Exhibit 99.1

 

 

						Contact Investor Relations Phone: (441) 278-0988 Email: investorrelations@endurance.bm

ENDURANCE REPORTS FOURTH QUARTER 2011 FINANCIAL RESULTS

PEMBROKE, Bermuda – February 9, 2012 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported a net loss of $27.4 million and $0.88 per diluted common share for the fourth quarter of 2011 versus net income of $111.2 million and $2.09 per diluted common share for the fourth quarter of 2010.

For the year ended December 31, 2011, the net loss was $93.7 million and $2.95 per diluted common share versus net income of $364.7 million and $6.38 per diluted common share for the year ended December 31, 2010.

Operating highlights for the quarter ended December 31, 2011 were as follows:

 

•

Net premiums written of $187.9 million, an increase of 18.8% over the same period in 2010;

 

•

Combined ratio of 112.5%, which included 8.4 percentage points of favorable prior year loss reserve development and 22.0 percentage points of catastrophe losses from 2011 events;

 

•

Net investment income of $40.6 million, a decrease of $16.3 million from the same period in 2010;

 

•

An operating loss, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $31.3 million and $0.98 per diluted common share;

 

•

An operating loss on average common equity for the quarter of 1.8%; and

 

•

Book value of $50.56 per diluted common share, down 2.1% from September 30, 2011.

Operating highlights for the year ended December 31, 2011 were as follows:

 

•

Net premiums written of $1,979.8 million, an increase of 12.3% over 2010;

 

•

Combined ratio of 112.9%, which included 9.3 percentage points of favorable prior year loss reserve development and 24.5 percentage points of catastrophe losses from 2011 events;

 

•

Net investment income of $147.0 million, a decrease of $53.3 million over the same period in 2010;

 

•

An operating loss, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $128.2 million and $3.81 per diluted common share;

 

•

An operating loss on average common equity of 6.3%; and

 

•

Book value of $50.56 per diluted common share, down 4.1% from December 31, 2010.

David Cash, Chief Executive Officer, commented, “While 2011 was a challenging year with global industry catastrophe losses in excess of $100 billion, Endurance is well positioned to benefit from the improving underwriting conditions we are beginning to see in many of our businesses. I am pleased with the improved pricing we were able to achieve in our reinsurance portfolio at January 1, particularly in our catastrophe lines, and our insurance business is also starting to see positive pricing momentum in a number of places.”

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Insurance Segment

Operating highlights for Endurance’s Insurance segment for the quarter ended December 31, 2011 were as follows:

 

•

Net premiums written of $96.5 million, an increase of 18.2% from the fourth quarter of 2010;

 

•

Combined ratio of 111.0%, an increase of 24.3 percentage points from the fourth quarter of 2010; and

 

•

Favorable prior year loss reserve development of 0.2 percentage points during the current period, compared to 5.6 percentage points of favorable prior year loss reserve development in the fourth quarter of 2010.

Operating highlights for Endurance’s Insurance segment for the year ended December 31, 2011 were as follows:

 

•

Net premiums written of $1,005.5 million, an increase of 21.2% from the prior year;

 

•

Combined ratio of 100.1%, an increase of 9.5 percentage points from 2010; and

 

•

Favorable prior year loss reserve development of 7.2 percentage points during the current period, compared to 5.7 percentage points of favorable prior year loss reserve development in 2010.

The increase in net written premiums of $14.8 million in the Insurance segment in the fourth quarter of 2011 compared to the fourth quarter of 2010 resulted predominantly from increased business written within the agriculture, professional lines and casualty lines of business partially offset by modest reductions in the property and healthcare liability lines of business. For the year ended December 31, 2011, net written premiums increased $175.6 million compared to a year ago, principally due to growth within the agriculture and casualty lines, partially offset by declines in the professional, property and healthcare liability lines of business. For both the fourth quarter of 2011 and the full year 2011, growth in the agriculture line was driven by higher commodity prices compared to a year ago, while growth in the casualty line occurred in our contract binding authority business which was added in late 2010. The decline in net premiums written in the professional and healthcare liability lines for the full year 2011 was driven by increased competition, as contracts which did not meet Endurance’s return requirements were non-renewed.

