Moody’s Lowers Endurance Specialty’s Ratings
Moody’s Investors Service has lowered the ratings of Bermuda-based Endurance Specialty Holdings Ltd and the insurance financial strength ratings of its principal operating subsidiaries [IFSR to A3 from A2]. The outlook for the ratings is stable.
Moody’s said that the rating downgrades result from a deterioration in the company’s credit profile over the past couple of years, including higher financial and operational leverage, as well as muted profitability that has been suppressed by catastrophe losses.
The ratings agency said, “The company’s common equity capital remains 12.8% below YE2010 levels, the result of $344 million in share repurchases executed in 1Q2011 and an inability to fully replenish equity capital following two heavy back-to-back catastrophe loss years in 2011 and 2012.
“While the company is performing better in 2013 and has meaningfully reduced its catastrophe risk exposure to levels more in line with its peers, Moody’s views Endurance’s overall credit profile to be more appropriately positioned at A3 for insurance financial strength at the current time.”
“In May 2013, Endurance elected John R. Charman as its Chairman and Chief Executive Officer, replacing David Cash. Mr. Charman was previously CEO of AXIS Capital Holdings Limited for 11 years following a long and distinguished track record in the Lloyd’s market.
“Mr. Charman has articulated a strategy that would enhance Endurance’s credit profile over time, in our opinion, including increasing the scale of the company, maintaining moderate peak risk exposures, improving core underwriting profitability and increasing geographic and product diversification. If successful, these strategic and operational initiatives could improve Endurance’s competitive position and its business and financial profile relative to its peers over the next few years.
According to Moody’s, Endurance’s ratings are based on the group’s good position in specialty insurance and reinsurance lines, its conservative reserving philosophy and investment profile and its sizable capital base. These strengths are tempered by the company’s weaker diversification by product and geography relative to some of its peers, weak core profitability and increased financial and operational leverage metrics relative to historical levels and by the inherent underwriting volatility in many of the company’s core lines of business, including catastrophe exposed property risks and certain casualty-based exposures.
