ENDURANCE SPECIALTY HOLDINGS LTD - FORM 8-K - EX-99.2 - INVESTOR FINANCIAL SUPPLEMENT FOR THE QUARTER ENDED JUNE 30, 2012

Attached files

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d387758d8k.htm
EX-99.3 - SLIDES FROM PRESENTATION BY MANAGEMENT - ENDURANCE SPECIALTY HOLDINGS LTD	d387758dex993.htm
EX-99.1 - SECOND QUARTER RESULTS OF OPERATIONS PRESS RELEASE, DATED JULY 31, 2012 - ENDURANCE SPECIALTY HOLDINGS LTD	d387758dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

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

VI. Regulation G		33

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.

LOGO

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 and 2010 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 JUNE 30,						SIX MONTHS ENDED JUNE 30,						Previous Quarter			Previous Year to Date
		2012			2011			2012			2011			Change			Change
HIGHLIGHTS	Net income (loss)	$	72,483		$	41,077		$	155,025		$	(46,340	)		76.5	%		434.5	%
	Net income (loss) available (attributable) to common and participating common shareholders		64,295			37,202			138,649			(54,090	)		72.8	%		356.3	%
	Net income (loss) allocated to common shareholders		63,210			36,492			136,272			(54,606	)		73.2	%		349.6	%
	Operating income (loss) [a]		59,455			24,473			120,988			(72,170	)		142.9	%		267.6	%
	Operating income (loss) available (attributable) to common and participating common shareholders [a]		51,267			20,598			104,612			(79,920	)		148.9	%		230.9	%
	Operating income (loss) allocated to common shareholders [a]		50,402			20,199			102,818			(80,436	)		149.5	%		227.8	%
	Operating cash flow		45,390			106,970			70,295			288,252			(57.6	)%		(75.6	)%
	Net investment income		31,766			39,842			88,841			92,343			(20.3	)%		(3.8	)%
	Gross premiums written		604,076			502,924			1,665,725			1,503,282			20.1	%		10.8	%
	Net premiums written		484,413			441,758			1,327,469			1,240,630			9.7	%		7.0	%
	Net premiums earned		519,340			486,578			930,975			869,411			6.7	%		7.1	%
	Total assets		9,340,128			8,760,040			9,340,128			8,760,040			6.6	%		6.6	%
	Total shareholders’ equity		2,747,242			2,670,276			2,747,242			2,670,276			2.9	%		2.9	%

PER SHARE AND SHARES DATA	Basic earnings (losses) per common share
	Net income (loss) (as reported)	$	1.48		$	0.92		$	3.20		$	(1.36	)		60.9	%		335.3	%
	Operating income (loss) (as reported) [a]	$	1.18		$	0.51		$	2.42		$	(2.00	)		131.4	%		221.0	%
	Diluted earnings (losses) per common share
	Net income (loss) (as reported)	$	1.48		$	0.87		$	3.20		$	(1.36	)		70.1	%		335.3	%
	Operating income (loss) (as reported) [a]	$	1.18		$	0.48		$	2.42		$	(2.00	)		145.8	%		221.0	%
As Reported	Weighted average common shares outstanding		42,599			39,710			42,519			40,227			7.3	%		5.7	%
	Weighted average common shares outstanding and dilutive potential common shares [e]		42,635			42,156			42,562			40,227			1.1	%		5.8	%

	Common dividends paid per share	$	0.31		$	0.30		$	0.62		$	0.60			3.3	%		3.3	%

Book Value Per Common Share	Book value [b]	$	54.37		$	56.35		$	54.37		$	56.35			(3.5	)%		(3.5	)%
	Diluted book value (treasury stock method) [b]	$	53.48		$	52.20		$	53.48		$	52.20			2.5	%		2.5	%

FINANCIAL RATIOS	Return on average common equity (ROAE), net income (loss) [c]		2.8	%		1.7	%		6.2	%		(2.2	)%		1.1			8.4
	ROAE, operating income (loss) [a] [c]		2.2	%		0.9	%		4.7	%		(3.3	)%		1.3			8.0
	Return on beg. common equity (ROBE), net income (loss) [d]		2.9	%		1.7	%		6.4	%		(2.0	)%		1.2			8.4
	ROBE, operating income (loss) [a] [d]		2.3	%		0.9	%		4.8	%		(3.0	)%		1.4			7.8

	Annualized ROAE, net income (loss) [c]		11.3	%		6.7	%		12.3	%		(4.4	)%		4.6			16.7
	Annualized ROAE, operating income (loss) [a] [c]		9.0	%		3.7	%		9.3	%		(6.5	)%		5.3			15.8
	Annualized ROBE, net income (loss) [d]		11.4	%		6.7	%		12.7	%		(4.1	)%		4.7			16.8
	Annualized ROBE, operating income (loss) [a] [d]		9.1	%		3.7	%		9.6	%		(6.0	)%		5.4			15.6
	Annualized investment yield		2.0	%		2.6	%		2.9	%		3.0	%		(0.6	)		(0.1	)

GAAP	Loss ratio		66.5	%		74.4	%		65.4	%		87.9	%		(7.9	)		(22.5	)
	Acquisition expense ratio		13.9	%		14.0	%		15.1	%		15.4	%		(0.1	)		(0.3	)
	General and administrative expense ratio		12.1	%		13.5	%		13.8	%		15.1	%		(1.4	)		(1.3	)

	Combined ratio		92.5	%		101.9	%		94.3	%		118.4	%		(9.4	)		(24.1	)

[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 31 for a reconciliation to net income (loss).

[b]

For detailed calculations, please refer to page 32.

[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 (April 1, 2011 liquidation value $200 million)

[d]

Beginning common equity for the stated periods excludes the $430 million liquidation value of the preferred shares (April 1, 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
	JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			JUNE 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	604,076		$	1,061,649		$	262,966		$	700,866		$	502,924		$	489,568
Premiums ceded		(119,663	)		(218,593	)		(75,102	)		(149,539	)		(61,166	)		(38,765	)

Net premiums written	$	484,413		$	843,056		$	187,864		$	551,327		$	441,758		$	450,803
Change in unearned premiums		34,927			(431,421	)		312,625			10,166			44,820			5,592

Net premiums earned	$	519,340		$	411,635		$	500,489		$	561,493		$	486,578		$	456,395
Other underwriting income (loss)		19			(335	)		(1,425	)		(2,141	)		1,088			(2,663	)

Total underwriting revenues	$	519,359		$	411,300		$	499,064		$	559,352		$	487,666		$	453,732

UNDERWRITING EXPENSES
Net losses and loss expenses	$	345,897		$	262,767		$	412,152		$	456,691		$	361,970		$	292,947
Acquisition expenses		72,128			68,489			77,157			72,249			67,887			66,708
General and administrative expenses		62,609			66,041			73,731			58,574			65,886			55,676

Total underwriting expenses	$	480,634		$	397,297		$	563,040		$	587,514		$	495,743		$	415,331

Underwriting income (loss)	$	38,725		$	14,003		$	(63,976	)	$	(28,162	)	$	(8,077	)	$	38,401

