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

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d431345d8k.htm
EX-99.1 - PRESS RELEASE - ENDURANCE SPECIALTY HOLDINGS LTD	d431345dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

THIRD 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.

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 SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,						Previous Quarter Change			Previous Year to Date Change
		2012			2011			2012			2011			Previous Quarter Change			Previous Year to Date Change

HIGHLIGHTS	Net income (loss)	$	40,118		$	(20,018	)	$	195,143		$	(66,358	)		(300.4	)%		394.1	%
	Net income (loss) available (attributable) to common and participating common shareholders		31,930			(28,206	)		170,579			(82,296	)		(213.2	)%		307.3	%
	Net income (loss) allocated to common shareholders		31,436			(28,430	)		167,751			(83,036	)		(210.6	)%		302.0	%
	Operating income (loss) [a]		34,325			(24,706	)		155,315			(96,875	)		(238.9	)%		260.3	%
	Operating income (loss) available (attributable) to common and participating common shareholders [a]		26,137			(32,894	)		130,751			(112,813	)		(179.5	)%		215.9	%
	Operating income (loss) allocated to common shareholders [a]		25,733			(33,118	)		128,583			(113,553	)		(177.7	)%		213.2	%
	Operating cash flow		141,154			49,247			211,449			337,499			186.6	%		(37.3	)%
	Net investment income		45,882			14,100			134,723			106,443			225.4	%		26.6	%
	Gross premiums written		621,255			700,866			2,286,980			2,204,148			(11.4	)%		3.8	%
	Net premiums written		514,080			551,327			1,841,549			1,791,957			(6.8	)%		2.8	%
	Net premiums earned		551,872			561,493			1,482,847			1,430,904			(1.7	)%		3.6	%
	Total assets		9,754,355			8,834,237			9,754,355			8,834,237			10.4	%		10.4	%
	Total shareholders’ equity		2,810,874			2,635,950			2,810,874			2,635,950			6.6	%		6.6	%

PER SHARE AND SHARES DATA	Basic earnings (losses) per common share
	Net income (loss) (as reported)	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)		(204.2	)%		290.3	%
	Operating income (loss) (as reported) [a]	$	0.60		$	(0.83	)	$	3.02		$	(2.83	)		(172.3	)%		206.7	%
	Diluted earnings (losses) per common share
	Net income (loss) (as reported)	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)		(204.2	)%		290.3	%
	Operating income (loss) (as reported) [a]	$	0.60		$	(0.83	)	$	3.02		$	(2.83	)		(172.3	)%		206.7	%
As Reported	Weighted average common shares outstanding		42,628			39,765			42,556			40,071			7.2	%		6.2	%
	Weighted average common shares outstanding and dilutive potential common shares [e]		42,658			39,765			42,594			40,071			7.3	%		6.3	%
	Common dividends paid per share	$	0.31		$	0.30		$	0.93		$	0.90			3.3	%		3.3	%
Book Value Per	Book value [b]	$	55.85		$	55.47		$	55.85		$	55.47			0.7	%		0.7	%
Common Share	Diluted book value (treasury stock method) [b]	$	54.95		$	51.63		$	54.95		$	51.63			6.4	%		6.4	%

FINANCIAL RATIOS	Return on average common equity (ROAE), net income (loss) [c]		1.4	%		(1.3	)%		7.5	%		(3.4	)%		2.7			10.9
	ROAE, operating income (loss) [a] [c]		1.1	%		(1.5	)%		5.7	%		(4.6	)%		2.6			10.3
	Return on beg. common equity (ROBE), net income (loss) [d]		1.4	%		(1.3	)%		7.8	%		(3.1	)%		2.7			10.9
	ROBE, operating income (loss) [a] [d]		1.1	%		(1.5	)%		6.0	%		(4.3	)%		2.6			10.3
	Annualized ROAE, net income (loss) [c]		5.4	%		(5.1	)%		10.0	%		(4.5	)%		10.5			14.5
	Annualized ROAE, operating income (loss) [a] [c]		4.5	%		(5.9	)%		7.6	%		(6.2	)%		10.4			13.8
	Annualized ROBE, net income (loss) [d]		5.5	%		(5.0	)%		10.4	%		(4.1	)%		10.5			14.5
	Annualized ROBE, operating income (loss) [a] [d]		4.5	%		(5.9	)%		8.0	%		(5.7	)%		10.4			13.7
	Annualized investment yield		3.0	%		0.4	%		2.9	%		2.6	%		2.6			0.3
GAAP	Loss ratio		73.8	%		81.3	%		68.5	%		85.3	%		(7.5	)		(16.8	)
	Acquisition expense ratio		16.1	%		12.9	%		15.5	%		14.4	%		3.2			1.1
	General and administrative expense ratio		9.6	%		10.4	%		12.2	%		13.3	%		(0.8	)		(1.1	)

	Combined ratio		99.5	%		104.6	%		96.2	%		113.0	%		(5.1	)		(16.8	)

[a]

Operating income (loss) represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses. Please see page 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.

[d]

Beginning common equity for the stated periods excludes the $430 million liquidation value of the preferred shares.

[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
	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			SEPT. 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	621,255		$	604,076		$	1,061,649		$	262,966		$	700,866		$	555,574
Premiums ceded		(107,175	)		(119,663	)		(218,593	)		(75,102	)		(149,539	)		(103,690	)

Net premiums written	$	514,080		$	484,413		$	843,056		$	187,864		$	551,327		$	451,884
Change in unearned premiums		37,792			34,927			(431,421	)		312,625			10,166			17,909

Net premiums earned	$	551,872		$	519,340		$	411,635		$	500,489		$	561,493		$	469,793
Other underwriting (loss) income		(1,347	)		19			(335	)		(1,425	)		(2,141	)		322

Total underwriting revenues	$	550,525		$	519,359		$	411,300		$	499,064		$	559,352		$	470,115

UNDERWRITING EXPENSES
Net losses and loss expenses	$	407,523		$	345,897		$	262,767		$	412,152		$	456,691		$	266,132
Acquisition expenses		88,782			72,128			68,489			77,157			72,249			67,443
General and administrative expenses		52,715			62,609			66,041			73,731			58,574			59,523

Total underwriting expenses	$	549,020		$	480,634		$	397,297		$	563,040		$	587,514		$	393,098

Underwriting income (loss)	$	1,505		$	38,725		$	14,003		$	(63,976	)	$	(28,162	)	$	77,017

OTHER OPERATING REVENUE
Net investment income	$	45,882		$	31,766		$	57,075		$	40,594		$	14,100		$	53,654
Interest expense		(9,041	)		(9,044	)		(9,047	)		(9,088	)		(9,055	)		(9,051	)
Amortization of intangibles		(2,434	)		(2,777	)		(2,777	)		(2,413	)		(2,976	)		(2,588	)

