Exhibit 99.1

 

Endurance Reports Third Quarter 2012 Financial Results

PEMBROKE, Bermuda – October 31, 2012 – Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $31.9 million and $0.74 per diluted common share for the third quarter of 2012 versus a net loss of $28.2 million and $0.71 per diluted common share for the third quarter of 2011.

For the nine months ended September 30, 2012, Endurance reported net income available to common shareholders of $170.6 million and $3.94 per diluted common share versus a net loss of $82.3 million and $2.07 per diluted common share for the nine months ended September 30, 2011. Book value per diluted share was $54.95 at September 30, 2012, an increase of 2.7% for the quarter and 8.7% from year end 2011.

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

 

•

Net premiums written of $514.1 million, a decrease of 6.8% compared to the same period in 2011;

 

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Combined ratio of 99.5%, which included 10.1 percentage points of favorable prior year loss reserve development, 2.4 percentage points of catastrophe losses from 2012 events and a $62.8 million net underwriting loss in our agriculture insurance line of business;

 

•

Net investment income of $45.9 million, an increase of $31.8 million from the same period in 2011;

 

•

Operating income, which excludes after-tax realized investment gains and foreign exchange losses and gains, of $25.7 million and $0.60 per diluted common share; and

 

•

Operating return on average common equity for the quarter of 1.1% or 4.5% on an annualized basis.

Operating highlights for the nine months ended September 30, 2012 were as follows:

 

•

Net premiums written of $1,841.5 million, an increase of 2.8% over the same period in 2011;

 

•

Combined ratio of 96.2%, which included 6.2 percentage points of favorable prior year loss reserve development, 3.4 percentage points of current year catastrophe losses and a $43.6 million net underwriting loss in our agriculture insurance line of business;

 

•

Net investment income of $134.7 million, an increase of $28.3 million over the same period in 2011;

 

•

Operating income, which excludes after-tax realized investment gains and foreign exchange gains, of $128.6 million and $3.02 per diluted common share; and

 

•

Operating return on average common equity for the first nine months of the year of 5.7%, or 7.6% on an annualized basis.

David Cash, Chief Executive Officer, commented, “Strong investment portfolio performance, favorable reserve development and solid underwriting profits in several of our insurance and reinsurance lines meaningfully offset our drought related agriculture insurance losses this quarter, which enabled us to generate a modest underwriting profit, illustrating the benefits of our diversified insurance and reinsurance business model. Looking forward, we believe the heavy agriculture claims volumes and service requirements stemming from the Midwestern drought will present us with an additional opportunity to showcase our industry leading service and technology in agriculture insurance.”

 

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Insurance Segment

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

 

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Net premiums written of $221.3 million, a decrease of 27.0% from the third quarter of 2011;

 

•

Combined ratio of 121.0%, an increase of 24.2 percentage points from the third quarter of 2011;

 

•

Favorable prior year loss reserve development of 6.2 percentage points during the current period, compared to 3.9 percentage points of favorable prior year loss reserve development in the third quarter of 2011; and

 

•

A net underwriting loss of $62.8 million in our agriculture business line due to the Midwest drought.

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

 

•

Net premiums written of $835.7 million, a decrease of 8.1% from the same period in 2011;

 

•

Combined ratio of 107.7%, an increase of 11.4 percentage points from the same period in 2011;

 

•

Favorable prior year loss reserve development of 5.5 percentage points during the current period, compared to 9.6 percentage points of favorable prior year loss reserve development in the same period in 2011; and

 

•

A net underwriting loss of $43.6 million in our agriculture business line due to the Midwest drought.

Net premiums written in the Insurance segment decreased $81.9 million and $73.3 million for the third quarter and nine months ended September 30, 2012, respectively, compared to the same periods in the prior year due to declines in agriculture, property and casualty premiums, offset in part by growth in professional lines premiums. Within the agriculture line of business, net premiums declined due to a lack of positive premium adjustments compared to the significant positive premium adjustments in the third quarter of 2011, decreases in commodity prices for spring crops and greater cession of premiums compared to 2011. The declines in property insurance premiums in the current periods compared to the same periods a year ago were driven by the Company’s decision to reallocate capital to lines of business with greater profit potential. Casualty insurance premiums declined in the current periods compared to the same periods a year ago due to reductions in large account premiums, which were partially offset by increases in smaller account casualty lines where rate increases are being realized. The growth in the professional lines of business was largely driven by growth in smaller account business written in the U.S. partially offset by declines in larger account business written in Bermuda, which experienced greater competitive pressures.