The increase in the Insurance segment combined ratio in the current quarter compared to a year ago was largely driven by increased net loss and acquisition expense ratios, partially offset by a lower general and administrative expense ratio. The increase in the net loss ratio largely reflects higher losses within the agriculture line of business due to adverse growing conditions compared to a year ago. Also impacting the current quarter net loss ratio were higher losses from the property line of business caused principally by two large fire claims. The decline in the general and administrative expense ratio for the fourth quarter of 2011 was due to lower variable incentive compensation compared to a year ago, partially offset by larger expenses related to write downs on leasehold improvements and expenses related to staffing changes made in the fourth quarter of 2011.

For the full year 2011 compared to a year ago, the combined ratio increased due to a higher net loss ratio, partially offset by modestly lower acquisition and general and administrative expense ratios. The net loss ratio for the full year was higher than a year ago predominantly due to higher losses in the agriculture line of business stemming from adverse growing conditions, as well as losses within the property line of business related to Hurricane Irene. Partially offsetting the higher level of losses was a larger amount of favorable prior year loss reserve development, predominantly driven by improved 2010 results in the agriculture line of business.

 

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Reinsurance Segment

Operating highlights for Endurance’s Reinsurance segment for the quarter ended December 31, 2011 were as follows:

 

•

Net premiums written of $91.4 million, an increase of 19.5% from the fourth quarter of 2010;

 

•

Combined ratio of 114.0%, an increase of 31.2 percentage points from the fourth quarter of 2010; and

 

•

Favorable prior year loss reserve development of 16.6 percentage points during the fourth quarter of 2011, compared to 4.9 percentage points of favorable prior year loss reserve development in the fourth quarter of 2010; and

 

•

Net catastrophe losses from 2011 events of $109.9 million or 43.8 percentage points on the combined ratio.

Operating highlights for Endurance’s Reinsurance segment for the year ended December 31, 2011 were as follows:

 

•

Net premiums written of $974.3 million, an increase of 4.3% from 2010;

 

•

Combined ratio of 126.0%, an increase of 39.1 percentage points from the prior year;

 

•

Favorable prior year loss reserve development of 11.5 percentage points during the current period, compared to 8.7 percentage points of favorable prior year loss reserve development in 2010; and

 

•

Net catastrophe losses from 2011 events of $457.1 million or 49.2 percentage points on the combined ratio.

The $14.9 million increase in net premiums written in the Reinsurance segment during the fourth quarter of 2011 over the fourth quarter of 2010 resulted primarily from growth in the casualty, property and surety and other specialty lines of business. Partially offsetting this growth were declines in net premiums written within the catastrophe and aerospace and marine lines of business. The largest change in net premiums written in the current quarter compared to fourth quarter 2010 was experienced in the casualty line of business due to favorable premium adjustments and increased participation on a renewing contract in 2011. For full year 2011, net premiums written increased $40.5 million compared to full year 2010 driven by growth across the catastrophe, property and the aerospace and marines lines of business, partially offset by declines in casualty and surety and other specialty lines.

The combined ratios in the Reinsurance segment for the quarter and year ended December 31, 2011 increased compared to the same periods in 2010 due to higher net loss ratios. The higher net loss ratios resulted from a greater frequency of large loss events during 2011, including the earthquakes in New Zealand and Japan and the Queensland floods in Australia during the first quarter, spring tornadoes in the United States in the second quarter, Hurricane Irene, the Danish flood, Texas brushfires and multiple storms in the Midwest in the third quarter and the Thailand flood in the fourth quarter. Partially offsetting the increase in the net loss ratios in the current periods was the recognition of greater favorable prior year loss reserve development within the short and long tail lines of business compared to the same periods in 2010, as claims within those lines of business did not emerge as anticipated.

