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

Attached files

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d580439d8k.htm
EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	d580439dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

SECOND QUARTER 2013

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. Largest Twenty-Five Corporate Holdings		22
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses		23
b. Prior Year Reserve Development by Segment		24
c. Prior Year Reserve Development by Line of Business		25
d. Analysis of Unpaid Losses and Loss Expenses		26
V. Shareholder Return Analysis
a. Shareholder Return Analysis		27
b. Weighted Average Dilutive Shares Outstanding		28
c. Earnings per Share - Two Class Method		29
d. Operating Income Reconciliation - Two Class Method		30
e. Book Value Per Share Analysis		31

VI. Regulation G		32

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, 2012.

Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation publicly to update or revise any forward looking statement, whether as a result of new information, future developments or otherwise.

LOGO

ENDURANCE SPECIALTY HOLDINGS LTD.

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

•

All financial information contained herein is unaudited, except the balance sheet and/or income statement data for the years ended December 31, 2012 and 2011 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						SIX MONTHS ENDED						Previous			Previous
		JUNE 30,						JUNE 30,						Quarter			Year to Date
		2013			2012			2013			2012			Change			Change

HIGHLIGHTS	Net income	$	61,019		$	72,483		$	161,318		$	155,025			(15.8	)%		4.1	%
	Net income available to common and participating common shareholders		52,831			64,295			144,942			138,649			(17.8	)%		4.5	%
	Net income allocated to common shareholders		51,699			63,210			142,197			136,272			(18.2	)%		4.3	%
	Operating income [a]		55,504			59,455			153,492			120,988			(6.6	)%		26.9	%
	Operating income available to common and participating common shareholders [a]		47,316			51,267			137,116			104,612			(7.7	)%		31.1	%
	Operating income allocated to common shareholders [a]		46,302			50,402			134,519			102,818			(8.1	)%		30.8	%
	Operating cash flow		19,219			45,390			42,712			70,295			(57.7	)%		(39.2	)%
	Net investment income		32,468			31,766			81,773			88,841			2.2	%		(8.0	)%
	Gross premiums written		572,710			604,076			1,750,072			1,665,725			(5.2	)%		5.1	%
	Net premiums written		464,621			484,413			1,373,536			1,327,469			(4.1	)%		3.5	%
	Net premiums earned		543,335			519,340			963,452			930,975			4.6	%		3.5	%
	Total assets		9,550,448			9,340,128			9,550,448			9,340,128			2.3	%		2.3	%
	Total shareholders’ equity		2,736,054			2,747,242			2,736,054			2,747,242			(0.4	)%		(0.4	)%

PER SHARE AND SHARES DATA	Basic and diluted earnings per common share
	Net income (as reported)	$	1.21		$	1.48		$	3.34		$	3.20			(18.2	)%		4.4	%
	Operating income (as reported) [a]	$	1.09		$	1.18		$	3.16		$	2.42			(7.6	)%		30.6	%
	Diluted earnings per common share
	Net income (as reported)	$	1.21		$	1.48		$	3.34		$	3.20			(18.2	)%		4.4	%
	Operating income (as reported) [a]	$	1.09		$	1.18		$	3.16		$	2.42			(7.6	)%		30.6	%
As Reported	Weighted average common shares outstanding		42,621			42,599			42,527			42,519			0.1	%		—
	Weighted average common shares outstanding and dilutive potential common shares [e]		42,622			42,635			42,527			42,562			—			(0.1	)%
	Common dividends paid per share	$	0.32		$	0.31		$	0.64		$	0.62			3.2	%		3.2	%

Book Value Per	Book value [b]	$	53.51		$	54.37		$	53.51		$	54.37			(1.6	)%		(1.6	)%
Common Share	Diluted book value (treasury stock method) [b]	$	51.95		$	53.48		$	51.95		$	53.48			(2.9	)%		(2.9	)%
FINANCIAL RATIOS	Return on average common equity (ROAE), net income [c]		2.3	%		2.8	%		6.3	%		6.2	%		(0.5	)		0.1
	ROAE, operating income [a] [c]		2.0	%		2.2	%		6.0	%		4.7	%		(0.2	)		1.3
	Return on beg. common equity (ROBE), net income [d]		2.3	%		2.9	%		6.4	%		6.4	%		(0.6	)		0.0
	ROBE, operating income [a] [d]		2.0	%		2.3	%		6.0	%		4.8	%		(0.3	)		1.2
	Annualized ROAE, net income [c]		9.1	%		11.3	%		12.6	%		12.3	%		(2.2	)		0.3
	Annualized ROAE, operating income [a] [c]		8.2	%		9.0	%		12.0	%		9.3	%		(0.8	)		2.7
	Annualized ROBE, net income [d]		9.0	%		11.4	%		12.7	%		12.7	%		(2.4	)		0.0
	Annualized ROBE, operating income [a] [d]		7.7	%		9.1	%		12.0	%		9.6	%		(1.4	)		2.4
	Annualized investment yield		2.0	%		2.0	%		2.6	%		2.9	%		0.0			(0.3	)

GAAP	Loss ratio		66.1	%		66.5	%		60.0	%		65.4	%		(0.4	)		(5.4	)
	Acquisition expense ratio		13.2	%		13.9	%		14.9	%		15.1	%		(0.7	)		(0.2	)
	General and administrative expense ratio		15.0	%		12.1	%		15.3	%		13.8	%		2.9			1.5

	Combined ratio		94.3	%		92.5	%		90.2	%		94.3	%		1.8			(4.1	)

[a]

Operating income 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 30 for a reconciliation to net income.

[b]

For detailed calculations, please refer to page 31.

