Exhibit 99.1

 

Endurance Reports Second Quarter 2012 Financial Results

PEMBROKE, Bermuda – July 31, 2012 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $64.3 million and $1.48 per diluted common share for the second quarter of 2012 versus net income of $37.2 million and $0.87 per diluted common share for the second quarter of 2011.

For the six months ended June 30, 2012, Endurance reported net income available to common shareholders of $138.6 million and $3.20 per diluted common share versus a net loss of $54.1 million and $1.36 per diluted common share for the six months ended June 30, 2011. Book value per diluted share was $53.48 at June 30, 2012, an increase of 3.0% for the quarter and 5.8% from year end 2011.

Operating highlights for the quarter ended June 30, 2012 were as follows:

 

•

Net premiums written of $484.4 million, an increase of 9.7% over the same period in 2011;

 

•

Combined ratio of 92.5%, which included 3.8 percentage points of favorable prior year loss reserve development and 2.7 percentage points of catastrophe losses from current quarter events;

 

•

Net investment income of $31.8 million, a decrease of $8.1 million from the same period in 2011;

 

•

Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $50.4 million and $1.18 per diluted common share; and

 

•

Operating return on average common equity for the quarter of 2.2% or 9.0% on an annualized basis.

Operating highlights for the six months ended June 30, 2012 were as follows:

 

•

Net premiums written of $1,327.5 million, an increase of 7.0% over the same period in 2011;

 

•

Combined ratio of 94.3%, which included 3.9 percentage points of favorable prior year loss reserve development and 4.0 percentage points of current year catastrophe losses;

 

•

Net investment income of $88.8 million, a decrease of $3.5 million over the same period in 2011;

 

•

Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $102.8 million and $2.42 per diluted common share; and

 

•

Operating return on average common equity for the first half of the year of 4.7%, or 9.3% on an annualized basis.

David Cash, Chief Executive Officer, commented, “Our results this quarter reflect relatively light catastrophe losses and improving P&C market conditions which led to improved underwriting margins within both our insurance and reinsurance segments compared to a year ago. Through successful growth initiatives and favorable renewals, we were able to grow our agriculture insurance, catastrophe reinsurance and casualty reinsurance businesses in the quarter while maintaining underwriting discipline in the current market.”

Commenting further on current drought conditions and the Company’s crop insurance business, Mr. Cash added, “While we anticipate that the current drought conditions will adversely impact our earnings in the second half of the year, our crop insurance business is very well diversified by crop and by geography. Our strong positions in the Southern states where irrigation is more prevalent and in parts of the northern and western corn belt of the Midwest where drought conditions currently have not been as severe will likely help mitigate the adverse impact of the drought claims we expect to receive in the central and eastern corn belt of the Midwest.”

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Insurance Segment

Operating highlights for Endurance’s Insurance segment for the quarter ended June 30, 2012 were as follows:

 

•

Net premiums written of $186.7 million, an increase of 7.6% from the second quarter of 2011;

 

•

Combined ratio of 97.3%, an improvement of 0.3 percentage points from the second quarter of 2011; and

 

•

Favorable prior year loss reserve development of 5.1 percentage points during the current period, compared to 9.3 percentage points of favorable prior year loss reserve development in the second quarter of 2011.

Operating highlights for Endurance’s Insurance segment for the six months ended June 30, 2012 were as follows:

 

•

Net premiums written of $614.4 million, an increase of 1.4% from the same period in 2011;

 

•

Combined ratio of 98.9%, an increase of 2.9 percentage points from the same period in 2011; and

 

•

Favorable prior year loss reserve development of 5.0 percentage points during the current period, compared to 14.0 percentage points of favorable prior year loss reserve development in the same period in 2011.

Net premiums written in the Insurance segment increased $13.2 million and $8.6 million for the second quarter and six months ended June 30, 2012, respectively, compared to the same periods in the prior year as growth in agriculture premiums was partially offset by a reduction in property premiums. Within the agriculture line of business, premiums increased as a result of growth in policy counts and increased premium levels per policy, which more than offset a decline in premium due to lower commodity prices. The declines in property insurance premiums compared to a year ago were driven by the Company’s strategic decision to reallocate capital to lines of business with greater profit potential.