OTHER OPERATING REVENUE
Net investment income	$	31,766		$	57,075		$	40,594		$	14,100		$	39,842		$	33,351
Interest expense		(9,044	)		(9,047	)		(9,088	)		(9,055	)		(9,057	)		(9,050	)
Amortization of intangibles		(2,777	)		(2,777	)		(2,413	)		(2,976	)		(3,026	)		(2,588	)

Total other operating revenue	$	19,945		$	45,251		$	29,093		$	2,069		$	27,759		$	21,713

INCOME (LOSS) BEFORE OTHER ITEMS	$	58,670		$	59,254		$	(34,883	)	$	(26,093	)	$	19,682		$	60,114
OTHER
Net foreign exchange gains (losses)	$	336		$	18,137		$	(233	)	$	4,085		$	(3,348	)	$	(129	)
Net realized and unrealized investment gains		14,958			5,203			5,331			1,033			21,532			2,657

Total other-than-temporary impairment losses		(148	)		—			(751	)		(168	)		(484	)		(738	)
Portion of loss recognised in other comprehensive income		(259	)		(219	)		50			(72	)		(448	)		(254	)

Net impairment losses recognised in earnings (losses)		(407	)		(219	)		(701	)		(240	)		(932	)		(992	)

Income tax (expense) benefit		(1,074	)		167			3,110			1,197			4,143			(3,057	)

NET INCOME (LOSS)	$	72,483		$	82,542		$	(27,376	)	$	(20,018	)	$	41,077		$	58,593
Preferred dividends		(8,188	)		(8,188	)		(8,187	)		(8,188	)		(3,875	)		(3,875	)


NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	64,295		$	74,354		$	(35,563	)	$	(28,206	)	$	37,202		$	54,718


KEY RATIOS/PER SHARE DATA

Loss ratio		66.5	%		63.9	%		82.4	%		81.3	%		74.4	%		64.2	%
Acquisition expense ratio		13.9	%		16.6	%		15.4	%		12.9	%		14.0	%		14.6	%
General and administrative expense ratio		12.1	%		16.0	%		14.7	%		10.4	%		13.5	%		12.2	%

Combined ratio		92.5	%		96.5	%		112.5	%		104.6	%		101.9	%		91.0	%


Basic earnings (losses) per common share	$	1.48		$	1.72		$	(0.88	)	$	(0.71	)	$	0.92		$	1.02
Diluted earnings (losses) per common share	$	1.48		$	1.72		$	(0.88	)	$	(0.71	)	$	0.87		$	0.97

ROAE, net income (loss) [a]		2.8	%		3.4	%		(1.6	)%		(1.3	)%		1.7	%		2.1	%

[a]


		2

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - YTD


	SIX MONTHS ENDED									YEAR ENDED
	JUNE 30, 2012			JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,665,725		$	1,503,282		$	1,308,437		$	2,467,114		$	2,053,236
Premiums ceded		(338,256	)		(262,652	)		(154,692	)		(487,293	)		(289,492	)

Net premiums written	$	1,327,469		$	1,240,630		$	1,153,745		$	1,979,821		$	1,763,744
Change in unearned premiums		(396,494	)		(371,219	)		(332,161	)		(48,428	)		(22,631	)

Net premiums earned	$	930,975		$	869,411		$	821,584		$	1,931,393		$	1,741,113
Other underwriting (loss) income		(316	)		19			(2,368	)		(3,547	)		(1,636	)

Total underwriting revenues	$	930,659		$	869,430		$	819,216		$	1,927,846		$	1,739,477

UNDERWRITING EXPENSES
Losses and loss expenses	$	608,664		$	763,823		$	525,544		$	1,632,666		$	1,038,100
Acquisition expenses		140,617			133,505			130,652			282,911			264,228
General and administrative expenses		128,650			131,847			114,641			264,152			241,920

Total underwriting expenses	$	877,931		$	1,029,175		$	770,837		$	2,179,729		$	1,544,248

Underwriting income (loss)	$	52,728		$	(159,745	)	$	48,379		$	(251,883	)	$	195,229

OTHER OPERATING REVENUE
Net investment income	$	88,841		$	92,343		$	89,830		$	147,037		$	200,358
Interest expense		(18,091	)		(18,111	)		(16,658	)		(36,254	)		(34,762	)
Amortization of intangibles		(5,554	)		(5,824	)		(5,176	)		(11,213	)		(10,460	)

Total other operating revenue	$	65,196		$	68,408		$	67,996		$	99,570		$	155,136

INCOME (LOSS) BEFORE OTHER ITEMS	$	117,924		$	(91,337	)	$	116,375		$	(152,313	)	$	350,365
OTHER
Net foreign exchange gains (losses)	$	18,473		$	3,570		$	(6,100	)	$	7,422		$	2,989
Net realized and unrealized investment gains		20,161			25,307			6,201			31,671			22,488

Total other-than-temporary impairment losses		(148	)		(1,740	)		(1,507	)		(2,659	)		(2,695	)
Portion of loss recognised in other comprehensive income		(478	)		(839	)		(346	)		(861	)		(1,249	)

Net impairment losses recognised in earnings (losses)		(626	)		(2,579	)		(1,853	)		(3,520	)		(3,944	)

Income tax (expense) benefit		(907	)		18,699			(241	)		23,006			(7,160	)

NET INCOME (LOSS)	$	155,025		$	(46,340	)	$	114,382		$	(93,734	)	$	364,738
Preferred dividends		(16,376	)		(7,750	)		(7,750	)		(24,125	)		(15,500	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	138,649		$	(54,090	)	$	106,632		$	(117,859	)	$	349,238


KEY RATIOS/PER SHARE DATA

Loss ratio		65.4	%		87.9	%		64.0	%		84.6	%		59.6	%
Acquisition expense ratio		15.1	%		15.4	%		15.9	%		14.6	%		15.2	%
General and administrative expense ratio		13.8	%		15.1	%		13.9	%		13.7	%		13.9	%

Combined ratio		94.3	%		118.4	%		93.8	%		112.9	%		88.7	%


Basic earnings (losses) per common share	$	3.20		$	(1.36	)	$	1.97		$	(2.95	)	$	6.73
Diluted earnings (losses) per common share	$	3.20		$	(1.36	)	$	1.88		$	(2.95	)	$	6.38

ROAE, net income (loss) [a]		6.2	%		(2.2	)%		4.1	%		(4.9	)%		13.3	%

[a]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares (liquidation value of $200 million as of December 31, 2010 and as of June 30, 2010, liquidation value of $430 million as of June 30, 2012 and 2011 and December 31, 2011).


