ENDURANCE SPECIALTY HOLDINGS LTD - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d297812d8k.htm
EX-99.1 - EXHIBIT 99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	d297812dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

FOURTH QUARTER 2011

Endurance Specialty Holdings Ltd.

Wellesley House, 90 Pitts Bay Rd.

Pembroke HM 08, Bermuda

Investor Relations

Phone: (441) 278-0988

Fax: (441) 278-0493

email: investorrelations@endurance.bm

This report is for information purposes only. It should be read in conjunction with other documents filed by Endurance Specialty Holdings Ltd. pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.

Financial Supplement Table of Contents


	Page
i. Basis of Presentation		i
I. Consolidated Financial Highlights		1
II. Consolidated Financial Statements
a. Consolidated Statements of (Loss) Income—Quarterly		2
b. Consolidated Statements of (Loss) Income—YTD		3
c. Consolidated Balance Sheets		4
III. Other Financial Information
a. Probable Maximum Loss by Zone and Peril		5
b. Segment Distribution		6
c. Consolidated Segment Data		7
d. Return on Equity Analysis		19
e. ROE Component Analysis—Annualized Premium and Investment Leverage		20
f. Investment Portfolio Information		21
g. Structured Securities Detail		22
h. Largest Twenty-Five Corporate Holdings		23
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses		24
b. Prior Year Reserve Development by Segment		25
c. Prior Year Reserve Development by Development Tail		26
d. Analysis of Unpaid Losses and Loss Expenses		27
V. Shareholder Return Analysis
a. Shareholder Return Analysis		28
b. Weighted Average Dilutive Shares Outstanding		29
c. (Losses) Earnings per Share—Two Class Method		30
d. Operating (Loss) Income Reconciliation—Two Class Method		31
e. Dilutive Shares Sensitivity Analysis		32
f. Book Value Per Share Analysis		33

VI. Regulation G		34

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:

Some of the statements in this financial supplement 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 financial supplement 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.

ENDURANCE SPECIALTY HOLDINGS LTD.

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

•

All financial information contained herein is unaudited, except the balance sheet and/or income statement data for the years ended December 31, 2010 and 2009 which was derived from the Company’s audited financial statements.

•

Unless otherwise noted, all data is in thousands, except for per share, percentage and ratio information.

•

As used in this financial supplement, “common shares” refers to our ordinary shares and class A shares, collectively.

•

Endurance Specialty Holdings Ltd., along with others in the industry, uses underwriting ratios as measures of performance. The loss ratio is the ratio of claims and claims adjustment expense to earned premiums. The acquisition expense ratio is the ratio of underwriting expenses (commissions, taxes, licenses and fees, as well as other underwriting expenses) to earned premiums. The general and administrative expense ratio is the ratio of general and administrative expenses to earned premiums. The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.

•

NM—Not meaningful.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

	September 30,		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,

		QUARTER ENDED DECEMBER 31,						FOR THE YEAR ENDED DECEMBER 31,						Previous Quarter			Previous Year to Date
		2011			2010			2011			2010			Change			Change

HIGHLIGHTS	Net (loss) income	$	(27,376	)	$	111,228		$	(93,734	)	$	364,738			(124.6	)%		(125.7	)%
	Net (loss) income (attributable) available to common and participating common shareholders		(35,563	)		107,353			(117,859	)		349,238			(133.1	)%		(133.7	)%
	Net (loss) income allocated to common shareholders		(35,784	)		105,317			(118,820	)		342,643			(134.0	)%		(134.7	)%
	Operating (loss) income [a]		(31,303	)		108,260			(128,178	)		345,535			(128.9	)%		(137.1	)%
	Operating (loss) income (attributable) available to common and participating common shareholders [a]		(39,490	)		104,385			(152,303	)		330,035			(137.8	)%		(146.1	)%
	Operating (loss) income allocated to common shareholders [a]		(39,711	)		102,405			(153,264	)		323,800			(138.8	)%		(147.3	)%
	Operating cash flow		(56,214	)		16,594			281,285			407,174			(438.8	)%		(30.9	)%
	Net investment income		40,594			56,874			147,037			200,358			(28.6	)%		(26.6	)%
	Gross premiums written		262,966			189,225			2,467,114			2,053,236			39.0	%		20.2	%
	Net premiums written		187,864			158,115			1,979,821			1,763,744			18.8	%		12.3	%
	Net premiums earned		500,489			449,736			1,931,393			1,741,113			11.3	%		10.9	%
	Total assets		8,292,615			7,979,405			8,292,615			7,979,405			3.9	%		3.9	%
	Total shareholders’ equity		2,611,165			2,848,153			2,611,165			2,848,153			(8.3	)%		(8.3	)%
PER SHARE AND SHARES DATA	Basic (losses) earnings per common share
	Net (loss) income (as reported)	$	(0.88	)	$	2.22		$	(2.95	)	$	6.73			(139.6	)%		(143.8	)%
	Operating (loss) income (as reported) [a]	$	(0.98	)	$	2.16		$	(3.81	)	$	6.36			(145.4	)%		(159.9	)%
	Diluted (losses) earnings per common share
	Net (loss) income (as reported)	$	(0.88	)	$	2.09		$	(2.95	)	$	6.38			(142.1	)%		(146.2	)%
	Operating (loss) income (as reported) [a]	$	(0.98	)	$	2.04		$	(3.81	)	$	6.03			(148.0	)%		(163.2	)%

As Reported	Weighted average common shares outstanding		40,641			47,385			40,215			50,882			(14.2	)%		(21.0	)%
	Weighted average common shares outstanding and dilutive potential common shares [e]		40,641			50,303			40,215			53,728			(19.2	)%		(25.2	)%
	Common dividends paid per share	$	0.30		$	0.25		$	1.20		$	1.00			20.0	%		20.0	%
Book Value Per	Book value [b]	$	51.48		$	57.25		$	51.48		$	57.25			(10.1	)%		(10.1	)%
Common Share	Diluted book value (treasury stock method) [b]	$	50.56		$	52.74		$	50.56		$	52.74			(4.1	)%		(4.1	)%

FINANCIAL RATIOS	Return on average common equity (ROAE), net (loss) income [c]		(1.6	)%		4.0	%		(4.9	)%		13.3	%		(5.6	)		(18.2	)
	ROAE, operating (loss) income [a] [c]		(1.8	)%		3.9	%		(6.3	)%		12.6	%		(5.7	)		(18.9	)
	Return on beg. common equity (ROBE), net (loss) income [d]		(1.6	)%		3.9	%		(4.5	)%		13.5	%		(5.5	)		(18.0	)
	ROBE, operating (loss) income [a] [d]		(1.8	)%		3.8	%		(5.8	)%		12.8	%		(5.6	)		(18.6	)

	Annualized ROAE, net (loss) income [c]		(6.5	)%		16.0	%		(4.9	)%		13.3	%		(22.5	)		(18.2	)
	Annualized ROAE, operating (loss) income [a] [c]		(7.2	)%		15.6	%		(6.3	)%		12.6	%		(22.8	)		(18.9	)
	Annualized ROBE, net (loss) income [d]		(6.4	)%		15.6	%		(4.5	)%		13.5	%		(22.0	)		(18.0	)
	Annualized ROBE, operating (loss) income [a] [d]		(7.2	)%		15.2	%		(5.8	)%		12.8	%		(22.4	)		(18.6	)
	Annualized investment yield		2.6	%		3.3	%		2.4	%		3.3	%		(0.7	)		(0.9	)

GAAP	Loss ratio		82.4	%		54.8	%		84.6	%		59.6	%		27.6			25.0
	Acquisition expense ratio		15.4	%		14.7	%		14.6	%		15.2	%		0.7			(0.6	)
	General and administrative expense ratio		14.7	%		15.1	%		13.7	%		13.9	%		(0.4	)		(0.2	)

	Combined ratio		112.5	%		84.6	%		112.9	%		88.7	%		27.9			24.2

[a]

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. Please see page 31 for a reconciliation to net (loss) income.

[b]

For detailed calculations, please refer to page 33.

[c]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the $430 million liquidation value of the preferred shares (year to date beginning liquidation value $200 million).