Total other operating revenue	$	34,407		$	19,945		$	45,251		$	29,093		$	2,069		$	42,015

INCOME (LOSS) BEFORE OTHER ITEMS	$	35,912		$	58,670		$	59,254		$	(34,883	)	$	(26,093	)	$	119,032
OTHER
Net foreign exchange (losses) gains	$	(3,774	)	$	336		$	18,137		$	(233	)	$	4,085		$	12,565
Net realized and unrealized investment gains		10,097			14,958			5,203			5,331			1,033			8,973
Total other-than-temporary impairment losses		(126	)		(148	)		—			(751	)		(168	)		(1,140	)
Portion of loss recognised in other comprehensive income		(5	)		(259	)		(219	)		50			(72	)		(240	)

Net impairment losses recognised in earnings (losses)		(131	)		(407	)		(219	)		(701	)		(240	)		(1,380	)
Income tax (expense) benefit		(1,986	)		(1,074	)		167			3,110			1,197			(62	)

NET INCOME (LOSS)	$	40,118		$	72,483		$	82,542		$	(27,376	)	$	(20,018	)	$	139,128
Preferred dividends		(8,188	)		(8,188	)		(8,188	)		(8,187	)		(8,188	)		(3,875	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	31,930		$	64,295		$	74,354		$	(35,563	)	$	(28,206	)	$	135,253

KEY RATIOS/PER SHARE DATA
Loss ratio		73.8	%		66.5	%		63.9	%		82.4	%		81.3	%		56.6	%
Acquisition expense ratio		16.1	%		13.9	%		16.6	%		15.4	%		12.9	%		14.4	%
General and administrative expense ratio		9.6	%		12.1	%		16.0	%		14.7	%		10.4	%		12.7	%

Combined ratio		99.5	%		92.5	%		96.5	%		112.5	%		104.6	%		83.7	%

Basic earnings (losses) per common share	$	0.74		$	1.48		$	1.72		$	(0.88	)	$	(0.71	)	$	2.64
Diluted earnings (losses) per common share	$	0.74		$	1.48		$	1.72		$	(0.88	)	$	(0.71	)	$	2.51
ROAE, net income (loss) [a]		1.4	%		2.8	%		3.4	%		(1.6	)%		(1.3	)%		5.0	%

[a]


			2

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - YTD


	NINE MONTHS ENDED									YEAR ENDED
	SEPT. 30, 2012			SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	2,286,980		$	2,204,148		$	1,864,011		$	2,467,114		$	2,053,236
Premiums ceded		(445,431	)		(412,191	)		(258,382	)		(487,293	)		(289,492	)

Net premiums written	$	1,841,549		$	1,791,957		$	1,605,629		$	1,979,821		$	1,763,744
Change in unearned premiums		(358,702	)		(361,053	)		(314,252	)		(48,428	)		(22,631	)

Net premiums earned	$	1,482,847		$	1,430,904		$	1,291,377		$	1,931,393		$	1,741,113
Other underwriting loss		(1,663	)		(2,122	)		(2,046	)		(3,547	)		(1,636	)

Total underwriting revenues	$	1,481,184		$	1,428,782		$	1,289,331		$	1,927,846		$	1,739,477

UNDERWRITING EXPENSES
Losses and loss expenses	$	1,016,187		$	1,220,514		$	791,676		$	1,632,666		$	1,038,100
Acquisition expenses		229,399			205,754			198,095			282,911			264,228
General and administrative expenses		181,365			190,421			174,164			264,152			241,920

Total underwriting expenses	$	1,426,951		$	1,616,689		$	1,163,935		$	2,179,729		$	1,544,248

Underwriting income (loss)	$	54,233		$	(187,907	)	$	125,396		$	(251,883	)	$	195,229

OTHER OPERATING REVENUE
Net investment income	$	134,723		$	106,443		$	143,484		$	147,037		$	200,358
Interest expense		(27,132	)		(27,166	)		(25,709	)		(36,254	)		(34,762	)
Amortization of intangibles		(7,988	)		(8,800	)		(7,764	)		(11,213	)		(10,460	)

Total other operating revenue	$	99,603		$	70,477		$	110,011		$	99,570		$	155,136

INCOME (LOSS) BEFORE OTHER ITEMS	$	153,836		$	(117,430	)	$	235,407		$	(152,313	)	$	350,365
OTHER
Net foreign exchange gains	$	14,699		$	7,655		$	6,465		$	7,422		$	2,989
Net realized and unrealized investment gains		30,258			26,340			15,174			31,671			22,488
Total other-than-temporary impairment losses		(274	)		(1,908	)		(2,647	)		(2,659	)		(2,695	)
Portion of loss recognised in other comprehensive income		(483	)		(911	)		(586	)		(861	)		(1,249	)

Net impairment losses recognised in earnings (losses)		(757	)		(2,819	)		(3,233	)		(3,520	)		(3,944	)
Income tax (expense) benefit		(2,893	)		19,896			(303	)		23,006			(7,160	)

NET INCOME (LOSS)	$	195,143		$	(66,358	)	$	253,510		$	(93,734	)	$	364,738
Preferred dividends		(24,564	)		(15,938	)		(11,625	)		(24,125	)		(15,500	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	170,579		$	(82,296	)	$	241,885		$	(117,859	)	$	349,238

KEY RATIOS/PER SHARE DATA
Loss ratio		68.5	%		85.3	%		61.3	%		84.6	%		59.6	%
Acquisition expense ratio		15.5	%		14.4	%		15.3	%		14.6	%		15.2	%
General and administrative expense ratio		12.2	%		13.3	%		13.5	%		13.7	%		13.9	%

Combined ratio		96.2	%		113.0	%		90.1	%		112.9	%		88.7	%

Basic earnings (losses) per common share	$	3.94		$	(2.07	)	$	4.56		$	(2.95	)	$	6.73
Diluted earnings (losses) per common share	$	3.94		$	(2.07	)	$	4.33		$	(2.95	)	$	6.38
ROAE, net income (loss) [a]		7.5	%		(3.4	)%		9.1	%		(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 September 30, 2010, liquidation value of $430 million as of September 30, 2012 and 2011 and December 31, 2011).