The improvement in the Insurance segment combined ratio for the quarter ended June 30, 2012 compared to the same period in 2011 was driven by a lower general and administrative expense ratio, partially offset by a higher net loss ratio. Lower general and administrative expenses resulted from favorable compensation cost adjustments across the Company and higher levels of expense reimbursements in the agriculture line of business while the higher net loss ratio was the result of lower prior year favorable loss reserve development in the current quarter compared to a year ago. For the six months ended June 30, 2012, the combined ratio was 2.9 percentage points higher than the same period a year ago as a higher net loss ratio was partially offset by a lower general and administrative expense ratio.

The Insurance segment’s net loss ratio in the second quarter of 2012 benefited from $13.6 million, or 5.1 percentage points of favorable prior year loss reserve development, compared to $23.2 million, or 9.3 percentage points, for the same period a year ago. For the six months ended June 30, 2012, the net loss ratio benefitted from 5.0 percentage points of favorable prior year loss reserve development compared to 14.0 percentage points for the first six months of 2011. The lower level of favorable prior year loss reserve development in the second quarter and first six months of 2012 compared to the same periods in 2011 was driven predominantly by the agriculture line of business. The increased favorable loss reserve development in the prior year periods resulted from the combination of a very strong 2010 crop year with a delayed harvest that extended claims settlements until the first two quarters of 2011 compared to the 2011 crop year, which did not experience the same level of harvest delays or extension of claim settlements into the first two quarters of 2012.

Reinsurance Segment

Operating highlights for Endurance’s Reinsurance segment for the quarter ended June 30, 2012 were as follows:

 

•

Net premiums written of $297.8 million, an increase of 11.0% from the second quarter of 2011;

 

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•

Combined ratio of 87.6%, an improvement of 18.8 percentage points from the second quarter of 2011;

 

•

Favorable prior year loss reserve development of 2.3 percentage points compared to 9.1 percentage points of favorable prior year loss reserve development in the second quarter of 2011; and

 

•

Net catastrophe losses from 2012 events of $14.4 million or 5.8 percentage points on the net loss ratio.

Operating highlights for Endurance’s Reinsurance segment for the six months ended June 30, 2012 were as follows:

 

•

Net premiums written of $713.0 million, an increase of 12.3% from the same period in 2011;

 

•

Combined ratio of 90.4%, an improvement of 48.1 percentage points from the same period in 2011;

 

•

Favorable prior year loss reserve development of 3.0 percentage points during the current period, compared to 7.8 percentage points of favorable prior year loss reserve development in the same period in 2011; and

 

•

Net catastrophe losses from 2012 events of $36.9 million or 7.8 percentage points on the net loss ratio.

The $29.5 million increase in net premiums written within the Reinsurance segment during the second quarter of 2012 over the second quarter of 2011 resulted primarily from increases within the catastrophe and casualty lines of business partially offset by a decline in the aerospace and marine line of business. The increase in catastrophe premiums was driven by improved pricing during mid year renewals and through the reallocation of capital from the insurance property line of businesses to the catastrophe line of business. The increase in casualty premiums resulted from one large contract being expanded at renewal, higher premium adjustments compared to a year ago and one contract having the renewal date transition to the second quarter of 2012. The reduction in the aerospace and marine line of business was largely driven by the non-renewal of business as one large ceding company retained more net exposures. For the six months ended June 30, 2012, net premiums written increased $78.2 million primarily due to increases within the property, catastrophe and casualty lines of business.

The combined ratio in the Reinsurance segment for the second quarter of 2012 improved compared to the same period in 2011 predominantly due to a lower net loss ratio and modestly improved general and administrative and acquisition expense ratio. The second quarter 2012 net loss ratio included 5.8 points of catastrophe losses relating to the earthquake in Italy and tornadoes that impacted the United States during the quarter while the second quarter 2011 net loss ratio included 27.1 points of catastrophe losses relating to United States tornadoes. The Reinsurance segment’s net loss ratio in the second quarter of 2012 benefited from $5.9 million, or 2.3 percentage points of favorable prior year loss reserve development, compared to $21.6 million, or 9.1 percentage points, for the same period a year ago.

For the first six months of 2012, the Reinsurance segment reported a combined ratio of 90.4% compared to 138.5% for the same period in 2011. The improvement in the combined ratio was largely attributable to an improvement in the net loss ratio as a result of the lower frequency and severity of catastrophe events in 2012, which added 7.8 points to the net loss ratio compared to 58.6 points to the net loss ratio in the first six months of 2011. For the six months ended June 30, 2012, the net loss ratio benefitted from 3.0 percentage points of favorable prior year loss reserve development compared to 7.8 percentage points in the first six months of 2011.

