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

Attached files

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d315582d8k.htm
EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	d315582dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

FIRST QUARTER 2012

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 Income (Loss)—Quarterly		2
b. Consolidated Statements of (Loss) Income—Prior Years		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		13
e. ROE Component Analysis—Annualized Premium and Investment Leverage		14
f. Investment Portfolio Information		15
g. Structured Securities Detail		16
h. Largest Twenty-Five Corporate Holdings		17
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses		18
b. Prior Year Reserve Development by Segment		19
c. Prior Year Reserve Development by Development Tail		20
d. Analysis of Unpaid Losses and Loss Expenses		21
V. Shareholder Return Analysis
a. Shareholder Return Analysis		22
b. Weighted Average Dilutive Shares Outstanding		23
c. Earnings (Losses) per Share—Two Class Method		24
d. Operating Income (Loss) Reconciliation—Two Class Method		25
e. Dilutive Shares Sensitivity Analysis		26
f. Book Value Per Share Analysis		27

VI. Regulation G		28

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 for the year ended December 31, 2011.

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, 2011, 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.


		i

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS


	QUARTER ENDED						Previous
	MARCH 31,						Quarter
	2012			2011			Change
HIGHLIGHTS
Net income (loss)	$	82,542		$	(87,417	)		194.4	%
Net income (loss) available (attributable) to common and participating common shareholders		74,354			(91,292	)		181.4	%
Net income (loss) allocated to common shareholders		73,059			(91,567	)		179.8	%
Operating income (loss) [a]		61,534			(96,643	)		163.7	%
Operating income (loss) available (attributable) to common and participating common shareholders [a]		53,346			(100,518	)		153.1	%
Operating income (loss) allocated to common shareholders [a]		52,417			(100,793	)		152.0	%
Operating cash flow		24,905			181,282			(86.3	)%
Net investment income		57,075			52,501			8.7	%
Gross premiums written		1,061,649			1,000,358			6.1	%
Net premiums written		843,056			798,872			5.5	%
Net premiums earned		411,635			382,833			7.5	%
Total assets		8,968,828			8,416,181			6.6	%
Total shareholders’ equity		2,684,538			2,408,264			11.5	%
PER SHARE AND SHARES DATA
Basic earnings (losses) per common share
Net income (loss) (as reported)	$	1.72		$	(2.25	)		176.4	%
Operating income (loss) (as reported) [a]	$	1.24		$	(2.47	)		150.2	%
Diluted earnings (losses) per common share
Net income (loss) (as reported)	$	1.72		$	(2.25	)		176.4	%
Operating income (loss) (as reported) [a]	$	1.23		$	(2.47	)		149.8	%
As Reported
Weighted average common shares outstanding		42,436			40,750			4.1	%
Weighted average common shares outstanding and dilutive potential common shares [e]		42,489			40,750			4.3	%
Common dividends paid per share	$	0.31		$	0.30			3.3	%
Book Value Per Common Share
Book value [b]	$	52.97		$	55.91			(5.3	)%
Diluted book value (treasury stock method) [b]	$	51.90		$	51.52			0.7	%

FINANCIAL RATIOS
Return on average common equity (ROAE), net income (loss) [c]		3.4	%		(3.8	)%		7.2
ROAE, operating income (loss) [a] [c]		2.4	%		(4.1	)%		6.5
Return on beg. common equity (ROBE), net income (loss) [d]		3.4	%		(3.4	)%		6.8
ROBE, operating income (loss) [a] [d]		2.4	%		(3.8	)%		6.2
Annualized ROAE, net income (loss) [c]		13.4	%		(15.0	)%		28.4
Annualized ROAE, operating income (loss) [a] [c]		9.6	%		(16.6	)%		26.2
Annualized ROBE, net income (loss) [d]		13.6	%		(13.8	)%		27.4
Annualized ROBE, operating income (loss) [a] [d]		9.8	%		(15.2	)%		25.0
Annualized investment yield		3.8	%		3.5	%		0.3

GAAP
Loss ratio		63.9	%		105.0	%		(41.1	)
Acquisition expense ratio		16.6	%		17.1	%		(0.5	)
General and administrative expense ratio		16.0	%		17.2	%		(1.2	)

Combined ratio		96.5	%		139.3	%		(42.8	)

[a]

Operating income (loss) 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 25 for a reconciliation to net income (loss).

[b]

For detailed calculations, please refer to page 27.

[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 (March 31, 2011 liquidation value $200 million).

[d]

Beginning common equity for the stated periods excludes the $430 million liquidation value of the preferred shares (March 31, 2011 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.