The increase in the Insurance segment combined ratio for the quarter ended September 30, 2012 compared to the same period in 2011 was driven by higher net loss, acquisition expense and general and administrative expense ratios. The net loss ratio increased as a result of agriculture insurance losses from the Midwest drought. The acquisition expense ratio was higher in the current quarter compared to a year ago due to the Company’s contract binding insurance operation, which has higher commission rates and represented a greater portion of earned premiums than a year ago. The general and administrative expense ratio was modestly higher in the current quarter due to the smaller earned premium base. For the nine months ended September 30, 2012, the combined ratio was 11.4 percentage points higher than the same period a year ago as higher net loss and acquisition expense ratios were partially offset by a lower general and administrative expense ratio. The net loss ratio for the nine months increased as a result of losses in the agriculture insurance line from the Midwest drought.

The Insurance segment’s net loss ratio in the third quarter of 2012 benefited from $17.4 million, or 6.2 percentage points of favorable prior year loss reserve development, compared to $12.4 million, or 3.9 percentage points, for the same period a year ago. For the current quarter, the improved favorable development was driven predominantly by the other and long tail lines of business. For the nine months ended September 30, 2012, the net loss ratio benefited from 5.5 percentage points of favorable prior year loss reserve development compared to 9.6 percentage points for the first nine months of

 

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2011. The lower level of favorable prior year loss reserve development in the first nine months of 2012 compared to the same period in 2011 was driven predominantly by the agriculture line of business, as the prior period was impacted by 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 September 30, 2012 were as follows:

 

•

Net premiums written of $292.8 million, an increase of 18.0% from the third quarter of 2011;

 

•

Combined ratio of 76.8%, an improvement of 38.2 percentage points from the third quarter of 2011;

 

•

Favorable prior year loss reserve development of 14.2 percentage points compared to 13.2 percentage points of favorable prior year loss reserve development in the third quarter of 2011; and

 

•

Net catastrophe losses from 2012 events of $13.2 million or 5.6 percentage points on the net loss ratio compared to net catastrophe losses of $96.3 million or 41.6 points in the third quarter of 2011.

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

 

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Net premiums written of $1,005.8 million, an increase of 13.9% from the same period in 2011;

 

•

Combined ratio of 85.6%, an improvement of 44.7 percentage points from the same period in 2011;

 

•

Favorable prior year loss reserve development of 6.9 percentage points during the current period, compared to 9.7 percentage points of favorable prior year loss reserve development in the same period in 2011; and

 

•

Net catastrophe losses from 2012 events of $49.6 million or 6.9 percentage points on the net loss ratio compared to net catastrophe losses of $347.2 million or 50.8 points in the first nine months of 2011.

The $44.7 million increase in net premiums written within the Reinsurance segment during the third quarter of 2012 compared to the third quarter of 2011 resulted primarily from increases within the property and casualty lines of business, partially offset by a modest decline in the catastrophe line of business. Growth in the property line of business in the current quarter was driven by higher renewal premiums and multiple new contracts generated by the U.S., Zurich and Singapore offices. An increase in the casualty line of business in the third quarter of 2012 was driven by higher levels of both new business and premium adjustments compared to a year ago. The catastrophe line of business declined from the same period a year ago due to non-renewal of select contracts and timing as several contracts’ renewal dates shifted out of the third quarter of 2012. For the nine months ended September 30, 2012, net premiums written increased $122.9 million, primarily due to increases within the property, catastrophe and casualty lines of business.

The combined ratio in the Reinsurance segment for the third quarter of 2012 improved compared to the same period in 2011, predominantly due to lower net loss and general and administrative expense ratios. The third quarter 2012 net loss ratio included 5.6 percentage points of catastrophe losses relating to Hurricane Isaac and a number of small loss events. The third quarter 2011 net loss ratio included 41.6 percentage points of catastrophe losses relating to Hurricane Irene, the Danish flood, Texas brushfires and multiple storms in the Midwest, which when accumulated triggered several aggregate loss contracts. The Reinsurance segment’s net loss ratio in the third quarter of 2012 benefited from $38.2 million, or 14.2 percentage points, of favorable prior year loss reserve development, compared to $32.0 million, or 13.2 percentage points, for the same period a year ago.

 

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For the first nine months of 2012, the Reinsurance segment reported a combined ratio of 85.6% compared to 130.3% 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 the first nine months of 2012, which added 6.9 percentage points to the net loss ratio compared to 50.8 percentage points in catastrophe losses in the first nine months of 2011. For the nine months ended September 30, 2012, the net loss ratio benefitted from 6.9 percentage points of favorable prior year loss reserve development compared to 9.7 percentage points in the first nine months of 2011.