Investments

Endurance’s net investment income for the quarter and six months ended June 30, 2012 was $31.8 million and $88.8 million, a decrease of $8.1 million and $3.5 million, respectively, compared to the same periods in 2011. The total return of Endurance’s investment portfolio was 0.90% and 2.29% for the quarter and six months ended June 20, 2012, respectively, compared to 1.32% and 2.23% for the quarter and six months ended June 30, 2011, respectively. Investment income generated from Endurance’s fixed maturity investments declined by $7.2 million and $12.4 million for the three

 

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and six months ended June 30, 2012, respectively, compared to the same period in 2011 due to lower reinvestment rates during 2012 and the short duration of Endurance’s fixed maturity portfolio. During the second quarter and six months ended June 30, 2012, Endurance’s net investment income included mark to market losses of $0.1 million and gains of $23.1 million, respectively, on its alternative investment funds and high yield loan funds, which are included in other investments, as compared to gains of $1.2 million and $14.9 million in the second quarter and first six months of 2011, respectively. The ending book yield on Endurance’s fixed maturity investments at June 30, 2012 was 2.57%, down from 2.68% at December 31, 2011 and 2.93% at June 30, 2011.

At June 30, 2012, Endurance’s fixed maturity portfolio, which comprises 92.9% of Endurance’s investments, had an average credit quality of AA and a duration of 2.60 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $145.2 million at June 30, 2012, an improvement of $22.4 million from December 31, 2011. Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $14.6 million and $19.5 million during the second quarter and first six months of 2012 compared to net realized investment gains of $20.6 million and $22.7 million during the second quarter and first six months of 2011.

Endurance ended the second quarter of 2012 with cash and invested assets of $6.4 billion, which represents a 0.8% increase from December 31, 2011. Net operating cash flow was $70.3 million for the six months ended June 30, 2012 versus $288.3 million for the same period in 2011.

Capitalization and Shareholders’ Equity

At June 30, 2012, Endurance’s shareholders’ equity was $2.75 billion or $53.48 per diluted common share versus $2.61 billion or $50.56 per diluted common share at December 31, 2011. For the quarter and six months ended June 30, 2012, Endurance declared and paid common dividends of $0.31 and $0.62 per share, respectively.

Earnings Call

Endurance will host a conference call on August 1, 2012 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (800) 967-7135 or (719) 457-2625 (international) and entering pass code: 5400386. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through August 15, 2012 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 5400386.

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

A copy of Endurance’s financial supplement for the second quarter of 2012 will be available on Endurance’s website at www.endurance.bm shortly after the release of earnings.

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

 

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About Endurance Specialty Holdings

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

Safe Harbor for Forward-Looking Statements

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

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

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

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

 

		June 30, 2012				December 31, 2011
Assets
Cash and cash equivalents		$	842,180			$	890,914
Fixed maturity investments, available for sale, at fair value			5,081,814				4,831,966
Short-term investments, available for sale, at fair value			40,913				67,802
Equity securities, available for sale, at fair value			70,652				59,767
Other investments			478,860				432,658
Premiums receivable, net			1,289,478				544,017
Insurance and reinsurance balances receivable			115,904				92,710
Deferred acquisition costs			196,693				166,049
Prepaid reinsurance premiums			258,522				149,670
Losses recoverable			618,447				666,928
Accrued investment income			27,383				29,708
Goodwill and intangible assets			176,743				181,828
Deferred tax asset			36,376				33,355
Net receivable on sales of investments			30,776				77,821
Other assets			75,387				67,422
Total Assets		$	9,340,128			$	8,292,615
Liabilities
Reserve for losses and loss expenses		$	3,984,622			$	3,824,224
Reserve for unearned premiums			1,437,482				932,108
Deposit liabilities			24,938				26,887
Reinsurance balances payable			306,122				189,488
Debt			527,299				528,118
Net payable on purchases of investments			186,652				55,243
Other liabilities			125,771				125,382
Total Liabilities			6,592,886				5,681,450
Shareholders’ Equity
Preferred shares
Series A, non-cumulative - 8,000,000 issued and outstanding (2011 - 8,000,000)			8,000				8,000
Series B, non-cumulative - 9,200,000 issued and outstanding (2011 - 9,200,000)			9,200				9,200
Common shares
43,296,381 issued and outstanding (2011 – 43,086,834)			43,296				43,087
Additional paid-in capital			531,145				526,910
Accumulated other comprehensive income			150,252				130,392
Retained earnings			2,005,349				1,893,576
Total Shareholders’ Equity			2,747,242				2,611,165
Total Liabilities and Shareholders’ Equity		$	9,340,128			$	8,292,615
Book Value per Common Share
Dilutive common shares outstanding			43,329,374				43,142,277
Diluted book value per common share [a]		$	53.48			$	50.56

Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2011, which was derived from Endurance’s audited financial statements.