[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]

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


		1

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - QUARTERLY


	QUARTERS ENDED
	JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			JUNE 30, 2011
UNDERWRITING REVENUES
Gross premiums written	$	572,710		$	1,177,362		$	262,046		$	621,255		$	604,076		$	502,924
Premiums ceded		(108,089	)		(268,447	)		(74,100	)		(107,175	)		(119,663	)		(61,166	)

Net premiums written	$	464,621		$	908,915		$	187,946		$	514,080		$	484,413		$	441,758
Change in unearned premiums		78,714			(488,798	)		343,107			37,792			34,927			44,820

Net premiums earned	$	543,335		$	420,117		$	531,053		$	551,872		$	519,340		$	486,578
Other underwriting income (loss)		888			749			(520	)		(1,347	)		19			1,088

Total underwriting revenues	$	544,223		$	420,866		$	530,533		$	550,525		$	519,359		$	487,666

UNDERWRITING EXPENSES
Net losses and loss expenses	$	359,058		$	218,970		$	504,808		$	407,523		$	345,897		$	361,970
Acquisition expenses		71,868			71,636			73,780			88,782			72,128			67,887
General and administrative expenses		81,359			66,478			54,324			52,715			62,609			65,886

Total underwriting expenses	$	512,285		$	357,084		$	632,912		$	549,020		$	480,634		$	495,743

Underwriting income (loss)	$	31,938		$	63,782		($	102,379	)	$	1,505		$	38,725		($	8,077	)

OTHER OPERATING REVENUE
Net investment income	$	32,468		$	49,305		$	38,603		$	45,882		$	31,766		$	39,842
Interest expense		(9,052	)		(9,038	)		(9,042	)		(9,041	)		(9,044	)		(9,057	)
Amortization of intangibles		(1,625	)		(2,101	)		(2,359	)		(2,434	)		(2,777	)		(3,026	)

Total other operating revenue	$	21,791		$	38,166		$	27,202		$	34,407		$	19,945		$	27,759

INCOME (LOSS) BEFORE OTHER ITEMS	$	53,729		$	101,948		($	75,177	)	$	35,912		$	58,670		$	19,682
OTHER
Net foreign exchange (losses) gains	($	3,368	)	($	2,927	)	$	1,212		($	3,774	)	$	336		($	3,348	)
Net realized and unrealized investment gains		10,372			6,235			41,881			10,097			14,958			21,532

Total other-than-temporary impairment losses		(579	)		(806	)		(90	)		(126	)		(148	)		(484	)
Portion of loss recognised in other comprehensive (loss) income		—			—			—			(5	)		(259	)		(448	)

Net impairment losses recognised in earnings (losses)		(579	)		(806	)		(90	)		(131	)		(407	)		(932	)

Income tax benefit (expense)		865			(4,151	)		(453	)		(1,986	)		(1,074	)		4,143

NET INCOME (LOSS)	$	61,019		$	100,299		($	32,627	)	$	40,118		$	72,483		$	41,077

Preferred dividends		(8,188	)		(8,188	)		(8,186	)		(8,188	)		(8,188	)		(3,875	)


NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	52,831		$	92,111		($	40,813	)	$	31,930		$	64,295		$	37,202


KEY RATIOS/PER SHARE DATA

Loss ratio		66.1	%		52.1	%		95.1	%		73.8	%		66.5	%		74.4	%
Acquisition expense ratio		13.2	%		17.1	%		13.9	%		16.1	%		13.9	%		14.0	%
General and administrative expense ratio		15.0	%		15.8	%		10.2	%		9.6	%		12.1	%		13.5	%

Combined ratio		94.3	%		85.0	%		119.2	%		99.5	%		92.5	%		101.9	%


Basic earnings (losses) per common share	$	1.21		$	2.14		($	0.96	)	$	0.74		$	1.48		$	0.92
Diluted earnings (losses) per common share [b]	$	1.21		$	2.13		($	0.96	)	$	0.74		$	1.48		$	0.87

ROAE, net income (loss) [a]		2.3	%		4.0	%		(1.8	)%		1.4	%		2.8	%		1.7	%

[a]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares of $430 million.

[b]

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


		2

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - YTD


	SIX MONTHS ENDED									YEAR ENDED
	JUNE 30, 2013			JUNE 30, 2012			JUNE 30, 2011			DEC. 31, 2012			DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written	$	1,750,072		$	1,665,725		$	1,503,282		$	2,549,026		$	2,467,114
Premiums ceded		(376,536	)		(338,256	)		(262,652	)		(519,531	)		(487,293	)

Net premiums written	$	1,373,536		$	1,327,469		$	1,240,630		$	2,029,495		$	1,979,821
Change in unearned premiums		(410,084	)		(396,494	)		(371,219	)		(15,595	)		(48,428	)

Net premiums earned	$	963,452		$	930,975		$	869,411		$	2,013,900		$	1,931,393
Other underwriting income (loss)		1,637			(316	)		19			(2,183	)		(3,547	)

Total underwriting revenues	$	965,089		$	930,659		$	869,430		$	2,011,717		$	1,927,846

UNDERWRITING EXPENSES
Losses and loss expenses	$	578,028		$	608,664		$	763,823		$	1,520,995		$	1,632,666
Acquisition expenses		143,504			140,617			133,505			303,179			282,911
General and administrative expenses		147,837			128,650			131,847			235,689			264,152

Total underwriting expenses	$	869,369		$	877,931		$	1,029,175		$	2,059,863		$	2,179,729

Underwriting income (loss)	$	95,720		$	52,728		($	159,745	)	($	48,146	)	($	251,883	)

OTHER OPERATING REVENUE
Net investment income	$	81,773		$	88,841		$	92,343		$	173,326		$	147,037
Interest expense		(18,090	)		(18,091	)		(18,111	)		(36,174	)		(36,254	)
Amortization of intangibles		(3,726	)		(5,554	)		(5,824	)		(10,347	)		(11,213	)

Total other operating revenue	$	59,957		$	65,196		$	68,408		$	126,805		$	99,570

INCOME (LOSS) BEFORE OTHER ITEMS	$	155,677		$	117,924		($	91,337	)	$	78,659		($	152,313	)
OTHER
Net foreign exchange (losses) gains	($	6,295	)	$	18,473		$	3,570		$	15,911		$	7,422
Net realized and unrealized investment gains		16,607			20,161			25,307			72,139			31,671

Total other-than-temporary impairment losses		(1,385	)		(148	)		(1,740	)		(364	)		(2,659	)
Portion of loss recognised in other comprehensive income		—			(478	)		(839	)		(483	)		(861	)

Net impairment losses recognised in earnings (losses)		(1,385	)		(626	)		(2,579	)		(847	)		(3,520	)

Income tax (expense) benefit		(3,286	)		(907	)		18,699			(3,346	)		23,006

NET INCOME (LOSS)	$	161,318		$	155,025		($	46,340	)	$	162,516		($	93,734	)

Preferred dividends		(16,376	)		(16,376	)		(7,750	)		(32,750	)		(24,125	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	144,942		$	138,649		($	54,090	)	$	129,766		($	117,859	)