		1

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)—QUARTERLY


	QUARTERS ENDED
	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,061,649		$	262,966		$	700,866		$	502,924		$	1,000,358		$	818,869
Premiums ceded		(218,593	)		(75,102	)		(149,539	)		(61,166	)		(201,486	)		(115,927	)

Net premiums written	$	843,056		$	187,864		$	551,327		$	441,758		$	798,872		$	702,942
Change in unearned premiums		(431,421	)		312,625			10,166			44,820			(416,039	)		(337,753	)

Net premiums earned	$	411,635		$	500,489		$	561,493		$	486,578		$	382,833		$	365,189
Other underwriting (loss) income		(335	)		(1,425	)		(2,141	)		1,088			(1,069	)		295

Total underwriting revenues	$	411,300		$	499,064		$	559,352		$	487,666		$	381,764		$	365,484

UNDERWRITING EXPENSES
Net losses and loss expenses	$	262,767		$	412,152		$	456,691		$	361,970		$	401,853		$	232,597
Acquisition expenses		68,489			77,157			72,249			67,887			65,618			63,944
General and administrative expenses		66,041			73,731			58,574			65,886			65,961			58,965

Total underwriting expenses	$	397,297		$	563,040		$	587,514		$	495,743		$	533,432		$	355,506

Underwriting income (loss)	$	14,003		$	(63,976	)	$	(28,162	)	$	(8,077	)	$	(151,668	)	$	9,978

OTHER OPERATING REVENUE
Net investment income	$	57,075		$	40,594		$	14,100		$	39,842		$	52,501		$	56,479
Interest expense		(9,047	)		(9,088	)		(9,055	)		(9,057	)		(9,054	)		(7,608	)
Amortization of intangibles		(2,777	)		(2,413	)		(2,976	)		(3,026	)		(2,798	)		(2,588	)

Total other operating revenue	$	45,251		$	29,093		$	2,069		$	27,759		$	40,649		$	46,283

INCOME (LOSS) BEFORE OTHER ITEMS	$	59,254		$	(34,883	)	$	(26,093	)	$	19,682		$	(111,019	)	$	56,261
OTHER
Net foreign exchange gains (losses)	$	18,137		$	(233	)	$	4,085		$	(3,348	)	$	6,918		$	(5,971	)
Net realized and unrealized investment gains		5,203			5,331			1,033			21,532			3,775			3,544

Total other-than-temporary impairment losses		—			(751	)		(168	)		(484	)		(1,256	)		(769	)
Portion of loss recognised in other comprehensive income		(219	)		50			(72	)		(448	)		(391	)		(92	)

Net impairment losses recognised in earnings (losses)		(219	)		(701	)		(240	)		(932	)		(1,647	)		(861	)

Income tax benefit		167			3,110			1,197			4,143			14,556			2,816

NET INCOME (LOSS)	$	82,542		$	(27,376	)	$	(20,018	)	$	41,077		$	(87,417	)	$	55,789
Preferred dividends		(8,188	)		(8,187	)		(8,188	)		(3,875	)		(3,875	)		(3,875	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	74,354		$	(35,563	)	$	(28,206	)	$	37,202		$	(91,292	)	$	51,914

KEY RATIOS/PER SHARE DATA
Loss ratio		63.9	%		82.4	%		81.3	%		74.4	%		105.0	%		63.7	%
Acquisition expense ratio		16.6	%		15.4	%		12.9	%		14.0	%		17.1	%		17.5	%
General and administrative expense ratio		16.0	%		14.7	%		10.4	%		13.5	%		17.2	%		16.1	%

Combined ratio		96.5	%		112.5	%		104.6	%		101.9	%		139.3	%		97.3	%

Basic earnings (losses) per common share	$	1.72		$	(0.88	)	$	(0.71	)	$	0.92		$	(2.25	)	$	0.95
Diluted earnings (losses) per common share	$	1.72		$	(0.88	)	$	(0.71	)	$	0.87		$	(2.25	)	$	0.91

ROAE, net income (loss) [a]		3.4	%		(1.6	)%		(1.3	)%		1.7	%		(3.8	)%		2.0	%

[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 of $430 million (Mar. 31, 2011 and 2010—$200 million).


		2

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME—PRIOR YEARS


	YEAR ENDED
	DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	2,467,114		$	2,053,236
Premiums ceded		(487,293	)		(289,492	)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

KEY RATIOS/PER SHARE DATA
Loss ratio		84.6	%		59.6	%
Acquisition expense ratio		14.6	%		15.2	%
General and administrative expense ratio		13.7	%		13.9	%

Combined ratio		112.9	%		88.7	%

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

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

[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]

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).


		3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2010
ASSETS
Cash and cash equivalents	$	679,634		$	890,914		$	623,944		$	750,844		$	568,770		$	609,852
Fixed maturity investments available for sale, at fair value		5,131,035			4,831,966			4,998,142			4,961,948			5,014,226			5,116,702
Short term investments available for sale, at fair value		54,919			67,802			323,119			303,895			48,186			70,444
Equity securities available for sale, at fair value		67,238			59,767			49,323			32,322			25,333			13,565
Other investments		432,428			432,658			386,785			395,078			401,450			376,652
Premiums receivable, net		1,284,026			636,727			1,192,455			1,154,480			1,049,129			827,609
Deferred acquisition costs		191,690			166,049			203,455			182,870			178,486			154,484
Securities lending collateral		—			—			—			84,652			72,657			59,886
Prepaid reinsurance premiums		280,094			149,670			204,961			198,708			248,275			107,977
Losses recoverable		497,522			666,928			479,132			369,081			340,908			319,349
Accrued investment income		25,669			29,708			30,851			31,189			29,164			32,934
Goodwill and intangible assets		179,051			181,828			183,857			186,835			189,501			181,954
Deferred tax assets		34,802			33,355			40,253			38,144			49,370			33,684
Receivable on pending investment sales		33,969			77,821			37,947			3,685			128,867			602
Other assets		76,751			67,422			80,013			66,309			71,859			73,711