Investments

Endurance’s net investment income decreased 28.6% or $16.3 million for the quarter ended December 31, 2011 and 26.6% or $53.3 million for the year ended December 31, 2011 compared to the same periods in 2010. During the fourth quarter and year ended December 31, 2011, Endurance’s net investment income included mark to market gains of $6.9 million and losses of $0.7 million, respectively, on its alternative

 

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investment funds and high yield loan funds which are included in other investments, as compared to gains of $16.4 million and $40.3 million in the fourth quarter and year ended December 31, 2010. Investment income generated from Endurance’s available for sale investments declined by $7.4 million and $13.9 million for the quarter and year ended December 31, 2011 compared to the same periods in 2010. This decrease resulted from lower reinvestment rates during 2011 and the short duration of Endurance’s fixed maturity portfolio. The ending book yield on Endurance’s fixed maturity investments at December 31, 2011 was 2.68%, down from 3.13% at December 31, 2010.

At December 31, 2011, Endurance’s fixed maturity portfolio, which comprises 90.5% of Endurance’s investments, had an average credit quality of AA and a duration of 2.39 years. Endurance’s fixed maturity portfolio was in an unrealized gain position of $161.6 million at December 31, 2011, an improvement of $13.2 million from December 31, 2010. Endurance recorded net realized gains on investment sales, including impairment losses recognized in earnings, of $4.6 million and $28.2 million during the fourth quarter and year ended December 31, 2011 compared to net realized investment gains of $6.6 million and $18.5 million during the same periods in 2010.

Endurance ended the fourth quarter of 2011 with cash and invested assets of $6.3 billion, which represents a 1.9% increase from December 31, 2010. Net operating cash flow was $281.3 million for the year ended December 31, 2011 versus $407.2 million for the year ended December 31, 2010.

Capitalization and Shareholders’ Equity

At December 31, 2011, Endurance’s shareholders’ equity was $2.61 billion or $50.56 per diluted common share versus $2.85 billion or $52.74 per diluted common share at December 31, 2010. For the quarter and year ended December 31, 2011, Endurance declared and paid dividends of $0.30 and $1.20 per share, respectively. During 2011, Endurance repurchased 7.6 million of its common shares for $340.8 million and issued 9.2 million perpetual preferred shares for net proceeds of $224.0 million.

Earnings Call

Endurance will host a conference call on February 10, 2012 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 695-0608 or (719) 457-2636 (international) and entering pass code: 8149681. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through February 24, 2012 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 8149681.

The public may access a live broadcast of the conference call at the “Investors” section of Endurance’s website, www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance’s website.

A copy of Endurance’s financial supplement for the fourth quarter of 2011 will be available on Endurance’s website at www.endurance.bm shortly after the release of earnings.

Operating (loss) income, operating (loss) return on average common equity, operating (loss) income per diluted common share, operating (loss) income (attributable) available allocated to common shareholders and the combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables.

 

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About Endurance Specialty Holdings

Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes property, casualty, healthcare liability, agriculture, professional lines and surety and other specialty lines of insurance and property, catastrophe, casualty, agriculture, marine, aerospace, and surety and other specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor’s on our principal operating subsidiaries. Endurance’s headquarters are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit www.endurance.bm.

Safe Harbor for Forward-Looking Statements

Some of the statements in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “should,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 and in our most recent Quarterly Report on Form 10-Q.

Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation publicly to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands of United States dollars, except share and per share amounts)

 