KEY RATIOS/PER SHARE DATA

Loss ratio		60.0	%		65.4	%		87.9	%		75.5	%		84.6	%
Acquisition expense ratio		14.9	%		15.1	%		15.4	%		15.1	%		14.6	%
General and administrative expense ratio		15.3	%		13.8	%		15.1	%		11.7	%		13.7	%

Combined ratio		90.2	%		94.3	%		118.4	%		102.3	%		112.9	%


Basic earnings (losses) per common share	$	3.34		$	3.20		($	1.36	)	$	3.00		($	2.95	)
Diluted earnings (losses) per common share [b]	$	3.34		$	3.20		($	1.36	)	$	3.00		($	2.95	)

ROAE, net income (loss) [a]		6.3	%		6.2	%		(2.2	)%		5.8	%		(4.9	)%

[a]

[b]


		3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012
ASSETS
Cash and cash equivalents	$	942,062		$	857,187		$	1,124,019		$	895,776		$	842,180
Fixed maturity investments available for sale, at fair value		4,755,091			5,008,753			4,868,150			5,052,963			5,081,814
Short term investments available for sale, at fair value		15,382			1,400			42,230			62,713			40,913
Equity securities available for sale, at fair value		232,919			188,927			86,997			83,085			70,652
Other investments		569,393			554,715			517,546			478,911			478,860
Premiums receivable, net		1,271,818			1,193,578			601,952			1,136,130			1,289,478
Insurance and reinsurance balances receivable		111,405			106,222			105,663			112,926			115,904
Deferred acquisition costs		210,740			212,953			168,252			215,811			196,693
Prepaid reinsurance premiums		292,911			340,066			166,702			228,854			258,522
Reinsurance recoverable on unpaid losses		594,020			588,576			691,783			1,058,362			595,328
Reinsurance recoverable on paid losses		101,753			11,891			83,159			18,285			23,119
Accrued investment income		25,404			24,865			27,166			23,937			27,383
Goodwill and intangible assets		168,621			169,899			172,000			174,309			176,743
Deferred tax assets		52,240			41,505			43,501			36,092			36,376
Receivable on pending investment sales		78,243			35,608			9,144			76,907			30,776
Other assets		128,446			95,336			86,708			99,294			75,387

TOTAL ASSETS	$	9,550,448		$	9,431,481		$	8,794,972		$	9,754,355		$	9,340,128


LIABILITIES
Reserve for losses and loss expenses		4,145,581		$	4,026,536		$	4,240,876		$	4,509,442		$	3,984,622
Reserve for unearned premiums		1,500,253			1,625,883			965,244			1,370,491			1,437,482
Deposit liabilities		17,785			22,533			22,220			23,557			24,938
Reinsurance balances payable		262,582			203,048			110,843			256,674			306,122
Debt		527,401			527,421			527,339			527,341			527,299
Payable on pending investment purchases		181,060			111,969			81,469			102,874			186,652
Other liabilities		179,732			147,841			136,384			153,102			125,771

TOTAL LIABILITIES	$	6,814,394		$	6,665,231		$	6,084,375		$	6,943,481		$	6,592,886

SHAREHOLDERS’ EQUITY
Preferred shares
Series A, non-cumulative	$	8,000		$	8,000		$	8,000		$	8,000		$	8,000
Series B, non-cumulative		9,200			9,200			9,200			9,200			9,200
Common shares		44,331			43,169			43,116			43,294			43,296
Additional paid-in capital		556,255			520,257			527,915			533,284			531,145
Accumulated other comprehensive income		31,438			137,439			152,463			193,239			150,252
Retained earnings		2,086,830			2,048,185			1,969,903			2,023,857			2,005,349

TOTAL SHAREHOLDERS’ EQUITY	$	2,736,054		$	2,766,250		$	2,710,597		$	2,810,874		$	2,747,242

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,550,448		$	9,431,481		$	8,794,972		$	9,754,355		$	9,340,128


Book value per common share	$	53.51		$	55.10		$	53.75		$	55.85		$	54.37
Diluted book value per common share (treasury stock method)	$	51.95		$	54.10		$	52.88		$	54.95		$	53.48

RATIOS
Debt-to-capital		16.2	%		16.0	%		16.3	%		15.8	%		16.1	%


		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, 2013 is equal to 12.8% of Shareholders’ Equity as of June 30, 2013.


		Estimated Occurrence Net Loss as of July 1, 2013										July 1, 2012		July 1, 2011
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	$	143	$	225	$	284	$	350	$	420	$	468	$	564
Europe	Windstorm		85		171		249		331		441		344		445
California	Earthquake		43		185		237		284		397		412		442
Japan	Windstorm		37		123		188		230		239		247		268
Northwest U.S.	Earthquake		—		5		31		89		194		184		241
Japan	Earthquake		10		55		105		137		195		138		185
United States	Tornado/Hail		38		57		73		89		113		96		98
Australia	Earthquake		1		6		29		87		189		83		95
New Zealand	Earthquake		1		3		9		23		51		22		34
Australia	Windstorm		3		12		30		58		109		37		39
New Madrid	Earthquake		—		—		—		7		70		11		14

The net loss estimates by zone above represent estimated losses related to our property, catastrophe and other specialty 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, 2012.


		5

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE SIX MONTHS ENDED JUNE 30, 2013

Net Premiums Written = $1,373.5 million

LOGO

[a]

Other specialty includes the agriculture line in the Insurance segment and the other specialty line in the Reinsurance segment.