			3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			JUNE 30, 2011
ASSETS
Cash and cash equivalents	$	895,776		$	842,180		$	679,634		$	890,914		$	623,944		$	750,844
Fixed maturity investments available for sale, at fair value		5,052,963			5,081,814			5,131,035			4,831,966			4,998,142			4,961,948
Short term investments available for sale, at fair value		62,713			40,913			54,919			67,802			323,119			303,895
Equity securities available for sale, at fair value		83,085			70,652			67,238			59,767			49,323			32,322
Other investments		478,911			478,860			432,428			432,658			386,785			395,078
Premiums receivable, net		1,136,130			1,289,478			1,188,186			544,017			1,100,867			1,122,291
Insurance and reinsurance balances receivable		112,926			115,904			95,840			92,710			91,588			32,189
Deferred acquisition costs		215,811			196,693			191,690			166,049			203,455			182,870
Securities lending collateral		—			—			—			—			—			84,652
Prepaid reinsurance premiums		228,854			258,522			280,094			149,670			204,961			198,708
Losses recoverable		1,076,647			618,447			497,522			666,928			479,132			369,081
Accrued investment income		23,937			27,383			25,669			29,708			30,851			31,189
Goodwill and intangible assets		174,309			176,743			179,051			181,828			183,857			186,835
Deferred tax assets		36,092			36,376			34,802			33,355			40,253			38,144
Receivable on pending investment sales		76,907			30,776			33,969			77,821			37,947			3,685
Other assets		99,294			75,387			76,751			67,422			80,013			66,309

TOTAL ASSETS	$	9,754,355		$	9,340,128		$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040

LIABILITIES
Reserve for losses and loss expenses	$	4,509,442		$	3,984,622		$	3,760,829		$	3,824,224		$	3,910,537		$	3,748,124
Reserve for unearned premiums		1,370,491			1,437,482			1,494,324			932,108			1,299,864			1,304,146
Deposit liabilities		23,557			24,938			26,950			26,887			28,860			30,300
Reinsurance balances payable		256,674			306,122			293,726			189,488			244,769			209,548
Securities lending payable		—			—			—			—			—			84,652
Debt		527,341			527,299			527,180			528,118			528,664			528,540
Payable on pending investment purchases		102,874			186,652			65,385			55,243			56,496			80,532
Other liabilities		153,102			125,771			115,896			125,382			129,097			103,922

TOTAL LIABILITIES	$	6,943,481		$	6,592,886		$	6,284,290		$	5,681,450		$	6,198,287		$	6,089,764

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			9,200
Common shares		43,294			43,296			43,387			43,087			40,517			40,509
Additional paid-in capital		533,284			531,145			528,677			526,910			512,323			509,165
Accumulated other comprehensive income		193,239			150,252			140,795			130,392			123,846			120,982
Retained earnings		2,023,857			2,005,349			1,954,479			1,893,576			1,942,064			1,982,420

TOTAL SHAREHOLDERS’ EQUITY	$	2,810,874		$	2,747,242		$	2,684,538		$	2,611,165		$	2,635,950		$	2,670,276

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,754,355		$	9,340,128		$	8,968,828		$	8,292,615		$	8,834,237		$	8,760,040

Book value per common share	$	55.85		$	54.37		$	52.97		$	51.48		$	55.47		$	56.35
Diluted book value per common share (treasury stock method)	$	54.95		$	53.48		$	51.90		$	50.56		$	51.63		$	52.20
RATIOS
Debt-to-capital		15.8	%		16.1	%		16.4	%		16.8	%		16.7	%		16.5	%


			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 16.6% of Shareholders’ Equity as of September 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 NINE MONTHS ENDED SEPTEMBER 30, 2012

Net Premiums Written = $1,841.5 million

LOGO

[a]

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


			6

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012									SEPT. 30, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	324,808		$	296,447		$	621,255		$	450,451		$	250,415		$	700,866

Net premiums written	$	221,265		$	292,815		$	514,080		$	303,210		$	248,117		$	551,327

Net premiums earned	$	283,273		$	268,599		$	551,872		$	318,602		$	242,891		$	561,493
Other underwriting (loss) income		(1,384	)		37			(1,347	)		(2,875	)		734			(2,141	)

Total underwriting revenues	$	281,889		$	268,636		$	550,525		$	315,727		$	243,625		$	559,352

UNDERWRITING EXPENSES
Net losses and loss expenses	$	288,750		$	118,773		$	407,523		$	260,206		$	196,485		$	456,691
Acquisition expenses		24,506			64,276			88,782			18,738			53,511			72,249
General and administrative expenses		29,409			23,306			52,715			29,328			29,246			58,574

Total expenses	$	342,665		$	206,355		$	549,020		$	308,272		$	279,242		$	587,514

UNDERWRITING (LOSS) INCOME	$	(60,776	)	$	62,281		$	1,505		$	7,455		$	(35,617	)	$	(28,162	)

GAAP RATIOS
Loss ratio		101.9	%		44.2	%		73.8	%		81.7	%		81.0	%		81.3	%
Acquisition expense ratio		8.7	%		23.9	%		16.1	%		5.9	%		22.0	%		12.9	%
General and administrative expense ratio		10.4	%		8.7	%		9.6	%		9.2	%		12.0	%		10.4	%

Combined ratio AS REPORTED		121.0	%		76.8	%		99.5	%		96.8	%		115.0	%		104.6	%

Effect of favorable prior accident year reserve development		6.2	%		14.2	%		10.1	%		3.9	%		13.2	%		7.9	%

Combined ratio net of prior accident year reserve development		127.2	%		91.0	%		109.6	%		100.7	%		128.2	%		112.5	%


			7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			SEPT. 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	324,808		$	292,659		$	635,347		$	167,766		$	450,451		$	303,561

Net premiums written	$	221,265		$	186,659		$	427,781		$	96,478		$	303,210		$	204,293

Net premiums earned	$	283,273		$	266,085		$	161,630		$	251,101		$	318,602		$	242,766
Other underwriting (loss) income		(1,384	)		(1,300	)		—			(493	)		(2,875	)		473

Total underwriting revenues	$	281,889		$	264,785		$	161,630		$	250,608		$	315,727		$	243,239

UNDERWRITING EXPENSES
Net losses and loss expenses	$	288,750		$	208,504		$	113,702		$	214,681		$	260,206		$	172,015
Acquisition expenses		24,506			17,545			16,214			20,388			18,738			17,356
General and administrative expenses		29,409			32,819			34,435			43,754			29,328			29,256

Total expenses	$	342,665		$	258,868		$	164,351		$	278,823		$	308,272		$	218,627

UNDERWRITING (LOSS) INCOME	$	(60,776	)	$	5,917		$	(2,721	)	$	(28,215	)	$	7,455		$	24,612

GAAP RATIOS
Loss ratio		101.9	%		78.4	%		70.4	%		85.5	%		81.7	%		70.9	%
Acquisition expense ratio		8.7	%		6.6	%		10.0	%		8.1	%		5.9	%		7.1	%
General and administrative expense ratio		10.4	%		12.3	%		21.3	%		17.4	%		9.2	%		12.1	%

