Endurance Specialty Insurance Ltd. has been assigned an 'A' insurer financial strength (IFS) rating by Fitch Ratings.

Fitch has also assigned the first-time ratings for Endurance of Issuer Default Rating (IDR) 'A-', senior unsecured notes 'BBB+', non-cumulative perpetual preferred shares 'BBB'.

The outlook is stable for all ratings.

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, according to Fitch.

The ratings also contemplate adequate capitalisation and a strong balance sheet.

The ratings 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 percent net return on average equity and an 86.9 percent combined ratio that benefited from approximately 12 points of favourable 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.

Fitch views Endurance's investment portfolio, which at June 30, 2008 was invested almost entirely in investment grade fixed income and short-term instruments, as a high quality portfolio with strong liquidity characteristics. Additionally, Fitch views the quality of Endurance's capital base as high since the company has little exposure to reinsurance recoverables or to intangible assets.