		6

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE QUARTERS ENDED
	JUNE 30, 2013									JUNE 30, 2012
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	276,941		$	295,769		$	572,710		$	292,659		$	311,417		$	604,076

Net premiums written	$	191,502		$	273,119		$	464,621		$	186,659		$	297,754		$	484,413

Net premiums earned	$	267,878		$	275,457		$	543,335		$	266,085		$	253,255		$	519,340
Other underwriting income (loss)		—			888			888			(1,300	)		1,319			19

Total underwriting revenues	$	267,878		$	276,345		$	544,223		$	264,785		$	254,574		$	519,359


UNDERWRITING EXPENSES
Net losses and loss expenses	$	215,844		$	143,214		$	359,058		$	208,504		$	137,393		$	345,897
Acquisition expenses		14,968			56,900			71,868			17,545			54,583			72,128
General and administrative expenses		43,524			37,835			81,359			32,819			29,790			62,609

Total expenses	$	274,336		$	237,949		$	512,285		$	258,868		$	221,766		$	480,634


UNDERWRITING (LOSS) INCOME	($	6,458	)	$	38,396		$	31,938		$	5,917		$	32,808		$	38,725


GAAP RATIOS
Loss ratio		80.6	%		52.0	%		66.1	%		78.4	%		54.2	%		66.5	%
Acquisition expense ratio		5.6	%		20.7	%		13.2	%		6.6	%		21.6	%		13.9	%
General and administrative expense ratio		16.2	%		13.7	%		15.0	%		12.3	%		11.8	%		12.1	%

Combined ratio AS REPORTED		102.4	%		86.4	%		94.3	%		97.3	%		87.6	%		92.5	%


Effect of favorable prior accident year reserve development		2.1	%		20.8	%		11.6	%		5.1	%		2.3	%		3.8	%


Combined ratio net of prior accident year reserve development		104.5	%		107.2	%		105.9	%		102.4	%		89.9	%		96.3	%


		7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			JUNE 30, 2011
UNDERWRITING REVENUES
Gross premiums written	$	276,941		$	652,943		$	177,116		$	324,808		$	292,659		$	225,750

Net premiums written	$	191,502		$	404,694		$	106,652		$	221,265		$	186,659		$	173,506

Net premiums earned	$	267,878		$	151,152		$	244,101		$	283,273		$	266,085		$	249,397
Other underwriting loss		—			—			—			(1,384	)		(1,300	)		—

Total underwriting revenues	$	267,878		$	151,152		$	244,101		$	281,889		$	264,785		$	249,397


UNDERWRITING EXPENSES
Net losses and loss expenses	$	215,844		$	99,464		$	244,985		$	288,750		$	208,504		$	191,396
Acquisition expenses		14,968			14,616			17,332			24,506			17,545			15,861
General and administrative expenses		43,524			35,627			28,445			29,409			32,819			36,227

Total expenses	$	274,336		$	149,707		$	290,762		$	342,665		$	258,868		$	243,484


UNDERWRITING (LOSS) INCOME	($	6,458	)	$	1,445		($	46,661	)	($	60,776	)	$	5,917		$	5,913


GAAP RATIOS
Loss ratio		80.6	%		65.7	%		100.3	%		101.9	%		78.4	%		76.7	%
Acquisition expense ratio		5.6	%		9.7	%		7.1	%		8.7	%		6.6	%		6.4	%
General and administrative expense ratio		16.2	%		23.6	%		11.7	%		10.4	%		12.3	%		14.5	%

Combined ratio AS REPORTED		102.4	%		99.0	%		119.1	%		121.0	%		97.3	%		97.6	%


Effect of favorable prior accident year reserve development		2.1	%		11.4	%		3.0	%		6.2	%		5.1	%		9.3	%

Combined ratio net of prior accident year reserve development		104.5	%		110.4	%		122.1	%		127.2	%		102.4	%		106.9	%


		8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			JUNE 30, 2011
UNDERWRITING REVENUES
Gross premiums written	$	295,769		$	524,419		$	84,930		$	296,447		$	311,417		$	277,174

Net premiums written	$	273,119		$	504,221		$	81,294		$	292,815		$	297,754		$	268,252

Net premiums earned	$	275,457		$	268,965		$	286,952		$	268,599		$	253,255		$	237,181
Other underwriting income (loss)		888			749			(520	)		37			1,319			1,088

Total underwriting revenues	$	276,345		$	269,714		$	286,432		$	268,636		$	254,574		$	238,269


UNDERWRITING EXPENSES
Net losses and loss expenses	$	143,214		$	119,506		$	259,823		$	118,773		$	137,393		$	170,574
Acquisition expenses		56,900			57,020			56,448			64,276			54,583			52,026
General and administrative expenses		37,835			30,851			25,879			23,306			29,790			29,659

Total expenses	$	237,949		$	207,377		$	342,150		$	206,355		$	221,766		$	252,259


UNDERWRITING INCOME (LOSS)	$	38,396		$	62,337		($	55,718	)	$	62,281		$	32,808		($	13,990	)


GAAP RATIOS
Loss ratio		52.0	%		44.4	%		90.5	%		44.2	%		54.2	%		71.9	%
Acquisition expense ratio		20.7	%		21.2	%		19.7	%		23.9	%		21.6	%		22.0	%
General and administrative expense ratio		13.7	%		11.5	%		9.0	%		8.7	%		11.8	%		12.5	%

Combined ratio AS REPORTED		86.4	%		77.1	%		119.2	%		76.8	%		87.6	%		106.4	%


Effect of favorable prior accident year reserve development		20.8	%		12.4	%		7.2	%		14.2	%		2.3	%		9.1	%


Combined ratio net of prior accident year reserve development		107.2	%		89.5	%		126.4	%		91.0	%		89.9	%		115.5	%


		9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2013		MAR. 31, 2013		DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		JUNE 30, 2011
INSURANCE SEGMENT
Agriculture	$	131,633	$	564,474	$	64,798	$	171,826	$	133,439	$	57,125
Casualty and other specialty		87,614		56,467		59,942		90,873		90,019		83,540
Professional lines		38,296		20,964		39,242		43,209		51,019		49,181
Property		19,398		11,038		13,134		18,900		18,182		35,904

TOTAL INSURANCE	$	276,941	$	652,943	$	177,116	$	324,808	$	292,659	$	225,750


REINSURANCE SEGMENT
Catastrophe	$	155,431	$	147,866	$	24,112	$	38,871	$	172,222	$	146,249
Property		48,384		148,411		31,065		157,742		54,026		52,185
Casualty		67,209		151,702		24,961		77,781		58,897		45,619
Other specialty		24,745		76,440		4,792		22,053		26,272		33,121

TOTAL REINSURANCE	$	295,769	$	524,419	$	84,930	$	296,447	$	311,417	$	277,174



REPORTED TOTALS	$	572,710	$	1,177,362	$	262,046	$	621,255	$	604,076	$	502,924


		10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2013		MAR. 31, 2013		DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		JUNE 30, 2011
INSURANCE SEGMENT
Agriculture	$	84,537	$	341,130	$	25,413	$	106,180	$	67,249	$	46,049
Casualty and other specialty		63,373		43,261		43,683		66,686		64,588		63,837
Professional lines		27,788		14,203		30,044		34,804		42,832		37,624
Property		15,804		6,100		7,512		13,595		11,990		25,996

