Fitch Affirms & Withdraws Ratings for Endurance Specialty Holdings Ltd

CHICAGO--()--Fitch Ratings has affirmed and withdrawn the ratings for Endurance Specialty Holdings Ltd (ENH) along with its (re)insurance operating subsidiaries, including the Issuer Default Rating (IDR) for ENH at 'A-', and the Insurer Financial Strength (IFS) rating of Endurance Specialty Insurance Ltd. at 'A'.

At the time of the ratings withdrawal the Rating Outlook was Stable for the affirmed ratings. A full list of rating actions follows at the end of this release.

Fitch has decided to discontinue the ratings, which are uncompensated.

KEY RATING DRIVERS

Fitch's rationale for the affirmation of ENH's ratings reflects the company's favorable earnings, moderate financial leverage, and high-quality and liquid investment portfolio. The ratings also reflect the inherent earnings volatility derived from the company's exposure to catastrophes and agriculture insurance losses, potential uncertainty in the company's loss reserve estimates for long-tail business lines and recent strategic initiative to reduce the company's volatility and improve its overall profitability.

In May 2013, ENH elected John R. Charman, a well-known and experienced insurance executive, as the company's CEO and Chairman of the Board. Mr. Charman has stated that he intends to transform Endurance into a fundamentally different company in the next three to five years. In his first six months, the company has made substantial management changes, taken meaningful actions to streamline operations and is repositioning its product and geographic premium mix for future growth opportunities.

While these changes did not impact ENH's ratings, these initiatives could potentially improve the company's competitive market position and scale of its operations. However, Fitch also cautions that rapid growth can create additional risks in underwriting quality and pricing adequacy on new business, especially during a period of market competitiveness.

ENH posted net income available to common shareholders of $220 million for the first nine months of 2013, improved from $130 million in 2012 due to reduced catastrophe losses. Results for the first nine months of 2013 included a modest $65.5 million of catastrophe losses. This compares to catastrophe losses of $206.4 million for full year 2012, including $158.2 million from Hurricane Sandy.

ENH's combined ratio improved to 89.3% in the first nine months of 2013 compared with 102.3% for full-year 2012, which included 10.4 points for catastrophe losses. Excluding the impact of catastrophes (4.5 points) and favorable reserve development (10.6 points), ENH's combined ratio in the first nine months of 2013 was 95.4%, down from 97.9% for full-year 2012. This improvement was due to reduced insurance segment losses thus far in 2013, following a $57.4 million net underwriting agriculture loss in the insurance segment in 2012 due to the Midwestern U.S. drought.

Fitch believes that ENH's financial leverage ratio continues to be modest at 15.8% as of Sept. 30, 2013, down from 16.8% at Dec. 31, 2012. ENH's GAAP operating earnings-based interest and preferred dividend coverage has been volatile but adequate, averaging 4.8x from 2008 to 2012, which included negative earnings coverage in 2011 due to the increased catastrophe losses. Coverage improved to 5.2x thus far in 2013, with reduced catastrophe losses.

Fitch has affirmed and withdrawn the following ratings:

Endurance Specialty Holdings Ltd.

--IDR at 'A-';

--$199 million 6.15% senior unsecured notes due 2015 at 'BBB+';

--$335 million 7% senior unsecured notes due 2034 at 'BBB+';

--$200 million 7.75% series A non-cumulative perpetual preferred shares at 'BBB-';

--$230 million 7.5% series B non-cumulative perpetual preferred shares at 'BBB-'.

Endurance Specialty Insurance Ltd.

Endurance Reinsurance Corporation of America

Endurance American Specialty Insurance Company

Endurance American Insurance Company

American Agri-Business Insurance Company

Endurance Risk Solutions Assurance Co.

--IFS at 'A'.

Additional information is available at 'www.fitchratings.com'. The issuer did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology - Effective Sept. 19, 2012 to Oct. 18, 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688011

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=810190

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Contacts

Fitch Ratings
Primary Analyst
Brian C. Schneider, CPA, CPCU, ARe, +1 312-606-2321
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Greg Dickerson, +1 212-908-0220
Director
or
Committee Chairperson
R. Andrew Davidson, CFA, +1 312-368-3144
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Brian C. Schneider, CPA, CPCU, ARe, +1 312-606-2321
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Greg Dickerson, +1 212-908-0220
Director
or
Committee Chairperson
R. Andrew Davidson, CFA, +1 312-368-3144
Senior Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com