Investments

Endurance’s net investment income for the quarter and nine months ended September 30, 2012 was $45.9 million and $134.7 million, an increase of $31.8 million and $28.3 million, respectively, compared to the same periods in 2011. The total return of Endurance’s investment portfolio was 1.75% and 4.08% for the quarter and nine months ended September 30, 2012, respectively, compared to 0.37% and 2.60% for the quarter and nine months ended September 30, 2011, respectively. Investment income generated from Endurance’s fixed maturity investments declined by $5.9 million and $18.3 million for the three and nine months ended September 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 third quarter and nine months ended September 30, 2012, Endurance’s net investment income included gains of $15.1 million and $38.1 million, respectively, on its alternative investment funds and high yield loan funds, which are included in other investments, as compared to losses of $22.5 million and $7.6 million in the third quarter and first nine months of 2011, respectively. The ending book yield on Endurance’s fixed maturity investments at September 30, 2012 was 2.38%, down from 2.68% at December 31, 2011 and 2.79% at September 30, 2011.

At September 30, 2012, Endurance’s fixed maturity portfolio, which comprises 90.5% of Endurance’s investments, had an average credit quality of AA and a duration of 2.52 years. Endurance’s fixed maturity portfolio was in a net unrealized gain position of $183.5 million at September 30, 2012, an improvement of $60.7 million from December 31, 2011. Endurance recorded net realized investment gains, net of impairment losses recognized in earnings, of $10.0 million and $29.5 million during the third quarter and first nine months of 2012 compared to net realized investment gains of $0.8 million and $23.5 million during the third quarter and first nine months of 2011.

Endurance ended the third quarter of 2012 with cash and invested assets of $6.5 billion, which represents a 3.8% increase from December 31, 2011. Net operating cash flow was $211.4 million for the nine months ended September 30, 2012 versus $337.5 million for the same period in 2011.

Capitalization and Shareholders’ Equity

At September 30, 2012, Endurance’s shareholders’ equity was $2.81 billion or $54.95 per diluted common share versus $2.61 billion or $50.56 per diluted common share at December 31, 2011. For the quarter and nine months ended September 30, 2012, Endurance declared and paid common dividends of $0.31 and $0.93 per share, respectively.

Subsequent Event

On October 29, 2012, Hurricane Sandy made landfall in the Northeastern United States. Preliminary information indicates that this storm has the potential to cause significant losses within the insurance industry generally. To date, reported claims as a result of this storm have been limited. Accordingly, while losses emanating from the storm cannot be accurately estimated at this time, the Company may need to establish appropriate loss reserves related to Hurricane Sandy in the fourth quarter of 2012, which may have a negative impact on its results of operations.

 

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Earnings Call

Endurance will host a conference call on November 1, 2012 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 337-8259 or (719) 325-2180 (international) and entering pass code: 2498170. 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 November 15, 2012 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 2498170.

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 third 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.

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)

 