TOTAL ASSETS	$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181		$	7,979,405

LIABILITIES
Reserve for losses and loss expenses	$	3,760,829		$	3,824,224		$	3,910,537		$	3,748,124		$	3,566,198		$	3,319,927
Reserve for unearned premiums		1,494,324			932,108			1,299,864			1,304,146			1,398,610			842,154
Deposit liabilities		26,950			26,887			28,860			30,300			32,768			32,505
Reinsurance balances payable		293,726			189,488			244,769			209,548			143,305			228,860
Securities lending payable		—			—			—			84,652			72,657			59,886
Debt		527,180			528,118			528,664			528,540			528,569			528,411
Payable on pending investment purchases		65,385			55,243			56,496			80,532			164,744			—
Other liabilities		115,896			125,382			129,097			103,922			101,066			119,509

TOTAL LIABILITIES	$	6,284,290		$	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		$	8,000
Series B, non-cumulative		9,200			9,200			9,200			9,200			—			—
Common shares		43,387			43,087			40,517			40,509			40,325			47,218
Additional paid-in capital		528,677			526,910			512,323			509,165			289,920			613,915
Accumulated other comprehensive income		140,795			130,392			123,846			120,982			112,648			118,413
Retained earnings		1,954,479			1,893,576			1,942,064			1,982,420			1,957,371			2,060,607

TOTAL SHAREHOLDERS’ EQUITY	$	2,684,538		$	2,611,165		$	2,635,950		$	2,670,276		$	2,408,264		$	2,848,153

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181		$	7,979,405

Book value per common share	$	52.97		$	51.48		$	55.47		$	56.35		$	55.91		$	57.25
Diluted book value per common share (treasury stock method)	$	51.90		$	50.56		$	51.63		$	52.20		$	51.52		$	52.74

RATIOS
Debt-to-capital		16.4	%		16.8	%		16.7	%		16.5	%		18.0	%		15.6	%


		4

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 21.4% of Shareholders' Equity as of March 31, 2012


		Estimated Occurrence Net Loss as of January 1, 2012										Jan. 1, 2011		Jan. 1, 2010
		10 Year		25 Year		50 Year		100 Year		250 Year		100 Year		100 Year
		Return		Return		Return		Return		Return		Return		Return
Zone	Peril	Period		Period		Period		Period		Period		Period		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 for the year ended December 31, 2011.

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


		5

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE QUARTER ENDED MARCH 31, 2012

Net Premiums Written = $843.1 million

LOGO

[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.


		6

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2012									MAR. 31, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	635,347		$	426,302		$	1,061,649		$	625,831		$	374,527		$	1,000,358

Net premiums written	$	427,781		$	415,275		$	843,056		$	432,296		$	366,576		$	798,872

Net premiums earned	$	161,630		$	250,005		$	411,635		$	162,492		$	220,341		$	382,833
Other underwriting loss		—			(335	)		(335	)		—			(1,069	)		(1,069	)

Total underwriting revenues	$	161,630		$	249,670		$	411,300		$	162,492		$	219,272		$	381,764

UNDERWRITING EXPENSES
Net losses and loss expenses	$	113,702		$	149,065		$	262,767		$	98,836		$	303,017		$	401,853
Acquisition expenses		16,214			52,275			68,489			16,308			49,310			65,618
General and administrative expenses		34,435			31,606			66,041			36,806			29,155			65,961

Total expenses	$	164,351		$	232,946		$	397,297		$	151,950		$	381,482		$	533,432

UNDERWRITING (LOSS) INCOME	$	(2,721	)	$	16,724		$	14,003		$	10,542		$	(162,210	)	$	(151,668	)

GAAP RATIOS
Loss ratio		70.4	%		59.7	%		63.9	%		60.8	%		137.5	%		105.0	%
Acquisition expense ratio		10.0	%		20.9	%		16.6	%		10.0	%		22.4	%		17.1	%
General and administrative expense ratio		21.3	%		12.6	%		16.0	%		22.7	%		13.2	%		17.2	%

Combined ratio AS REPORTED		101.7	%		93.2	%		96.5	%		93.5	%		173.1	%		139.3	%

Effect of favorable prior accident year reserve development		4.9	%		3.6	%		4.1	%		21.3	%		6.4	%		12.7	%

Combined ratio net of prior accident year reserve development		106.6	%		96.8	%		100.6	%		114.8	%		179.5	%		152.0	%


		7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	635,347		$	167,766		$	450,451		$	225,750		$	625,831		$	464,341

Net premiums written	$	427,781		$	96,478		$	303,210		$	173,506		$	432,296		$	348,941

Net premiums earned	$	161,630		$	251,101		$	318,602		$	249,397		$	162,492		$	145,676
Other underwriting loss		—			(493	)		(2,875	)		—			—			(2	)

Total underwriting revenues	$	161,630		$	250,608		$	315,727		$	249,397		$	162,492		$	145,674

UNDERWRITING EXPENSES
Net losses and loss expenses	$	113,702		$	214,681		$	260,206		$	191,396		$	98,836		$	86,084
Acquisition expenses		16,214			20,388			18,738			15,861			16,308			17,426
General and administrative expenses		34,435			43,754			29,328			36,227			36,806			30,121