TOTAL INSURANCE	$	191,502	$	404,694	$	106,652	$	221,265	$	186,659	$	173,506


REINSURANCE SEGMENT
Catastrophe	$	138,041	$	131,398	$	22,073	$	36,484	$	158,865	$	139,337
Property		44,516		148,411		31,065		157,742		54,033		52,185
Casualty		67,211		150,273		24,960		77,781		58,895		45,617
Other specialty		23,351		74,139		3,196		20,808		25,961		31,113

TOTAL REINSURANCE	$	273,119	$	504,221	$	81,294	$	292,815	$	297,754	$	268,252



REPORTED TOTALS	$	464,621	$	908,915	$	187,946	$	514,080	$	484,413	$	441,758


		11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	JUNE 30, 2013		MAR. 31, 2013		DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		JUNE 30, 2011
INSURANCE SEGMENT
Agriculture	$	172,492	$	56,431	$	142,851	$	183,277	$	162,703	$	142,952
Casualty and other specialty		55,872		54,123		55,425		53,060		53,757		49,091
Professional lines		27,757		30,924		35,530		35,577		36,719		37,788
Property		11,757		9,674		10,295		11,359		12,906		19,566

TOTAL INSURANCE	$	267,878	$	151,152	$	244,101	$	283,273	$	266,085	$	249,397


REINSURANCE SEGMENT
Catastrophe	$	86,560	$	84,795	$	95,050	$	85,983	$	81,334	$	81,747
Property		90,934		86,555		92,757		74,818		70,546		58,643
Casualty		70,104		71,070		73,911		79,135		74,049		70,441
Other specialty		27,859		26,545		25,234		28,663		27,326		26,350

TOTAL REINSURANCE	$	275,457	$	268,965	$	286,952	$	268,599	$	253,255	$	237,181



REPORTED TOTALS	$	543,335	$	420,117	$	531,053	$	551,872	$	519,340	$	486,578


		12

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE SIX MONTHS ENDED
	JUNE 30, 2013									JUNE 30, 2012
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	929,884		$	820,188		$	1,750,072		$	928,006		$	737,719		$	1,665,725

Net premiums written	$	596,196		$	777,340		$	1,373,536		$	614,440		$	713,029		$	1,327,469

Net premiums earned	$	419,030		$	544,422		$	963,452		$	427,715		$	503,260		$	930,975
Other underwriting income (loss)		—			1,637			1,637			(1,300	)		984			(316	)

Total underwriting revenues	$	419,030		$	546,059		$	965,089		$	426,415		$	504,244		$	930,659


UNDERWRITING EXPENSES
Losses and loss expenses	$	315,308		$	262,720		$	578,028		$	322,206		$	286,458		$	608,664
Acquisition expenses		29,584			113,920			143,504			33,759			106,858			140,617
General and administrative expenses		79,151			68,686			147,837			67,254			61,396			128,650

Total expenses	$	424,043		$	445,326		$	869,369		$	423,219		$	454,712		$	877,931


UNDERWRITING (LOSS) INCOME	($	5,013	)	$	100,733		$	95,720		$	3,196		$	49,532		$	52,728


GAAP RATIOS
Loss ratio		75.2	%		48.3	%		60.0	%		75.3	%		57.0	%		65.4	%
Acquisition expense ratio		7.1	%		20.9	%		14.9	%		7.9	%		21.2	%		15.1	%
General and administrative expense ratio		18.9	%		12.6	%		15.3	%		15.7	%		12.2	%		13.8	%

Combined ratio AS REPORTED		101.2	%		81.8	%		90.2	%		98.9	%		90.4	%		94.3	%


Effect of favorable prior accident year reserve development		5.5	%		16.6	%		11.8	%		5.0	%		3.0	%		3.9	%


Combined ratio net of prior accident year reserve development		106.7	%		98.4	%		102.0	%		103.9	%		93.4	%		98.2	%


		13

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE SIX MONTHS ENDED									FOR THE YEARS ENDED
	JUNE 30, 2013			JUNE 30, 2012			JUNE 30, 2011			DEC. 31, 2012			DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written	$	929,884		$	928,006		$	851,581		$	1,429,930		$	1,469,798

Net premiums written	$	596,196		$	614,440		$	605,802		$	942,357		$	1,005,490

Net premiums earned	$	419,030		$	427,715		$	411,889		$	955,089		$	981,592
Other underwriting loss		—			(1,300	)		—			(2,684	)		(3,368	)

Total underwriting revenues	$	419,030		$	426,415		$	411,889		$	952,405		$	978,224


UNDERWRITING EXPENSES
Losses and loss expenses	$	315,308		$	322,206		$	290,232		$	855,941		$	765,119
Acquisition expenses		29,584			33,759			32,169			75,597			71,295
General and administrative expenses		79,151			67,254			73,033			125,108			146,115

Total expenses	$	424,043		$	423,219		$	395,434		$	1,056,646		$	982,529


UNDERWRITING (LOSS) INCOME	($	5,013	)	$	3,196		$	16,455		($	104,241	)	($	4,305	)


GAAP RATIOS
Loss ratio		75.2	%		75.3	%		70.5	%		89.6	%		77.9	%
Acquisition expense ratio		7.1	%		7.9	%		7.8	%		7.9	%		7.3	%
General and administrative expense ratio		18.9	%		15.7	%		17.7	%		13.1	%		14.9	%

Combined ratio AS REPORTED		101.2	%		98.9	%		96.0	%		110.6	%		100.1	%


Effect of favorable prior accident year reserve development		5.5	%		5.0	%		14.0	%		4.8	%		7.2	%

Combined ratio net of prior accident year reserve development		106.7	%		103.9	%		110.0	%		115.4	%		107.3	%


		14

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE SIX MONTHS ENDED									FOR THE YEARS ENDED
	JUNE 30, 2013			JUNE 30, 2012			JUNE 30, 2011			DEC. 31, 2012			DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written	$	820,188		$	737,719		$	651,701		$	1,119,096		$	997,316

Net premiums written	$	777,340		$	713,029		$	634,828		$	1,087,138		$	974,331

Net premiums earned	$	544,422		$	503,260		$	457,522		$	1,058,811		$	949,801
Other underwriting income (loss)		1,637			984			19			501			(179	)