[d]

Beginning common equity for the stated periods excludes the liquidation value of the preferred shares (quarter to date beginning liquidation value $430 million, year to date beginning liquidation value $200 million).

[e]

Warrants and options that are anti-dilutive are not included in the calculation of diluted shares outstanding. Warrants and options are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected as additional treasury method repurchases.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME—QUARTERLY

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	QUARTERS ENDED
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	262,966		$	700,866		$	502,924		$	1,000,358		$	189,225		$	209,367
Premiums ceded		(75,102	)		(149,539	)		(61,166	)		(201,486	)		(31,110	)		(62,925	)

Net premiums written	$	187,864		$	551,327		$	441,758		$	798,872		$	158,115		$	146,442
Change in unearned premiums		312,625			10,166			44,820			(416,039	)		291,621			247,501

Net premiums earned	$	500,489		$	561,493		$	486,578		$	382,833		$	449,736		$	393,943
Other underwriting (loss) income		(1,425	)		(2,141	)		1,088			(1,069	)		410			(284	)

Total underwriting revenues	$	499,064		$	559,352		$	487,666		$	381,764		$	450,146		$	393,659

UNDERWRITING EXPENSES
Net losses and loss expenses	$	412,152		$	456,691		$	361,970		$	401,853		$	246,424		$	164,005
Acquisition expenses		77,157			72,249			67,887			65,618			66,133			72,821
General and administrative expenses		73,731			58,574			65,886			65,961			67,756			57,932

Total underwriting expenses	$	563,040		$	587,514		$	495,743		$	533,432		$	380,313		$	294,758

Underwriting (loss) income	$	(63,976	)	$	(28,162	)	$	(8,077	)	$	(151,668	)	$	69,833		$	98,901

OTHER OPERATING REVENUE
Net investment income	$	40,594		$	14,100		$	39,842		$	52,501		$	56,874		$	59,257
Interest expense		(9,088	)		(9,055	)		(9,057	)		(9,054	)		(9,053	)		(7,541	)
Amortization of intangibles		(2,413	)		(2,976	)		(3,026	)		(2,798	)		(2,696	)		(2,699	)

Total other operating revenue	$	29,093		$	2,069		$	27,759		$	40,649		$	45,125		$	49,017

(LOSS) INCOME BEFORE OTHER ITEMS	$	(34,883	)	$	(26,093	)	$	19,682		$	(111,019	)	$	114,958		$	147,918
OTHER
Net foreign exchange (losses) gains	$	(233	)	$	4,085		$	(3,348	)	$	6,918		$	(3,476	)	$	(1,008	)
Net realized and unrealized investment gains		5,331			1,033			21,532			3,775			7,314			3,166

Total other-than-temporary impairment losses		(751	)		(168	)		(484	)		(1,256	)		(48	)		(561	)
Portion of loss recognised in other comprehensive income		50			(72	)		(448	)		(391	)		(663	)		(423	)

Net impairment losses recognised in (losses) earnings [a]		(701	)		(240	)		(932	)		(1,647	)		(711	)		(984	)

Income tax benefit (expense)		3,110			1,197			4,143			14,556			(6,857	)		5,733

NET (LOSS) INCOME	$	(27,376	)	$	(20,018	)	$	41,077		$	(87,417	)	$	111,228		$	154,825
Preferred dividends		(8,187	)		(8,188	)		(3,875	)		(3,875	)		(3,875	)		(3,875	)


NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	(35,563	)	$	(28,206	)	$	37,202		$	(91,292	)	$	107,353		$	150,950


KEY RATIOS/PER SHARE DATA

Loss ratio		82.4	%		81.3	%		74.4	%		105.0	%		54.8	%		41.6	%
Acquisition expense ratio		15.4	%		12.9	%		14.0	%		17.1	%		14.7	%		18.5	%
General and administrative expense ratio		14.7	%		10.4	%		13.5	%		17.2	%		15.1	%		14.7	%

Combined ratio		112.5	%		104.6	%		101.9	%		139.3	%		84.6	%		74.8	%


Basic (losses) earnings per common share	$	(0.88	)	$	(0.71	)	$	0.92		$	(2.25	)	$	2.22		$	2.69
Diluted (losses) earnings per common share	$	(0.88	)	$	(0.71	)	$	0.87		$	(2.25	)	$	2.09		$	2.56

ROAE, net (loss) income [b]		(1.6	)%		(1.3	)%		1.7	%		(3.8	)%		4.0	%		5.9	%

[a]

Effective April 1, 2009, the Company adopted new accounting guidance related to the recognition and presentation of other-than-temporary impairments, which required the Company to identify whether an investment was in an unrealized loss position due to credit or non-credit related factors. Only credit related impairments are recognized in earnings.

[b]

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME—YTD

		September 30,			September 30,			September 30,
	YEAR ENDED
	DEC. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	2,467,114		$	2,053,236		$	2,021,450
Premiums ceded		(487,293	)		(289,492	)		(415,400	)

Net premiums written	$	1,979,821		$	1,763,744		$	1,606,050
Change in unearned premiums		(48,428	)		(22,631	)		27,142

Net premiums earned	$	1,931,393		$	1,741,113		$	1,633,192
Other underwriting (loss) income		(3,547	)		(1,636	)		3,914

Total underwriting revenues	$	1,927,846		$	1,739,477		$	1,637,106

UNDERWRITING EXPENSES
Net losses and loss expenses	$	1,632,666		$	1,038,100		$	866,640
Acquisition expenses		282,911			264,228			267,971
General and administrative expenses		264,152			241,920			237,154

Total underwriting expenses	$	2,179,729		$	1,544,248		$	1,371,765

Underwriting (loss) income	$	(251,883	)	$	195,229		$	265,341

OTHER OPERATING REVENUE
Net investment income	$	147,037		$	200,358		$	284,200
Interest expense		(36,254	)		(34,762	)		(30,174	)
Amortization of intangibles		(11,213	)		(10,460	)		(10,463	)

Total other operating revenue	$	99,570		$	155,136		$	243,563

(LOSS) INCOME BEFORE OTHER ITEMS	$	(152,313	)	$	350,365		$	508,904
OTHER
Net foreign exchange gains	$	7,422		$	2,989		$	29,740
Net realized and unrealized investment gains		31,671			22,488			6,303

Total other-than-temporary impairment losses		(2,659	)		(2,695	)		(50,993	)
Portion of loss recognised in other comprehensive income		(861	)		(1,249	)		30,742

Net impairment losses recognised in (losses) earnings [a]		(3,520	)		(3,944	)		(20,251	)

Income tax benefit (expense)		23,006			(7,160	)		11,408

NET (LOSS) INCOME	$	(93,734	)	$	364,738		$	536,104
Preferred dividends		(24,125	)		(15,500	)		(15,500	)

NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	(117,859	)	$	349,238		$	520,604


KEY RATIOS/PER SHARE DATA

Loss ratio		84.6	%		59.6	%		53.1	%
Acquisition expense ratio		14.6	%		15.2	%		16.4	%
General and administrative expense ratio		13.7	%		13.9	%		14.5	%

Combined ratio		112.9	%		88.7	%		84.0	%


Basic (losses) earnings per common share	$	(2.95	)	$	6.73		$	9.14
Diluted (losses) earnings per common share	$	(2.95	)	$	6.38		$	8.69

ROAE, net (loss) income [b]		(4.9	)%		13.3	%		22.7	%

[a]

[b]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares (liquidation value of $200 million as of December 31, 2010 and 2009, liquidation value of $430 million as of December 31, 2011).