Combined ratio AS REPORTED		121.0	%		97.3	%		101.7	%		111.0	%		96.8	%		90.1	%

Effect of favorable prior accident year reserve development		6.2	%		5.1	%		4.9	%		0.2	%		3.9	%		3.9	%

Combined ratio net of prior accident year reserve development		127.2	%		102.4	%		106.6	%		111.2	%		100.7	%		94.0	%


			8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			SEPT. 30, 2010
UNDERWRITING REVENUES
Gross premiums written	$	296,447		$	311,417		$	426,302		$	95,200		$	250,415		$	252,013

Net premiums written	$	292,815		$	297,754		$	415,275		$	91,386		$	248,117		$	247,591

Net premiums earned	$	268,599		$	253,255		$	250,005		$	249,388		$	242,891		$	227,027
Other underwriting income (loss)		37			1,319			(335	)		(932	)		734			(151	)

Total underwriting revenues	$	268,636		$	254,574		$	249,670		$	248,456		$	243,625		$	226,876

UNDERWRITING EXPENSES
Net losses and loss expenses	$	118,773		$	137,393		$	149,065		$	197,471		$	196,485		$	94,117
Acquisition expenses		64,276			54,583			52,275			56,769			53,511			50,087
General and administrative expenses		23,306			29,790			31,606			29,977			29,246			30,267

Total expenses	$	206,355		$	221,766		$	232,946		$	284,217		$	279,242		$	174,471

UNDERWRITING INCOME (LOSS)	$	62,281		$	32,808		$	16,724		$	(35,761	)	$	(35,617	)	$	52,405

GAAP RATIOS
Loss ratio		44.2	%		54.2	%		59.7	%		79.2	%		81.0	%		41.5	%
Acquisition expense ratio		23.9	%		21.6	%		20.9	%		22.8	%		22.0	%		22.1	%
General and administrative expense ratio		8.7	%		11.8	%		12.6	%		12.0	%		12.0	%		13.3	%

Combined ratio AS REPORTED		76.8	%		87.6	%		93.2	%		114.0	%		115.0	%		76.9	%

Effect of favorable prior accident year reserve development		14.2	%		2.3	%		3.6	%		16.6	%		13.2	%		11.3	%

Combined ratio net of prior accident year reserve development		91.0	%		89.9	%		96.8	%		130.6	%		128.2	%		88.2	%


			9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		SEPT. 30, 2010
INSURANCE SEGMENT
Agriculture	$	171,826	$	133,439	$	533,667	$	46,260	$	289,656	$	156,162
Professional lines		43,209		51,019		36,345		45,110		39,559		43,381
Casualty		54,704		68,088		37,827		46,370		57,520		40,538
Property		18,900		18,182		9,844		18,669		30,049		30,295
Healthcare liability		34,076		19,922		16,653		10,276		33,652		34,024
Surety and other specialty		2,093		2,009		1,011		1,081		15		(839	)

TOTAL INSURANCE	$	324,808	$	292,659	$	635,347	$	167,766	$	450,451	$	303,561

REINSURANCE SEGMENT
Catastrophe	$	38,871	$	172,222	$	143,182	$	15,250	$	46,275	$	45,513
Casualty		77,781		58,897		121,674		59,231		56,293		81,167
Property		157,742		54,026		106,746		15,087		129,203		111,395
Aerospace and Marine		9,914		18,288		25,629		1,119		5,891		4,184
Surety and other specialty		12,139		7,984		29,071		4,513		12,753		9,754

TOTAL REINSURANCE	$	296,447	$	311,417	$	426,302	$	95,200	$	250,415	$	252,013

REPORTED TOTALS	$	621,255	$	604,076	$	1,061,649	$	262,966	$	700,866	$	555,574


			10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		SEPT. 30, 2010
INSURANCE SEGMENT
Agriculture	$	106,180	$	67,249	$	354,920	$	9,121	$	185,017	$	89,119
Professional lines		34,804		42,832		30,205		38,402		30,812		38,522
Casualty		32,397		43,549		26,463		30,139		37,664		23,700
Property		13,595		11,990		833		8,668		17,681		21,366
Healthcare liability		32,196		19,031		14,348		9,067		32,021		32,393
Surety and other specialty		2,093		2,008		1,012		1,081		15		(807	)

TOTAL INSURANCE	$	221,265	$	186,659	$	427,781	$	96,478	$	303,210	$	204,293

REINSURANCE SEGMENT
Catastrophe	$	36,484	$	158,865	$	133,718	$	14,753	$	43,868	$	41,154
Casualty		77,781		58,895		120,437		59,234		56,292		81,163
Property		157,742		54,033		106,746		15,087		129,203		111,395
Aerospace and Marine		9,914		18,287		25,593		768		6,002		4,184
Surety and other specialty		10,894		7,674		28,781		1,544		12,752		9,695

TOTAL REINSURANCE	$	292,815	$	297,754	$	415,275	$	91,386	$	248,117	$	247,591

REPORTED TOTALS	$	514,080	$	484,413	$	843,056	$	187,864	$	551,327	$	451,884


			11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		SEPT. 30, 2011		SEPT. 30, 2010
INSURANCE SEGMENT
Agriculture	$	183,277	$	162,703	$	59,969	$	146,068	$	215,830	$	134,864
Professional lines		35,577		36,719		33,884		37,580		34,343		38,085
Casualty		33,122		34,239		33,974		30,765		32,343		25,682
Property		11,359		12,906		14,543		16,735		16,636		24,000
Healthcare liability		18,699		18,463		18,799		19,168		19,435		20,942
Surety and other specialty		1,239		1,055		461		785		15		(807	)

TOTAL INSURANCE	$	283,273	$	266,085	$	161,630	$	251,101	$	318,602	$	242,766

REINSURANCE SEGMENT
Catastrophe	$	85,983	$	81,334	$	82,337	$	82,197	$	86,395	$	74,675
Casualty		79,135		74,049		73,252		73,838		68,882		71,844
Property		74,818		70,546		68,378		67,911		62,519		56,975
Aerospace and Marine		15,516		14,674		14,357		13,052		12,236		8,602
Surety and other specialty		13,147		12,652		11,681		12,390		12,859		14,931

TOTAL REINSURANCE	$	268,599	$	253,255	$	250,005	$	249,388	$	242,891	$	227,027

REPORTED TOTALS	$	551,872	$	519,340	$	411,635	$	500,489	$	561,493	$	469,793


			12

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE NINE MONTHS ENDED
	SEPT. 30, 2012									SEPT. 30, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	1,252,814		$	1,034,166		$	2,286,980		$	1,302,032		$	902,116		$	2,204,148