Total expenses	$	164,351		$	278,823		$	308,272		$	243,484		$	151,950		$	133,631

UNDERWRITING (LOSS) INCOME	$	(2,721	)	$	(28,215	)	$	7,455		$	5,913		$	10,542		$	12,043

GAAP RATIOS
Loss ratio		70.4	%		85.5	%		81.7	%		76.7	%		60.8	%		59.0	%
Acquisition expense ratio		10.0	%		8.1	%		5.9	%		6.4	%		10.0	%		12.0	%
General and administrative expense ratio		21.3	%		17.4	%		9.2	%		14.5	%		22.7	%		20.7	%

Combined ratio AS REPORTED		101.7	%		111.0	%		96.8	%		97.6	%		93.5	%		91.7	%

Effect of favorable prior accident year reserve development		4.9	%		0.2	%		3.9	%		9.3	%		21.3	%		12.1	%

Combined ratio net of prior accident year reserve development		106.6	%		111.2	%		100.7	%		106.9	%		114.8	%		103.8	%


		8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	426,302		$	95,200		$	250,415		$	277,174		$	374,527		$	354,528

Net premiums written	$	415,275		$	91,386		$	248,117		$	268,252		$	366,576		$	354,001

Net premiums earned	$	250,005		$	249,388		$	242,891		$	237,181		$	220,341		$	219,513
Other underwriting (loss) income		(335	)		(932	)		734			1,088			(1,069	)		297

Total underwriting revenues	$	249,670		$	248,456		$	243,625		$	238,269		$	219,272		$	219,810

UNDERWRITING EXPENSES
Net losses and loss expenses	$	149,065		$	197,471		$	196,485		$	170,574		$	303,017		$	146,513
Acquisition expenses		52,275			56,769			53,511			52,026			49,310			46,518
General and administrative expenses		31,606			29,977			29,246			29,659			29,155			28,844

Total expenses	$	232,946		$	284,217		$	279,242		$	252,259		$	381,482		$	221,875

UNDERWRITING INCOME (LOSS)	$	16,724		$	(35,761	)	$	(35,617	)	$	(13,990	)	$	(162,210	)	$	(2,065	)

GAAP RATIOS
Loss ratio		59.7	%		79.2	%		81.0	%		71.9	%		137.5	%		66.8	%
Acquisition expense ratio		20.9	%		22.8	%		22.0	%		22.0	%		22.4	%		21.2	%
General and administrative expense ratio		12.6	%		12.0	%		12.0	%		12.5	%		13.2	%		13.1	%

Combined ratio AS REPORTED		93.2	%		114.0	%		115.0	%		106.4	%		173.1	%		101.1	%

Effect of favorable prior accident year reserve development		3.6	%		16.6	%		13.2	%		9.1	%		6.4	%		9.5	%

Combined ratio net of prior accident year reserve development		96.8	%		130.6	%		128.2	%		115.5	%		179.5	%		110.6	%


		9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
INSURANCE SEGMENT
Agriculture	$	533,667	$	46,260	$	289,656	$	57,125		$	508,705		$	350,199
Professional lines		36,345		45,110		39,559		49,181			35,469			33,508
Casualty		37,827		46,370		57,520		63,178			38,882			34,228
Property		9,844		18,669		30,049		35,904			24,690			26,523
Healthcare liability		16,653		10,276		33,652		20,454			18,137			20,316
Surety and other specialty		1,011		1,081		15		(92	)		(52	)		(433	)

TOTAL INSURANCE	$	635,347	$	167,766	$	450,451	$	225,750		$	625,831		$	464,341

REINSURANCE SEGMENT
Catastrophe	$	143,182	$	15,250	$	46,275	$	146,249		$	138,247		$	122,669
Casualty		121,674		59,231		56,293		45,619			116,352			107,974
Property		106,746		15,087		129,203		52,185			70,087			64,522
Aerospace and Marine		25,629		1,119		5,891		26,743			20,838			18,066
Surety and other specialty		29,071		4,513		12,753		6,378			29,003			41,297

TOTAL REINSURANCE	$	426,302	$	95,200	$	250,415	$	277,174		$	374,527		$	354,528

REPORTED TOTALS	$	1,061,649	$	262,966	$	700,866	$	502,924		$	1,000,358		$	818,869


		10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
INSURANCE SEGMENT
Agriculture	$	354,920	$	9,121	$	185,017	$	46,049		$	346,472		$	268,107
Professional lines		30,205		38,402		30,812		37,624			31,124			27,602
Casualty		26,463		30,139		37,664		43,811			25,759			21,038
Property		833		8,668		17,681		25,996			12,585			14,088
Healthcare liability		14,348		9,067		32,021		20,115			16,406			18,523
Surety and other specialty		1,012		1,081		15		(89	)		(50	)		(417	)

TOTAL INSURANCE	$	427,781	$	96,478	$	303,210	$	173,506		$	432,296		$	348,941

REINSURANCE SEGMENT
Catastrophe	$	133,718	$	14,753	$	43,868	$	139,337		$	131,123		$	122,759
Casualty		120,437		59,234		56,292		45,617			115,554			107,263
Property		106,746		15,087		129,203		52,185			70,087			64,522
Aerospace and Marine		25,593		768		6,002		24,726			20,839			18,031
Surety and other specialty		28,781		1,544		12,752		6,387			28,973			41,426