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

		September 30,			September 30,			September 30,			September 30,			September 30,
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010
ASSETS
Cash and cash equivalents	$	890,914		$	623,944		$	750,844		$	568,770		$	609,852
Fixed maturity investments available for sale, at fair value		4,831,966			4,998,142			4,961,948			5,014,226			5,116,702
Short term investments available for sale, at fair value		67,802			323,119			303,895			48,186			70,444
Equity securities available for sale, at fair value		59,767			49,323			32,322			25,333			13,565
Other investments		432,658			386,785			395,078			401,450			376,652
Premiums receivable, net		636,727			1,192,455			1,154,480			1,049,129			827,609
Deferred acquisition costs		166,049			203,455			182,870			178,486			154,484
Securities lending collateral		—			—			84,652			72,657			59,886
Prepaid reinsurance premiums		149,670			204,961			198,708			248,275			107,977
Losses recoverable		666,928			479,132			369,081			340,908			319,349
Accrued investment income		29,708			30,851			31,189			29,164			32,934
Goodwill and intangible assets		181,828			183,857			186,835			189,501			181,954
Deferred tax assets		33,355			40,253			38,144			49,370			33,684
Receivable on pending investment sales		77,821			37,947			3,685			128,867			602
Other assets		67,422			80,013			66,309			71,859			73,711

TOTAL ASSETS	$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181		$	7,979,405


LIABILITIES
Reserve for losses and loss expenses	$	3,824,224		$	3,910,537		$	3,748,124		$	3,566,198		$	3,319,927
Reserve for unearned premiums		932,108			1,299,864			1,304,146			1,398,610			842,154
Deposit liabilities		26,887			28,860			30,300			32,768			32,505
Reinsurance balances payable		189,488			244,769			209,548			143,305			228,860
Securities lending payable		—			—			84,652			72,657			59,886
Debt		528,118			528,664			528,540			528,569			528,411
Payable on pending investment purchases		55,243			56,496			80,532			164,744			—
Other liabilities		125,382			129,097			103,922			101,066			119,509

TOTAL LIABILITIES	$	5,681,450		$	6,198,287		$	6,089,764		$	6,007,917		$	5,131,252

SHAREHOLDERS’ EQUITY
Preferred shares
Series A, non-cumulative	$	8,000		$	8,000		$	8,000		$	8,000		$	8,000
Series B, non-cumulative		9,200			9,200			9,200			—			—
Common shares		43,087			40,517			40,509			40,325			47,218
Additional paid-in capital		526,910			512,323			509,165			289,920			613,915
Accumulated other comprehensive income		169,130			162,584			159,720			151,386			157,151
Retained earnings		1,854,838			1,903,326			1,943,682			1,918,633			2,021,869

TOTAL SHAREHOLDERS’ EQUITY	$	2,611,165		$	2,635,950		$	2,670,276		$	2,408,264		$	2,848,153

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181		$	7,979,405


Book value per common share	$	51.48		$	55.47		$	56.35		$	55.91		$	57.25
Diluted book value per common share (treasury stock method)	$	50.56		$	51.63		$	52.20		$	51.52		$	52.74

RATIOS
Debt-to-capital		16.8	%		16.7	%		16.5	%		18.0	%		15.6	%

ENDURANCE SPECIALTY HOLDINGS LTD.

Probable Maximum Loss by Zone and Peril

(in millions of dollars)

Largest 1 in 100 year PML as of January 1, 2012 is equal to 22.0% of Shareholders’ Equity as of December 31, 2011

	September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
		Estimated Occurrence Net Loss as of January 1, 2012										Jan. 1, 2011		Jan. 1, 2010
Zone	Peril	10 Year Return Period		25 Year Return Period		50 Year Return Period		100 Year Return Period		250 Year Return Period		100 Year Return Period		100 Year Return Period

United States	Hurricane*	$	288	$	401	$	484	$	574	$	703	$	567	$	592
Europe	Windstorm		118		213		294		384		508		463		486
California	Earthquake		46		227		337		409		539		456		430
Japan	Windstorm		51		160		234		317		365		363		348
Northwest U.S.	Earthquake		1		10		64		206		369		238		235
Japan	Earthquake		32		110		147		189		279		143		142
United States	Tornado/Hail		52		78		100		123		157		84		88
Australia	Earthquake		—		3		23		73		164		71		65
New Zealand	Earthquake		—		2		11		29		58		44		32
Australia	Windstorm		1		8		23		48		90		36		39
New Madrid	Earthquake		—		—		1		12		102		12		11

The net loss estimates by zone above represent estimated losses related to our property, catastrophe and aerospace and marine lines of business, based upon our catastrophe models and assumptions regarding the location, size, magnitude, and frequency of the catastrophe events utilized to determine the above estimates. The net loss estimates are presented on an occurrence basis, before income tax and net of reinsurance recoveries, if applicable. Return period refers to the frequency with which the related size of a catastrophic event is expected to occur.

Actual realized catastrophic losses could differ materially from our net loss estimates and our net loss estimates should not be considered as representative of the actual losses that we may incur in connection with any particular catastrophic event. The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by management’s assumptions regarding event characteristics, construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurance’s underwriting portfolio risk control mechanisms and other factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 and our most recent Quarterly Report on Form 10-Q.

*	United States Windstorm estimated net losses as of January 1, 2012 are based on RMS version 11.0

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE YEAR ENDED DECEMBER 31, 2011

Net Premiums Written = $1,980 million

[a]

Other specialty includes the agriculture line in the Insurance segment and aerospace and marine and surety and other specialty lines in the Reinsurance segment.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED
	DEC. 31, 2011									DEC. 31, 2010
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	167,766		$	95,200		$	262,966		$	112,664		$	76,561		$	189,225

Net premiums written	$	96,478		$	91,386		$	187,864		$	81,643		$	76,472		$	158,115

Net premiums earned	$	251,101		$	249,388		$	500,489		$	205,528		$	244,208		$	449,736
Other underwriting (loss) income		(493	)		(932	)		(1,425	)		4			406			410

Total underwriting revenues	$	250,608		$	248,456		$	499,064		$	205,532		$	244,614		$	450,146


UNDERWRITING EXPENSES
Net losses and loss expenses	$	214,681		$	197,471		$	412,152		$	129,168		$	117,256		$	246,424
Acquisition expenses		20,388			56,769			77,157			12,220			53,913			66,133
General and administrative expenses		43,754			29,977			73,731			36,812			30,944			67,756

Total expenses	$	278,823		$	284,217		$	563,040		$	178,200		$	202,113		$	380,313

UNDERWRITING (LOSS) INCOME	$	(28,215	)	$	(35,761	)	$	(63,976	)	$	27,332		$	42,501		$	69,833


GAAP RATIOS
Loss ratio		85.5	%		79.2	%		82.4	%		62.9	%		48.0	%		54.8	%
Acquisition expense ratio		8.1	%		22.8	%		15.4	%		5.9	%		22.1	%		14.7	%
General and administrative expense ratio		17.4	%		12.0	%		14.7	%		17.9	%		12.7	%		15.1	%

Combined ratio AS REPORTED		111.0	%		114.0	%		112.5	%		86.7	%		82.8	%		84.6	%


Effect of favorable prior accident year reserve development		0.2	%		16.6	%		8.4	%		5.6	%		4.9	%		5.2	%


Combined ratio net of prior accident year reserve development		111.2	%		130.6	%		120.9	%		92.3	%		87.7	%		89.8	%

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	167,766		$	450,451		$	225,750		$	625,831		$	112,664		$	150,471

Net premiums written	$	96,478		$	303,210		$	173,506		$	432,296		$	81,643		$	88,432

Net premiums earned	$	251,101		$	318,602		$	249,397		$	162,492		$	205,528		$	191,151
Other underwriting (loss) income		(493	)		(2,875	)		—			—			4			89

Total underwriting revenues	$	250,608		$	315,727		$	249,397		$	162,492		$	205,532		$	191,240


UNDERWRITING EXPENSES
Net losses and loss expenses	$	214,681		$	260,206		$	191,396		$	98,836		$	129,168		$	119,297
Acquisition expenses		20,388			18,738			15,861			16,308			12,220			18,619
General and administrative expenses		43,754			29,328			36,227			36,806			36,812			28,813

Total expenses	$	278,823		$	308,272		$	243,484		$	151,950		$	178,200		$	166,729


UNDERWRITING (LOSS) INCOME	$	(28,215	)	$	7,455		$	5,913		$	10,542		$	27,332		$	24,511


GAAP RATIOS
Loss ratio		85.5	%		81.7	%		76.7	%		60.8	%		62.9	%		62.4	%
Acquisition expense ratio		8.1	%		5.9	%		6.4	%		10.0	%		5.9	%		9.7	%
General and administrative expense ratio		17.4	%		9.2	%		14.5	%		22.7	%		17.9	%		15.1	%

Combined ratio AS REPORTED		111.0	%		96.8	%		97.6	%		93.5	%		86.7	%		87.2	%


Effect of favorable prior accident year reserve development		0.2	%		3.9	%		9.3	%		21.3	%		5.6	%		11.2	%