Net premiums written	$	835,705		$	1,005,844		$	1,841,549		$	909,012		$	882,945		$	1,791,957

Net premiums earned	$	710,988		$	771,859		$	1,482,847		$	730,491		$	700,413		$	1,430,904
Other underwriting (loss) income		(2,684	)		1,021			(1,663	)		(2,875	)		753			(2,122	)

Total underwriting revenues	$	708,304		$	772,880		$	1,481,184		$	727,616		$	701,166		$	1,428,782

UNDERWRITING EXPENSES
Losses and loss expenses	$	610,956		$	405,231		$	1,016,187		$	550,438		$	670,076		$	1,220,514
Acquisition expenses		58,265			171,134			229,399			50,907			154,847			205,754
General and administrative expenses		96,663			84,702			181,365			102,361			88,060			190,421

Total expenses	$	765,884		$	661,067		$	1,426,951		$	703,706		$	912,983		$	1,616,689

UNDERWRITING (LOSS) INCOME	$	(57,580	)	$	111,813		$	54,233		$	23,910		$	(211,817	)	$	(187,907	)

GAAP RATIOS
Loss ratio		85.9	%		52.4	%		68.5	%		75.3	%		95.6	%		85.3	%
Acquisition expense ratio		8.2	%		22.2	%		15.5	%		7.0	%		22.1	%		14.4	%
General and administrative expense ratio		13.6	%		11.0	%		12.2	%		14.0	%		12.6	%		13.3	%

Combined ratio AS REPORTED		107.7	%		85.6	%		96.2	%		96.3	%		130.3	%		113.0	%

Effect of favorable prior accident year reserve development		5.5	%		6.9	%		6.2	%		9.6	%		9.7	%		9.6	%

Combined ratio net of prior accident year reserve development		113.2	%		92.5	%		102.4	%		105.9	%		140.0	%		122.6	%


			13

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE NINE MONTHS ENDED									FOR THE YEARS ENDED
	SEPT. 30, 2012			SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,252,814		$	1,302,032		$	999,528		$	1,469,798		$	1,112,192

Net premiums written	$	835,705		$	909,012		$	748,221		$	1,005,490		$	829,864

Net premiums earned	$	710,988		$	730,491		$	616,300		$	981,592		$	821,828
Other underwriting (loss) income		(2,684	)		(2,875	)		471			(3,368	)		475

Total underwriting revenues	$	708,304		$	727,616		$	616,771		$	978,224		$	822,303

UNDERWRITING EXPENSES
Losses and loss expenses	$	610,956		$	550,438		$	428,872		$	765,119		$	558,040
Acquisition expenses		58,265			50,907			51,336			71,295			63,556
General and administrative expenses		96,663			102,361			86,523			146,115			123,335

Total expenses	$	765,884		$	703,706		$	566,731		$	982,529		$	744,931

UNDERWRITING (LOSS) INCOME	$	(57,580	)	$	23,910		$	50,040		$	(4,305	)	$	77,372

GAAP RATIOS
Loss ratio		85.9	%		75.3	%		69.6	%		77.9	%		67.9	%
Acquisition expense ratio		8.2	%		7.0	%		8.4	%		7.3	%		7.7	%
General and administrative expense ratio		13.6	%		14.0	%		14.0	%		14.9	%		15.0	%

Combined ratio AS REPORTED		107.7	%		96.3	%		92.0	%		100.1	%		90.6	%

Effect of favorable prior accident year reserve development		5.5	%		9.6	%		5.7	%		7.2	%		5.7	%

Combined ratio net of prior accident year reserve development		113.2	%		105.9	%		97.7	%		107.3	%		96.3	%


			14

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE NINE MONTHS ENDED									FOR THE YEARS ENDED
	SEPT. 30, 2012			SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,034,166		$	902,116		$	864,483		$	997,316		$	941,044

Net premiums written	$	1,005,844		$	882,945		$	857,408		$	974,331		$	933,880

Net premiums earned	$	771,859		$	700,413		$	675,077		$	949,801		$	919,285
Other underwriting income (loss)		1,021			753			(2,517	)		(179	)		(2,111	)

Total underwriting revenues	$	772,880		$	701,166		$	672,560		$	949,622		$	917,174

UNDERWRITING EXPENSES
Losses and loss expenses	$	405,231		$	670,076		$	362,804		$	867,547		$	480,060
Acquisition expenses		171,134			154,847			146,759			211,616			200,672
General and administrative expenses		84,702			88,060			87,641			118,037			118,585

Total expenses	$	661,067		$	912,983		$	597,204		$	1,197,200		$	799,317

UNDERWRITING INCOME (LOSS)	$	111,813		$	(211,817	)	$	75,356		$	(247,578	)	$	117,857

GAAP RATIOS
Loss ratio		52.4	%		95.6	%		53.7	%		91.3	%		52.2	%
Acquisition expense ratio		22.2	%		22.1	%		21.8	%		22.3	%		21.8	%
General and administrative expense ratio		11.0	%		12.6	%		13.0	%		12.4	%		12.9	%

Combined ratio AS REPORTED		85.6	%		130.3	%		88.5	%		126.0	%		86.9	%

Effect of favorable prior accident year reserve development		6.9	%		9.7	%		10.1	%		11.5	%		8.7	%

Combined ratio net of prior accident year reserve development		92.5	%		140.0	%		98.6	%		137.5	%		95.6	%


			15

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE NINE MONTHS ENDED								FOR THE YEARS ENDED
	SEPT. 30, 2012		SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	838,932	$	855,486		$	560,531		$	901,746	$	567,461
Professional lines		130,573		124,209			133,456			169,319		170,146
Casualty		160,619		159,580			130,172			205,950		167,549
Property		46,926		90,643			99,976			109,312		122,110
Healthcare liability		70,651		72,243			76,782			82,519		87,593
Surety and other specialty		5,113		(129	)		(1,389	)		952		(2,667	)

TOTAL INSURANCE	$	1,252,814	$	1,302,032		$	999,528		$	1,469,798	$	1,112,192

REINSURANCE SEGMENT
Catastrophe	$	354,275	$	330,771		$	291,990		$	346,021	$	309,886
Casualty		258,352		218,264			246,060			277,495		294,030
Property		318,514		251,475			215,916			266,562		224,544
Aerospace and Marine		53,831		53,472			46,381			54,591		48,761
Surety and other specialty		49,194		48,134			64,136			52,647		63,823

