Endurance Q3 profits suffer from Montpelier Re acquisition costs

Insurance firm Endurance Specialty Holdings has experienced a drop in its profits in the third quarter of the year to $43.6 million compared with a profit of $68 million for the third quarter of 2014.

For the nine months ended September 30, 2015, Endurance’s profits were also down to $219.9 million versus a profit of $239.3 million for the nine months ended September 30, 2014.

Endurance completed its acquisition of Montpelier Re Holdings on July 31, 2015. As a result of the acquisition, the Bermuda-based consolidated results of operations for the third quarter of 2015 include those of Montpelier from August 1, 2015 through September 30, 2015.

Endurance’s third quarter and year to date results include $64 million and $68.5 million of one-time transaction and integration expenses associated with the acquisition of Montpelier.  In addition, Endurance recognised $350.8 million of identifiable intangible assets and $87.6 million of goodwill in connection with the acquisition of Montpelier.

Gross written premiums (GWP) for the quarter decreased by 2.6 percent compared with $642.6 million in Q3 2014. This boost was due to the firm’s insurance sector, which posted GWP of $448.6 million in the quarter, an increase of 6.7 percent from the third quarter of 2014. The reinsurance sector saw GWP fall by 5.7 percent for the third quarter of the year, compared with the same period last year, to $194 million.

Combined ratio for the quarter was 87.9 percent. This included 12.1 percentage points of favourable prior year loss reserve development, 3.8 percentage points of net catastrophe losses from 2015 events, and 11.5 percentage points of one-time corporate expenses related to the acquisition of Montpelier.

"Against a backdrop of relentless global competition coupled with extremely challenging investment market conditions, I am very pleased with our ability to generate an attractive third quarter annualised operating return on equity, excluding one-time transaction costs, of 12.3 percent,” said John Charman, chairman and chief executive officer.

“Our strong results ably reflect the high quality of our underwriting and risk management, our ongoing expense discipline as well as the benefits arising from a globally diversified specialty insurance and reinsurance platform.”