Combined ratio net of prior accident year reserve development		111.2	%		100.7	%		106.9	%		114.8	%		92.3	%		98.4	%

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA

		Septe			Septe			Septe			Septe			Septe			Septe
	FOR THE QUARTERS ENDED
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	95,200		$	250,415		$	277,174		$	374,527		$	76,561		$	58,896

Net premiums written	$	91,386		$	248,117		$	268,252		$	366,576		$	76,472		$	58,010

Net premiums earned	$	249,388		$	242,891		$	237,181		$	220,341		$	244,208		$	202,792
Other underwriting (loss) income		(932	)		734			1,088			(1,069	)		406			(373	)

Total underwriting revenues	$	248,456		$	243,625		$	238,269		$	219,272		$	244,614		$	202,419


UNDERWRITING EXPENSES
Net losses and loss expenses	$	197,471		$	196,485		$	170,574		$	303,017		$	117,256		$	44,708
Acquisition expenses		56,769			53,511			52,026			49,310			53,913			54,202
General and administrative expenses		29,977			29,246			29,659			29,155			30,944			29,119

Total expenses	$	284,217		$	279,242		$	252,259		$	381,482		$	202,113		$	128,029


UNDERWRITING (LOSS) INCOME	$	(35,761	)	$	(35,617	)	$	(13,990	)	$	(162,210	)	$	42,501		$	74,390


GAAP RATIOS
Loss ratio		79.2	%		81.0	%		71.9	%		137.5	%		48.0	%		22.0	%
Acquisition expense ratio		22.8	%		22.0	%		22.0	%		22.4	%		22.1	%		26.7	%
General and administrative expense ratio		12.0	%		12.0	%		12.5	%		13.2	%		12.7	%		14.4	%

Combined ratio AS REPORTED		114.0	%		115.0	%		106.4	%		173.1	%		82.8	%		63.1	%


Effect of favorable prior accident year reserve development		16.6	%		13.2	%		9.1	%		6.4	%		4.9	%		9.7	%

Combined ratio net of prior accident year reserve development		130.6	%		128.2	%		115.5	%		179.5	%		87.7	%		72.8	%

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS

		September 30,		September 30,		September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED
	DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	46,260	$	289,656	$	57,125		$	508,705		$	6,930		$	33,430
Professional lines		45,110		39,559		49,181			35,469			36,690			49,915
Casualty		46,370		57,520		63,178			38,882			37,377			31,680
Property		18,669		30,049		35,904			24,690			22,134			26,479
Healthcare liability		10,276		33,652		20,454			18,137			10,811			9,650
Surety and other specialty		1,081		15		(92	)		(52	)		(1,278	)		(683	)

TOTAL INSURANCE	$	167,766	$	450,451	$	225,750		$	625,831		$	112,664		$	150,471


REINSURANCE SEGMENT
Catastrophe	$	15,250	$	46,275	$	146,249		$	138,247		$	17,896		$	13,939
Casualty		59,231		56,293		45,619			116,352			47,970			34,543
Property		15,087		129,203		52,185			70,087			8,628			9,710
Aerospace and Marine		1,119		5,891		26,743			20,838			2,380			1,716
Surety and other specialty		4,513		12,753		6,378			29,003			(313	)		(1,012	)

TOTAL REINSURANCE	$	95,200	$	250,415	$	277,174		$	374,527		$	76,561		$	58,896


REPORTED TOTALS	$	262,966	$	700,866	$	502,924		$	1,000,358		$	189,225		$	209,367

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS

		September 30,		September 30,		September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED
	DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	9,121	$	185,017	$	46,049		$	346,472		$	2,372		$	697
Professional lines		38,402		30,812		37,624			31,124			33,171			44,456
Casualty		30,139		37,664		43,811			25,759			25,536			19,875
Property		8,668		17,681		25,996			12,585			11,895			14,932
Healthcare liability		9,067		32,021		20,115			16,406			9,946			9,129
Surety and other specialty		1,081		15		(89	)		(50	)		(1,277	)		(657	)

TOTAL INSURANCE	$	96,478	$	303,210	$	173,506		$	432,296		$	81,643		$	88,432


REINSURANCE SEGMENT
Catastrophe	$	14,753	$	43,868	$	139,337		$	131,123		$	17,896		$	12,753
Casualty		59,234		56,292		45,617			115,554			47,965			34,537
Property		15,087		129,203		52,185			70,087			8,628			9,710
Aerospace and Marine		768		6,002		24,726			20,839			2,380			1,721
Surety and other specialty		1,544		12,752		6,387			28,973			(397	)		(711	)

TOTAL REINSURANCE	$	91,386	$	248,117	$	268,252		$	366,576		$	76,472		$	58,010


REPORTED TOTALS	$	187,864	$	551,327	$	441,758		$	798,872		$	158,115		$	146,442

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS

		September 30,		September 30,		September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED
	DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	146,068	$	215,830	$	142,952		$	59,808		$	100,177		$	81,065
Professional lines		37,580		34,343		37,788			36,175			37,167			39,948
Casualty		30,765		32,343		28,735			29,742			28,415			23,525
Property		16,735		16,636		19,566			16,593			20,362			16,929
Healthcare liability		19,168		19,435		20,445			20,224			20,684			19,943
Surety and other specialty		785		15		(89	)		(50	)		(1,277	)		9,741

TOTAL INSURANCE	$	251,101	$	318,602	$	249,397		$	162,492		$	205,528		$	191,151


REINSURANCE SEGMENT
Catastrophe	$	82,197	$	86,395	$	81,747		$	76,335		$	79,617		$	75,937
Casualty		73,838		68,882		70,441			64,953			74,702			55,805
Property		67,911		62,519		58,643			52,452			64,229			46,829
Aerospace and Marine		13,052		12,236		13,154			13,587			11,312			11,155
Surety and other specialty		12,390		12,859		13,196			13,014			14,348			13,066

TOTAL REINSURANCE	$	249,388	$	242,891	$	237,181		$	220,341		$	244,208		$	202,792


REPORTED TOTALS	$	500,489	$	561,493	$	486,578		$	382,833		$	449,736		$	393,943

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011									DEC. 31, 2010
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	1,469,798		$	997,316		$	2,467,114		$	1,112,192		$	941,044		$	2,053,236

Net premiums written	$	1,005,490		$	974,331		$	1,979,821		$	829,864		$	933,880		$	1,763,744

Net premiums earned	$	981,592		$	949,801		$	1,931,393		$	821,828		$	919,285		$	1,741,113
Other underwriting (loss) income		(3,368	)		(179	)		(3,547	)		475			(2,111	)		(1,636	)

Total underwriting revenues	$	978,224		$	949,622		$	1,927,846		$	822,303		$	917,174		$	1,739,477


UNDERWRITING EXPENSES
Net losses and loss expenses	$	765,119		$	867,547		$	1,632,666		$	558,040		$	480,060		$	1,038,100
Acquisition expenses		71,295			211,616			282,911			63,556			200,672			264,228
General and administrative expenses		146,115			118,037			264,152			123,335			118,585			241,920

Total expenses	$	982,529		$	1,197,200		$	2,179,729		$	744,931		$	799,317		$	1,544,248


UNDERWRITING (LOSS) INCOME	$	(4,305	)	$	(247,578	)	$	(251,883	)	$	77,372		$	117,857		$	195,229


GAAP RATIOS
Loss ratio		77.9	%		91.3	%		84.6	%		67.9	%		52.2	%		59.6	%
Acquisition expense ratio		7.3	%		22.3	%		14.6	%		7.7	%		21.8	%		15.2	%
General and administrative expense ratio		14.9	%		12.4	%		13.7	%		15.0	%		12.9	%		13.9	%

Combined ratio AS REPORTED		100.1	%		126.0	%		112.9	%		90.6	%		86.9	%		88.7	%


Effect of favorable prior accident year reserve development		7.2	%		11.5	%		9.3	%		5.7	%		8.7	%		7.3	%


Combined ratio net of prior accident year reserve development		107.3	%		137.5	%		122.2	%		96.3	%		95.6	%		96.0	%