TOTAL REINSURANCE	$	415,275	$	91,386	$	248,117	$	268,252		$	366,576		$	354,001

REPORTED TOTALS	$	843,056	$	187,864	$	551,327	$	441,758		$	798,872		$	702,942


		11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			MAR. 31, 2011			MAR. 31, 2010
INSURANCE SEGMENT
Agriculture	$	59,969	$	146,068	$	215,830	$	142,952		$	59,808		$	46,612
Professional lines		33,884		37,580		34,343		37,788			36,175			39,606
Casualty		33,974		30,765		32,343		28,735			29,742			24,658
Property		14,543		16,735		16,636		19,566			16,593			15,793
Healthcare liability		18,799		19,168		19,435		20,445			20,224			19,588
Surety and other specialty		461		785		15		(89	)		(50	)		(581	)

TOTAL INSURANCE	$	161,630	$	251,101	$	318,602	$	249,397		$	162,492		$	145,676

REINSURANCE SEGMENT
Catastrophe	$	82,337	$	82,197	$	86,395	$	81,747		$	76,335		$	81,888
Casualty		73,252		73,838		68,882		70,441			64,953			61,516
Property		68,378		67,911		62,519		58,643			52,452			49,432
Aerospace and Marine		14,357		13,052		12,236		13,154			13,587			12,253
Surety and other specialty		11,681		12,390		12,859		13,196			13,014			14,424

TOTAL REINSURANCE	$	250,005	$	249,388	$	242,891	$	237,181		$	220,341		$	219,513

REPORTED TOTALS	$	411,635	$	500,489	$	561,493	$	486,578		$	382,833		$	365,189


		12

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE QUARTER
	ENDED MAR. 31, 2012
Average common equity [a]	$	2,217,852

Net premiums earned	$	411,635
Combined ratio		96.5	%
Operating margin		3.5	%
Premium leverage		0.19	x

Implied ROAE from underwriting activity		0.7	%

Average cash and invested assets at amortized cost	$	6,191,489
Investment leverage		2.79	x
Year to date investment income yield, pretax		0.9	%

Implied ROAE from investment activity		2.5	%

Financing Costs [b]		(0.8	)%

Implied Pre-tax Operating ROAE, for period [c]		2.4	%

[a]

[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.


		13

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE


	FOR THE QUARTERS ENDED												YEARS ENDED DECEMBER 31,
	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			2011			2010
Average common equity [a]	$	2,217,852		$	2,193,558		$	2,223,113		$	2,224,270		$	2,451,346		$	2,617,718

Net premiums earned	$	411,635		$	500,489		$	561,493		$	486,578		$	1,931,393		$	1,741,113

Premium leverage		0.19	x		0.23	x		0.25	x		0.22	x		0.79	x		0.67	x

Annualized premium leverage		0.76	x		0.92	x		1.00	x		0.88	x		0.79	x		0.67	x

Average cash and invested assets at amortized cost	$	6,191,489		$	6,214,330		$	6,252,158		$	6,089,706		$	6,130,518		$	6,017,647

Investment leverage		2.79	x		2.83	x		2.81	x		2.74	x		2.50	x		2.30	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.


		14

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF MARCH 31, 2012 AND DECEMBER 31, 2011


	March 31, 2012					December 31, 2011
Type of Investment	Fair Value		Percentage			Fair Value		Percentage
Cash and equivalents [a]	$	648,218		10.2	%	$	913,492		14.5	%
Short-term investments		54,919		0.9	%		67,802		1.1	%
U.S. government and government agencies notes		1,404,450		22.2	%		1,269,123		20.1	%
Government and agency guaranteed corporates		253,509		4.0	%		351,825		5.6	%
U.S. government agency residential mortgage-backed securities		987,037		15.6	%		965,019		15.3	%
U.S. government agency commercial mortgage-backed securities		24,023		0.4	%		28,807		0.5	%
Municipals		50,212		0.8	%		53,517		0.8	%
Foreign government		116,947		1.8	%		74,997		1.2	%
Corporate securities		1,269,480		20.0	%		1,139,899		18.1	%
Non-agency residential mortgage-backed securities		102,561		1.6	%		114,662		1.8	%
Non-agency commercial mortgage-backed securities		551,877		8.7	%		518,483		8.2	%
Asset-backed securities		370,939		5.9	%		315,634		5.0	%
Equity securities		67,238		1.1	%		59,767		0.9	%
Other investments [b]		432,428		6.8	%		432,658		6.9	%

Total	$	6,333,838		100.0	%	$	6,305,685		100.0	%


Ratings [e]	Fair Value		Percentage			Fair Value		Percentage
U.S. government and government agencies notes	$	1,404,450		24.7	%	$	1,269,123		23.5	%
AAA/Aaa		943,495		16.6	%		941,500		17.6	%
AA/Aa		1,669,700		29.4	%		1,665,593		30.9	%
A/A		910,353		16.0	%		776,251		14.4	%
BBB		138,423		2.4	%		130,864		2.4	%
Below BBB		117,797		2.1	%		114,716		2.1	%
Not Rated		1,736		—			1,721		—
Equity securities		67,238		1.2	%		59,767		1.1	%
Other investments [b]		432,428		7.6	%		432,658		8.0	%

