Please ensure Javascript is enabled for purposes of website accessibility

Can Endurance Specialty Insure Future Growth?

By Dan Caplinger – Feb 1, 2016 at 12:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The reinsurance company is fighting a tough market but has hopes for better prospects ahead.

Endurance writes crop insurance. Image source: Endurance Specialty Holdings.

The reinsurance industry is full of minefields for the unwary, but it also is highly lucrative for those who are successful at it. Reinsurance and specialty-coverage insurer Endurance Specialty Holdings (ENH) has done a good job over time of producing consistent growth throughout numerous cycles in the industry. But as Endurance prepares for its fourth-quarter financial report on Wednesday, investors want to see if the company can avoid some of the pressures that peer Chubb (NYSE: CB) saw in its report. Let's take a closer look at how Endurance Specialty Holdings has done and what's ahead for the reinsurer in 2016.

Stats on Endurance Specialty

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$302.51 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Data source: Yahoo! Finance.

Which way will Endurance Specialty earnings go?
In recent months, investors have been generally positive about Endurance Specialty's earnings prospects. They've raised their fourth-quarter estimates by close to 10%, and they've boosted their full-year 2015 projections by nearly $0.75 per share, offsetting a dime-per-share cut to their 2016 consensus. The stock hasn't gone anywhere, though, falling 3% since late October.

Endurance Specialty's third-quarter results explain much of the concern that shareholders have about the insurer's future prospects. Gross premiums written climbed slightly, but an unexpected drop in net premiums written pointed to the impact of what CEO John Charman referred to as "a backdrop of relentless global competition" on Endurance's results. Net income fell by more than a third, yet some of the headwinds in Endurance's business came from the ongoing integration of its purchase of Montpelier Re.

Yet there's already evidence that the poor conditions in the reinsurance market might have continued. Chubb reported in late January that its global reinsurance division saw a 22% decrease in net premiums for its most recent quarter. Chubb's combined ratios for the quarter climbed more than 3 percentage points, and catastrophe losses accounted for most of the gain that Chubb saw. If Endurance's experience resembles Chubb's, then continued weakness in the reinsurance arena could hold back Endurance's growth as well.

Other macroeconomic factors are also likely weighing on sentiment about Endurance. The reinsurer does have some exposure to losses in the commodities sector, both through its business of writing crop insurance and because of its having policyholders in the energy industry. The potential for rising interest rates in the U.S. could put downward pressure on any bond holdings the company has, although Endurance took advantage of the low-rate environment to refinance an outstanding preferred stock issue with a new offering that pays a smaller dividend.

Still, the acquisition of Montpelier Re has had some positive impacts. In November, bond rating agency Moody's affirmed Endurance's bond ratings but changed its outlook on the company to positive. Endurance has set goals to increase the firm's scale and market presence and write more specialty insurance and reinsurance line business, and Moody's thinks that the Montpelier Re purchase improves the odds of Endurance meeting those goals sooner.

In the Endurance Specialty financial report, investors should look closely to see if it delivers another negative surprise. If the signs of weakness that Chubb saw in its reinsurance operations show up in Endurance's results as well, then investors will need to think twice about their exposure to the entire industry going forward. On the other hand, if Endurance can produce success even in a tough environment, then it will speak even more loudly to the company's reputation for excellence.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Endurance Specialty. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Endurance Specialty Holdings Ltd. Stock Quote
Endurance Specialty Holdings Ltd.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.