focus has already impacted our core results as evidence by our full year insurance accident year loss ratio improving 4.4 percentage points from a year ago. With reinsurance, over the last 18 months, we have completely re-underwritten and rebalanced our portfolio with a much greater emphasis on specialty business. As a result, our full year 2014