			September 30,				September 30,
		December 31, 2011				December 31, 2010
Assets
Cash and cash equivalents		$	890,914			$	609,852
Fixed maturity investments, available for sale, at fair value			4,831,966				5,116,702
Short term investments, available for sale, at fair value			67,802				70,444
Equity securities, available for sale, at fair value			59,767				13,565
Other investments			432,658				376,652
Premiums receivable, net			636,727				827,609
Deferred acquisition costs			166,049				154,484
Securities lending collateral			—				59,886
Prepaid reinsurance premiums			149,670				107,977
Losses recoverable			666,928				319,349
Accrued investment income			29,708				32,934
Goodwill and intangible assets			181,828				181,954
Deferred tax assets			33,355				33,684
Receivable on pending investment sales			77,821				602
Other assets			67,422				73,711
Total Assets		$	8,292,615			$	7,979,405
Liabilities
Reserve for losses and loss expenses		$	3,824,224			$	3,319,927
Reserve for unearned premiums			932,108				842,154
Deposit liabilities			26,887				32,505
Securities lending payable			—				59,886
Reinsurance balances payable			189,488				228,860
Debt			528,118				528,411
Payable on pending investment purchases			55,243				—
Other liabilities			125,382				119,509
Total Liabilities			5,681,450				5,131,252
Shareholders’ Equity
Preferred shares
Series A, non-cumulative – 8,000,000 issued and outstanding (2010 – 8,000,000)			8,000				8,000
Series B, non-cumulative – 9,200,000 issued and outstanding (2010 – Nil)			9,200				—
Common shares
43,086,834 issued and outstanding (2010 – 47,218,468)			43,087				47,218
Additional paid-in capital			526,910				613,915
Accumulated other comprehensive income			169,130				157,151
Retained earnings			1,854,838				2,021,869
Total Shareholders’ Equity			2,611,165				2,848,153
Total Liabilities and Shareholders’ Equity		$	8,292,615			$	7,979,405
Book Value per Common Share
Dilutive common shares outstanding			43,142,277				50,210,614
Diluted book value per common share[a]		$	50.56			$	52.74

 

Note:

All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2010, which was derived from Endurance’s audited financial statements.

 

[a]	Excludes the $430 million liquidation value of the preferred shares (2010: $200 million).

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME

(in thousands of United States dollars, except share and per share amounts)

 

			September 30,				September 30,				September 30,				September 30,
		Quarter Ended								For the Year Ended
		December 31,				December 31,				December 31,				December 31,
		2011				2010				2011				2010
Revenues
Gross premiums written		$	262,966			$	189,225			$	2,467,114			$	2,053,236
Net premiums written		$	187,864			$	158,115			$	1,979,821			$	1,763,744
Change in unearned premiums			312,625				291,621				(48,428	)			(22,631	)
Net premiums earned			500,489				449,736				1,931,393				1,741,113
Other underwriting (loss) income			(1,425	)			410				(3,547	)			(1,636	)
Net investment income			40,594				56,874				147,037				200,358
Net realized and unrealized gains			5,331				7,314				31,671				22,488
Total other-than-temporary impairment losses			(751	)			(48	)			(2,659	)			(2,695	)
Portion of loss recognized in accumulated other comprehensive income			50				(663	)			(861	)			(1,249	)
Net impairment losses recognized in earnings			(701	)			(711	)			(3,520	)			(3,944	)
Total revenues			544,288				513,623				2,103,034				1,958,379
Expenses
Net losses and loss expenses			412,152				246,424				1,632,666				1,038,100
Acquisition expenses			77,157				66,133				282,911				264,228
General and administrative expenses			73,731				67,756				264,152				241,920
Amortization of intangibles			2,413				2,696				11,213				10,460
Net foreign exchange losses (gains)			233				3,476				(7,422	)			(2,989	)
Interest expense			9,088				9,053				36,254				34,762
Total expenses			574,774				395,538				2,219,774				1,586,481
(Loss) Income before income taxes			(30,486	)			118,085				(116,740	)			371,898
Income tax benefit (expense)			3,110				(6,857	)			23,006				(7,160	)
Net (loss) income			(27,376	)			111,228				(93,734	)			364,738
Preferred dividends			(8,187	)			(3,875	)			(24,125	)			(15,500	)
Net (loss) income (attributable) available to common and participating common shareholders		$	(35,563	)		$	107,353			$	(117,859	)		$	349,238
Per share data
Basic (losses) earnings per common share		$	(0.88	)		$	2.22			$	(2.95	)		$	6.73
Diluted (losses) earnings per common share		$	(0.88	)		$	2.09			$	(2.95	)		$	6.38

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

 