Total	$	5,685,620		100.0	%	$	5,392,193		100.0	%


Performance	March 31, 2012			December 31, 2011
Yield [c]		3.8	%		2.4	%
Duration in years [d]		2.64			2.39


	Quarter Ended		Quarter Ended		Quarter Ended			Quarter Ended		Quarter Ended
Investment Income	Mar. 31, 2012		Dec. 31, 2011		Sept. 30, 2011			June 30, 2011		Mar. 31, 2011
Cash and fixed income securities	$	33,950	$	33,705	$	36,622		$	38,661	$	38,744
Other Investments		23,125		6,889		(22,522	)		1,181		13,757

Total net investment income	$	57,075	$	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 quarter ending 3/31/12 and twelve months ending 12/31/11 excludes realized and unrealized gains and losses on fixed maturity investments.

[d]

Duration excludes other investments and operating cash.

[e]

Excludes cash and equivalents.


		15

ENDURANCE SPECIALTY HOLDINGS LTD.

STRUCTURED SECURITIES DETAIL


	March 31, 2012								December 31, 2011
						Percentage of								Percentage of
Structured (RMBS, CMBS, ABS, CDO and CLO) securities ratings	Fair Value		Percentage			Investment Portfolio			Fair Value		Percentage			Investment Portfolio
U.S. Government and agencies	$	1,011,060		49.7	%		16.0	%	$	993,826		51.2	%		15.8	%
AAA/Aaa		676,591		33.2	%		10.7	%		669,536		34.5	%		10.6	%
AA/Aa		165,520		8.1	%		2.6	%		101,792		5.2	%		1.6	%
A/A		88,574		4.3	%		1.4	%		83,472		4.3	%		1.3	%
BBB		35,970		1.8	%		0.6	%		34,905		1.8	%		0.6	%
Below BBB		58,491		2.9	%		0.9	%		58,852		3.0	%		0.9	%
Not Rated		231		—			—			222		—			—

Total	$	2,036,437		100.0	%		32.2	%	$	1,942,605		100.0	%		30.8	%


						Percentage of								Percentage of
Structured securities sectors (RMBS, CMBS, ABS, CDO and CLO)	Fair Value		Percentage			Investment Portfolio			Fair Value		Percentage			Investment Portfolio
Commercial
Agency	$	24,023		1.2	%		0.4	%	$	28,807		1.5	%		0.5	%
Non Agency		573,004		28.1	%		9.0	%		537,920		27.7	%		8.5	%
Residential
Agency		987,037		48.5	%		15.7	%		965,019		49.7	%		15.3	%
Non Agency		102,561		5.0	%		1.6	%		115,304		5.9	%		1.8	%
Consumer		288,180		14.2	%		4.5	%		246,649		12.7	%		3.9	%
Collateralized Loan Obligations (CLO)		61,632		3.0	%		1.0	%		48,906		2.5	%		0.8	%

Total	$	2,036,437		100.0	%		32.2	%	$	1,942,605		100.0	%		30.8	%

Spread Duration 3.13 years


		16

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF MAR. 31, 2012


	March 31, 2012
	Amortized				Unrealized			Credit
ISSUER (1) (2) (4)	Cost		Fair Value		Gain (Loss)			Quality (3)
JPMORGAN CHASE & CO	$	36,892	$	38,342	$	1,008		A
US BANCORP		32,477		33,236		758		A
INTERNATIONAL BUSINESS MACHINES CORP		31,387		31,707		320		A+
METLIFE INC		29,049		29,717		668		A
WAL-MART STORES INC		26,267		27,450		1,073		AA
PHILIP MORRIS INTERNATIONAL INC		25,259		26,028		770		A
CITIGROUP INC		25,362		25,405		9		A-
NOVARTIS AG		23,647		25,103		1,456		AA-
GOLDMAN SACHS GROUP INC/THE		24,753		24,751		(2	)	A-
NEW YORK LIFE INSURANCE COMPANY		24,070		24,639		569		AA+
CREDIT SUISSE GROUP AG		22,060		22,805		745		A+
PEPSICO INC/NC		18,242		19,542		1,301		A
VERIZON COMMUNICATIONS INC		17,728		19,115		1,386		A-
HSBC HOLDINGS PLC		17,828		18,957		354		A+
WELLS FARGO & COMPANY		18,062		18,160		98		A+
MORGAN STANLEY		18,288		17,930		(358	)	A-
EDISON INTERNATIONAL		16,930		17,881		952		A
BANK OF AMERICA CORP		17,445		17,862		93		A-
BANK OF NOVA SCOTIA		15,544		15,748		204		AA-
NATIONAL GRID PLC		13,911		15,335		1,423		A-
RIO TINTO LIMITED		15,122		14,979		(143	)	A-
AT&T INC		14,048		14,742		694		A-
MEDTRONIC INC		13,399		14,237		837		A+
ROYAL DUTCH SHELL PLC		13,312		13,789		477		AA
PFIZER INC		13,344		13,521		177		AA

(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.