 

[a]	Excludes the $430 million liquidation value of the preferred shares (2011 - $430 million).

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

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

 

		Quarter Ended								For the Six Months Ended
		June 30, 2012				June 30, 2011				June 30, 2012				June 30, 2011
Revenues
Gross premiums written		$	604,076			$	502,924			$	1,665,725			$	1,503,282
Net premiums written		$	484,413			$	441,758			$	1,327,469			$	1,240,630
Change in unearned premiums			34,927				44,820				(396,494	)			(371,219	)
Net premiums earned			519,340				486,578				930,975				869,411
Other underwriting income (loss)			19				1,088				(316	)			19
Net investment income			31,766				39,842				88,841				92,343
Net realized and unrealized gains			14,958				21,532				20,161				25,307
Total other-than-temporary impairment losses			(148	)			(484	)			(148	)			(1,740	)
Portion of loss recognized in other comprehensive income (loss)			(259	)			(448	)			(478	)			(839	)
Net impairment losses recognized in earnings (losses)			(407	)			(932	)			(626	)			(2,579	)
Total revenues			565,676				548,108				1,039,035				984,501
Expenses
Net losses and loss expenses			345,897				361,970				608,664				763,823
Acquisition expenses			72,128				67,887				140,617				133,505
General and administrative expenses			62,609				65,886				128,650				131,847
Amortization of intangibles			2,777				3,026				5,554				5,824
Net foreign exchange (gains) losses			(336	)			3,348				(18,473	)			(3,570	)
Interest expense			9,044				9,057				18,091				18,111
Total expenses			492,119				511,174				883,103				1,049,540
Income (loss) before income taxes			73,557				36,934				155,932				(65,039	)
Income tax (expense) benefit			(1,074	)			4,143				(907	)			18,699
Net income (loss)			72,483				41,077				155,025				(46,340	)
Preferred dividends			(8,188	)			(3,875	)			(16,376	)			(7,750	)
Net income (loss) available (attributable) to common and participating common shareholders		$	64,295			$	37,202			$	138,649			$	(54,090	)
Per share data
Basic earnings (losses) per common share		$	1.48			$	0.92			$	3.20			$	(1.36	)
Diluted earnings (losses) per common share		$	1.48			$	0.87			$	3.20			$	(1.36	)

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the quarter ended June 30, 2012
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	292,659			$	311,417			$	604,076
Ceded premiums written			(106,000	)			(13,663	)			(119,663	)
Net premiums written			186,659				297,754				484,413
Net premiums earned			266,085				253,255				519,340
Other underwriting (loss) income			(1,300	)			1,319				19
Total underwriting revenues			264,785				254,574				519,359
Expenses
Net losses and loss expenses			208,504				137,393				345,897
Acquisition expenses			17,545				54,583				72,128
General and administrative expenses			32,819				29,790				62,609
			258,868				221,766				480,634
Underwriting income		$	5,917			$	32,808			$	38,725
Net loss ratio			78.4	%			54.2	%			66.5	%
Acquisition expense ratio			6.6	%			21.6	%			13.9	%
General and administrative expense ratio			12.3	%			11.8	%			12.1	%
Combined ratio			97.3	%			87.6	%			92.5	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the quarter ended June 30, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	225,750			$	277,174			$	502,924
Ceded premiums written			(52,244	)			(8,922	)			(61,166	)
Net premiums written			173,506				268,252				441,758
Net premiums earned			249,397				237,181				486,578
Other underwriting income			—				1,088				1,088
Total underwriting revenues			249,397				238,269				487,666
Expenses
Net losses and loss expenses			191,396				170,574				361,970
Acquisition expenses			15,861				52,026				67,887
General and administrative expenses			36,227				29,659				65,886
			243,484				252,259				495,743
Underwriting income (loss)		$	5,913			$	(13,990	)		$	(8,077	)
Net loss ratio			76.7	%			71.9	%			74.4	%
Acquisition expense ratio			6.4	%			22.0	%			14.0	%
General and administrative expense ratio			14.5	%			12.5	%			13.5	%
Combined ratio			97.6	%			106.4	%			101.9	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the six months ended June 30, 2012
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	928,006			$	737,719			$	1,665,725
Ceded premiums written			(313,566	)			(24,690	)			(338,256	)
Net premiums written			614,440				713,029				1,327,469
Net premiums earned			427,715				503,260				930,975
Other underwriting (loss) income			(1,300	)			984				(316	)
Total underwriting revenues			426,415				504,244				930,659
Expenses
Net losses and loss expenses			322,206				286,458				608,664
Acquisition expenses			33,759				106,858				140,617
General and administrative expenses			67,254				61,396				128,650
			423,219				454,712				877,931
Underwriting income		$	3,196			$	49,532			$	52,728
Net loss ratio			75.3	%			57.0	%			65.4	%
Acquisition expense ratio			7.9	%			21.2	%			15.1	%
General and administrative expense ratio			15.7	%			12.2	%			13.8	%
Combined ratio			98.9	%			90.4	%			94.3	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the six months ended June 30, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	851,581			$	651,701			$	1,503,282
Ceded premiums written			(245,779	)			(16,873	)			(262,652	)
Net premiums written			605,802				634,828				1,240,630
Net premiums earned			411,889				457,522				869,411
Other underwriting income			—				19				19
			411,889				457,541				869,430
Expenses
Net losses and loss expenses			290,232				473,591				763,823
Acquisition expenses			32,169				101,336				133,505
General and administrative expenses			73,033				58,814				131,847
			395,434				633,741				1,029,175
Underwriting income (loss)		$	16,455			$	(176,200	)		$	(159,745	)
Net loss ratio			70.5	%			103.5	%			87.9	%
Acquisition expense ratio			7.8	%			22.1	%			15.4	%
General and administrative expense ratio			17.7	%			12.9	%			15.1	%
Combined ratio			96.0	%			138.5	%			118.4	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