TOTAL REINSURANCE	$	1,034,166	$	902,116		$	864,483		$	997,316	$	941,044

REPORTED TOTALS	$	2,286,980	$	2,204,148		$	1,864,011		$	2,467,114	$	2,053,236


			16

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE NINE MONTHS ENDED								FOR THE YEARS ENDED
	SEPT. 30, 2012		SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	528,349	$	577,538		$	402,395		$	586,659	$	404,767
Professional lines		107,841		99,560			115,546			137,962		148,717
Casualty		102,409		107,234			82,265			137,373		107,801
Property		26,418		56,262			76,404			64,930		88,299
Healthcare liability		65,575		68,542			72,947			77,609		82,893
Surety and other specialty		5,113		(124	)		(1,336	)		957		(2,613	)

TOTAL INSURANCE	$	835,705	$	909,012		$	748,221		$	1,005,490	$	829,864

REINSURANCE SEGMENT
Catastrophe	$	329,067	$	314,328		$	287,721		$	329,081	$	305,617
Casualty		257,113		217,463			245,257			276,697		293,222
Property		318,521		251,475			215,916			266,562		224,544
Aerospace and Marine		53,794		51,567			44,316			52,335		46,696
Surety and other specialty		47,349		48,112			64,198			49,656		63,801

TOTAL REINSURANCE	$	1,005,844	$	882,945		$	857,408		$	974,331	$	933,880

REPORTED TOTALS	$	1,841,549	$	1,791,957		$	1,605,629		$	1,979,821	$	1,763,744


			17

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE NINE MONTHS ENDED								FOR THE YEARS ENDED
	SEPT. 30, 2012		SEPT. 30, 2011			SEPT. 30, 2010			DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	405,949	$	418,590		$	297,466		$	564,658	$	397,643
Professional lines		106,180		108,306			117,317			145,886		154,484
Casualty		101,335		90,820			76,655			121,585		105,070
Property		38,808		52,795			65,946			69,530		86,308
Healthcare liability		55,961		60,104			60,416			79,272		81,100
Surety and other specialty		2,755		(124	)		(1,500	)		661		(2,777	)

TOTAL INSURANCE	$	710,988	$	730,491		$	616,300		$	981,592	$	821,828

REINSURANCE SEGMENT
Catastrophe	$	249,654	$	244,477		$	236,091		$	326,674	$	315,708
Casualty		226,436		204,276			198,266			278,114		272,968
Property		213,742		173,614			163,053			241,525		227,282
Aerospace and Marine		44,547		38,977			33,606			52,029		44,918
Surety and other specialty		37,480		39,069			44,061			51,459		58,409

TOTAL REINSURANCE	$	771,859	$	700,413		$	675,077		$	949,801	$	919,285

REPORTED TOTALS	$	1,482,847	$	1,430,904		$	1,291,377		$	1,931,393	$	1,741,113


			18

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE NINE MONTHS ENDED SEPT. 30, 2012
Average common equity [a]	$	2,281,020
Net premiums earned	$	1,482,847
Combined ratio		96.2	%
Operating margin		3.8	%
Premium leverage		0.65	x
Implied ROAE from underwriting activity		2.5	%
Average cash and invested assets at amortized cost	$	6,273,418
Investment leverage		2.75	x
Year to date investment income yield, pretax		2.1	%
Implied ROAE from investment activity		5.8	%
Financing Costs [b]		(2.3	)%
Implied Pre-tax Operating ROAE, for period [c]		6.0	%

[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,
	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			2011			2010
Average common equity [a]	$	2,349,058		$	2,285,890		$	2,217,852		$	2,193,558		$	2,451,346		$	2,617,718
Net premiums earned	$	551,872		$	519,340		$	411,635		$	500,489		$	1,931,393		$	1,741,113
Premium leverage		0.23	x		0.23	x		0.19	x		0.23	x		0.79	x		0.67	x
Annualized premium leverage		0.92	x		0.92	x		0.76	x		0.92	x		0.79	x		0.67	x
Average cash and invested assets at amortized cost	$	6,288,639		$	6,206,710		$	6,191,489		$	6,214,330		$	6,130,518		$	6,017,647
Investment leverage		2.68	x		2.72	x		2.79	x		2.83	x		2.50	x		2.30	x

[a]


			20

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF SEPTEMBER 30, 2012 AND DECEMBER 31, 2011


	September 30, 2012					December 31, 2011
	Fair Value		Percentage			Fair Value		Percentage
Type of Investment
Cash and equivalents [a]	$	869,809		13.3	%	$	913,492		14.5	%
Short-term investments		62,713		1.0	%		67,802		1.1	%
U.S. government and government agencies notes		1,305,526		19.9	%		1,269,123		20.1	%
Government and agency guaranteed corporates		223,321		3.4	%		351,825		5.6	%
U.S. government agency residential mortgage-backed securities		977,482		14.9	%		965,019		15.3	%
U.S. government agency commercial mortgage-backed securities		35,645		0.5	%		28,807		0.5	%
Municipals		54,061		0.8	%		53,517		0.8	%
Foreign government		118,881		1.8	%		74,997		1.2	%
Corporate securities		1,201,284		18.4	%		1,139,899		18.1	%
Non-agency residential mortgage-backed securities		83,208		1.3	%		114,662		1.8	%
Non-agency commercial mortgage-backed securities		598,500		9.1	%		518,483		8.2	%
Asset-backed securities		455,055		7.0	%		315,634		5.0	%
Equity securities		83,085		1.3	%		59,767		0.9	%
Other investments [b]		478,911		7.3	%		432,658		6.9	%

Total	$	6,547,481		100.0	%	$	6,305,685		100.0	%


	Fair Value		Percentage			Fair Value		Percentage
Ratings [e]
U.S. government and government agencies notes	$	1,305,526		23.0	%	$	1,269,123		23.5	%
AAA/Aaa		1,119,526		19.7	%		941,500		17.6	%
AA/Aa		1,671,351		29.5	%		1,665,593		30.9	%
A/A		757,145		13.3	%		776,251		14.4	%
BBB		137,061		2.4	%		130,864		2.4	%
Below BBB		122,876		2.2	%		114,716		2.1	%
Not Rated		2,191		—			1,721		—
Equity securities		83,085		1.5	%		59,767		1.1	%
Other investments [b]		478,911		8.4	%		432,658		8.0	%

Total	$	5,677,672		100.0	%	$	5,392,193		100.0	%


						September 30, 2012					December 31, 2011
Performance
Yield [c]							3.0	%				2.4	%
Duration in years [d]							2.52					2.39

	Quarter Ended Sept. 30, 2012		Quarter Ended June 30, 2012			Quarter Ended Mar. 31, 2012			Quarter Ended Dec. 31, 2011		Quarter Ended Sept. 30, 2011
Investment Income
Cash and fixed income securities	$	30,832	$	31,840		$	33,950		$	33,705	$	36,622
Other Investments		15,050		(74	)		23,125			6,889		(22,522	)

Total net investment income	$	45,882	$	31,766		$	57,075		$	40,594	$	14,100


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 9/30/12 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