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA

		September 30,			September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	1,469,798		$	1,112,192		$	1,152,150

Net premiums written	$	1,005,490		$	829,864		$	740,310

Net premiums earned	$	981,592		$	821,828		$	823,703
Other underwriting (loss) income		(3,368	)		475			3,533

Total underwriting revenues	$	978,224		$	822,303		$	827,236


UNDERWRITING EXPENSES
Net losses and loss expenses	$	765,119		$	558,040		$	553,008
Acquisition expenses		71,295			63,556			84,724
General and administrative expenses		146,115			123,335			119,766

Total expenses	$	982,529		$	744,931		$	757,498


UNDERWRITING (LOSS) INCOME	$	(4,305	)	$	77,372		$	69,738


GAAP RATIOS
Loss ratio		77.9	%		67.9	%		67.1	%
Acquisition expense ratio		7.3	%		7.7	%		10.3	%
General and administrative expense ratio		14.9	%		15.0	%		14.6	%

Combined ratio AS REPORTED		100.1	%		90.6	%		92.0	%


Effect of favorable prior accident year reserve development		7.2	%		5.7	%		11.2	%


Combined ratio net of prior accident year reserve development		107.3	%		96.3	%		103.2	%

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA

		September 30,			September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011			DEC. 31, 2010			DEC. 31, 2009
UNDERWRITING REVENUES
Gross premiums written	$	997,316		$	941,044		$	869,300

Net premiums written	$	974,331		$	933,880		$	865,740

Net premiums earned	$	949,801		$	919,285		$	809,489
Other underwriting (loss) income		(179	)		(2,111	)		381

Total underwriting revenues	$	949,622		$	917,174		$	809,870


UNDERWRITING EXPENSES
Net losses and loss expenses	$	867,547		$	480,060		$	313,632
Acquisition expenses		211,616			200,672			183,247
General and administrative expenses		118,037			118,585			117,388

Total expenses	$	1,197,200		$	799,317		$	614,267


UNDERWRITING (LOSS) INCOME	$	(247,578	)	$	117,857		$	195,603


GAAP RATIOS
Loss ratio		91.3	%		52.2	%		38.8	%
Acquisition expense ratio		22.3	%		21.8	%		22.6	%
General and administrative expense ratio		12.4	%		12.9	%		14.5	%

Combined ratio AS REPORTED		126.0	%		86.9	%		75.9	%


Effect of favorable prior accident year reserve development		11.5	%		8.7	%		7.3	%


Combined ratio net of prior accident year reserve development		137.5	%		95.6	%		83.2	%

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS

		September 30,		September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011		DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	901,746	$	567,461		$	572,096
Professional lines		169,319		170,146			193,799
Casualty		205,950		167,549			152,580
Property		109,312		122,110			124,621
Healthcare liability		82,519		87,593			82,955
Surety and other specialty		952		(2,667	)		26,099

TOTAL INSURANCE	$	1,469,798	$	1,112,192		$	1,152,150


REINSURANCE SEGMENT
Catastrophe	$	346,021	$	309,886		$	303,404
Casualty		277,495		294,030			255,142
Property		266,562		224,544			215,085
Aerospace and Marine		54,591		48,761			44,696
Surety and other specialty		52,647		63,823			50,973

TOTAL REINSURANCE	$	997,316	$	941,044		$	869,300


REPORTED TOTALS	$	2,467,114	$	2,053,236		$	2,021,450

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS

		September 30,		September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011		DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	586,659	$	404,767		$	324,480
Professional lines		137,962		148,717			167,091
Casualty		137,373		107,801			91,071
Property		64,930		88,299			68,011
Healthcare liability		77,609		82,893			78,284
Surety and other specialty		957		(2,613	)		11,373

TOTAL INSURANCE	$	1,005,490	$	829,864		$	740,310


REINSURANCE SEGMENT
Catastrophe	$	329,081	$	305,617		$	302,218
Casualty		276,697		293,222			254,897
Property		266,562		224,544			215,085
Aerospace and Marine		52,335		46,696			42,563
Surety and other specialty		49,656		63,801			50,977

TOTAL REINSURANCE	$	974,331	$	933,880		$	865,740


REPORTED TOTALS	$	1,979,821	$	1,763,744		$	1,606,050

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS

		September 30,		September 30,			September 30,
	FOR THE YEARS ENDED
	DEC. 31, 2011		DEC. 31, 2010			DEC. 31, 2009
INSURANCE SEGMENT
Agriculture	$	564,658	$	397,643		$	331,960
Professional lines		145,886		154,484			152,547
Casualty		121,585		105,070			89,340
Property		69,530		86,308			76,245
Healthcare liability		79,272		81,100			80,219
Surety and other specialty		661		(2,777	)		93,392

TOTAL INSURANCE	$	981,592	$	821,828		$	823,703


REINSURANCE SEGMENT
Catastrophe	$	326,674	$	315,708		$	296,982
Casualty		278,114		272,968			208,865
Property		241,525		227,282			198,606
Aerospace and Marine		52,029		44,918			49,088
Surety and other specialty		51,459		58,409			55,948

TOTAL REINSURANCE	$	949,801	$	919,285		$	809,489


REPORTED TOTALS	$	1,931,393	$	1,741,113		$	1,633,192

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS

		September 30,
	FOR THE YEAR
	ENDED DEC. 31, 2011

Average common equity [a]	$	2,414,659

Net premiums earned	$	1,931,393
Combined ratio		112.9	%
Operating margin		(12.9	)%
Premium leverage		0.80	x

Implied ROAE from underwriting activity		(10.3	)%


Average cash and invested assets at amortized cost	$	6,091,780
Investment leverage		2.52	x
Year to date investment income yield, pretax		2.4	%

Implied ROAE from investment activity		6.0	%


Financing Costs [b]		(2.5	)%


Implied Pre-tax Operating ROAE, for period [c]		(6.8	)%

[a]

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

[b]

Financing costs include interest expense and preferred dividends.

[c]

Implied pre-tax Operating ROAE considers only the main components of the Company’s return on equity — underwriting and investment returns. As such, it differs from operating ROE primarily due to the exclusion of tax on underwriting, financing and investment activites and the tax-effected impact of amortization expense.

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED												YEARS ENDED DECEMBER 31,
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			2011			2010

Average common equity [a]	$	2,193,558		$	2,223,113		$	2,224,270		$	2,428,209		$	2,414,659		$	2,617,718

Net premiums earned	$	500,489		$	561,493		$	486,578		$	382,833		$	1,931,393		$	1,741,113

Premium leverage		0.23	x		0.25	x		0.22	x		0.16	x		0.80	x		0.67	x
Annualized premium leverage		0.92	x		1.00	x		0.88	x		0.64	x		0.80	x		0.67	x

Average cash and invested assets at amortized cost	$	6,175,592		$	6,213,420		$	6,050,968		$	5,960,786		$	6,091,780		$	5,978,909
Investment leverage		2.82	x		2.79	x		2.72	x		2.45	x		2.52	x		2.28	x

[a]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares outstanding at the beginning and end of each period.