		3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			MAR. 31, 2011
ASSETS
Cash and cash equivalents	$	842,180		$	679,634		$	890,914		$	623,944		$	750,844		$	568,770
Fixed maturity investments available for sale, at fair value		5,081,814			5,131,035			4,831,966			4,998,142			4,961,948			5,014,226
Short term investments available for sale, at fair value		40,913			54,919			67,802			323,119			303,895			48,186
Equity securities available for sale, at fair value		70,652			67,238			59,767			49,323			32,322			25,333
Other investments		478,860			432,428			432,658			386,785			395,078			401,450
Premiums receivable, net		1,289,478			1,188,186			544,017			1,100,867			1,122,291			1,019,061
Insurance and reinsurance balances receivable		115,904			95,840			92,710			91,588			32,189			30,068
Deferred acquisition costs		196,693			191,690			166,049			203,455			182,870			178,486
Securities lending collateral		—			—			—			—			84,652			72,657
Prepaid reinsurance premiums		258,522			280,094			149,670			204,961			198,708			248,275
Losses recoverable		618,447			497,522			666,928			479,132			369,081			340,908
Accrued investment income		27,383			25,669			29,708			30,851			31,189			29,164
Goodwill and intangible assets		176,743			179,051			181,828			183,857			186,835			189,501
Deferred tax assets		36,376			34,802			33,355			40,253			38,144			49,370
Receivable on pending investment sales		30,776			33,969			77,821			37,947			3,685			128,867
Other assets		75,387			76,751			67,422			80,013			66,309			71,859

TOTAL ASSETS	$	9,340,128		$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181


LIABILITIES
Reserve for losses and loss expenses	$	3,984,622		$	3,760,829		$	3,824,224		$	3,910,537		$	3,748,124		$	3,566,198
Reserve for unearned premiums		1,437,482			1,494,324			932,108			1,299,864			1,304,146			1,398,610
Deposit liabilities		24,938			26,950			26,887			28,860			30,300			32,768
Reinsurance balances payable		306,122			293,726			189,488			244,769			209,548			143,305
Securities lending payable		—			—			—			—			84,652			72,657
Debt		527,299			527,180			528,118			528,664			528,540			528,569
Payable on pending investment purchases		186,652			65,385			55,243			56,496			80,532			164,744
Other liabilities		125,771			115,896			125,382			129,097			103,922			101,066

TOTAL LIABILITIES	$	6,592,886		$	6,284,290		$	5,681,450		$	6,198,287		$	6,089,764		$	6,007,917

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			9,200			—
Common shares		43,296			43,387			43,087			40,517			40,509			40,325
Additional paid-in capital		531,145			528,677			526,910			512,323			509,165			289,920
Accumulated other comprehensive income		150,252			140,795			130,392			123,846			120,982			112,648
Retained earnings		2,005,349			1,954,479			1,893,576			1,942,064			1,982,420			1,957,371

TOTAL SHAREHOLDERS’ EQUITY	$	2,747,242		$	2,684,538		$	2,611,165		$	2,635,950		$	2,670,276		$	2,408,264

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,340,128		$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040		$	8,416,181


Book value per common share	$	54.37		$	52.97		$	51.48		$	55.47		$	56.35		$	55.91
Diluted book value per common share (treasury stock method)	$	53.48		$	51.90		$	50.56		$	51.63		$	52.20		$	51.52

RATIOS
Debt-to-capital		16.1	%		16.4	%		16.8	%		16.7	%		16.5	%		18.0	%


		4

ENDURANCE SPECIALTY HOLDINGS LTD.

Probable Maximum Loss by Zone and Peril

(in millions of dollars)

Largest 1 in 100 year PML as of July 1, 2012 is equal to 17.0% of Shareholders’ Equity as of June 30, 2012


		Estimated Occurrence Net Loss as of July 1, 2012										July 1, 2011		July 1, 2010
Zone	Peril	10 Year Return Period		25 Year Return Period		50 Year Return Period		100 Year Return Period		250 Year Return Period		100 Year Return Period		100 Year Return Period

United States	Hurricane*	$	238	$	340	$	407	$	468	$	571	$	564	$	510
Europe	Windstorm		104		187		260		344		456		445		399
California	Earthquake		51		228		350		412		547		442		435
Japan	Windstorm		20		104		173		247		290		268		349
Northwest U.S.	Earthquake		1		9		57		184		356		241		236
Japan	Earthquake		11		66		99		138		201		185		133
United States	Tornado/Hail		40		59		76		96		123		98		72
Australia	Earthquake		—		5		27		83		175		95		52
New Zealand	Earthquake		—		1		6		22		53		34		37
Australia	Windstorm		1		6		18		37		75		39		27
New Madrid	Earthquake		—		—		1		11		100		14		12

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 and reinstatement premiums, 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 July 1, 2012 are based on RMS version 11.0 and include reinstatement premiums, if applicable.


		5

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE SIX MONTHS ENDED JUNE 30, 2012

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
	JUNE 30, 2012									JUNE 30, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	292,659		$	311,417		$	604,076		$	225,750		$	277,174		$	502,924

Net premiums written	$	186,659		$	297,754		$	484,413		$	173,506		$	268,252		$	441,758

Net premiums earned	$	266,085		$	253,255		$	519,340		$	249,397		$	237,181		$	486,578
Other underwriting (loss) income		(1,300	)		1,319			19			—			1,088			1,088

Total underwriting revenues	$	264,785		$	254,574		$	519,359		$	249,397		$	238,269		$	487,666


UNDERWRITING EXPENSES
Net losses and loss expenses	$	208,504		$	137,393		$	345,897		$	191,396		$	170,574		$	361,970
Acquisition expenses		17,545			54,583			72,128			15,861			52,026			67,887
General and administrative expenses		32,819			29,790			62,609			36,227			29,659			65,886

Total expenses	$	258,868		$	221,766		$	480,634		$	243,484		$	252,259		$	495,743


UNDERWRITING INCOME (LOSS)	$	5,917		$	32,808		$	38,725		$	5,913		$	(13,990	)	$	(8,077	)


GAAP RATIOS
Loss ratio		78.4	%		54.2	%		66.5	%		76.7	%		71.9	%		74.4	%
Acquisition expense ratio		6.6	%		21.6	%		13.9	%		6.4	%		22.0	%		14.0	%
General and administrative expense ratio		12.3	%		11.8	%		12.1	%		14.5	%		12.5	%		13.5	%

Combined ratio AS REPORTED		97.3	%		87.6	%		92.5	%		97.6	%		106.4	%		101.9	%


Effect of favorable prior accident year reserve development		5.1	%		2.3	%		3.8	%		9.3	%		9.1	%		9.2	%


Combined ratio net of prior accident year reserve development		102.4	%		89.9	%		96.3	%		106.9	%		115.5	%		111.1	%


		7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			JUNE 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	292,659		$	635,347		$	167,766		$	450,451		$	225,750		$	231,626

Net premiums written	$	186,659		$	427,781		$	96,478		$	303,210		$	173,506		$	194,987

Net premiums earned	$	266,085		$	161,630		$	251,101		$	318,602		$	249,397		$	227,858
Other underwriting loss		(1,300	)		—			(493	)		(2,875	)		—			—

Total underwriting revenues	$	264,785		$	161,630		$	250,608		$	315,727		$	249,397		$	227,858


UNDERWRITING EXPENSES
Net losses and loss expenses	$	208,504		$	113,702		$	214,681		$	260,206		$	191,396		$	170,773
Acquisition expenses		17,545			16,214			20,388			18,738			15,861			16,554
General and administrative expenses		32,819			34,435			43,754			29,328			36,227			27,146

