Fitch assigns first-time ratings to holding company and its subsidiaries
Fitch Ratings has initiated rating coverage on Endurance Specialty Insurance Ltd. (Endurance Bermuda) by assigning an 'A' insurer financial strength (IFS) rating. Endurance Bermuda is the principal (re)insurance operating subsidiary of Endurance Specialty Holdings Limited (Endurance). Fitch has also assigned the following first-time ratings for Endurance:
--Issuer Default Rating (IDR) 'A-';
--Senior unsecured notes 'BBB+';
--Non-cumulative perpetual preferred shares 'BBB'.
The rating outlook is stable for all ratings (full rating list follows the end of the press release).
The ratings reflect Endurance's solid profitability, earnings and cash flow benefits derived from the company's diverse book of business and the strong support the company's high-quality and liquid investment portfolio provides for its loss reserves. The ratings also contemplate adequate capitalization and a strong balance sheet.
The ratings also incorporate Fitch's belief that Endurance's underwriting margins are likely to contract in the near-to-medium term as premium rates in the company's core lines continue to face cyclical pricing pressure. Additionally, the ratings consider Endurance's exposure to large catastrophe events and potential adverse reserve development from the company's casualty lines reserves.
Endurance's first-half 2008 earnings were strong as the company generated a 14.9% net return on average equity (ROAE) and an 86.9% combined ratio that benefited from approximately 12 points of favorable loss reserve development. Viewed over the longer-term, Fitch views Endurance's underwriting profitability as generally consistent with that of the company's peers reflecting comparatively light catastrophe-related losses and favorable reserve development. Fitch's expectation is that underwriting margins industry-wide are likely to be pressured over the next 12-to-18 months and the agency expects ENH to be affected by this trend.