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF DECEMBER 31, 2011 AND 2010

		September 30,		September 30,			September 30,		September 30,
	December 31, 2011					December 31, 2010
Type of Investment	Fair Value		Percentage			Fair Value		Percentage
Cash and equivalents [a]	$	913,492		14.5	%	$	610,454		9.9	%
Short-term investments		67,802		1.1	%		70,444		1.1	%
U.S. government and government agencies notes		1,269,123		20.1	%		1,010,819		16.3	%
Government and agency guaranteed corporates		351,825		5.6	%		671,150		10.8	%
U.S. government agency residential mortgage-backed securities		965,019		15.3	%		883,948		14.3	%
U.S. government agency commercial mortgage-backed securities		28,807		0.5	%		22,889		0.4	%
Municipals		53,517		0.8	%		29,979		0.5	%
Foreign government		74,997		1.2	%		140,461		2.3	%
Corporate securities		1,139,899		18.1	%		1,232,511		19.9	%
Non-agency residential mortgage-backed securities		114,662		1.8	%		246,410		4.0	%
Non-agency commercial mortgage-backed securities		518,483		8.2	%		604,820		9.8	%
Asset-backed securities		315,634		5.0	%		273,715		4.4	%
Equity securities		59,767		0.9	%		13,565		0.2	%
Other investments [b]		432,658		6.9	%		376,652		6.1	%

Total	$	6,305,685		100.0	%	$	6,187,817		100.0	%

		September 30,		September 30,			September 30,		September 30,
Ratings [e]	Fair Value		Percentage			Fair Value		Percentage
U.S. government and government agencies notes	$	1,269,123		23.5	%	$	1,010,819		18.1	%
AAA/Aaa		941,500		17.6	%		2,639,682		47.4	%
AA/Aa		1,665,593		30.9	%		465,315		8.3	%
A/A		776,251		14.4	%		793,980		14.2	%
BBB		130,864		2.4	%		50,733		0.9	%
Below BBB		114,716		2.1	%		221,848		4.0	%
Not Rated		1,721		—			4,769		0.1	%
Equity securities		59,767		1.1	%		13,565		0.2	%
Other investments [b]		432,658		8.0	%		376,652		6.8	%

Total	$	5,392,193		100.0	%	$	5,577,363		100.0	%

		September 30,			September 30,
Performance	December 31, 2011			December 31, 2010
Yield [c]		2.4	%		3.3	%
Duration in years [d]		2.39			2.39

		September 30,			September 30,		September 30,			September 30,		September 30,
	Year Ended			Quarter Ended		Quarter Ended			Quarter Ended		Quarter Ended
Investment Income	Dec. 31, 2011			Dec. 31, 2011		Sept. 30, 2011			June 30, 2011		Mar. 31, 2011
Cash and fixed income securities	$	147,731		$	33,705	$	36,622		$	38,661	$	38,744
Other Investments		(694	)		6,889		(22,522	)		1,181		13,757

Total net investment income	$	147,037		$	40,594	$	14,100		$	39,842	$	52,501

Note: [a]

Cash and equivalents, including operating cash, are shown net of investments pending settlement.

[b]

Other investments includes investments in alternative and specialty funds.

[c]

Earned yield for the twelve months ending 12/31/11 and twelve months ending 12/31/10 excludes realized and unrealized gains and losses on fixed maturity investments.

[d]

Duration excludes other investments and operating cash.

[e]

Excludes cash and equivalents.

ENDURANCE SPECIALTY HOLDINGS LTD.

STRUCTURED SECURITIES DETAIL

AS OF DEC. 31, 2011

		September 30,		September 30,			September 30,
						Percentage of
Structured (RMBS, CMBS, ABS, CDO and CLO) securities ratings	Fair Value		Percentage			Investment Portfolio
U.S. Government and agencies	$	993,826		51.2	%		15.8	%
AAA/Aaa		669,536		34.5	%		10.6	%
AA/Aa		101,792		5.2	%		1.6	%
A/A		83,472		4.3	%		1.3	%
BBB		34,905		1.8	%		0.6	%
Below BBB		58,852		3.0	%		0.9	%
Not Rated		222		—			—

Total	$	1,942,605		100.0	%		30.8	%

	September 30,	September 30,		September 30,		September 30,			September 30,
								Percentage of
Structured securities sectors (RMBS, CMBS, ABS, CDO and CLO)			Fair Value		Percentage			Investment Portfolio
Commercial
Agency			$	28,807		1.5	%		0.5	%
Non Agency				537,920		27.7	%		8.5	%
Residential
Agency				965,019		49.7	%		15.3	%
Non Agency				115,304		5.9	%		1.8	%
Consumer				246,649		12.7	%		3.9	%
Collateralized Loan Obligations (CLO)				48,906		2.5	%		0.8	%

Total			$	1,942,605		100.0	%		30.8	%

	Spread Duration	3.00 years

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF DEC. 31, 2011

		September 30,		September 30,		September 30,		September 30,
	December 31, 2011
	Amortized				Unrealized			Credit
ISSUER (1) (2) (4)	Cost		Fair Value		Gain (Loss)			Quality (3)

JPMORGAN CHASE & CO	$	38,053	$	38,253	$	200		A
METLIFE INC		30,545		30,996		451		A
WAL-MART STORES INC		26,370		27,428		1,057		AA
INTERNATIONAL BUSINESS MACHINES CORP		27,093		27,331		238		A+
VERIZON COMMUNICATIONS INC		24,867		26,203		1,336		A-
NOVARTIS AG		23,647		25,000		1,354		AA-
US BANCORP		21,675		22,311		637		A
CREDIT SUISSE GROUP AG		22,129		21,875		(254	)	A+
HSBC HOLDINGS PLC		20,678		20,620		(58	)	A+
PEPSICO INC/NC		18,288		19,687		1,399		A
EDISON INTERNATIONAL		16,978		17,791		813		A
MORGAN STANLEY		18,807		17,400		(1,408	)	A-
BANK OF AMERICA CORP		17,922		16,409		(1,513	)	A-
NEW YORK LIFE INSURANCE COMPANY		15,533		16,098		564		AA+
BANK OF NOVA SCOTIA		15,550		15,746		195		AA-
NATIONAL GRID PLC		13,916		15,279		1,363		A-
CITIGROUP INC		15,769		15,252		(517	)	A-
PHILIP MORRIS INTERNATIONAL INC		14,418		15,202		784		A
ROYAL DUTCH SHELL PLC		14,199		14,841		642		AA
AT&T INC		14,095		14,719		625		A-
MEDTRONIC INC		13,399		13,988		589		AA-
BANK OF NEW YORK MELLON CORP/THE		12,174		12,581		407		A+
TOTAL SA		12,382		12,434		52		AA-
GENERAL ELECTRIC CO		12,472		12,206		(265	)	AA+
ROYAL BANK OF SCOTLAND GROUP PLC		12,574		12,009		(566	)	A

(1)	Corporate issuers exclude government-backed, government-sponsored enterprises, covered bonds and cash and cash equivalents.

(2)	Credit exposures represent only direct exposure to fixed maturities and short term investments of the parent issuer and its major subsidiaries.

(3)	Represents weighted average credit quality of underlying issues.

(4)	Includes preferred equity securities.

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	THREE MONTHS ENDED DEC. 31, 2011									YEAR ENDED DEC. 31, 2011
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	3,910,537		$	(479,132	)	$	3,431,405		$	3,319,927		$	(319,349	)	$	3,000,578

Incurred related to:
Current year		667,310			(213,079	)		454,231			2,523,501			(710,857	)		1,812,644
Prior years		(26,475	)		(15,604	)		(42,079	)		(224,297	)		44,319			(179,978	)

Total Incurred		640,835			(228,683	)		412,152			2,299,204			(666,538	)		1,632,666


Paid related to:
Current year		(601,534	)		72,465			(529,069	)		(1,194,480	)		344,348			(850,132	)
Prior years		(124,414	)		(31,615	)		(156,029	)		(594,663	)		(25,468	)		(620,131	)

Total Paid		(725,948	)		40,850			(685,098	)		(1,789,143	)		318,880			(1,470,263	)


Foreign currency translation		(1,200	)		37			(1,163	)		(5,764	)		79			(5,685	)


Balance, end of period	$	3,824,224		$	(666,928	)	$	3,157,296		$	3,824,224		$	(666,928	)	$	3,157,296

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2011

		September 30,			September 30,			September 30,
							Total
	Insurance			Reinsurance			Company

Incurred related to prior years

Quarter ended March 31, 2011	$	(34,612	)	$	(14,093	)	$	(48,705	)
Quarter ended June 30, 2011		(23,190	)		(21,591	)		(44,781	)
Quarter ended September 30, 2011		(12,411	)		(32,002	)		(44,413	)
Quarter ended December 31, 2011		(566	)		(41,513	)		(42,079	)

Year ended December 31, 2011	$	(70,779	)	$	(109,199	)	$	(179,978	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2010

		September 30,			September 30,			September 30,
							Total
	Insurance			Reinsurance			Company
Incurred related to prior years

Quarter ended March 31, 2010	$	(17,679	)	$	(20,915	)	$	(38,594	)
Quarter ended June 30, 2010		(8,099	)		(21,379	)		(29,478	)
Quarter ended September 30, 2010		(9,568	)		(25,566	)		(35,134	)
Quarter ended December 31, 2010		(11,525	)		(12,071	)		(23,596	)