		17

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES


	THREE MONTHS ENDED MAR. 31, 2012
	GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	3,824,224		$	(666,928	)	$	3,157,296

Incurred related to:
Current year		372,829			(93,161	)		279,668
Prior years		(39,496	)		22,595			(16,901	)

Total Incurred		333,333			(70,566	)		262,767

Paid related to:
Current year		(5,096	)		—			(5,096	)
Prior years		(388,592	)		240,044			(148,548	)

Total Paid		(393,688	)		240,044			(153,644	)

Foreign currency translation		(3,040	)		(72	)		(3,112	)

Balance, end of period	$	3,760,829		$	(497,522	)	$	3,263,307


		18

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIOD ENDED MAR. 31, 2012


							Total
	Insurance			Reinsurance			Company
Incurred related to prior years
Quarter ended March 31, 2012	$	(7,847	)	$	(9,054	)	$	(16,901	)

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


							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


							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	)


		19

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY DEVELOPMENT TAIL

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT


	FOR THE QUARTERS ENDED															FOR THE YEAR ENDED
	MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011			DEC. 31, 2011
INSURANCE SEGMENT
Short tail[a]	$	(4,447	)	$	(132	)	$	(4,182	)	$	(5,150	)	$	(9,274	)	$	(18,738	)
Long tail[b]		(331	)		(916	)		(8,501	)		(5,490	)		(2,560	)		(17,467	)
Other[c]		(3,069	)		482			272			(12,550	)		(22,778	)		(34,574	)

TOTAL INSURANCE		(7,847	)		(566	)		(12,411	)		(23,190	)		(34,612	)		(70,779	)

REINSURANCE SEGMENT
Short tail[a]		(6,150	)		(37,014	)		(19,342	)		(19,245	)		(14,163	)		(89,764	)
Long tail[b]		(4,982	)		(4,917	)		(11,234	)		335			275			(15,541	)
Other[c]		2,078			418			(1,426	)		(2,681	)		(205	)		(3,894	)

TOTAL REINSURANCE		(9,054	)		(41,513	)		(32,002	)		(21,591	)		(14,093	)		(109,199	)

REPORTED TOTALS	$	(16,901	)	$	(42,079	)	$	(44,413	)	$	(44,781	)	$	(48,705	)	$	(179,978	)

[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, surety and other 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.


		20

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES


																									Reported
	Insurance												Reinsurance												Totals
	Short Tail			Long Tail			Other			Total			Short Tail			Long Tail			Other			Total
AT MAR. 31, 2012
Case reserves	$	29,993		$	408,703		$	52,447		$	491,143		$	531,683		$	292,812		$	3,081		$	827,576		$	1,318,719
Total reserves	$	56,263		$	1,641,930		$	172,143		$	1,870,336		$	888,327		$	994,880		$	7,286		$	1,890,493		$	3,760,829

Case reserves / Total reserves		53.3	%		24.9	%		30.5	%		26.3	%		59.9	%		29.4	%		42.3	%		43.8	%		35.1	%

IBNR / Total reserves		46.7	%		75.1	%		69.5	%		73.7	%		40.1	%		70.6	%		57.7	%		56.2	%		64.9	%

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	%


		21

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	QUARTER ENDED			YEARS ENDED DECEMBER 31,						INCEPTION TO
	MAR. 31, 2012			2011			2010			MAR. 31, 2012
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders	$	74,354		$	(117,859	)	$	349,238		$	2,415,735
Operating income (loss) available (attributable) to common and participating common shareholders		53,346			(152,303	)		330,035			2,400,466
Average Shareholders’ equity [a]		2,217,852			2,414,659			2,617,718			1,978,182

Net income (loss) return on average equity		3.4	%		(4.9	)%		13.3	%		11.9	% [c]
Operating return on average equity		2.4	%		(6.3	)%		12.6	%		11.8	% [c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	51.90		$	50.56		$	52.74		$	51.90
Dividends paid per share		0.31			1.20			1.00			8.64

Change in diluted book value per common share		2.7	%		(4.1	)%		18.2	%		16.4	% [c]

Total return to common shareholders [b]		3.3	%		(1.9	)%		20.5	%		20.7	% [c]

[a]

Excludes the $430 million (2010—$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.


		22

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION—TWO CLASS METHOD


		QUARTERS ENDED
		MAR. 31,
		2012			2011
DILUTIVE SHARES OUTSTANDING:	Average market price per share	$	38.69		$	47.17
AS REPORTED	Basic weighted average common shares outstanding [a]		42,436			40,750
	Add: weighted avg. unvested restricted share units		10			16
	Weighted average exercise price per share		—			—
	Proceeds from unrecognized restricted share unit expense	$	22		$	186
	Less: restricted share units bought back via treasury method		—			(16	)
	Add: weighted avg. dilutive warrants outstanding		—			2,955
	Weighted average exercise price per share		—		$	12.57
	Less: warrants bought back via treasury method		—			(2,955	)
	Add: weighted avg. dilutive options outstanding		109			1,211
	Weighted average exercise price per share	$	23.50		$	16.01
	Proceeds from unrecognized option expense		—			—
	Less: options bought back via treasury method		(66	)		(1,211	)

	Weighted average dilutive shares outstanding [b]		42,489			40,750

Notes: [a]

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

[b]


		23

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS (LOSSES) PER SHARE INFORMATION—TWO CLASS METHOD


	QUARTERS ENDED MAR. 31,
	2012			2011
Net income (loss)	$	82,542		$	(87,417	)
Less preferred dividends		(8,188	)		(3,875	)

Net income (loss) available (attributable) to common and participating common shareholders	$	74,354		$	(91,292	)
Less amount allocated to participating common shareholders [a]		(1,295	)		(275	)

Net income (loss) available allocated to common shareholders	$	73,059		$	(91,567	)

Denominator:
Weighted average shares—basic
Outstanding		42,436			40,750

		42,436			40,750

Share Equivalents
Options		43			—
Restricted share units		10			—

Weighted average shares—diluted		42,489			40,750

Basic earnings (losses) per common share	$	1.72		$	(2.25	)

Diluted earnings (losses) per common share [b]	$	1.72		$	(2.25	)

[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 earnings (losses) per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders.