			September 30,				September 30,				September 30,
		For the quarter ended December 31, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	167,766			$	95,200			$	262,966
Ceded premiums written			(71,288	)			(3,814	)			(75,102	)
Net premiums written			96,478				91,386				187,864
Net premiums earned			251,101				249,388				500,489
Other underwriting loss			(493	)			(932	)			(1,425	)
Total underwriting revenues			250,608				248,456				499,064
Expenses
Net losses and loss expenses			214,681				197,471				412,152
Acquisition expenses			20,388				56,769				77,157
General and administrative expenses			43,754				29,977				73,731
			278,823				284,217				563,040
Underwriting loss		$	(28,215	)		$	(35,761	)		$	(63,976	)
Net loss ratio			85.5	%			79.2	%			82.4	%
Acquisition expense ratio			8.1	%			22.8	%			15.4	%
General and administrative expense ratio			17.4	%			12.0	%			14.7	%
Combined ratio			111.0	%			114.0	%			112.5	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

 

			September 30,				September 30,				September 30,
		For the quarter ended December 31, 2010
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	112,664			$	76,561			$	189,225
Ceded premiums written			(31,021	)			(89	)			(31,110	)
Net premiums written			81,643				76,472				158,115
Net premiums earned			205,528				244,208				449,736
Other underwriting income			4				406				410
Total underwriting revenues			205,532				244,614				450,146
Expenses
Net losses and loss expenses			129,168				117,256				246,424
Acquisition expenses			12,220				53,913				66,133
General and administrative expenses			36,812				30,944				67,756
			178,200				202,113				380,313
Underwriting income		$	27,332			$	42,501			$	69,833
Net loss ratio			62.9	%			48.0	%			54.8	%
Acquisition expense ratio			5.9	%			22.1	%			14.7	%
General and administrative expense ratio			17.9	%			12.7	%			15.1	%
Combined ratio			86.7	%			82.8	%			84.6	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

 

			September 30,				September 30,				September 30,
		For the year ended December 31, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	1,469,798			$	997,316			$	2,467,114
Ceded premiums written			(464,308	)			(22,985	)			(487,293	)
Net premiums written			1,005,490				974,331				1,979,821
Net premiums earned			981,592				949,801				1,931,393
Other underwriting loss			(3,368	)			(179	)			(3,547	)
Total underwriting revenues			978,224				949,622				1,927,846
Expenses
Net losses and loss expenses			765,119				867,547				1,632,666
Acquisition expenses			71,295				211,616				282,911
General and administrative expenses			146,115				118,037				264,152
			982,529				1,197,200				2,179,729
Underwriting loss		$	(4,305	)		$	(247,578	)		$	(251,883	)
Net loss ratio			77.9	%			91.3	%			84.6	%
Acquisition expense ratio			7.3	%			22.3	%			14.6	%
General and administrative expense ratio			14.9	%			12.4	%			13.7	%
Combined ratio			100.1	%			126.0	%			112.9	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

 

			September 30,				September 30,				September 30,
		For the year ended December 31, 2010
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	1,112,192			$	941,044			$	2,053,236
Ceded premiums written			(282,328	)			(7,164	)			(289,492	)
Net premiums written			829,864				933,880				1,763,744
Net premiums earned			821,828				919,285				1,741,113
Other underwriting income (loss)			475				(2,111	)			(1,636	)
Total underwriting revenues			822,303				917,174				1,739,477
Expenses
Net losses and loss expenses			558,040				480,060				1,038,100
Acquisition expenses			63,556				200,672				264,228
General and administrative expenses			123,335				118,585				241,920
			744,931				799,317				1,544,248
Underwriting income		$	77,372			$	117,857			$	195,229
Net loss ratio			67.9	%			52.2	%			59.6	%
Acquisition expense ratio			7.7	%			21.8	%			15.2	%
General and administrative expense ratio			15.0	%			12.9	%			13.9	%
Combined ratio			90.6	%			86.9	%			88.7	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the quarter ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			85.5	%			62.9	%			79.2	%			48.0	%			82.4	%			54.8	%
Acquisition expense ratio			8.1	%			5.9	%			22.8	%			22.1	%			15.4	%			14.7	%
General and administrative expense ratio			17.4	%			17.9	%			12.0	%			12.7	%			14.7	%			15.1	%
Combined ratio			111.0	%			86.7	%			114.0	%			82.8	%			112.5	%			84.6	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the quarter ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			0.2	%			5.6	%			16.6	%			4.9	%			8.4	%			5.2	%