Year ended December 31, 2010	$	(46,871	)	$	(79,931	)	$	(126,802	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2009

		September 30,			September 30,			September 30,
							Total
	Insurance			Reinsurance			Company
Incurred related to prior years

Quarter ended March 31, 2009	$	(36,798	)	$	(2,520	)	$	(39,318	)
Quarter ended June 30, 2009		(19,842	)		(16,132	)		(35,974	)
Quarter ended September 30, 2009		(13,952	)		(20,449	)		(34,401	)
Quarter ended December 31, 2009		(21,486	)		(19,710	)		(41,196	)

Year ended December 31, 2009	$	(92,078	)	$	(58,811	)	$	(150,889	)

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY DEVELOPMENT TAIL

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
	FOR THE QUARTERS ENDED												FOR THE YEAR ENDED
	DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2011			DEC. 31, 2010
INSURANCE SEGMENT
Short tail[a]	$	(132	)	$	(4,182	)	$	(5,150	)	$	(9,274	)	$	(18,738	)	$	(21,349	)
Long tail[b]		(916	)		(8,501	)		(5,490	)		(2,560	)		(17,467	)		(11,649	)
Other[c]		482			272			(12,550	)		(22,778	)		(34,574	)		(13,873	)

TOTAL INSURANCE		(566	)		(12,411	)		(23,190	)		(34,612	)		(70,779	)		(46,871	)


REINSURANCE SEGMENT
Short tail[a]		(37,014	)		(19,342	)		(19,245	)		(14,163	)		(89,764	)		(68,865	)
Long tail[b]		(4,917	)		(11,234	)		335			275			(15,541	)		(7,700	)
Other[c]		418			(1,426	)		(2,681	)		(205	)		(3,894	)		(3,366	)

TOTAL REINSURANCE		(41,513	)		(32,002	)		(21,591	)		(14,093	)		(109,199	)		(79,931	)


REPORTED TOTALS	$	(42,079	)	$	(44,413	)	$	(44,781	)	$	(48,705	)	$	(179,978	)	$	(126,802	)

[a]

Short tail business is that for which development typically emerges within a period of several quarters. The Company’s short tail line of business in the Insurance segment includes its property line of business. The Company’s short tail lines in its Reinsurance segment include property, catastrophe, aerospace and marine and surety.

[b]

Long tail business is that for which development emerges over many years. The Company’s long tail lines of business in the Insurance segment includes casualty, healthcare liability, workers’ compensation and professional lines. The Company’s long tail line of business in the Reinsurance segment includes its casualty line of business and some units included in its surety and other specialty line of business.

[c]

The Company writes certain specialty lines of business for which the loss emergence is considered to be unique in nature and thus, has been included as other. The Company’s other lines of business included in the Insurance segment is agriculture and in the Reinsurance segment is the agriculture unit included in its surety and other specialty line of business.

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES

		September 30,			September 30,			September 30,			September 30,			September 30,			September 30,			September 30,			September 30,			September 30,
																									Reported
	Insurance												Reinsurance												Totals
	Short Tail			Long Tail			Other			Total			Short Tail			Long Tail			Other			Total
AT DEC. 31, 2011
Case reserves	$	31,408		$	404,377		$	203,844		$	639,629		$	497,218		$	284,619		$	403		$	782,240		$	1,421,869
Total reserves	$	57,721		$	1,624,221		$	255,601		$	1,937,543		$	902,492		$	979,407		$	4,782		$	1,886,681		$	3,824,224

Case reserves / Total reserves		54.4	%		24.9	%		79.8	%		33.0	%		55.1	%		29.1	%		8.4	%		41.5	%		37.2	%

IBNR / Total reserves		45.6	%		75.1	%		20.2	%		67.0	%		44.9	%		70.9	%		91.6	%		58.5	%		62.8	%


AT SEPT. 30, 2011
Case reserves	$	28,669		$	387,942		$	370,589		$	787,200		$	488,768		$	268,058		$	573		$	757,399		$	1,544,599
Total reserves	$	53,598		$	1,582,357		$	396,681		$	2,032,636		$	912,592		$	957,963		$	7,346		$	1,877,901		$	3,910,537

Case reserves / Total reserves		53.5	%		24.5	%		93.4	%		38.7	%		53.6	%		28.0	%		7.8	%		40.3	%		39.5	%

IBNR / Total reserves		46.5	%		75.5	%		6.6	%		61.3	%		46.4	%		72.0	%		92.2	%		59.7	%		60.5	%


AT JUNE 30, 2011
Case reserves	$	19,410		$	375,869		$	247,145		$	642,424		$	431,972		$	268,802		$	1,187		$	701,961		$	1,344,385
Total reserves	$	48,268		$	1,568,198		$	276,347		$	1,892,813		$	893,835		$	950,506		$	10,970		$	1,855,311		$	3,748,124
Case reserves / Total reserves		40.2	%		24.0	%		89.4	%		33.9	%		48.3	%		28.3	%		10.8	%		37.8	%		35.9	%
IBNR / Total reserves		59.8	%		76.0	%		10.6	%		66.1	%		51.7	%		71.7	%		89.2	%		62.2	%		64.1	%

AT MAR. 31, 2011
Case reserves	$	18,089		$	378,010		$	73,374		$	469,473		$	322,587		$	255,397		$	455		$	578,439		$	1,047,912
Total reserves	$	45,739		$	1,539,977		$	187,017		$	1,772,733		$	861,084		$	919,839		$	12,542		$	1,793,465		$	3,566,198

Case reserves / Total reserves		39.5	%		24.5	%		39.2	%		26.5	%		37.5	%		27.8	%		3.6	%		32.3	%		29.4	%

IBNR / Total reserves		60.5	%		75.5	%		60.8	%		73.5	%		62.5	%		72.2	%		96.4	%		67.7	%		70.6	%


AT DEC. 31, 2010
Case reserves	$	14,730		$	325,750		$	116,687		$	457,167		$	319,322		$	248,870		$	990		$	569,182		$	1,026,349
Total reserves	$	45,330		$	1,493,398		$	190,865		$	1,729,593		$	670,750		$	907,384		$	12,200		$	1,590,334		$	3,319,927

Case reserves / Total reserves		32.5	%		21.8	%		61.1	%		26.4	%		47.6	%		27.4	%		8.1	%		35.8	%		30.9	%

IBNR / Total reserves		67.5	%		78.2	%		38.9	%		73.6	%		52.4	%		72.6	%		91.9	%		64.2	%		69.1	%

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS

		September 30,			September 30,			September 30,			September 30,		September 30,
	YEARS ENDED DECEMBER 31,									INCEPTION TO
	2011			2010			2009			DEC. 31, 2011
(Loss) Income and Return on Equity:
Net (loss) income (attributable) available to common and participating common shareholders	$	(117,859	)	$	349,238		$	520,604		$	2,302,643

Operating (loss) income (attributable) available to common and participating common shareholders		(152,303	)		330,035			505,202			2,349,233

Average Shareholders’ equity [a]		2,414,659			2,617,718			2,297,283			1,972,190

Net (loss) income return on average equity		(4.9	)%		13.3	%		22.7	%		11.7	%	[c]
Operating return on average equity		(6.3	)%		12.6	%		22.0	%		11.9	%	[c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	50.56		$	52.74		$	44.61		$	50.56

Dividends paid per share		1.20			1.00			1.00			8.33

Change in diluted book value per common share		(4.1	)%		18.2	%		34.9	%		16.1	%	[c]


Total return to common shareholders [b]		(1.9	)%		20.5	%		38.0	%		20.4	%	[c]

[a]

Excludes the $430 million (2010 and earlier—$200 million) liquidation value of the preferred shares.

[b]

Total return to common shareholders is calculated as the change in diluted book value per common share plus dividends paid divided by beginning diluted book value per share.

[c]

Represents average non-compounded annual returns since December 31, 2001.