Total underwriting revenues	$	546,059		$	504,244		$	457,541		$	1,059,312		$	949,622


UNDERWRITING EXPENSES
Losses and loss expenses	$	262,720		$	286,458		$	473,591		$	665,054		$	867,547
Acquisition expenses		113,920			106,858			101,336			227,582			211,616
General and administrative expenses		68,686			61,396			58,814			110,581			118,037

Total expenses	$	445,326		$	454,712		$	633,741		$	1,003,217		$	1,197,200


UNDERWRITING INCOME (LOSS)	$	100,733		$	49,532		($	176,200	)	$	56,095		($	247,578	)


GAAP RATIOS
Loss ratio		48.3	%		57.0	%		103.5	%		62.8	%		91.3	%
Acquisition expense ratio		20.9	%		21.2	%		22.1	%		21.5	%		22.3	%
General and administrative expense ratio		12.6	%		12.2	%		12.9	%		10.4	%		12.4	%

Combined ratio AS REPORTED		81.8	%		90.4	%		138.5	%		94.7	%		126.0	%


Effect of favorable prior accident year reserve development		16.6	%		3.0	%		7.8	%		7.0	%		11.5	%

Combined ratio net of prior accident year reserve development		98.4	%		93.4	%		146.3	%		101.7	%		137.5	%


		15

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED						FOR THE YEARS ENDED
	JUNE 30, 2013		JUNE 30, 2012		JUNE 30, 2011		DEC. 31, 2012		DEC. 31, 2011
INSURANCE SEGMENT
Agriculture	$	696,107	$	667,106	$	565,830	$	903,730	$	901,746
Casualty and other specialty		144,081		145,510		140,507		296,325		289,421
Professional lines		59,260		87,364		84,650		169,815		169,319
Property		30,436		28,026		60,594		60,060		109,312

TOTAL INSURANCE	$	929,884	$	928,006	$	851,581	$	1,429,930	$	1,469,798


REINSURANCE SEGMENT
Catastrophe	$	303,297	$	315,404	$	284,496	$	378,387	$	346,021
Property		196,795		160,772		122,272		349,579		266,562
Casualty		218,911		180,571		161,971		283,313		277,495
Other specialty		101,185		80,972		82,962		107,817		107,238

TOTAL REINSURANCE	$	820,188	$	737,719	$	651,701	$	1,119,096	$	997,316



REPORTED TOTALS	$	1,750,072	$	1,665,725	$	1,503,282	$	2,549,026	$	2,467,114


		16

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED						FOR THE YEARS ENDED
	JUNE 30, 2013		JUNE 30, 2012		JUNE 30, 2011		DEC. 31, 2012		DEC. 31, 2011
INSURANCE SEGMENT
Agriculture	$	425,667	$	422,169	$	392,521	$	553,762	$	586,659
Casualty and other specialty		106,634		106,411		105,952		216,780		215,939
Professional lines		41,991		73,037		68,748		137,885		137,962
Property		21,904		12,823		38,581		33,930		64,930

TOTAL INSURANCE	$	596,196	$	614,440	$	605,802	$	942,357	$	1,005,490


REINSURANCE SEGMENT
Catastrophe	$	269,439	$	292,583	$	270,460	$	351,140	$	329,081
Property		192,927		160,779		122,272		349,586		266,562
Casualty		217,484		179,332		161,171		282,073		276,697
Other specialty		97,490		80,335		80,925		104,339		101,991

TOTAL REINSURANCE	$	777,340	$	713,029	$	634,828	$	1,087,138	$	974,331



REPORTED TOTALS	$	1,373,536	$	1,327,469	$	1,240,630	$	2,029,495	$	1,979,821


		17

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE SIX MONTHS ENDED						FOR THE YEARS ENDED
	JUNE 30, 2013		JUNE 30, 2012		JUNE 30, 2011		DEC. 31, 2012		DEC. 31, 2011
INSURANCE SEGMENT
Agriculture	$	228,923	$	222,672	$	202,760	$	548,800	$	564,658
Casualty and other specialty		109,995		106,991		99,007		215,476		201,518
Professional lines		58,681		70,603		73,963		141,710		145,886
Property		21,431		27,449		36,159		49,103		69,530

TOTAL INSURANCE	$	419,030	$	427,715	$	411,889	$	955,089	$	981,592


REINSURANCE SEGMENT
Catastrophe	$	171,355	$	163,671	$	158,082	$	344,704	$	326,674
Property		177,489		138,924		111,095		306,499		241,525
Casualty		141,174		147,301		135,394		300,347		278,114
Other specialty		54,404		53,364		52,951		107,261		103,488

TOTAL REINSURANCE	$	544,422	$	503,260	$	457,522	$	1,058,811	$	949,801



REPORTED TOTALS	$	963,452	$	930,975	$	869,411	$	2,013,900	$	1,931,393


		18

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE SIX MONTHS ENDED JUNE 30, 2013

Average common equity [a]	$	2,293,326

Net premiums earned	$	963,452
Combined ratio		90.2	%
Operating margin		9.8	%
Premium leverage		0.42x

Implied ROAE from underwriting activity		4.1	%


Average cash and invested assets at amortized cost	$	6,403,144
Investment leverage		2.79x
Year to date investment income yield, pretax		1.3	%

Implied ROAE from investment activity		3.6	%


Financing Costs [b]		(1.5	)%


Implied Pre-tax Operating ROAE, for period [c]		6.2	%


Implied Pre-tax Operating ROAE, annualized [c]		12.4	%

[a]

[b]

Financing costs include interest expense and preferred dividends.

[c]

Implied pre-tax Operating ROAE considers only the main components of the Company’s return on equity – underwriting and investment returns. As such, it differs from operating ROE primarily due to the exclusion of tax on underwriting, financing and investment activites and the tax-effected impact of amortization expense.