Net of Prior Year Net Loss Reserve Development

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the quarter ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			85.7	%			68.5	%			95.8	%			52.9	%			90.8	%			60.0	%
Acquisition expense ratio			8.1	%			5.9	%			22.8	%			22.1	%			15.4	%			14.7	%
General and administrative expense ratio			17.4	%			17.9	%			12.0	%			12.7	%			14.7	%			15.1	%
Combined ratio			111.2	%			92.3	%			130.6	%			87.7	%			120.9	%			89.8	%

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the year ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			77.9	%			67.9	%			91.3	%			52.2	%			84.6	%			59.6	%
Acquisition expense ratio			7.3	%			7.7	%			22.3	%			21.8	%			14.6	%			15.2	%
General and administrative expense ratio			14.9	%			15.0	%			12.4	%			12.9	%			13.7	%			13.9	%
Combined ratio			100.1	%			90.6	%			126.0	%			86.9	%			112.9	%			88.7	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the year ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			7.2	%			5.7	%			11.5	%			8.7	%			9.3	%			7.3	%

Net of Prior Year Net Loss Reserve Development

 

			September 30,				September 30,				September 30,				September 30,				September 30,				September 30,
		For the year ended December 31
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			85.1	%			73.6	%			102.8	%			60.9	%			93.9	%			66.9	%
Acquisition expense ratio			7.3	%			7.7	%			22.3	%			21.8	%			14.6	%			15.2	%
General and administrative expense ratio			14.9	%			15.0	%			12.4	%			12.9	%			13.7	%			13.9	%
Combined ratio			107.3	%			96.3	%			137.5	%			95.6	%			122.2	%			96.0	%

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, excluding prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

The following tables show Endurance’s gross and net premiums written for the quarters and years ended December 31, 2011 and 2010:

 

			September 30,				September 30,				September 30,				September 30,
		Quarter Ended December 31, 2011								Quarter Ended December 31, 2010
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	46,260			$	9,121			$	6,930			$	2,372
Professional lines			45,110				38,402				36,690				33,171
Casualty			46,370				30,139				37,377				25,536
Property			18,669				8,668				22,134				11,895
Healthcare liability			10,276				9,067				10,811				9,946
Surety and other specialty			1,081				1,081				(1,278	)			(1,277	)
Subtotal Insurance		$	167,766			$	96,478			$	112,664			$	81,643
Reinsurance
Catastrophe		$	15,250			$	14,753			$	17,896			$	17,896
Casualty			59,231				59,234				47,970				47,965
Property			15,087				15,087				8,628				8,628
Aerospace and Marine			1,119				768				2,380				2,380
Surety and other specialty			4,513				1,544				(313	)			(397	)
Subtotal Reinsurance		$	95,200			$	91,386			$	76,561			$	76,472
Total		$	262,966			$	187,864			$	189,225			$	158,115

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

 

			September 30,				September 30,				September 30,				September 30,
		Year Ended December 31, 2011								Year Ended December 31, 2010
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	901,746			$	586,659			$	567,461			$	404,767
Professional lines			169,319				137,962				170,146				148,717
Casualty			205,950				137,373				167,549				107,801
Property			109,312				64,930				122,110				88,299
Healthcare liability			82,519				77,609				87,593				82,893
Surety and other specialty			952				957				(2,667	)			(2,613	)
Subtotal Insurance		$	1,469,798			$	1,005,490			$	1,112,192			$	829,864
Reinsurance
Catastrophe		$	346,021			$	329,081			$	309,886			$	305,617
Casualty			277,495				276,697				294,030				293,222
Property			266,562				266,562				224,544				224,544
Aerospace and Marine			54,591				52,335				48,761				46,696
Surety and other specialty			52,647				49,656				63,823				63,801
Subtotal Reinsurance		$	997,316			$	974,331			$	941,044			$	933,880
Total		$	2,467,114			$	1,979,821			$	2,053,236			$	1,763,744