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION—TWO CLASS METHOD

	September 30,		September 30,			September 30,			September 30,			September 30,
		QUARTERS ENDED						YEARS ENDED
		DEC. 31,						DEC. 3,
		2011			2010			2011			2010
DILUTIVE SHARES OUTSTANDING:	Average market price per share	$	36.21		$	43.49		$	40.93		$	39.04
AS REPORTED	Basic weighted average common shares outstanding [a]		40,641			47,385			40,215			50,882
	Add: weighted avg. unvested restricted share units		10			18			11			18
	Weighted average exercise price per share		—			—			—			—
	Proceeds from unrecognized restricted share unit expense	$	100		$	239		$	100		$	239
	Less: restricted share units bought back via treasury method		(10	)		(5	)		(11	)		(7	)
	Add: weighted avg. dilutive warrants outstanding		1,944			2,986			2,670			2,990
	Weighted average exercise price per share	$	11.67		$	12.87		$	11.67		$	12.87
	Less: warrants bought back via treasury method		(1,944	)		(884	)		(2,670	)		(986	)
	Add: weighted avg. dilutive options outstanding		369			1,294			673			1,424
	Weighted average exercise price per share	$	15.44		$	16.50		$	15.04		$	16.27
	Proceeds from unrecognized option expense		—			—			—			—
	Less: options bought back via treasury method		(369	)		(491	)		(673	)		(593	)

	Weighted average dilutive shares outstanding [b]		40,641			50,303			40,215			53,728

Notes:

[a] Excludes unvested restricted shares outstanding which are considered participating securities under the two-class method for calculation of EPS.

[b] Warrants and options that are anti-dilutive are not included in the calculation of diluted shares outstanding. Warrants and options are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected in the calculations above as additional treasury method repurchases.

ENDURANCE SPECIALTY HOLDINGS LTD.

(LOSSES) EARNINGS PER SHARE INFORMATION—TWO CLASS METHOD

		September 30,			September 30,			September 30,			September 30,
	QUARTERS ENDED DEC. 31,						YEARS ENDED DEC. 31,
	2011			2010			2011			2010

Net (loss) income	$	(27,376	)	$	111,228		$	(93,734	)	$	364,738
Less 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
Less amount allocated to participating common shareholders [a]		(221	)		(2,036	)		(961	)		(6,595	)

Net (loss) income (attributable) available allocated to common shareholders	$	(35,784	)	$	105,317		$	(118,820	)	$	342,643


Denominator:
Weighted average shares—basic
Outstanding		40,641			47,385			40,215			50,880
Vested restricted share units		—			—			—			2

		40,641			47,385			40,215			50,882


Share Equivalents
Warrants		—			2,102			—			2,004
Options		—			803			—			831
Restricted share units		—			13			—			11

Weighted average shares—diluted		40,641			50,303			40,215			53,728


Basic (losses) earnings per common share	$	(0.88	)	$	2.22		$	(2.95	)	$	6.73


Diluted (losses) earnings per common share [b]	$	(0.88	)	$	2.09		$	(2.95	)	$	6.38

[a]

Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Company’s stock compensation plans that are considered participating securities related to the calculation of (losses) earnings per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders.

[b]

Represents diluted (losses) earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method.

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING (LOSS) INCOME RECONCILIATION

(LOSSES) EARNINGS PER SHARE INFORMATION—TWO CLASS METHOD

		September 30,			September 30,			September 30,			September 30,
	Two-Class Method						Two-Class Method
	QUARTERS ENDED DEC. 31,						YEARS ENDED DEC. 31,
	2011			2010			2011			2010

Net (loss) income	$	(27,376	)	$	111,228		$	(93,734	)	$	364,738
Add (less) after-tax items:
Net foreign exchange 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 (losses) 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
Less amount allocated to participating common shareholders [a]		(221	)		(1,980	)		(961	)		(6,235	)

Operating (loss) income allocated to common shareholders	$	(39,711	)	$	102,405		$	(153,264	)	$	323,800


Weighted average common shares outstanding
Basic		40,641			47,385			40,215			50,882
Dilutive		40,641			50,303			40,215			53,728

Basic per common share data
Net (loss) income allocated to common shareholders	$	(0.88	)	$	2.22		$	(2.95	)	$	6.73
Add (less) after-tax items:
Net foreign exchange gains		0.01			0.07			(0.19	)		(0.05	)
Net realized and unrealized investment gains		(0.12	)		(0.15	)		(0.76	)		(0.40	)
Net impairment losses recognized in (losses) earnings		0.01			0.02			0.09			0.08

Operating (loss) income allocated to common shareholders	$	(0.98	)	$	2.16		$	(3.81	)	$	6.36


Diluted per common share data
Net (loss) income allocated to common shareholders	$	(0.88	)	$	2.09		$	(2.95	)	$	6.38
Add (less) after-tax items:
Net foreign exchange gains		0.01			0.07			(0.19	)		(0.05	)
Net realized and unrealized investment gains		(0.12	)		(0.14	)		(0.76	)		(0.37	)
Net impairment losses recognized in (losses) earnings		0.01			0.02			0.09			0.07

Operating (loss) income allocated to common shareholders [b]	$	(0.98	)	$	2.04		$	(3.81	)	$	6.03

[a]

[b]

Represents diluted (losses) earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method.

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES SENSITIVITY ANALYSIS

		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,		September 30,
DILUTIVE SHARES OUSTANDING
Market Price per Share
$33.00	$	34.00	$	35.00	$	36.00	$	37.00	$	38.00	$	39.00	$	40.00	$	41.00	$	42.00	$	43.00
43,131		43,134		43,136		43,138		43,140		43,142		43,144		43,145		43,147		43,149		43,150

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE

	September 30,		September 30,			September 30,
		DEC. 31,
		2011			2010
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	38.25		$	46.07
AS-IF CONVERTED [a]	Basic common shares outstanding		42,367			46,259
	Add: unvested restricted shares and restricted share units		730			980
	Add: dilutive warrants outstanding		—			2,986
	Weighted average exercise price per share		—		$	12.87
	Add: dilutive options outstanding		115			1,278
	Weighted average exercise price per share	$	23.14		$	16.50

	Book Value [b]	$	2,181,165		$	2,648,153
	Add: proceeds from converted warrants		—			38,430
	Add: proceeds from converted options		2,661			21,087

	Pro forma book value	$	2,183,826		$	2,707,670
	Dilutive shares outstanding		43,212			51,503
	Basic book value per common share	$	51.48		$	57.25
	Diluted book value per common share	$	50.54		$	52.57
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	38.25		$	46.07
TREASURY STOCK METHOD	Basic common shares outstanding		42,367			46,259
	Add: unvested restricted shares and restricted share units		730			980
	Add: dilutive warrants outstanding		—			2,986
	Weighted average exercise price per share		—		$	12.87
	Less: warrants bought back via treasury method		—			(834	)
	Add: dilutive options outstanding		115			1,278
	Weighted average exercise price per share	$	23.14		$	16.50
	Less: options bought back via treasury method		(70	)		(458	)

	Dilutive shares outstanding		43,142			50,211
	Basic book value per common share	$	51.48		$	57.25
	Diluted book value per common share	$	50.56		$	52.74

[a]

The as-if converted method assumes that the proceeds received upon exercise of options and warrants will be retained by the Company and the resulting common shares from exercise will remain outstanding

[b]

Excludes the $430 million (2010—$200 million) liquidation value of the preferred shares.

ENDURANCE SPECIALTY HOLDINGS LTD.

REGULATION G

In presenting the Company’s results, management has included and discussed certain non-GAAP measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

Operating (loss) income is an internal performance measure used by the Company in the management of its operations. 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. The Company 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 determined in accordance with GAAP, the Company believes that showing operating (loss) income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company’s results of operations in a manner similar to how management analyzes the Company’s underlying business performance. Operating (loss) income should not be viewed as a substitute for GAAP net (loss) income. Please see page 31 for a reconciliation of operating (loss) income to net (loss) income.

Return on Average Equity (ROAE) is comprised using the average common equity calculated as the arithmetic average of the beginning and ending common equity balances for stated periods. Return on Beginning Equity (ROBE) is comprised using the beginning common equity for stated periods. The Company presents various measures of Return on Equity that are commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

Investment yield is provided by the Company’s investment managers and is calculated by dividing net investment income by average invested assets at amortized cost. The Company utilizes and presents the investment yield in order to better disclose the performance of the Company’s investments and to show the components of the Company’s ROE.

The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share. Please see page 33 for a reconciliation of diluted book value per common share to basic book value per common share.

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