		September 30, 2012				December 31, 2011
Assets
Cash and cash equivalents		$	895,776			$	890,914
Fixed maturity investments, available for sale, at fair value			5,052,963				4,831,966
Short-term investments, available for sale, at fair value			62,713				67,802
Equity securities, available for sale, at fair value			83,085				59,767
Other investments			478,911				432,658
Premiums receivable, net			1,136,130				544,017
Insurance and reinsurance balances receivable			112,926				92,710
Deferred acquisition costs			215,811				166,049
Prepaid reinsurance premiums			228,854				149,670
Losses recoverable			1,076,647				666,928
Accrued investment income			23,937				29,708
Goodwill and intangible assets			174,309				181,828
Deferred tax asset			36,092				33,355
Net receivable on sales of investments			76,907				77,821
Other assets			99,294				67,422
Total Assets		$	9,754,355			$	8,292,615
Liabilities
Reserve for losses and loss expenses		$	4,509,442			$	3,824,224
Reserve for unearned premiums			1,370,491				932,108
Deposit liabilities			23,557				26,887
Reinsurance balances payable			256,674				189,488
Debt			527,341				528,118
Net payable on purchases of investments			102,874				55,243
Other liabilities			153,102				125,382
Total Liabilities			6,943,481				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
43,294,300 issued and outstanding (2011 – 43,086,834)			43,294				43,087
Additional paid-in capital			533,284				526,910
Accumulated other comprehensive income			193,239				130,392
Retained earnings			2,023,857				1,893,576
Total Shareholders’ Equity			2,810,874				2,611,165
Total Liabilities and Shareholders’ Equity		$	9,754,355			$	8,292,615
Book Value per Common Share
Dilutive common shares outstanding			43,326,122				43,142,277
Diluted book value per common share [a]		$	54.95			$	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 Nine Months Ended
		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Revenues
Gross premiums written		$	621,255			$	700,866			$	2,286,980			$	2,204,148
Net premiums written		$	514,080			$	551,327			$	1,841,549			$	1,791,957
Change in unearned premiums			37,792				10,166				(358,702	)			(361,053	)
Net premiums earned			551,872				561,493				1,482,847				1,430,904
Other underwriting loss			(1,347	)			(2,141	)			(1,663	)			(2,122	)
Net investment income			45,882				14,100				134,723				106,443
Net realized and unrealized gains			10,097				1,033				30,258				26,340
Total other-than-temporary impairment losses			(126	)			(168	)			(274	)			(1,908	)
Portion of loss recognized in other comprehensive income (loss)			(5	)			(72	)			(483	)			(911	)
Net impairment losses recognized in earnings (losses)			(131	)			(240	)			(757	)			(2,819	)
Total revenues			606,373				574,245				1,645,408				1,558,746
Expenses
Net losses and loss expenses			407,523				456,691				1,016,187				1,220,514
Acquisition expenses			88,782				72,249				229,399				205,754
General and administrative expenses			52,715				58,574				181,365				190,421
Amortization of intangibles			2,434				2,976				7,988				8,800
Net foreign exchange losses (gains)			3,774				(4,085	)			(14,699	)			(7,655	)
Interest expense			9,041				9,055				27,132				27,166
Total expenses			564,269				595,460				1,447,372				1,645,000
Income (loss) before income taxes			42,104				(21,215	)			198,036				(86,254	)
Income tax (expense) benefit			(1,986	)			1,197				(2,893	)			19,896
Net income (loss)			40,118				(20,018	)			195,143				(66,358	)
Preferred dividends			(8,188	)			(8,188	)			(24,564	)			(15,938	)
Net income (loss) available (attributable) to common and participating common shareholders		$	31,930			$	(28,206	)		$	170,579			$	(82,296	)
Per share data
Basic earnings (losses) per common share		$	0.74			$	(0.71	)		$	3.94			$	(2.07	)
Diluted earnings (losses) per common share		$	0.74			$	(0.71	)		$	3.94			$	(2.07	)

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the quarter ended September 30, 2012
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	324,808			$	296,447			$	621,255
Ceded premiums written			(103,543	)			(3,632	)			(107,175	)
Net premiums written			221,265				292,815				514,080
Net premiums earned			283,273				268,599				551,872
Other underwriting (loss) income			(1,384	)			37				(1,347	)
Total underwriting revenues			281,889				268,636				550,525
Expenses
Net losses and loss expenses			288,750				118,773				407,523
Acquisition expenses			24,506				64,276				88,782
General and administrative expenses			29,409				23,306				52,715
			342,665				206,355				549,020
Underwriting (loss) income		$	(60,776	)		$	62,281			$	1,505
Net loss ratio			101.9	%			44.2	%			73.8	%
Acquisition expense ratio			8.7	%			23.9	%			16.1	%
General and administrative expense ratio			10.4	%			8.7	%			9.6	%
Combined ratio			121.0	%			76.8	%			99.5	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the quarter ended September 30, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	450,451			$	250,415			$	700,866
Ceded premiums written			(147,241	)			(2,298	)			(149,539	)
Net premiums written			303,210				248,117				551,327
Net premiums earned			318,602				242,891				561,493
Other underwriting (loss) income			(2,875	)			734				(2,141	)
Total underwriting revenues			315,727				243,625				559,352
Expenses
Net losses and loss expenses			260,206				196,485				456,691
Acquisition expenses			18,738				53,511				72,249
General and administrative expenses			29,328				29,246				58,574
			308,272				279,242				587,514
Underwriting income (loss)		$	7,455			$	(35,617	)		$	(28,162	)
Net loss ratio			81.7	%			81.0	%			81.3	%
Acquisition expense ratio			5.9	%			22.0	%			12.9	%
General and administrative expense ratio			9.2	%			12.0	%			10.4	%
Combined ratio			96.8	%			115.0	%			104.6	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the nine months ended September 30, 2012
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	1,252,814			$	1,034,166			$	2,286,980
Ceded premiums written			(417,109	)			(28,322	)			(445,431	)
Net premiums written			835,705				1,005,844				1,841,549
Net premiums earned			710,988				771,859				1,482,847
Other underwriting (loss) income			(2,684	)			1,021				(1,663	)
Total underwriting revenues			708,304				772,880				1,481,184
Expenses
Net losses and loss expenses			610,956				405,231				1,016,187
Acquisition expenses			58,265				171,134				229,399
General and administrative expenses			96,663				84,702				181,365
			765,884				661,067				1,426,951
Underwriting (loss) income		$	(57,580	)		$	111,813			$	54,233
Net loss ratio			85.9	%			52.4	%			68.5	%
Acquisition expense ratio			8.2	%			22.2	%			15.5	%
General and administrative expense ratio			13.6	%			11.0	%			12.2	%
Combined ratio			107.7	%			85.6	%			96.2	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars, except ratios)