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RECONCILIATIONS

(in thousands of United States dollars, except share and per share amounts)

The following is a reconciliation of Endurance’s net (loss) income, net (loss) income per diluted common share, net (loss) income (attributable) available allocated to common shareholders under the two-class method and annualized return on average common equity to operating (loss) income, operating (loss) income per diluted common share, operating (loss) income (attributable) available allocated to common shareholders under the two-class method and annualized operating (loss) return on average common equity (all non-GAAP measures) for the quarters and years ended December 31, 2011 and 2010:

 

			September 30,				September 30,				September 30,				September 30,
		Quarter Ended December 31,								Year Ended December 31,
		2011				2010				2011				2010
Net (loss) income		$	(27,376	)		$	111, 228			$	(93,734	)		$	364,738
Add (Less) after-tax items:
Net foreign exchange losses (gains)			208				3,496				(7,614	)			(2,967	)
Net realized and unrealized investment gains			(4,836	)			(7,176	)			(30,350	)			(20,180	)
Net impairment losses recognized in earnings			701				712				3,520				3,944
Operating (loss) income before preferred dividends		$	(31,303	)		$	108,260			$	(128,178	)		$	345,535
Preferred dividends			(8,187	)			(3,875	)			(24,125	)			(15,500	)
Operating (loss) income (attributable) available to common and participating common shareholders		$	(39,490	)		$	104,385			$	(152,303	)		$	330,035
Operating (loss) income (attributable) available allocated to common shareholders under the two-class method		$	(39,711	)		$	102,405			$	(153,264	)		$	323,800
Weighted average dilutive common shares			40,641,211				50,302,939				40,214,979				53,728,459
Operating (loss) income per diluted common share [b]		$	(0.98	)		$	2.04			$	(3.81	)		$	6.03
Average common equity [a]		$	2,193,558			$	2,683,919			$	2,414,659			$	2,617,718
Operating (loss) return on average common equity			(1.8	)%			3.9	%			(6.3	)%			12.6	%
Annualized operating (loss) return on average common equity			(7.2	)%			15.6	%			(6.3	)%			12.6	%
Net (loss) income		$	(27,376	)		$	111,228			$	(93,734	)		$	364,738
Preferred dividends			(8,187	)			(3,875	)			(24,125	)			(15,500	)
Net (loss) income (attributable) available to common and participating common shareholders		$	(35,563	)		$	107,353			$	(117,859	)		$	349,238
Net (loss) income (attributable) available allocated to common shareholders under the two-class method		$	(35,784	)		$	105,317			$	(118,820	)		$	342,643
Net (loss) income per diluted common share		$	(0.88	)		$	2.09			$	(2.95	)		$	6.38
(Loss) Return on average common equity, Net (loss) income			(1.6	)%			4.0	%			(4.9	)%			13.3	%
Annualized (loss) return on average common equity, Net (loss) income			(6.5	)%			16.0	%			(4.9	)%			13.3	%

 

[a]	Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated period, which excludes the $430 million liquidation value of the preferred shares (2010: $200 million).

 

[b]	Represents diluted (loss) income per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method.

 

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Operating (loss) income and operating (loss) income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating (loss) income (attributable) available allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating (loss) income divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating (loss) income represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Endurance believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net (loss) income and net (loss) income per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating (loss) income and operating (loss) income per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of operations in a manner similar to how management analyzes Endurance’s underlying business performance. Operating (loss) income and operating (loss) income per dilutive common share should not be viewed as substitutes for GAAP net (loss) income and net (loss) income per dilutive common share, respectively.

Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

# # #

 

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