BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F Annual Dividend Rate BUSINESS DESCRIPTION Endurance Specialty Holdings Ltd., through its subsidiaries, underwrites specialty lines of personal and commercial property and casualty insurance, and reinsurance worldwide. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change 0.47 41.37 20.28 GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues 4.21 18.59 5.54 Net Income -76.11 3.75 4.60 EPS -77.95-17.67-8.13 RETURN ON EQUITY (%) Ind Avg S&P 500 Q4 2016 6.82 8.48 12.00 Q4 2015 6.41 9.82 12.28 Q4 2014 9.91 9.48 14.59 P/E COMPARISON Sector: Financial Services Sub-Industry: Reinsurance Source: S&P BUY BUY RATING SINCE 12/11/2012 TARGET PRICE $121.89 Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY Volume in Millions TARGET PRICE $121.89 2016 2017 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History 130 120 110 100 90 80 70 60 50 40 20 0 18.80 EPS ANALYSIS¹ ($) 23.66 Ind Avg 26.33 S&P 500 RECOMMENDATION We rate () a BUY. This is driven by some important positives, which we believe should have a greater impact than any nesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income. HIGHLIGHTS Despite its growing revenue, the company underperformed as compared with the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 4.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share. 's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Q1 2.17 Q2 1.68 Q3 1.52 2014 Q4 1.70 Q1 2.23 Q2 1.68 Q3 0.73 2015 NA = not available NM = not meaningful Q4 1.36 Q1 1.58 Q2 1.14 Q3 1.92 2016 1 Compustat fiscal year convention is used for all fundamental data items. Q4 0.30 Compared to its closing price of one year ago, 's share price has jumped by 41.37%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year. Net operating cash flow has increased to $356.11 million or 11.46% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -13.81%. has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, reported lower earnings of $4.94 versus $6.00 in the prior year. This year, the market expects an improvement in earnings ($6.18 versus $4.94). Report Date: PAGE 1
PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -50% 400% UNFAVORABLE -40% TPRE WMIH EBITDA Margin (TTM) VR Y FAVORABLE GLRE BCRH 40% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $163.7 Million and $9.6 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -50% 400% UNFAVORABLE MHLD 1% TPRE Earnings Yield (TTM) GLRE Y ESGR WMIH FAVORABLE VR RGA BCRH RE 11% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -16.6% and 378.3%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The US insurance industry provides a broad range of financial security products for individuals and businesses. The industry includes primary insurers, reinsurers and agency and brokerage firms. Insurance companies can be categorized into life and health, property and casualty and reinsurance. Premiums and investment income are the primary component of overall revenue. The industry is mature and dominated by large companies with intense price competition. The US insurance industry has witnessed a great deal of merger and acquisition activity in recent years. The life insurance industry remains highly competitive due to rapid product development and shortened product life-cycles. In recent years, the L&H segment has been characterized by a dramatic product shift from traditional life insurance to annuity and retirement asset management. Life insurance in the US expanded to more than $578 billion, or nearly half of total business line. This can be attributed to an increased focus on retirement and estate planning, which has led to robust sales of combined savings protection products and annuities. The trend toward the single premium business and pension and annuities products drove sales. Sweeping national health insurance reform was signed into law in 2010 that allows young people to stay on their parent s health plan, begins to close the Medicare drug plan donut hole, and phases in mandatory coverage of all Americans. Significant challenges have arisen for property and casualty insurance companies. However, the absence of any recent major casualty or natural calamity has benefited the industry. The US reinsurance market has entered a soft phase of the cycle and will remain as such assuming no major catastrophes in the coming quarters. The primary and reinsurance sectors experienced divergent pricing trends, but the reinsurance market remains relatively stable. The insurance industry is not immune to the financial troubles that plague the rest of the US economy. Despite having minor exposure to higher risk mortgage-related assets, the slowdown in the US economy may adversely impact insurers performance in the near future. Insurers face challenges related to catastrophe losses, increasing price pressure and changes in the legal and regulatory environment, all of which could erode future underwriting performance and profitability. On a positive note, US insurers may embrace international market opportunities in response to increased market saturation at the domestic level. PEER GROUP: Insurance Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) ENDURANCE SPECIALTY HOLDI 92.87 6,490 18.80 2,503.71 357.02 Y ALLEGHANY CORP 621.19 9,576 21.06 6,090.52 456.92 RE EVEREST RE GROUP LTD 234.04 9,574 9.83 5,755.70 996.34 RGA REINSURANCE GROUP AMER INC 125.78 8,092 11.65 11,521.51 701.44 GLRE GREENLIGHT CAPITAL RE LTD 21.85 680 18.36 588.37 44.88 VR VALIDUS HOLDINGS LTD 56.32 4,744 13.01 2,434.37 363.84 ESGR ENSTAR GROUP LTD 187.65 3,081 14.40 1,131.00 264.81 WMIH WMIH CORP 1.35 279 22.50 5.47 71.38 BCRH BLUE CAP REINSURANCE 18.70 164 11.47 42.60 14.30 MHLD MAIDEN HOLDINGS LTD 13.80 1,515 51.11 2,731.63 48.98 TPRE THIRD POINT REINSURANCE LTD 11.80 1,257 47.20 691.57 27.64 The peer group comparison is based on Major Reinsurance companies of comparable size. Report Date: PAGE 2