 

		For the nine months ended September 30, 2011
		Insurance				Reinsurance				Reported Totals
Revenues
Gross premiums written		$	1,302,032			$	902,116			$	2,204,148
Ceded premiums written			(393,020	)			(19,171	)			(412,191	)
Net premiums written			909,012				882,945				1,791,957
Net premiums earned			730,491				700,413				1,430,904
Other underwriting (loss) income			(2,875	)			753				(2,122	)
			727,616				701,166				1,428,782
Expenses
Net losses and loss expenses			550,438				670,076				1,220,514
Acquisition expenses			50,907				154,847				205,754
General and administrative expenses			102,361				88,060				190,421
			703,706				912,983				1,616,689
Underwriting income (loss)		$	23,910			$	(211,817	)		$	(187,907	)
Net loss ratio			75.3	%			95.6	%			85.3	%
Acquisition expense ratio			7.0	%			22.1	%			14.4	%
General and administrative expense ratio			14.0	%			12.6	%			13.3	%
Combined ratio			96.3	%			130.3	%			113.0	%

 

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ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

 

		For the quarter ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			101.9	%			81.7	%			44.2	%			81.0	%			73.8	%			81.3	%
Acquisition expense ratio			8.7	%			5.9	%			23.9	%			22.0	%			16.1	%			12.9	%
General and administrative expense ratio			10.4	%			9.2	%			8.7	%			12.0	%			9.6	%			10.4	%
Combined ratio			121.0	%			96.8	%			76.8	%			115.0	%			99.5	%			104.6	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

		For the quarter ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			6.2	%			3.9	%			14.2	%			13.2	%			10.1	%			7.9	%

Net of Prior Year Net Loss Reserve Development

 

		For the quarter ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			108.1	%			85.6	%			58.4	%			94.2	%			83.9	%			89.2	%
Acquisition expense ratio			8.7	%			5.9	%			23.9	%			22.0	%			16.1	%			12.9	%
General and administrative expense ratio			10.4	%			9.2	%			8.7	%			12.0	%			9.6	%			10.4	%
Combined ratio			127.2	%			100.7	%			91.0	%			128.2	%			109.6	%			112.5	%

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 nine months ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			85.9	%			75.3	%			52.4	%			95.6	%			68.5	%			85.3	%
Acquisition expense ratio			8.2	%			7.0	%			22.2	%			22.1	%			15.5	%			14.4	%
General and administrative expense ratio			13.6	%			14.0	%			11.0	%			12.6	%			12.2	%			13.3	%
Combined ratio			107.7	%			96.3	%			85.6	%			130.3	%			96.2	%			113.0	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

 

		For the nine months ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			5.5	%			9.6	%			6.9	%			9.7	%			6.2	%			9.6	%

Net of Prior Year Net Loss Reserve Development

 

		For the nine months ended September 30,
		Insurance								Reinsurance								Total
		2012				2011				2012				2011				2012				2011
Net loss ratio			91.4	%			84.9	%			59.3	%			105.3	%			74.7	%			94.9	%
Acquisition expense ratio			8.2	%			7.0	%			22.2	%			22.1	%			15.5	%			14.4	%
General and administrative expense ratio			13.6	%			14.0	%			11.0	%			12.6	%			12.2	%			13.3	%
Combined ratio			113.2	%			105.9	%			92.5	%			140.0	%			102.4	%			122.6	%

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 September 30, 2012 and 2011:

 