[b]

Represents diluted earnings (losses) 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 INCOME (LOSS) RECONCILIATION

EARNINGS (LOSSES) PER SHARE INFORMATION—TWO CLASS METHOD


	Two-Class Method
	QUARTERS ENDED MAR. 31,
	2012			2011
Net income (loss)	$	82,542		$	(87,417	)
Add (less) after-tax items:
Net foreign exchange gains		(16,260	)		(6,851	)
Net realized and unrealized investment gains		(4,967	)		(4,022	)
Net impairment losses recognized in earnings (losses)		219			1,647

Operating income (loss) before preferred dividends	$	61,534		$	(96,643	)
Preferred dividends		(8,188	)		(3,875	)

Operating income (loss) available (attributable) to common and participating common shareholders	$	53,346		$	(100,518	)
Less amount allocated to participating common shareholders [a]		(929	)		(275	)

Operating income (loss) allocated to common shareholders	$	52,417		$	(100,793	)

Weighted average common shares outstanding
Basic		42,436			40,750
Dilutive		42,489			40,750

Basic per common share data
Net income (loss) allocated to common shareholders	$	1.72		$	(2.25	)
Add (less) after-tax items:
Net foreign exchange gains		(0.38	)		(0.16	)
Net realized and unrealized investment gains		(0.11	)		(0.10	)
Net impairment losses recognized in earnings (losses)		0.01			0.04

Operating income (loss) allocated to common shareholders	$	1.24		$	(2.47	)

Diluted per common share data
Net income (loss) allocated to common shareholders	$	1.72		$	(2.25	)
Add (less) after-tax items:
Net foreign exchange gains		(0.38	)		(0.16	)
Net realized and unrealized investment gains		(0.12	)		(0.10	)
Net impairment losses recognized in earnings (losses)		0.01			0.04

Operating income (loss) allocated to common shareholders [b]	$	1.23		$	(2.47	)

[a]

[b]

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


		25

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES SENSITIVITY ANALYSIS

DILUTIVE SHARES OUSTANDING

		000000		000000		000000		000000		000000		000000		000000		000000		000000		000000
Market Price per Share
$35.00	$	36.00	$	37.00	$	38.00	$	39.00	$	40.00	$	41.00	$	42.00	$	43.00	$	44.00	$	45.00

43,430		43,432		43,433		43,435		43,437		43,438		43,440		43,441		43,443		43,444		43,445


		26

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE


		MAR. 31,						DEC. 31,
		2012			2011			2011
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	40.66		$	48.82		$	38.25
AS-IF CONVERTED [a]	Basic common shares outstanding		42,565			39,499			42,367
	Add: unvested restricted shares and restricted share units		833			835			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	12.57			—
	Add: dilutive options outstanding		102			561			115
	Weighted average exercise price per share	$	24.13		$	16.01		$	23.14
	Book Value [b]	$	2,254,538		$	2,208,264		$	2,181,165
	Add: proceeds from converted warrants		—			36,403			—
	Add: proceeds from converted options		2,461			8,982			2,661

	Pro forma book value	$	2,256,999		$	2,253,649		$	2,183,826
	Dilutive shares outstanding		43,500			43,791			43,212

	Basic book value per common share	$	52.97		$	55.91		$	51.48
	Diluted book value per common share	$	51.89		$	51.46		$	50.54

DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	40.66		$	48.82		$	38.25
TREASURY STOCK METHOD	Basic common shares outstanding		42,565			39,499			42,367
	Add: unvested restricted shares and restricted share units		833			835			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	12.57			—
	Less: warrants bought back via treasury method		—			(746	)		—
	Add: dilutive options outstanding		102			561			115
	Weighted average exercise price per share	$	24.13		$	16.01		$	23.14
	Less: options bought back via treasury method		(61	)		(184	)		(70	)

	Dilutive shares outstanding		43,439			42,861			43,142

	Basic book value per common share	$	52.97		$	55.91		$	51.48
	Diluted book value per common share	$	51.90		$	51.52		$	50.56

[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 (Mar. 31, 2011—$200 million) liquidation value of the preferred shares.


		27

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 income (loss) is an internal performance measure used by the Company in the management of its operations. Operating income (loss) 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 income (loss) determined in accordance with GAAP, the Company believes that showing operating income (loss) 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 income (loss) should not be viewed as a substitute for GAAP net income (loss). Please see page 25 for a reconciliation of operating income (loss) to net income (loss).

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 27 for a reconciliation of diluted book value per common share to basic book value per common share.


		28

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