Best Affirms Endurance Specialty and Subs ‘A’ Ratings; Outlook Stable

March 6, 2012

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Bermuda-based Endurance Specialty Insurance Ltd. and its affiliates. Best also affirmed the ICR of “bbb” and debt ratings of the publicly traded parent, Endurance Specialty Holdings, Ltd. The outlook for all of the ratings is stable.

The ratings reflect Endurance’s “strong level of risk-adjusted capitalization, solid historical operating performance over the last few years and its specialty focused, diversified business profile,” Best explained.

The rating agency also pointed out that “Endurance has continued to focus on writing agriculture insurance, which now accounts for approximately 30 percent of the company’s net premiums written, up from 20 percent in 2009. Some of that increase can be attributed to rising commodity prices.

“The agriculture insurance business is not linked to the property/casualty pricing cycle so it can offer a balance to the total underwriting portfolio. In addition, Endurance has built a solid enterprise risk management framework that has evolved with the company. In that regard, Endurance’s losses from the rash of global catastrophes in 2011 were within Best’s expectations.”

As partial offsetting factors Best cited Endurance’s “exposure to large catastrophe losses as well as the current soft casualty market environment and uncertain financial markets. These challenges and other rating factors, which could lead to a ratings downgrade or a revision of the outlook to negative, include unfavorable operating profitability trends, outsized catastrophe or investment losses relative to expectations and peers, significant adverse loss reserve development and/or a material decline in risk-adjusted capital.”

However, Best also indicated that in the alternative there are “factors that could lead to a ratings upgrade include sustained favorable operating profitability, coupled with maintenance of strong risk-adjusted capital levels.”

Best summarized the various ratings affected by its action as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for Endurance Specialty Insurance Ltd. and its following affiliates:
— Endurance Reinsurance Corporation of America
— Endurance Worldwide Insurance Limited
— Endurance American Specialty Insurance Company
— Endurance American Insurance Company
— Endurance Risk Solutions Assurance Co.
— American Agri-Business Insurance Company

The following debt ratings have been affirmed:
Endurance Specialty Holdings, Ltd.—
— “bbb” on $335 million 7.0 percent senior unsecured notes, due 2034
— “bbb” on $200 million 6.15 percent senior unsecured notes, due 2015
— “bb+” on $200 million 7.75 percent Series A non-cumulative preferred shares
— “bb+” on $230 million 7.50 percent Series B non-cumulative preferred shares

The following indicative shelf ratings have been affirmed for debt securities available under the existing shelf registration:
Endurance Specialty Holdings, Ltd.—
— “bbb” on senior unsecured debt
— “bbb-“on subordinated debt
— “bb+” on preferred stock

Endurance Holdings Capital Trust I & II (guaranteed by Endurance Specialty Holdings, Ltd.)—
— “bb+” on preferred securities

Source: A.M. Best

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