		19

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE


	FOR THE QUARTERS ENDED								YEARS ENDED DECEMBER 31,
	JUNE 30, 2013		MAR. 31, 2013		DEC. 31, 2012		SEPT. 30, 2012		2012		2011

Average common equity [a]	$	2,321,152	$	2,308,424	$	2,330,736	$	2,349,058	$	2,230,881	$	2,451,346

Net premiums earned	$	543,335	$	420,117	$	531,053	$	551,872	$	2,013,900	$	1,931,393

Premium leverage		0.23x		0.18x		0.23x		0.23x		0.90x		0.79x


Annualized premium leverage		0.92x		0.72x		0.92x		0.92x		0.90x		0.79x


Average cash and invested assets at amortized cost	$	6,389,569	$	6,411,315	$	6,394,427	$	6,288,639	$	6,303,881	$	6,130,518


Investment leverage		2.75x		2.78x		2.74x		2.68x		2.83x		2.50x

[a]


		20

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012


			June 30, 2013					December 31, 2012
Type of Investment			Fair Value		Percentage			Fair Value		Percentage
Cash and equivalents [a]			$	839,245		13.1	%	$	1,051,694		16.0	%
Short-term investments				15,382		0.2	%		42,230		0.6	%
Fixed maturity investments
U.S. government and government agencies notes				671,597		10.5	%		737,535		11.2	%
Government and agency guaranteed corporates				50,435		0.8	%		64,464		1.0	%
U.S. government agency residential mortgage-backed securities				1,133,451		17.7	%		1,197,788		18.2	%
U.S. government agency commercial mortgage-backed securities				32,043		0.5	%		25,684		0.4	%
Municipals				27,902		0.4	%		38,894		0.6	%
Foreign government				161,373		2.5	%		109,337		1.7	%
Corporate securities				1,273,322		19.9	%		1,373,671		20.9	%
Non-agency residential mortgage-backed securities				70,026		1.1	%		82,791		1.3	%
Non-agency commercial mortgage-backed securities				834,138		13.0	%		755,695		11.6	%
Asset-backed securities [b]				500,804		7.8	%		482,291		7.3	%
Equity securities
Equity investments				148,591		2.3	%		66,309		0.9	%
Emerging market debt fund				50,139		0.8	%		10,576		0.2	%
Preferred equity investments				9,068		0.1	%		10,112		0.2	%
Short-term fixed income fund				25,121		0.4	%		—		—
Other investments [c]				569,393		8.9	%		517,546		7.9	%

Total			$	6,412,030		100.0	%	$	6,566,617		100.0	%


Ratings [d]			Fair Value		Percentage			Fair Value		Percentage
U.S. government and government agencies notes			$	671,597		14.1	%	$	737,535		15.0	%
AAA/Aaa				1,017,720		21.3	%		993,277		20.2	%
AA/Aa				1,746,510		36.7	%		1,821,250		37.1	%
A/A				931,561		19.5	%		993,307		20.2	%
BBB				292,820		6.1	%		219,017		4.5	%
Below BBB				105,384		2.2	%		143,198		2.9	%
Not Rated				4,881		0.1	%		2,796		0.1	%

Total			$	4,770,473		100.0	%	$	4,910,380		100.0	%


Performance					June 30, 2013					December 31, 2012
Yield [e]						2.0	%				2.8	%
Duration in years [f]						3.05					2.49

Investment Income	Quarter Ended June 30, 2013		Quarter Ended Mar. 31, 2013		Quarter Ended Dec. 31, 2012			Quarter Ended Sept. 30, 2012		Quarter Ended June 30, 2012
Cash and available for sale securities	$	25,688	$	26,246	$	27,645		$	30,832	$	31,840
Other investments		6,780		23,059		10,958			15,050		(74	)

Total net investment income	$	32,468	$	49,305	$	38,603		$	45,882	$	31,766


Note:	[a]	Cash and equivalents, including operating cash, are shown net of investments pending settlement.
	[b]	Includes CLOs of $87.9 million (2012: $105.5 million) and CDOs of $11.4 million (2012: $8.5 million).
	[c]	Other investments includes investments in alternative and specialty funds.
	[d]	Excludes cash and equivalents, equity securities and other investments.
	[e]	Earned yield for the quarter ending 6/30/13 and twelve months ending 12/31/12 excludes realized and unrealized gains and losses on fixed maturity investments.
	[f]	Duration excludes other investments and operating cash.


		21

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF JUNE 30, 2013


	June 30, 2013
ISSUER (1) (2) (3)	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Credit Quality (4)

MORGAN STANLEY	$	51,923	$	51,424	($	499	)	A-
CITIGROUP INC		44,021		43,507		(514	)	A-
JPMORGAN CHASE & CO		41,028		40,756		(272	)	A
GOLDMAN SACHS GROUP INC/THE		39,616		39,164		(452	)	A-
GENERAL ELECTRIC CO		36,627		36,128		(499	)	AA+
BANK OF AMERICA CORP		36,002		35,286		(716	)	A-
PHILIP MORRIS INTERNATIONAL INC		22,733		23,004		271		A
AMERICAN EXPRESS COMPANY		22,517		22,280		(237	)	A-
COMCAST CORPORATION		21,121		21,541		420		A-
AT&T INC		20,920		20,997		77		A-
CAPITAL ONE FINANCIAL CORPORATION		20,936		20,379		(557	)	BBB
FORD MOTOR COMPANY		19,061		18,744		(317	)	BB+
HSBC HOLDINGS PLC		18,530		18,542		12		A+
VERIZON COMMUNICATIONS INC		17,532		18,243		711		A-
BB& T CORP		17,447		17,108		(339	)	A-
METLIFE INC		16,601		16,487		(114	)	A-
US BANCORP		15,943		16,319		376		A+
PRINCIPAL LIFE GLOBAL FUNDING II		15,624		15,653		29		A+
NATIONAL GRID PLC		13,888		15,252		1,364		A-
NEW YORK LIFE INSURANCE COMPANY		14,612		14,815		203		AA+
ORACLE CORPORATION		14,658		14,468		(190	)	A+
INTERNATIONAL BUSINESS MACHINES CORP		14,246		14,333		87		AA-
WELLS FARGO & COMPANY		13,717		13,753		36		A+
CREDIT SUISSE GROUP AG		14,088		13,626		(462	)	A+
PEPSICO INC		12,825		13,481		656		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)	Includes preferred equity securities.