		Quarter Ended September 30, 2012								Quarter Ended September 30, 2011
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	171,826			$	106,180			$	289,656			$	185,017
Professional lines			43,209				34,804				39,559				30,812
Casualty			54,704				32,397				57,520				37,664
Property			18,900				13,595				30,049				17,681
Healthcare liability			34,076				32,196				33,652				32,021
Surety and other specialty			2,093				2,093				15				15
Subtotal Insurance		$	324,808			$	221,265			$	450,451			$	303,210
Reinsurance
Catastrophe		$	38,871			$	36,484			$	46,275			$	43,868
Casualty			77,781				77,781				56,293				56,292
Property			157,742				157,742				129,203				129,203
Aerospace and marine			9,914				9,914				5,891				6,002
Surety and other specialty			12,139				10,894				12,753				12,752
Subtotal Reinsurance		$	296,447			$	292,815			$	250,415			$	248,117
Total		$	621,255			$	514,080			$	700,866			$	551,327

 

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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 nine months ended September 30, 2012 and 2011:

 

		Nine Months Ended September 30, 2012								Nine Months Ended September 30, 2011
		Gross Premiums Written				Net Premiums Written				Gross Premiums Written				Net Premiums Written
Insurance
Agriculture		$	838,932			$	528,349			$	855,486			$	577,538
Professional lines			130,573				107,841				124,209				99,560
Casualty			160,619				102,409				159,580				107,234
Property			46,926				26,418				90,643				56,262
Healthcare liability			70,651				65,575				72,243				68,542
Surety and other specialty			5,113				5,113				(129	)			(124	)
Subtotal Insurance		$	1,252,814			$	835,705			$	1,302,032			$	909,012
Reinsurance
Catastrophe		$	354,275			$	329,067			$	330,771			$	314,328
Casualty			258,352				257,113				218,264				217,463
Property			318,514				318,521				251,475				251,475
Aerospace and marine			53,831				53,794				53,472				51,567
Surety and other specialty			49,194				47,349				48,134				48,112
Subtotal Reinsurance		$	1,034,166			$	1,005,844			$	902,116			$	882,945
Total		$	2,286,980			$	1,841,549			$	2,204,148			$	1,791,957

 

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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 nine months ended September 30, 2012 and 2011:

 

		Quarter Ended September 30,								Nine Months Ended September 30,
		2012				2011				2012				2011
Net income (loss)		$	40,118			$	(20,018	)		$	195,143			$	(66,358	)
Add (less) after-tax items:
Net foreign exchange losses (gains)			3,767				(4,153	)			(12,857	)			(7,822	)
Net realized and unrealized gains			(9,691	)			(775	)			(27,708	)			(25,514	)
Net impairment losses recognized in earnings (losses)			131				240				737				2,819
Operating income (loss) before preferred dividends		$	34,325			$	(24,706	)		$	155,315			$	(96,875	)
Preferred dividends			(8,188	)			(8,188	)			(24,564	)			(15,938	)
Operating income (loss) allocated (attributable) to common and participating common shareholders		$	26,137			$	(32,894	)		$	130,751			$	(112,813	)
Operating income (loss) allocated (attributable) to common shareholders under the two-class method		$	25,733			$	(33,118	)		$	128,583			$	(113,553	)
Weighted average diluted common			42,657,906				39,764,756				42,594,293				40,071,340
Operating income (loss) per diluted common share [b]		$	0.60			$	(0.83	)		$	3.02			$	(2.83	)
Average common equity [a]		$	2,349,058			$	2,223,113			$	2,281,020			$	2,427,052
Operating return on average common equity			1.1	%			(1.5	)%			5.7	%			(4.6	)%
Annualized operating return on average common equity			4.5	%			(5.9	)%			7.6	%			(6.2	)%
Net income (loss)		$	40,118			$	(20,018	)		$	195,143			$	(66,358	)
Preferred dividends			(8,188	)			(8,188	)			(24,564	)			(15,938	)
Net income (loss) available (attributable) to common and participating common shareholders		$	31,930			$	(28,206	)		$	170,579			$	(82,296	)
Net income (loss) available (attributable) to common shareholders under the two-class method		$	31,436			$	(28,430	)		$	167,751			$	(83,036	)
Net income (loss) per diluted common share		$	0.74			$	(0.71	)		$	3.94			$	(2.07	)
Return (loss) on average common equity, Net income (loss)			1.4	%			(1.3	)%			7.5	%			(3.4	)%
Annualized return (loss) on average common equity, Net income (loss)			5.4	%			(5.1	)%			10.0	%			(4.5	)%

 

[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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