Endurance Specialty Holdings Ltd ( ENH)

JPMorgan SMid Cap Conference

December 1, 2011 03:45 pm ET


Michael McGuire - CFO


Matthew Heimermann - JPMorgan Securities

Good afternoon, everyone. I’m Matt Heimermann. I cover property and casualty insurance here for JPMorgan. It’s my pleasure to introduce Michael McGuire who is the CFO of Endurance Specialty Holdings. He’s been with the company since 2003 and has held the CFO title since 2006 and before that had a career in the accounting field. And with that, I’ll turn it over.

Michael McGuire

Thanks, Matt and thank you to you and to JPMorgan for the opportunity to speak to the group and to meet with various investors over the last day. And I wanted to start with just acknowledging our forward-looking statements. I won’t read the fine print, but I’ll put it there for your reference. So please note that many things I will say today are forward-looking and please reference the Safe Harbor protections there.

So today, what I thought I’d do is give you a brief introduction to Endurance. Also to provide some thoughts about our underwriting portfolio, where we see opportunities, what we see market conditions to be. Endurance is coming very close to its 10-year anniversary in the next few weeks and it’s a milestone that we are quite proud of as a company. And we’ve weathered through some very significant volatile events in our history. And we started in Bermuda 10 years ago with $1.2 billion of capital, a few desks, a few computers and a few people and no ratings but with a vision to create a globally diversified insurer and reinsurer, with the base in Bermuda, but positions broadly.

Fast forward to where we are today, we’ve succeeded on a number of dimensions. We now have a company that has operations still on Bermuda but also in the U.S. and many locations in Europe and in Asia, a very well-diversified portfolio of insurance and reinsurance risks.

Along the way, we’ve generated very strong results since inception in spite of the volatility that we’ve seen in the financial markets as well as in, in the natural peril world. Yeah, it’s been a pretty crazy decade if we think about what’s happened, be the hurricanes, earthquakes, floods, tornadoes and whatnot. It’s been a pretty challenging set of events. When you layer on the global financial crisis that really started in ‘08 and really continues to this day to see the results that we’ve produced and the position that we currently hold, it’s a pretty strong achievement.

As I said, we do have very strong market positions and we have developed leading core product line specializations across a number of areas. And I think of catastrophe insurance, crop insurance, large risk, excess casualty insurance, just to name a few. Those are core franchise positions for us that have generated good results for us over time and ones that I expect to continue generating good results for us. I’ll get into that in a little bit later. We do have about 850 employees now globally with offices as I said, in Bermuda, the U.S. and Europe and Asia.

Our financial strength is one of our strengths as a company and we have $3.2 billion of total capital and $2.6 billion of shareholders’ equity. We do have strong ratings across the board from A.M. Best, Standard & Poor’s and Moody’s and Standard & Poor’s has recognized Endurance as one of only four companies in North America to have Excellent Enterprise Risk Management. There’s only three other companies that have achieved that level of recognition from Standard & Poor’s. As a Risk Management Company that really matters for us and it was nice to get that acknowledgment from Standard & Poor’s.

If I think about being stewards of capital, which is a key part of our strategy, we’ve done a very good job shepherding capital, growing our capital base for our customers and our clients, but also being diligent in returning that capital to our shareholders. As I said, we started with $1.2 billion of capital back in 2001. We’ve grown that capital to $2.6 billion of equity, $3.2 billion of total capital, yet during that same period, we’ve also returned $1.9 billion of capital to our shareholders in form of dividends and share repurchases. So, we’ve done a very good job, I think, of stewarding that capital and returning it to our shareholders in very short order.

We’ve generated very strong financial results along the way. On average, we’ve produced a 12.6% annualized operating return on equity and we’ve grown our book value, excluding dividends, annually 17%, since inception. Those are very, very strong performance metrics in a period when we saw pretty significant volatility in financial and catastrophe events in our lifetime. I think currently if I look at our sector, it’s increasingly showing signs of improving market conditions.

I think we’re beginning to emerge out of a low point in the cycle. Certainly being led by property lines, but we’re also starting to see it in some of the more standard line casualty insurance exposures. So, we’re starting to see that turn come. I think it’ll be a slow and steady turn as we get into 2012, but we’re seeing very positive signs. There are still pockets of competition that in cases are as aggressive, but we are seeing a more broad turn in a number of lines of business. So, we’re feeling increasingly optimistic about the way that the market is turning.

Read the rest of this transcript for free on seekingalpha.com