Annual Dividend Rate COMPANY DESCRIPTION Endurance Specialty Holdings Ltd., through its subsidiaries, underwrites specialty lines of personal and commercial property and casualty insurance, and reinsurance worldwide. The company's Insurance segment provides agriculture insurance covering multi-peril crop insurance, crop hail, livestock risk protection, and other agriculture risk management products, as well as casualty insurance, healthcare liability insurance, and contract and commercial surety insurance. This segment also offers professional lines of insurance products, including directors' and officers' liability, errors and omissions, employment practices liability, environmental liability, fiduciary, and pension trust liability insurance; and property insurance, inland marine, ocean marine, marine war, energy, and aviation insurance. Its Reinsurance segment provides catastrophe reinsurance for catastrophic perils primarily for property and workers' compensation business; property reinsurance for property insurance policies; and casualty reinsurance for third party liability exposures, such as automobile, general, and umbrella liabilities, as well as for workers' compensation. This segment also offers professional line of business reinsurance; and specialty line of business, including the reinsurance of aviation and space business, proportional and non-proportional reinsurance of hull and cargo insurance business, proportional and excess of loss coverages of contract and commercial surety business, personal accident coverages, political risk coverages, weather risk management products, and agriculture coverages for weather related perils, as well as protection from yield and price risks. The company distributes its products directly, as well as through independent agents, and insurance and reinsurance brokers. Endurance Specialty Holdings Ltd. was founded in 2001 and is based in Pembroke, Bermuda. Waterloo House Pembroke HM08 BMU Phone: 441-278-0400 Fax: 441-278-0401 http://www.endurance.bm Employees: 1000 STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 2.0 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than 30% of the stocks we rate. Total Return 4.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. Efficiency 3.5 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 60% of the companies we review. Price volatility 5.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. Solvency 4.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 80% of the companies we analyze. Income 3.5 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 60% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. Report Date: PAGE 3
Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial FINANCIAL ANALYSIS 's gross profit margin for the fourth quarter of its fiscal year 2016 has significantly decreased when compared to the same period a year ago. Even though sales increased, the net income has decreased. During the same period, stockholders' equity ("net worth") has remained unchanged from the same quarter last year. 1.47 Q1 FY17 6.18 E 2017(E) 6.67 E 2018(E) STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.thestreetratings.com. INCOME STATEMENT Net Sales ($mil) 602.25 577.87 EBITDA ($mil) 44.88 155.28 EBIT ($mil) 18.40 133.11 Net Income ($mil) 23.80 99.59 BALANCE SHEET Cash & Equiv. ($mil) 1,783.06 1,815.23 Total Assets ($mil) 14,122.86 13,241.53 Total Debt ($mil) 705.29 717.65 Equity ($mil) 4,882.44 4,856.26 PROFITABILITY Gross Profit Margin 18.07% 42.48% EBITDA Margin 7.45% 26.87% Operating Margin 3.06% 23.03% Sales Turnover 0.18 0.16 Return on Assets 2.52% 2.59% Return on Equity 6.82% 6.41% DEBT Current Ratio NA NA Debt/Capital 0.13 0.13 Interest Expense 10.81 10.82 Interest Coverage 1.70 12.31 SHARE DATA Shares outstanding (mil) 68 67 Div / share 0.38 0.35 EPS 0.30 1.36 Book value / share 72.20 72.70 Institutional Own % NA NA Avg Daily Volume 369,056 1,228,815 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. Report Date: PAGE 4
RATINGS HISTORY Our rating for has not changed since 12/11/2012. As of 3/23/2017, the stock was trading at a price of which is.5% below its 52-week high of $93.31 and 47.9% above its 52-week low of $62.78. 2 Year Chart BUY: $64.17 2015 2016 $100 $75 MOST RECENT RATINGS CHANGES Date Price Action From To 3/23/15 $64.17 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 3/23/2017) 42.23% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 31.14% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 26.63% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 VALUATION BUY. This stock's P/E ratio indicates a discount compared to an average of 23.66 for the Insurance industry and a discount compared to the S&P 500 average of 26.33. Conducting a second comparison, its price-to-book ratio of 1.29 indicates a significant discount versus the S&P 500 average of 2.93 and a discount versus the industry average of 1.80. The price-to-sales ratio is above the S&P 500 average and well above the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings 18.80 Peers 23.66 Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations. is trading at a discount to its peers. Price/Projected Earnings 13.93 Peers 15.01 Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations. is trading at a valuation on par with its peers. Price/Book 1.29 Peers 1.80 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 2.51 Peers 1.43 Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant premium to its industry. DISCLAIMER: Price/CashFlow 15.12 Peers 11.75 Premium. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant premium to its peers. Price to Earnings/Growth 0.74 Peers 1.48 Discount. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. trades at a significant discount to its peers. Earnings Growth lower higher -17.67 Peers -9.54 Lower. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. However, is expected to significantly trail its peers on the basis of its earnings growth rate. Sales Growth lower higher 18.59 Peers 15.12 Higher. A sales growth rate that exceeds the industry implies that a company is gaining market share. has a sales growth rate that exceeds its peers. The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at http://www.thestreet.com/static/about/terms-of-use.html. Report Date: PAGE 5