	September 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	$	1,013,127		47.1	%		15.4	%	$	993,826		51.2	%		15.8	%
AAA/Aaa		772,968		36.0	%		11.8	%		669,536		34.5	%		10.6	%
AA/Aa		180,410		8.4	%		2.8	%		101,792		5.2	%		1.6	%
A/A		79,976		3.7	%		1.2	%		83,472		4.3	%		1.3	%
BBB		47,680		2.2	%		0.7	%		34,905		1.8	%		0.6	%
Below BBB		55,729		2.6	%		0.9	%		58,852		3.0	%		0.9	%
Not Rated		—		—			—			222		—			—

Total	$	2,149,890		100.0	%		32.8	%	$	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	$	35,645		1.7	%		0.5	%	$	28,807		1.5	%		0.5	%
Non Agency		624,670		29.1	%		9.5	%		537,920		27.7	%		8.5	%
Residential
Agency		977,482		45.4	%		14.9	%		965,019		49.7	%		15.3	%
Non Agency		91,701		4.3	%		1.4	%		115,304		5.9	%		1.8	%
Consumer		345,940		16.0	%		5.4	%		246,649		12.7	%		3.9	%
Collateralized Loan Obligations (CLO)		74,452		3.5	%		1.1	%		48,906		2.5	%		0.8	%

Total	$	2,149,890		100.0	%		32.8	%	$	1,942,605		100.0	%		30.8	%

Spread Duration 3.09 years


			22

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF SEPT. 30, 2012


	September 30, 2012
ISSUER (1) (2) (4)	Amortized Cost		Fair Value		Unrealized Gain (Loss)		Credit Quality (3)
JPMORGAN CHASE & CO	$	34,688	$	35,623	$	935	A
US BANCORP		32,483		33,947		1,464	A+
INTERNATIONAL BUSINESS MACHINES CORP		31,364		32,126		762	AA-
METLIFE INC		29,056		29,592		536	A
WAL-MART STORES INC		26,370		27,520		1,150	AA
PHILIP MORRIS INTERNATIONAL INC		24,693		26,081		1,388	A
NOVARTIS AG		23,647		25,042		1,395	AA-
NEW YORK LIFE INSURANCE COMPANY		24,075		24,991		916	AA+
MORGAN STANLEY		22,695		23,171		476	A-
PEPSICO INC/NC		18,149		19,285		1,136	A
BANK OF AMERICA CORP		18,092		18,975		883	A-
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC		18,496		18,594		98	AAA
VERIZON COMMUNICATIONS INC		16,911		18,486		1,575	A-
PRINCIPAL LIFE GLOBAL FUNDING II		17,623		17,736		113	A+
EDISON INTERNATIONAL		16,668		17,657		989	A
AT&T INC		16,773		17,380		607	A-
GOLDMAN SACHS GROUP INC/THE		15,281		15,926		645	A-
NATIONAL GRID PLC		13,902		15,911		2,009	A-
BANK OF NOVA SCOTIA		15,532		15,629		97	AA-
MEDTRONIC INC		13,399		14,146		747	A+
HSBC HOLDINGS PLC		13,234		13,644		410	A+
BANCO SANTANDER SA		12,399		13,367		968	AA-
PFIZER INC		12,781		13,211		430	AA
CITIGROUP INC		12,316		12,768		452	A-
PRUDENTIAL FINANCIAL INC		12,391		12,693		302	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 SEPT. 30, 2012									NINE MONTHS ENDED SEPT. 30, 2012
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	3,984,622		$	(618,447	)	$	3,366,175		$	3,824,224		$	(666,928	)	$	3,157,296
Incurred related to:
Current year		936,184			(473,019	)		463,165			1,855,934			(747,652	)		1,108,282
Prior years		(49,146	)		(6,496	)		(55,642	)		(107,393	)		15,298			(92,095	)

Total Incurred		887,038			(479,515	)		407,523			1,748,541			(732,354	)		1,016,187

Paid related to:
Current year		(227,520	)		112,524			(114,996	)		(306,290	)		148,961			(157,329	)
Prior years		(149,583	)		(91,153	)		(240,736	)		(762,096	)		173,764			(588,332	)

Total Paid		(377,103	)		21,371			(355,732	)		(1,068,386	)		322,725			(745,661	)

Foreign currency translation		14,885			(56	)		14,829			5,063			(90	)		4,973

Balance, end of period	$	4,509,442		$	(1,076,647	)	$	3,432,795		$	4,509,442		$	(1,076,647	)	$	3,432,795


			24

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIODS ENDED SEPT. 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	)
Quarter ended September 30, 2012		(17,439	)		(38,203	)		(55,642	)

Nine months ended September 30, 2012	$	(38,919	)	$	(53,176	)	$	(92,095	)

(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
	SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			SEPT. 30, 2011			DEC. 31, 2011
INSURANCE SEGMENT
Short tail[a]	$	(4,655	)	$	(2,618	)	$	(4,447	)	$	(132	)	$	(4,182	)	$	(18,738	)
Long tail[b]		(10,083	)		(8,249	)		(331	)		(916	)		(8,501	)		(17,467	)
Other[c]		(2,701	)		(2,766	)		(3,069	)		482			272			(34,574	)

TOTAL INSURANCE		(17,439	)		(13,633	)		(7,847	)		(566	)		(12,411	)		(70,779	)

REINSURANCE SEGMENT
Short tail[a]		(30,022	)		(7,095	)		(6,150	)		(37,014	)		(19,342	)		(89,764	)
Long tail[b]		(9,876	)		(3,287	)		(4,982	)		(4,917	)		(11,234	)		(15,541	)
Other[c]		1,695			4,463			2,078			418			(1,426	)		(3,894	)

TOTAL REINSURANCE		(38,203	)		(5,919	)		(9,054	)		(41,513	)		(32,002	)		(109,199	)

REPORTED TOTALS	$	(55,642	)	$	(19,552	)	$	(16,901	)	$	(42,079	)	$	(44,413	)	$	(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 SEPT. 30, 2012
Case reserves	$	24,670		$	401,257		$	730,852		$	1,156,779		$	514,053		$	305,309		$	8,159		$	827,521		$	1,984,300
Total reserves	$	51,689		$	1,714,901		$	868,496		$	2,635,086		$	837,986		$	1,010,527		$	25,843		$	1,874,356		$	4,509,442
Case reserves / Total reserves		47.7	%		23.4	%		84.2	%		43.9	%		61.3	%		30.2	%		31.6	%		44.1	%		44.0	%

IBNR / Total reserves		52.3	%		76.6	%		15.8	%		56.1	%		38.7	%		69.8	%		68.4	%		55.9	%		56.0	%
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	%