		For the quarter ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			78.4	%			76.7	%			54.2	%			71.9	%			66.5	%			74.4	%
Acquisition expense ratio			6.6	%			6.4	%			21.6	%			22.0	%			13.9	%			14.0	%
General and administrative expense ratio			12.3	%			14.5	%			11.8	%			12.5	%			12.1	%			13.5	%
Combined ratio			97.3	%			97.6	%			87.6	%			106.4	%			92.5	%			101.9	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

		For the quarter ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			5.1	%			9.3	%			2.3	%			9.1	%			3.8	%			9.2	%

Net of Prior Year Net Loss Reserve Development

 

		For the quarter ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			83.5	%			86.0	%			56.5	%			81.0	%			70.3	%			83.6	%
Acquisition expense ratio			6.6	%			6.4	%			21.6	%			22.0	%			13.9	%			14.0	%
General and administrative expense ratio			12.3	%			14.5	%			11.8	%			12.5	%			12.1	%			13.5	%
Combined ratio			102.4	%			106.9	%			89.9	%			115.5	%			96.3	%			111.1	%

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

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

		For the six months ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			75.3	%			70.5	%			57.0	%			103.5	%			65.4	%			87.9	%
Acquisition expense ratio			7.9	%			7.8	%			21.2	%			22.1	%			15.1	%			15.4	%
General and administrative expense ratio			15.7	%			17.7	%			12.2	%			12.9	%			13.8	%			15.1	%
Combined ratio			98.9	%			96.0	%			90.4	%			138.5	%			94.3	%			118.4	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

		For the six months ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			5.0	%			14.0	%			3.0	%			7.8	%			3.9	%			10.8	%

Net of Prior Year Net Loss Reserve Development

 

		For the six months ended June 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			80.3	%			84.5	%			60.0	%			111.3	%			69.3	%			98.7	%
Acquisition expense ratio			7.9	%			7.8	%			21.2	%			22.1	%			15.1	%			15.4	%
General and administrative expense ratio			15.7	%			17.7	%			12.2	%			12.9	%			13.8	%			15.1	%
Combined ratio			103.9	%			110.0	%			93.4	%			146.3	%			98.2	%			129.2	%

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

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

The following tables show Endurance’s gross and net premiums written for the quarters ended June 30, 2012 and 2011:

 