Total expenses	$	258,868		$	164,351		$	278,823		$	308,272		$	243,484		$	214,473


UNDERWRITING INCOME (LOSS)	$	5,917		$	(2,721	)	$	(28,215	)	$	7,455		$	5,913		$	13,385


GAAP RATIOS
Loss ratio		78.4	%		70.4	%		85.5	%		81.7	%		76.7	%		74.9	%
Acquisition expense ratio		6.6	%		10.0	%		8.1	%		5.9	%		6.4	%		7.3	%
General and administrative expense ratio		12.3	%		21.3	%		17.4	%		9.2	%		14.5	%		11.9	%

Combined ratio AS REPORTED		97.3	%		101.7	%		111.0	%		96.8	%		97.6	%		94.1	%


Effect of favorable prior accident year reserve development		5.1	%		4.9	%		0.2	%		3.9	%		9.3	%		3.6	%

Combined ratio net of prior accident year reserve development		102.4	%		106.6	%		111.2	%		100.7	%		106.9	%		97.7	%


		8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			JUNE 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	311,417		$	426,302		$	95,200		$	250,415		$	277,174		$	257,942

Net premiums written	$	297,754		$	415,275		$	91,386		$	248,117		$	268,252		$	255,816

Net premiums earned	$	253,255		$	250,005		$	249,388		$	242,891		$	237,181		$	228,537
Other underwriting income (loss)		1,319			(335	)		(932	)		734			1,088			(2,663	)

Total underwriting revenues	$	254,574		$	249,670		$	248,456		$	243,625		$	238,269		$	225,874


UNDERWRITING EXPENSES
Net losses and loss expenses	$	137,393		$	149,065		$	197,471		$	196,485		$	170,574		$	122,174
Acquisition expenses		54,583			52,275			56,769			53,511			52,026			50,154
General and administrative expenses		29,790			31,606			29,977			29,246			29,659			28,530

Total expenses	$	221,766		$	232,946		$	284,217		$	279,242		$	252,259		$	200,858


UNDERWRITING INCOME (LOSS)	$	32,808		$	16,724		$	(35,761	)	$	(35,617	)	$	(13,990	)	$	25,016


GAAP RATIOS
Loss ratio		54.2	%		59.7	%		79.2	%		81.0	%		71.9	%		53.5	%
Acquisition expense ratio		21.6	%		20.9	%		22.8	%		22.0	%		22.0	%		21.9	%
General and administrative expense ratio		11.8	%		12.6	%		12.0	%		12.0	%		12.5	%		12.5	%

Combined ratio AS REPORTED		87.6	%		93.2	%		114.0	%		115.0	%		106.4	%		87.9	%


Effect of favorable prior accident year reserve development		2.3	%		3.6	%		16.6	%		13.2	%		9.1	%		9.4	%

Combined ratio net of prior accident year reserve development		89.9	%		96.8	%		130.6	%		128.2	%		115.5	%		97.3	%


		9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			JUNE 30, 2010
INSURANCE SEGMENT
Agriculture	$	133,439	$	533,667	$	46,260	$	289,656	$	57,125		$	54,170
Professional lines		51,019		36,345		45,110		39,559		49,181			56,567
Casualty		68,088		37,827		46,370		57,520		63,178			55,406
Property		18,182		9,844		18,669		30,049		35,904			43,158
Healthcare liability		19,922		16,653		10,276		33,652		20,454			22,442
Surety and other specialty		2,009		1,011		1,081		15		(92	)		(117	)

TOTAL INSURANCE	$	292,659	$	635,347	$	167,766	$	450,451	$	225,750		$	231,626


REINSURANCE SEGMENT
Catastrophe	$	172,222	$	143,182	$	15,250	$	46,275	$	146,249		$	123,808
Casualty		58,897		121,674		59,231		56,293		45,619			56,919
Property		54,026		106,746		15,087		129,203		52,185			39,999
Aerospace and Marine		18,288		25,629		1,119		5,891		26,743			24,131
Surety and other specialty		7,984		29,071		4,513		12,753		6,378			13,085

TOTAL REINSURANCE	$	311,417	$	426,302	$	95,200	$	250,415	$	277,174		$	257,942



REPORTED TOTALS	$	604,076	$	1,061,649	$	262,966	$	700,866	$	502,924		$	489,568


		10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			JUNE 30, 2010
INSURANCE SEGMENT
Agriculture	$	67,249	$	354,920	$	9,121	$	185,017	$	46,049		$	45,169
Professional lines		42,832		30,205		38,402		30,812		37,624			49,422
Casualty		43,549		26,463		30,139		37,664		43,811			37,527
Property		11,990		833		8,668		17,681		25,996			40,950
Healthcare liability		19,031		14,348		9,067		32,021		20,115			22,031
Surety and other specialty		2,008		1,012		1,081		15		(89	)		(112	)

TOTAL INSURANCE	$	186,659	$	427,781	$	96,478	$	303,210	$	173,506		$	194,987


REINSURANCE SEGMENT
Catastrophe	$	158,865	$	133,718	$	14,753	$	43,868	$	139,337		$	123,808
Casualty		58,895		120,437		59,234		56,292		45,617			56,831
Property		54,033		106,746		15,087		129,203		52,185			39,999
Aerospace and Marine		18,287		25,593		768		6,002		24,726			22,101
Surety and other specialty		7,674		28,781		1,544		12,752		6,387			13,077

TOTAL REINSURANCE	$	297,754	$	415,275	$	91,386	$	248,117	$	268,252		$	255,816



REPORTED TOTALS	$	484,413	$	843,056	$	187,864	$	551,327	$	441,758		$	450,803


		11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		JUNE 30, 2011			JUNE 30, 2010
INSURANCE SEGMENT
Agriculture	$	162,703	$	59,969	$	146,068	$	215,830	$	142,952		$	115,990
Professional lines		36,719		33,884		37,580		34,343		37,788			39,626
Casualty		34,239		33,974		30,765		32,343		28,735			26,315
Property		12,906		14,543		16,735		16,636		19,566			26,153
Healthcare liability		18,463		18,799		19,168		19,435		20,445			19,886
Surety and other specialty		1,055		461		785		15		(89	)		(112	)

TOTAL INSURANCE	$	266,085	$	161,630	$	251,101	$	318,602	$	249,397		$	227,858


REINSURANCE SEGMENT
Catastrophe	$	81,334	$	82,337	$	82,197	$	86,395	$	81,747		$	79,528
Casualty		74,049		73,252		73,838		68,882		70,441			64,906
Property		70,546		68,378		67,911		62,519		58,643			56,646
Aerospace and Marine		14,674		14,357		13,052		12,236		13,154			12,751
Surety and other specialty		12,652		11,681		12,390		12,859		13,196			14,706

TOTAL REINSURANCE	$	253,255	$	250,005	$	249,388	$	242,891	$	237,181		$	228,537



REPORTED TOTALS	$	519,340	$	411,635	$	500,489	$	561,493	$	486,578		$	456,395


		12

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE SIX MONTHS ENDED
	JUNE 30, 2012									JUNE 30, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	928,006		$	737,719		$	1,665,725		$	851,581		$	651,701		$	1,503,282

