Endurance's CEO Presents At BAML 2012 Insurance Conference (Transcript)

Call Start: 17:15

Call End: 17:44

Endurance Specialty Holdings Ltd. (ENH)

Bank of America Merrill Lynch 2012 Insurance Conference

February 15, 2012 - 5:15 p.m. ET

Executives

David Cash – Chief Executive Officer

Analysts

Jay A. Cohen – Bank of America Merrill Lynch

Presentation

Jay A. Cohen – Bank of America Merrill Lynch

Very pleased to have with us from Endurance, David Cash, CEO. Endurance is a company that seems to be, let's say, constantly changing. But if you look -- and I'm sure they have a graph of their business mix over the years. They've been very nimble. And I think it very much distinguishes this company. And they really act as they talk, and so keep that in mind. We'll have David here to really give us an update on what's been happening and a look forward as well. David?

David Cash

Thank you, Jay. Am I live? No, I can hear myself. Thank you and thank you for being here. I appreciate. Someone's got to be the last, and it's me. Number 17 of 17. I'm sure you had more than your fill today of market conditions and sort of company stories. And so, what I will do is I'll walk you through the Endurance story sort of reasonably quickly, and then I', prepared to answer questions either on our strategies or our market conditions and the way we're positioning that marketplace.

I appreciate the fact you've been willing to stay this late, so I'm not going to abuse that generosity on your part. So maybe just a start, talk a little bit about the company today. Endurance was formed at the end of 2001. We just had our 10th anniversary. I had a chance to ring the bell at the New York Stock Exchange. So long 10 years. I feel very tired but I'm pleased to have made it here. We were created in Bermuda originally at the very end of 2001.

We currently have operations through the United States, Bermuda, London, Zurich, Singapore. We operate sort of what I'll call a Bermuda insurance and reinsurance company [indiscernible]. We have today currently about $2.6 million worth of shareholder equity and $3 billion plus worth of resources to pay claims. We rated A by A.M. Best, A by Standard & Poor's. And we have an excellent rating for risk management from Standard & Poor's; one of four companies in North America that hold that rating.

We went public in 2003 in the nuclear winter of IPOs. Since that date, we've generated little north of 100% return for our shareholders, even in what would have to be described as sort of an equity-bare market. So it's not a number that necessarily I want it to be, but I think it's a very credible number in terms of the environment we've come through. Let me just talk a little bit about our company. We operate both as an insurance company and a reinsurance company.

This slide shows our premium mix across our two businesses. We generated still north of $1.9 billion of premium last year in written premium, closer to $2.5 billion of premium on a gross basis. And our business is split roughly 50/50, reinsurance and insurance. On the reinsurance side, starting in Bermuda, opened a small operation in the U.S. in 2002, and in 2002 bought the Hartford Re book of business. Towards the middle of 2003 grew that book of business significantly.

More recently, we've cycle managed that down, just given the market conditions. And then additionally, we have an operation in London. So reinsurance business, it's all brokered. It's brokered by the same kinds of brokers. We deal with different clients, but we sell roughly speaking the same kinds of process, be that in Bermuda, the U.S. or internationally. We're organized and managed geographically. We have a team in Bermuda. They're really a cat team.

The team in the U.S. is like a working layer treaty business. This tends to be less cat exposed, little more cycle exposed, little more exposed to the pricing cycle. And then the last part of our business is our international business, primarily based in Zurich. We have a small operation in London and a small operation in Singapore. This business tends to be a little more relationship oriented. It tends to sell sort of a collection of different covers to clients at the same time.

And what you tend to find is this business is less cyclical. You don't just jump into this business and jump out of it. You have to build it overtime. So it's one of those businesses that I expect to keep growing overtime. The last year has obviously been more than interesting from an international perspective. We've had no end of catastrophes. But even with that, I think our performance is sound and I would expect to see that part of our business grow going forward.

Turning to our insurance book business, this started as a Bermuda book of business. And on the slide here, this would be the business we refer to as our ERS, Endurance Risk Solutions Fortune 1000 business in Bermuda. That was started in 2002. We write excess casualty business. We write professional lines business. We write healthcare business. We tend to insure the largest corporate clients. These are Fortune 1000 clients.

These are companies that buy anywhere from $100 million to $1 billion in insurance capacity. Very cyclical. This is sort of the original Bermuda insurance business. It was first started in Bermuda in the early-90s, actually the late 80s by ACE and EXEL. It's now a large market. There are a number of players in the Bermuda market that write this business. Turning to the United States, we have two different kind of collections of business.

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