		Quarter Ended June 30, 2012								Quarter Ended June 30, 2011
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	133,439			$	67,249			$	57,125			$	46,049
Professional lines			51,019				42,832				49,181				37,624
Casualty			68,088				43,549				63,178				43,811
Property			18,182				11,990				35,904				25,996
Healthcare liability			19,922				19,031				20,454				20,115
Surety and other specialty			2,009				2,008				(92	)			(89	)
Subtotal Insurance		$	292,659			$	186,659			$	225,750			$	173,506
Reinsurance
Catastrophe		$	172,222			$	158,865			$	146,249			$	139,337
Casualty			58,897				58,895				45,619				45,617
Property			54,026				54,033				52,185				52,185
Aerospace and marine			18,288				18,287				26,743				24,726
Surety and other specialty			7,984				7,674				6,378				6,387
Subtotal Reinsurance		$	311,417			$	297,754			$	277,174			$	268,252
Total		$	604,076			$	484,413			$	502,924			$	441,758

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

The following tables show Endurance’s gross and net premiums written for the six months ended June 30, 2012 and 2011:

 

		Six Months Ended June 30, 2012								Six Months Ended June 30, 2011
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	667,106			$	422,169			$	565,830			$	392,521
Professional lines			87,364				73,037				84,650				68,748
Casualty			105,915				70,012				102,060				69,570
Property			28,026				12,823				60,594				38,581
Healthcare liability			36,575				33,379				38,591				36,521
Surety and other specialty			3,020				3,020				(144	)			(139	)
Subtotal Insurance		$	928,006			$	614,440			$	851,581			$	605,802
Reinsurance
Catastrophe		$	315,404			$	292,583			$	284,496			$	270,460
Casualty			180,571				179,332				161,971				161,171
Property			160,772				160,779				122,272				122,272
Aerospace and marine			43,917				43,880				47,581				45,565
Surety and other specialty			37,055				36,455				35,381				35,360
Subtotal Reinsurance		$	737,719			$	713,029			$	651,701			$	634,828
Total		$	1,665,725			$	1,327,469			$	1,503,282			$	1,240,630

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RECONCILIATIONS

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

The following is a reconciliation of Endurance’s net income (loss), net income (loss) per diluted common share, net income (loss) allocated to common shareholders under the two-class method and annualized return on average common equity to operating income (loss), operating income (loss) per diluted common share, operating income (loss) allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the three and six months ended June 30, 2012 and 2011:

 

		Quarter Ended June 30,								Six Months Ended June 30,
		2012				2011				2012				2011
Net income (loss)		$	72,483			$	41,077			$	155,025			$	(46,340	)
(Less) add after-tax items:
Net foreign exchange (gains) losses			(365	)			3,181				(16,625	)			(3,670	)
Net realized and unrealized gains			(13,050	)			(20,717	)			(18,018	)			(24,739	)
Net impairment losses recognized in earnings			387				932				606				2,579
Operating income (loss) before preferred dividends		$	59,455			$	24,473			$	120,988			$	(72,170	)
Preferred dividends			(8,188	)			(3,875	)			(16,376	)			(7,750	)
Operating income (loss) allocated (attributable) to common and participating common shareholders		$	51,267			$	20,598			$	104,612			$	(79,920	)
Operating income (loss) allocated (attributable) to common shareholders under the two-class method		$	50,402			$	20,199			$	102,818			$	(80,436	)
Weighted average diluted common			42,635,182				42,155,890				42,562,007				40,227,173
Operating income (loss) per diluted common share [b]		$	1.18			$	0.48			$	2.42			$	(2.00	)
Average common equity [a]		$	2,285,890			$	2,224,270			$	2,249,204			$	2,444,215
Operating return on average common equity			2.2	%			0.9	%			4.7	%			(3.3	)%
Annualized operating return on average common equity			9.0	%			3.7	%			9.3	%			(6.5	)%
Net income (loss)		$	72,483			$	41,077			$	155,025			$	(46,340	)
Preferred dividends			(8,188	)			(3,875	)			(16,376	)			(7,750	)
Net income (loss) available (attributable) to common and participating common shareholders		$	64,295			$	37,202			$	138,649			$	(54,090	)
Net income (loss) available (attributable) to common shareholders under the two-class method		$	63,210			$	36,492			$	136,272			$	(54,606	)
Net income (loss) per diluted common share		$	1.48			$	0.87			$	3.20			$	(1.36	)
Return (loss) on average common equity, Net income (loss)			2.8	%			1.7	%			6.2	%			(2.2	)%
Annualized return (loss) on average common equity, Net income (loss)			11.3	%			6.7	%			12.3	%			(4.4	)%

 

[a]	Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated period, which excludes the $430 million liquidation value of the preferred shares (2011: $430 million; 2010: $200 million)

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

 

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

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

Contact:

Investor Relations

Phone: +1 441 278 0988

Email: investorrelations@endurance.bm

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