Net premiums written	$	614,440		$	713,029		$	1,327,469		$	605,802		$	634,828		$	1,240,630

Net premiums earned	$	427,715		$	503,260		$	930,975		$	411,889		$	457,522		$	869,411
Other underwriting (loss) income		(1,300	)		984			(316	)		—			19			19

Total underwriting revenues	$	426,415		$	504,244		$	930,659		$	411,889		$	457,541		$	869,430


UNDERWRITING EXPENSES
Losses and loss expenses	$	322,206		$	286,458		$	608,664		$	290,232		$	473,591		$	763,823
Acquisition expenses		33,759			106,858			140,617			32,169			101,336			133,505
General and administrative expenses		67,254			61,396			128,650			73,033			58,814			131,847

Total expenses	$	423,219		$	454,712		$	877,931		$	395,434		$	633,741		$	1,029,175


UNDERWRITING INCOME (LOSS)	$	3,196		$	49,532		$	52,728		$	16,455		$	(176,200	)	$	(159,745	)


GAAP RATIOS
Loss ratio		75.3	%		57.0	%		65.4	%		70.5	%		103.5	%		87.9	%
Acquisition expense ratio		7.9	%		21.2	%		15.1	%		7.8	%		22.1	%		15.4	%
General and administrative expense ratio		15.7	%		12.2	%		13.8	%		17.7	%		12.9	%		15.1	%

Combined ratio AS REPORTED		98.9	%		90.4	%		94.3	%		96.0	%		138.5	%		118.4	%


Effect of favorable prior accident year reserve development		5.0	%		3.0	%		3.9	%		14.0	%		7.8	%		10.8	%


Combined ratio net of prior accident year reserve development		103.9	%		93.4	%		98.2	%		110.0	%		146.3	%		129.2	%


		13

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE SIX MONTHS ENDED									FOR THE YEARS ENDED
	JUNE 30, 2012			JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	928,006		$	851,581		$	695,967		$	1,469,798		$	1,112,192

Net premiums written	$	614,440		$	605,802		$	543,928		$	1,005,490		$	829,864

Net premiums earned	$	427,715		$	411,889		$	373,534		$	981,592		$	821,828
Other underwriting (loss) income		(1,300	)		—			(2	)		(3,368	)		475

Total underwriting revenues	$	426,415		$	411,889		$	373,532		$	978,224		$	822,303


UNDERWRITING EXPENSES
Losses and loss expenses	$	322,206		$	290,232		$	256,857		$	765,119		$	558,040
Acquisition expenses		33,759			32,169			33,980			71,295			63,556
General and administrative expenses		67,254			73,033			57,267			146,115			123,335

Total expenses	$	423,219		$	395,434		$	348,104		$	982,529		$	744,931


UNDERWRITING INCOME (LOSS)	$	3,196		$	16,455		$	25,428		$	(4,305	)	$	77,372


GAAP RATIOS
Loss ratio		75.3	%		70.5	%		68.8	%		77.9	%		67.9	%
Acquisition expense ratio		7.9	%		7.8	%		9.1	%		7.3	%		7.7	%
General and administrative expense ratio		15.7	%		17.7	%		15.3	%		14.9	%		15.0	%

Combined ratio AS REPORTED		98.9	%		96.0	%		93.2	%		100.1	%		90.6	%


Effect of favorable prior accident year reserve development		5.0	%		14.0	%		6.9	%		7.2	%		5.7	%

Combined ratio net of prior accident year reserve development		103.9	%		110.0	%		100.1	%		107.3	%		96.3	%


		14

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE SIX MONTHS ENDED									FOR THE YEARS ENDED
	JUNE 30, 2012			JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	737,719		$	651,701		$	612,470		$	997,316		$	941,044

Net premiums written	$	713,029		$	634,828		$	609,817		$	974,331		$	933,880

Net premiums earned	$	503,260		$	457,522		$	448,050		$	949,801		$	919,285
Other underwriting income (loss)		984			19			(2,366	)		(179	)		(2,111	)

Total underwriting revenues	$	504,244		$	457,541		$	445,684		$	949,622		$	917,174


UNDERWRITING EXPENSES
Losses and loss expenses	$	286,458		$	473,591		$	268,687		$	867,547		$	480,060
Acquisition expenses		106,858			101,336			96,672			211,616			200,672
General and administrative expenses		61,396			58,814			57,374			118,037			118,585

Total expenses	$	454,712		$	633,741		$	422,733		$	1,197,200		$	799,317


UNDERWRITING INCOME (LOSS)	$	49,532		$	(176,200	)	$	22,951		$	(247,578	)	$	117,857


GAAP RATIOS
Loss ratio		57.0	%		103.5	%		59.9	%		91.3	%		52.2	%
Acquisition expense ratio		21.2	%		22.1	%		21.6	%		22.3	%		21.8	%
General and administrative expense ratio		12.2	%		12.9	%		12.8	%		12.4	%		12.9	%

Combined ratio AS REPORTED		90.4	%		138.5	%		94.3	%		126.0	%		86.9	%


Effect of favorable prior accident year reserve development		3.0	%		7.8	%		9.4	%		11.5	%		8.7	%

Combined ratio net of prior accident year reserve development		93.4	%		146.3	%		103.7	%		137.5	%		95.6	%


		15

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED								FOR THE YEARS ENDED
	JUNE 30, 2012		JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	667,106	$	565,830		$	404,369		$	901,746	$	567,461
Professional lines		87,364		84,650			90,075			169,319		170,146
Casualty		105,915		102,060			89,634			205,950		167,549
Property		28,026		60,594			69,681			109,312		122,110
Healthcare liability		36,575		38,591			42,758			82,519		87,593
Surety and other specialty		3,020		(144	)		(550	)		952		(2,667	)

TOTAL INSURANCE	$	928,006	$	851,581		$	695,967		$	1,469,798	$	1,112,192


REINSURANCE SEGMENT
Catastrophe	$	315,404	$	284,496		$	246,477		$	346,021	$	309,886
Casualty		180,571		161,971			164,893			277,495		294,030
Property		160,772		122,272			104,521			266,562		224,544
Aerospace and Marine		43,917		47,581			42,197			54,591		48,761
Surety and other specialty		37,055		35,381			54,382			52,647		63,823

TOTAL REINSURANCE	$	737,719	$	651,701		$	612,470		$	997,316	$	941,044




REPORTED TOTALS	$	1,665,725	$	1,503,282		$	1,308,437		$	2,467,114	$	2,053,236


		16

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED								FOR THE YEARS ENDED
	JUNE 30, 2012		JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	422,169	$	392,521		$	313,276		$	586,659	$	404,767
Professional lines		73,037		68,748			77,024			137,962		148,717
Casualty		70,012		69,570			58,565			137,373		107,801
Property		12,823		38,581			55,038			64,930		88,299
Healthcare liability		33,379		36,521			40,554			77,609		82,893
Surety and other specialty		3,020		(139	)		(529	)		957		(2,613	)

