Best Upgrades Rating of Endurance Specialty to ‘A’

A.M. Best Co. also announced that it has upgraded the financial strength rating to A (Excellent) from A- (Excellent) of another Bermuda insurer, Endurance Specialty Insurance Ltd. and its operating affiliates, and assigned them a stable outlook. The company was formed after Sept. 11 by Aon, Texas Pacific Group, Thomas H. Lee Company, Perry Capital and Capital Z (an investment vehicle of Zurich Financial Services).

“This action reflects the company’s superior operating results which stem from the development of a strong broker distribution network, selective acquisitions and the successful implementation of underwriting and risk management controls. Additionally, Endurance maintains excellent capitalization with $1.5 billion of shareholders equity at March 31, 2003, along with a highly experienced and talented management team,” said Best.

The rating agency noted that “During its first year of operation, Endurance’s book of business was split evenly between short-tail and long-tail business. The entire book produced a combined ratio of 86% in 2002, benefiting from higher market rates, light catastrophes and an unencumbered balance sheet. Combined results also included conservative reserving methodologies for the company’s long-tail casualty lines of business.”

It also acknowledged that Endurance had acquired the renewal rights to LaSalle Re’s property catastrophe business and recently entered into an agreement with the Hartford to obtain the renewal rights to selected portions of Hartford Re’s book of business. “Each acquisition was complementary to Endurance’s existing book of business and did not include the addition of any historical liabilities,” said Best.

“Endurance has established a diversified book of business, both geographically and by line. Its operating strategy focuses on broker-sourced short-tail and long-tail lines, including property per risk, property/catastrophe reinsurance, casualty treaty reinsurance, casualty individual risk and specialty lines.

In 2002, Endurance expanded its operating platform through the formation of affiliated companies in the United Kingdom and the United States. Each affiliate’s capital is protected through either quota share, stop loss or excess of loss reinsurance agreements with Endurance. Endurance successfully completed a public offering in February 2003, issuing 9.6 million shares and raising approximately $221 million in additional capital,” the announcement continued.

Best said: “Partially offsetting these strengths is potential market pressure on pricing, which could dampen expected returns and exposure to low frequency high severity property catastrophe losses. Endurance also faces the challenge of integrating the Hartford Re book of business along with some degree of uncertainty in regards to the future retention of this book of business.” The rating agency also indicated it would “continue to closely monitor Endurance’s operations and performance.”

Commenting on the ratings upgrade Endurance President and CEO Kenneth J. LeStrange stated, “We are pleased with A.M. Best’s decision to upgrade Endurance. Our strong, unencumbered balance sheet, disciplined underwriting, and specialized monoline focus have contributed greatly to establishing a company built for the long-term. A.M. Best’s decision is another important milestone for solidifying Endurance’s financial strength and longevity.”