			27

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	NINE MONTHS ENDED SEPT. 30, 2012			YEARS ENDED DECEMBER 31,						INCEPTION TO SEPT. 30, 2012
	NINE MONTHS ENDED SEPT. 30, 2012			2011			2010			INCEPTION TO SEPT. 30, 2012
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders	$	170,579		$	(117,859	)	$	349,238		$	2,511,960
Operating income (loss) available (attributable) to common and participating common shareholders		130,751			(152,303	)		330,035			2,475,612
Average Shareholders’ equity [a]		2,281,020			2,414,659			2,617,718			1,993,737
Net income (loss) return on average equity		7.5	%		(4.9	)%		13.3	%		11.7	%	[c]
Operating return on average equity		5.7	%		(6.3	)%		12.6	%		11.6	%	[c]
Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	54.95		$	50.56		$	52.74		$	54.95
Dividends paid per share		0.93			1.20			1.00			9.26
Change in diluted book value per common share		8.7	%		(4.1	)%		18.2	%		17.1	%	[c]

Total return to common shareholders [b]		10.5	%		(1.9	)%		20.5	%		21.5	%	[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 SEPT. 30,						NINE MONTHS ENDED SEPT. 30,
		2012			2011			2012			2011
DILUTIVE SHARES OUTSTANDING:	Average market price per share	$	37.28		$	37.39		$	38.40		$	42.50
AS REPORTED	Basic weighted average common shares outstanding [a]		42,628			39,765			42,556			40,071
	Add: weighted avg. unvested restricted share units		2			9			3			11
	Weighted average exercise price per share		—			—			—			—
	Proceeds from unrecognized restricted share unit expense	$	26		$	176		$	26		$	176
	Less: restricted share units bought back via treasury method		(1	)		(9	)		(1	)		(11	)
	Add: weighted avg. dilutive warrants outstanding		—			2,896			—			2,915
	Weighted average exercise price per share		—		$	11.97			—		$	11.97
	Less: warrants bought back via treasury method		—			(2,896	)		—			(2,915	)
	Add: weighted avg. dilutive options outstanding		85			560			96			775
	Weighted average exercise price per share	$	24.68		$	14.29		$	24.02		$	14.99
	Proceeds from unrecognized option expense		—			—			—			—
	Less: options bought back via treasury method		(56	)		(560	)		(60	)		(775	)

	Weighted average dilutive shares outstanding [b]		42,658			39,765			42,594			40,071

Notes: [a]

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

[b]


			29

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS (LOSSES) PER SHARE INFORMATION - TWO CLASS METHOD


	QUARTERS ENDED SEPT. 30,						NINE MONTHS ENDED SEPT. 30,
	2012			2011			2012			2011
Net income (loss)	$	40,118		$	(20,018	)	$	195,143		$	(66,358	)
Less 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	)
Less amount allocated to participating common shareholders [a]		(494	)		(224	)		(2,828	)		(740	)

Net income (loss) available allocated to common shareholders	$	31,436		$	(28,430	)	$	167,751		$	(83,036	)

Denominator:
Weighted average shares—basic		42,628			39,765			42,556			40,071

Share Equivalents
Options		29			—			36			—
Restricted share units		1			—			2			—

Weighted average shares—diluted		42,658			39,765			42,594			40,071

Basic earnings (losses) per common share	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)

Diluted earnings (losses) per common share [b]	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)

[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 SEPT. 30,						NINE MONTHS ENDED SEPT. 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 investment 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) available (attributable) to common and participating common shareholders	$	26,137		$	(32,894	)	$	130,751		$	(112,813	)
Less amount allocated to participating common shareholders [a]		(404	)		(224	)		(2,168	)		(740	)

Operating income (loss) allocated to common shareholders	$	25,733		$	(33,118	)	$	128,583		$	(113,553	)

Weighted average common shares outstanding
Basic		42,628			39,765			42,556			40,071
Dilutive		42,658			39,765			42,594			40,071
Basic per common share data
Net income (loss) allocated to common shareholders	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)
Add (less) after-tax items:
Net foreign exchange losses (gains)		0.09			(0.11	)		(0.30	)		(0.20	)
Net realized and unrealized investment gains		(0.23	)		(0.02	)		(0.64	)		(0.63	)
Net impairment losses recognized in earnings (losses)		—			0.01			0.02			0.07

Operating income (loss) allocated to common shareholders	$	0.60		$	(0.83	)	$	3.02		$	(2.83	)

Diluted per common share data
Net income (loss) allocated to common shareholders	$	0.74		$	(0.71	)	$	3.94		$	(2.07	)
Add (less) after-tax items:
Net foreign exchange losses (gains)		0.09			(0.11	)		(0.30	)		(0.20	)
Net realized and unrealized investment gains		(0.23	)		(0.02	)		(0.64	)		(0.63	)
Net impairment losses recognized in earnings (losses)		—			0.01			0.02			0.07

Operating income (loss) allocated to common shareholders [b]	$	0.60		$	(0.83	)	$	3.02		$	(2.83	)

[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


		SEPT. 30,						DEC. 31,
		2012			2011			2011
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	38.50		$	34.15		$	38.25
AS-IF CONVERTED [a]	Basic common shares outstanding		42,631			39,770			42,367
	Add: unvested restricted shares and restricted share units		665			753			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	11.97			—
	Add: dilutive options outstanding		85			559			115
	Weighted average exercise price per share	$	24.80		$	14.29		$	23.14
	Book Value [b]	$	2,380,874		$	2,205,950		$	2,181,165
	Add: proceeds from converted warrants		—			34,665			—
	Add: proceeds from converted options		2,108			7,988			2,661

	Pro forma book value	$	2,382,982		$	2,248,603		$	2,183,826
	Dilutive shares outstanding		43,381			43,978			43,212
	Basic book value per common share	$	55.85		$	55.47		$	51.48
	Diluted book value per common share	$	54.93		$	51.13		$	50.54
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	38.50		$	34.15		$	38.25
TREASURY STOCK METHOD	Basic common shares outstanding		42,631			39,770			42,367
	Add: unvested restricted shares and restricted share units		665			753			730
	Add: dilutive warrants outstanding		—			2,896			—
	Weighted average exercise price per share		—		$	11.97			—
	Less: warrants bought back via treasury method		—			(1,015	)		—
	Add: dilutive options outstanding		85			559			115
	Weighted average exercise price per share	$	24.80		$	14.29		$	23.14
	Less: options bought back via treasury method		(55	)		(234	)		(70	)

	Dilutive shares outstanding		43,326			42,729			43,142
	Basic book value per common share	$	55.85		$	55.47		$	51.48
	Diluted book value per common share	$	54.95		$	51.63		$	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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