TOTAL INSURANCE	$	614,440	$	605,802		$	543,928		$	1,005,490	$	829,864


REINSURANCE SEGMENT
Catastrophe	$	292,583	$	270,460		$	246,567		$	329,081	$	305,617
Casualty		179,332		161,171			164,094			276,697		293,222
Property		160,779		122,272			104,521			266,562		224,544
Aerospace and Marine		43,880		45,565			40,132			52,335		46,696
Surety and other specialty		36,455		35,360			54,503			49,656		63,801

TOTAL REINSURANCE	$	713,029	$	634,828		$	609,817		$	974,331	$	933,880




REPORTED TOTALS	$	1,327,469	$	1,240,630		$	1,153,745		$	1,979,821	$	1,763,744


		17

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED								FOR THE YEARS ENDED
	JUNE 30, 2012		JUNE 30, 2011			JUNE 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	222,672	$	202,760		$	162,602		$	564,658	$	397,643
Professional lines		70,603		73,963			79,232			145,886		154,484
Casualty		68,213		58,477			50,973			121,585		105,070
Property		27,449		36,159			41,946			69,530		86,308
Healthcare liability		37,262		40,669			39,474			79,272		81,100
Surety and other specialty		1,516		(139	)		(693	)		661		(2,777	)

TOTAL INSURANCE	$	427,715	$	411,889		$	373,534		$	981,592	$	821,828


REINSURANCE SEGMENT
Catastrophe	$	163,671	$	158,082		$	161,416		$	326,674	$	315,708
Casualty		147,301		135,394			126,422			278,114		272,968
Property		138,924		111,095			106,078			241,525		227,282
Aerospace and Marine		29,031		26,741			25,004			52,029		44,918
Surety and other specialty		24,333		26,210			29,130			51,459		58,409

TOTAL REINSURANCE	$	503,260	$	457,522		$	448,050		$	949,801	$	919,285




REPORTED TOTALS	$	930,975	$	869,411		$	821,584		$	1,931,393	$	1,741,113


		18

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE SIX MONTHS ENDED JUNE 30, 2012

Average common equity [a]	$	2,249,204

Net premiums earned	$	930,975
Combined ratio		94.3	%
Operating margin		5.7	%
Premium leverage		0.41x
Implied ROAE from underwriting activity		2.3	%

Average cash and invested assets at amortized cost	$	6,198,094
Investment leverage		2.76x
Year to date investment income yield, pretax		1.4	%
Implied ROAE from investment activity		3.9	%

Financing Costs [b]		(1.5	)%

Implied Pre-tax Operating ROAE, for period [c]		4.7	%

[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 activities and the tax-effected impact of amortization expense.


		19

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE


	FOR THE QUARTERS ENDED								YEARS ENDED DECEMBER 31,
	JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		2011		2010

Average common equity [a]	$	2,285,890	$	2,217,852	$	2,193,558	$	2,223,113	$	2,451,346	$	2,617,718

Net premiums earned	$	519,340	$	411,635	$	500,489	$	561,493	$	1,931,393	$	1,741,113

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

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

Average cash and invested assets at amortized cost	$	6,206,710	$	6,191,489	$	6,214,330	$	6,252,158	$	6,130,518	$	6,017,647

Investment leverage		2.72x		2.79x		2.83x		2.81x		2.50x		2.30x

[a]


		20

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF JUNE 30, 2012 AND DECEMBER 31, 2011


				June 30, 2012					December 31, 2011
Type of Investment				Fair Value		Percentage			Fair Value			Percentage
Cash and equivalents [a]				$	686,304		10.8	%	$	913,492			14.5	%
Short-term investments					40,913		0.6	%		67,802			1.1	%
U.S. government and government agencies notes					1,272,276		20.0	%		1,269,123			20.1	%
Government and agency guaranteed corporates					181,300		2.9	%		351,825			5.6	%
U.S. government agency residential mortgage-backed securities					1,092,930		17.2	%		965,019			15.3	%
U.S. government agency commercial mortgage-backed securities					28,680		0.5	%		28,807			0.5	%
Municipals					53,834		0.8	%		53,517			0.8	%
Foreign government					143,159		2.3	%		74,997			1.2	%
Corporate securities					1,238,024		19.4	%		1,139,899			18.1	%
Non-agency residential mortgage-backed securities					93,128		1.5	%		114,662			1.8	%
Non-agency commercial mortgage-backed securities					572,370		9.0	%		518,483			8.2	%
Asset-backed securities					406,113		6.4	%		315,634			5.0	%
Equity securities					70,652		1.1	%		59,767			0.9	%
Other investments [b]					478,860		7.5	%		432,658			6.9	%

Total				$	6,358,543		100.0	%	$	6,305,685			100.0	%


Ratings [e]				Fair Value		Percentage			Fair Value			Percentage
U.S. government and government agencies notes				$	1,272,276		22.5	%	$	1,269,123			23.5	%
AAA/Aaa					1,046,079		18.5	%		941,500			17.6	%
AA/Aa					1,770,697		31.2	%		1,665,593			30.9	%
A/A					773,268		13.6	%		776,251			14.4	%
BBB					139,589		2.5	%		130,864			2.4	%
Below BBB					118,959		2.1	%		114,716			2.1	%
Not Rated					1,859		—			1,721			—
Equity securities					70,652		1.2	%		59,767			1.1	%
Other investments [b]					478,860		8.4	%		432,658			8.0	%

Total				$	5,672,239		100.0	%	$	5,392,193			100.0	%


Performance						June 30, 2012						December 31, 2011
Yield [c]							2.0	%					2.4	%
Duration in years [d]							2.60						2.39

Investment Income	Quarter Ended June 30, 2012			Quarter Ended Mar. 31, 2012		Quarter Ended Dec. 31, 2011			Quarter Ended Sept. 30, 2011			Quarter Ended June 30, 2011
Cash and fixed income securities	$	31,840		$	33,950	$	33,705		$	36,622		$	38,661
Other Investments		(74	)		23,125		6,889			(22,522	)		1,181

Total net investment income	$	31,766		$	57,075	$	40,594		$	14,100		$	39,842

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 6/30/12 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.


		21

ENDURANCE SPECIALTY HOLDINGS LTD.

STRUCTURED SECURITIES DETAIL


		June 30, 2012								December 31, 2011
Structured (RMBS, CMBS, ABS, CDO and CLO) securities ratings		Fair Value		Percentage			Percentage of Investment Portfolio			Fair Value		Percentage			Percentage of Investment Portfolio
U.S. Government and agencies		$	1,121,610		51.1	%		17.7	%	$	993,826		51.2	%		15.8	%
AAA/Aaa			708,113		32.3	%		11.1	%		669,536		34.5	%		10.6	%
AA/Aa			177,020		8.1	%		2.8	%		101,792		5.2	%		1.6	%
A/A			88,197		4.0	%		1.4	%		83,472		4.3	%		1.3	%
BBB			43,160		2.0	%		0.7	%		34,905		1.8	%		0.6	%
Below BBB			55,121		2.5	%		0.9	%		58,852		3.0	%		0.9	%
Not Rated			—		—			—			222		—			—

Total		$	2,193,221		100.0	%		34.6	%	$	1,942,605		100.0	%		30.8	%


Structured securities sectors (RMBS, CMBS, ABS, CDO and CLO)		Fair Value		Percentage			Percentage of Investment Portfolio			Fair Value		Percentage			Percentage of Investment Portfolio
Commercial
Agency		$	28,680		1.3	%		0.5	%	$	28,807		1.5	%		0.5	%
Non Agency			597,877		27.3	%		9.4	%		537,920		27.7	%		8.5	%
Residential
Agency			1,092,930		49.8	%		17.2	%		965,019		49.7	%		15.3	%
Non Agency			94,414		4.3	%		1.5	%		115,304		5.9	%		1.8	%
Consumer			323,124		14.7	%		5.1	%		246,649		12.7	%		3.9	%
Collateralized Loan Obligations (CLO)			56,196		2.6	%		0.9	%		48,906		2.5	%		0.8	%

Total		$	2,193,221		100.0	%		34.6	%	$	1,942,605		100.0	%		30.8	%

	Spread Duration 3.33 years


		22

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF JUNE 30, 2012


	June 30, 2012
ISSUER (1) (2) (4)	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Credit Quality (3)

JPMORGAN CHASE & CO	$	33,594	$	34,165	$	571		A
US BANCORP		32,480		33,635		1,155		A
INTERNATIONAL BUSINESS MACHINES CORP		31,376		31,763		388		AA-
METLIFE INC		29,053		29,567		514		A
WAL-MART STORES INC		26,365		27,385		1,020		AA
PHILIP MORRIS INTERNATIONAL INC		24,783		25,823		1,040		A
NOVARTIS AG		23,647		25,048		1,401		AA-
NEW YORK LIFE INSURANCE COMPANY		24,072		24,706		634		AA+
PEPSICO INC/NC		18,196		19,395		1,200		A
VERIZON COMMUNICATIONS INC		17,665		19,116		1,450		A-
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC		18,584		18,721		137		AAA
MORGAN STANLEY		18,269		17,813		(456	)	A-
EDISON INTERNATIONAL		16,720		17,649		929		A
BANK OF AMERICA CORP		17,406		17,554		148		A-
AT&T INC		16,816		17,415		599		A-
NATIONAL GRID PLC		13,907		15,718		1,811		A-
BANK OF NOVA SCOTIA		15,538		15,679		141		AA-
HSBC HOLDINGS PLC		15,210		15,562		351		A+
CITIGROUP INC		15,221		15,304		83		A-
GOLDMAN SACHS GROUP INC/THE		15,302		15,210		(92	)	A-
RIO TINTO LIMITED		15,059		15,133		74		A-
MEDTRONIC INC		13,399		14,130		731		A+
PFIZER INC		12,864		13,111		247		AA
ROYAL BANK OF SCOTLAND GROUP PLC		12,576		12,849		273		A
PRUDENTIAL FINANCIAL INC		12,448		12,674		227		A+

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

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

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

(4)	Includes preferred equity securities.


		23

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES


	THREE MONTHS ENDED JUNE 30, 2012									SIX MONTHS ENDED JUNE 30, 2012
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	3,760,829		$	(497,522	)	$	3,263,307		$	3,824,224		$	(666,928	)	$	3,157,296

Incurred related to:
Current year		546,920			(181,471	)		365,449			919,749			(274,632	)		645,117
Prior years		(18,750	)		(802	)		(19,552	)		(58,246	)		21,793			(36,453	)

Total Incurred		528,170			(182,273	)		345,897			861,503			(252,839	)		608,664


Paid related to:
Current year		(73,674	)		36,437			(37,237	)		(78,770	)		36,437			(42,333	)
Prior years		(223,921	)		24,872			(199,049	)		(612,513	)		264,916			(347,597	)

Total Paid		(297,595	)		61,309			(236,286	)		(691,283	)		301,353			(389,930	)


Foreign currency translation		(6,782	)		39			(6,743	)		(9,822	)		(33	)		(9,855	)

Balance, end of period	$	3,984,622		$	(618,447	)	$	3,366,175		$	3,984,622		$	(618,447	)	$	3,366,175


		24

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIODS ENDED JUNE 30, 2012


	Insurance			Reinsurance			Total Company

Incurred related to prior years

Quarter ended March 31, 2012	$	(7,847	)	$	(9,054	)	$	(16,901	)
Quarter ended June 30, 2012		(13,633	)		(5,919	)		(19,552	)

Six months ended June 30, 2012	$	(21,480	)	$	(14,973	)	$	(36,453	)

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


	Insurance			Reinsurance			Total 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


	Insurance			Reinsurance			Total 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	)


		25

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
	JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011			DEC. 31, 2011
INSURANCE SEGMENT
Short tail[a]	$	(2,618	)	$	(4,447	)	$	(132	)	$	(4,182	)	$	(5,150	)	$	(18,738	)
Long tail[b]		(8,249	)		(331	)		(916	)		(8,501	)		(5,490	)		(17,467	)
Other[c]		(2,766	)		(3,069	)		482			272			(12,550	)		(34,574	)

TOTAL INSURANCE		(13,633	)		(7,847	)		(566	)		(12,411	)		(23,190	)		(70,779	)


REINSURANCE SEGMENT
Short tail[a]		(7,095	)		(6,150	)		(37,014	)		(19,342	)		(19,245	)		(89,764	)
Long tail[b]		(3,287	)		(4,982	)		(4,917	)		(11,234	)		335			(15,541	)
Other[c]		4,463			2,078			418			(1,426	)		(2,681	)		(3,894	)

TOTAL REINSURANCE		(5,919	)		(9,054	)		(41,513	)		(32,002	)		(21,591	)		(109,199	)


REPORTED TOTALS	$	(19,552	)	$	(16,901	)	$	(42,079	)	$	(44,413	)	$	(44,781	)	$	(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 specialty 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.


		26

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES


	Insurance												Reinsurance												Reported Totals
	Short Tail			Long Tail			Other			Total			Short Tail			Long Tail			Other			Total
AT JUNE 30, 2012
Case reserves	$	30,243		$	391,391		$	242,751		$	664,385		$	522,767		$	305,735		$	7,144		$	835,646		$	1,500,031
Total reserves	$	57,482		$	1,663,900		$	392,441		$	2,113,823		$	850,284		$	1,006,107		$	14,408		$	1,870,799		$	3,984,622
Case reserves / Total reserves		52.6	%		23.5	%		61.9	%		31.4	%		61.5	%		30.4	%		49.6	%		44.7	%		37.6	%

IBNR / Total reserves		47.4	%		76.5	%		38.1	%		68.6	%		38.5	%		69.6	%		50.4	%		55.3	%		62.4	%

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	%


		27

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	SIX MONTHS ENDED			YEARS ENDED DECEMBER 31,						INCEPTION TO
	JUNE 30, 2012			2011			2010			JUNE 30, 2012
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders	$	138,649		$	(117,859	)	$	349,238		$	2,480,030

Operating income (loss) available (attributable) to common and participating common shareholders		104,612			(152,303	)		330,035			2,449,874

Average Shareholders’ equity [a]		2,249,204			2,414,659			2,617,718			1,985,381

Net income (loss) return on average equity		6.2	%		(4.9	)%		13.3	%		11.9	%	[c]
Operating return on average equity		4.7	%		(6.3	)%		12.6	%		11.8	%	[c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	53.48		$	50.56		$	52.74		$	53.48

Dividends paid per share		0.62			1.20			1.00			8.95

Change in diluted book value per common share		5.8	%		(4.1	)%		18.2	%		16.8	%	[c]

Total return to common shareholders [b]		7.0	%		(1.9	)%		20.5	%		21.2	%	[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.


		28

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION - TWO CLASS METHOD


		QUARTERS ENDED						SIX MONTHS ENDED
		JUNE 30,						JUNE 30,
		2012			2011			2012			2011

DILUTIVE SHARES	Average market price per share	$	39.22		$	43.10		$	38.96		$	45.12
OUTSTANDING:
AS REPORTED	Basic weighted average common shares outstanding [a]		42,599			39,710			42,519			40,227

	Add: weighted avg. unvested restricted share units		1			9			4			12
	Weighted average exercise price per share		—			—			—			—
	Proceeds from unrecognized restricted share unit expense	$	27		$	248		$	27		$	248
	Less: restricted share units bought back via treasury method		(1	)		(6	)		(1	)		(12	)

	Add: weighted avg. dilutive warrants outstanding		—			2,896			—			2,925
	Weighted average exercise price per share		—		$	12.27			—		$	12.27
	Less: warrants bought back via treasury method		—			(824	)		—			(2,925	)

	Add: weighted avg. dilutive options outstanding		95			561			102			884
	Weighted average exercise price per share	$	24.27		$	14.57		$	23.81		$	15.42
	Proceeds from unrecognized option expense		—			—			—			—
	Less: options bought back via treasury method		(59	)		(190	)		(62	)		(884	)

	Weighted average dilutive shares outstanding [b]		42,635			42,156			42,562			40,227

Notes:

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

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


		29

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS (LOSSES) PER SHARE INFORMATION - TWO CLASS METHOD


	QUARTERS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2012			2011			2012			2011

Net income (loss)	$	72,483		$	41,077		$	155,025		$	(46,340	)
Less 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	)
Less amount allocated to participating common shareholders [a]		(1,085	)		(710	)		(2,377	)		(516	)

Net income (loss) available allocated to common shareholders	$	63,210		$	36,492		$	136,272		$	(54,606	)


Denominator:
Weighted average shares - basic		42,599			39,710			42,519			40,227


Share Equivalents
Warrants		—			2,072			—			—
Options		36			371			40			—
Restricted share units		—			3			3			—

Weighted average shares - diluted		42,635			42,156			42,562			40,227


Basic earnings (losses) per common share	$	1.48		$	0.92		$	3.20		$	(1.36	)


Diluted earnings (losses) per common share [b]	$	1.48		$	0.87		$	3.20		$	(1.36	)

[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.


		30

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING INCOME (LOSS) RECONCILIATION

EARNINGS (LOSSES) PER SHARE INFORMATION - TWO CLASS METHOD


	Two-Class Method						Two-Class Method
	QUARTERS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2012			2011			2012			2011

Net income (loss)	$	72,483		$	41,077		$	155,025		$	(46,340	)
Add (less) after-tax items:
Net foreign exchange (gains) losses		(365	)		3,181			(16,625	)		(3,670	)
Net realized and unrealized investment gains		(13,050	)		(20,717	)		(18,018	)		(24,739	)
Net impairment losses recognized in earnings (losses)		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) available (attributable) to common and participating common shareholders	$	51,267		$	20,598		$	104,612		$	(79,920	)
Less amount allocated to participating common shareholders [a]		(865	)		(399	)		(1,794	)		(516	)

Operating income (loss) allocated to common shareholders	$	50,402		$	20,199		$	102,818		$	(80,436	)


Weighted average common shares outstanding
Basic		42,599			39,710			42,519			40,227
Dilutive		42,635			42,156			42,562			40,227

Basic per common share data
Net income (loss) allocated to common shareholders	$	1.48		$	0.92		$	3.20		$	(1.36	)
Add (less) after-tax items:
Net foreign exchange (gains) losses		(0.01	)		0.08			(0.39	)		(0.09	)
Net realized and unrealized investment gains		(0.30	)		(0.52	)		(0.41	)		(0.61	)
Net impairment losses recognized in earnings (losses)		0.01			0.03			0.02			0.06

Operating income (loss) allocated to common shareholders	$	1.18		$	0.51		$	2.42		$	(2.00	)


Diluted per common share data
Net income (loss) allocated to common shareholders	$	1.48		$	0.87		$	3.20		$	(1.36	)
Add (less) after-tax items:
Net foreign exchange (gains) losses		(0.01	)		0.08			(0.39	)		(0.09	)
Net realized and unrealized investment gains		(0.30	)		(0.49	)		(0.41	)		(0.61	)
Net impairment losses recognized in earnings (losses)		0.01			0.02			0.02			0.06

Operating income (loss) allocated to common shareholders [b]	$	1.18		$	0.48		$	2.42		$	(2.00	)

[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.


		31

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE


		JUNE 30,						DEC. 31,
		2012			2011			2011
DILUTIVE COMMON	Price per share at period end	$	38.32		$	41.33		$	38.25
SHARES OUTSTANDING:
AS-IF CONVERTED [a]	Basic common shares outstanding		42,617			39,756			42,367
	Add: unvested restricted shares and restricted share units		681			763			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	12.27			—
	Add: dilutive options outstanding		88			561			115
	Weighted average exercise price per share	$	24.59		$	14.57		$	23.14

	Book Value [b]	$	2,317,242		$	2,240,276		$	2,181,165
	Add: proceeds from converted warrants		—			35,534			—
	Add: proceeds from converted options		2,164			8,174			2,661

	Pro forma book value	$	2,319,406		$	2,283,984		$	2,183,826
	Dilutive shares outstanding		43,386			43,976			43,212
	Basic book value per common share	$	54.37		$	56.35		$	51.48
	Diluted book value per common share	$	53.46		$	51.94		$	50.54

DILUTIVE COMMON	Price per share at period end	$	38.32		$	41.33		$	38.25
SHARES OUTSTANDING:
TREASURY STOCK	Basic common shares outstanding		42,617			39,756			42,367
METHOD
	Add: unvested restricted shares and restricted share units		681			763			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	12.27			—
	Less: warrants bought back via treasury method		—			(860	)		—
	Add: dilutive options outstanding		88			561			115
	Weighted average exercise price per share	$	24.59		$	14.57		$	23.14
	Less: options bought back via treasury method		(56	)		(198	)		(70	)

	Dilutive shares outstanding		43,330			42,918			43,142
	Basic book value per common share	$	54.37		$	56.35		$	51.48
	Diluted book value per common share	$	53.48		$	52.20		$	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 liquidation value of the preferred shares.


		32

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 31 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 32 for a reconciliation of diluted book value per common share to basic book value per common share.


		33

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