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


		22

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES


	THREE MONTHS ENDED JUNE 30, 2013									SIX MONTHS ENDED JUNE 30, 2013
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	4,026,536		($	588,576	)	$	3,437,960		$	4,240,876		($	691,783	)	$	3,549,093

Incurred related to:
Current year		639,178			(217,315	)		421,863			1,016,940			(325,439	)		691,501
Prior years		(66,759	)		3,954			(62,805	)		(94,780	)		(18,693	)		(113,473	)

Total Incurred		572,419			(213,361	)		359,058			922,160			(344,132	)		578,028


Paid related to:
Current year		(131,480	)		583			(130,897	)		(134,872	)		2,423			(132,449	)
Prior years		(312,364	)		207,219			(105,145	)		(856,014	)		439,201			(416,813	)

Total Paid		(443,844	)		207,802			(236,042	)		(990,886	)		441,624			(549,262	)


Foreign currency translation		(9,530	)		115			(9,415	)		(26,569	)		271			(26,298	)

Balance, end of period	$	4,145,581		($	594,020	)	$	3,551,561		$	4,145,581		($	594,020	)	$	3,551,561


		23

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIOD ENDED JUNE 30, 2013


	Insurance			Reinsurance			Total Company

Incurred related to prior years

Quarter ended March 31, 2013	($	17,295	)	($	33,373	)	($	50,668	)
Quarter ended June 30, 2013		(5,625	)		(57,180	)		(62,805	)

Six months ended June 30, 2013	($	22,920	)	($	90,553	)	($	113,473	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 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	)
Quarter ended December 31, 2012		(7,267	)		(20,795	)		(28,062	)

Year ended December 31, 2012	($	46,186	)	($	73,971	)	($	120,157	)

(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	)


		24

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY LINE OF BUSINESS

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT


	FOR THE QUARTERS ENDED															FOR THE YEAR ENDED
	JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			DEC. 31, 2012
INSURANCE SEGMENT
Agriculture	($	233	)	($	4,733	)	($	768	)	($	2,701	)	($	2,766	)	($	9,304	)
Casualty and other specialty		(2,701	)		(4,577	)		(6,506	)		(4,146	)		(7,902	)		(17,702	)
Professional lines		(603	)		302			1,424			(5,937	)		(347	)		(6,043	)
Property		(2,088	)		(8,287	)		(1,417	)		(4,655	)		(2,618	)		(13,137	)

TOTAL INSURANCE		(5,625	)		(17,295	)		(7,267	)		(17,439	)		(13,633	)		(46,186	)


REINSURANCE SEGMENT
Catastrophe		(26,439	)		(11,911	)		(7,134	)		(5,745	)		(8,485	)	($	30,414	)
Property		(24,783	)		(1,205	)		(6,707	)		(10,527	)		5,474			270
Casualty		(805	)		(14,156	)		(3,302	)		(9,350	)		(1,253	)		(18,965	)
Other specialty		(5,153	)		(6,101	)		(3,652	)		(12,581	)		(1,655	)		(24,862	)

TOTAL REINSURANCE		(57,180	)		(33,373	)		(20,795	)		(38,203	)		(5,919	)		(73,971	)


REPORTED TOTALS	($	62,805	)	($	50,668	)	($	28,062	)	($	55,642	)	($	19,552	)	($	120,157	)


		25

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES


	Insurance															Reinsurance															Reported Totals
	Agriculture			Casualty and other specialty			Professional lines			Property			Subtotal			Catastrophe			Property			Casualty			Other specialty			Subtotal			Total
AT JUNE 30, 2013
Case reserves	$	271,424		$	331,791		$	127,378		$	25,667		$	756,260		$	140,909		$	221,468		$	299,194		$	96,262		$	757,833		$	1,514,093
Total reserves	$	415,026		$	1,274,263		$	513,875		$	39,730		$	2,242,894		$	294,752		$	375,388		$	985,751		$	246,796		$	1,902,687		$	4,145,581

Case reserves / Total reserves		65.4	%		26.0	%		24.8	%		64.6	%		33.7	%		47.8	%		59.0	%		30.4	%		39.0	%		39.8	%		36.5	%


IBNR / Total reserves		34.6	%		74.0	%		75.2	%		35.4	%		66.3	%		52.2	%		41.0	%		69.6	%		61.0	%		60.2	%		63.5	%


AT MAR. 31, 2013
Case reserves	$	171,382		$	327,726		$	127,426		$	27,993		$	654,527		$	173,606		$	249,203		$	290,399		$	101,862		$	815,070		$	1,469,597
Total reserves	$	307,140		$	1,252,914		$	517,849		$	42,962		$	2,120,865		$	288,537		$	394,088		$	975,821		$	247,225		$	1,905,671		$	4,026,536

Case reserves / Total reserves		55.8	%		26.2	%		24.6	%		65.2	%		30.9	%		60.2	%		63.2	%		29.8	%		41.2	%		42.8	%		36.5	%


IBNR / Total reserves		44.2	%		73.8	%		75.4	%		34.8	%		69.1	%		39.8	%		36.8	%		70.2	%		58.8	%		57.2	%		63.5	%


AT DEC. 31, 2012
Case reserves	$	392,457		$	308,611		$	110,441		$	54,196		$	865,705		$	201,105		$	281,681		$	296,494		$	119,261		$	898,541		$	1,764,246
Total reserves	$	464,043		$	1,252,900		$	497,260		$	72,849		$	2,287,052		$	298,328		$	415,460		$	976,476		$	263,560		$	1,953,824		$	4,240,876

Case reserves / Total reserves		84.6	%		24.6	%		22.2	%		74.4	%		37.9	%		67.4	%		67.8	%		30.4	%		45.3	%		46.0	%		41.6	%


IBNR / Total reserves		15.4	%		75.4	%		77.8	%		25.6	%		62.1	%		32.6	%		32.2	%		69.6	%		54.7	%		54.0	%		58.4	%


AT SEPT. 30, 2012
Case reserves	$	730,853		$	314,101		$	87,156		$	24,669		$	1,156,779		$	177,506		$	237,824		$	288,979		$	123,213		$	827,522		$	1,984,301
Total reserves	$	868,497		$	1,238,957		$	477,427		$	50,205		$	2,635,086		$	277,304		$	354,069		$	968,913		$	274,070		$	1,874,356		$	4,509,442

Case reserves / Total reserves		84.2	%		25.4	%		18.3	%		49.1	%		43.9	%		64.0	%		67.2	%		29.8	%		45.0	%		44.1	%		44.0	%


IBNR / Total reserves		15.8	%		74.6	%		81.7	%		50.9	%		56.1	%		36.0	%		32.8	%		70.2	%		55.0	%		55.9	%		56.0	%


AT JUNE 30, 2012
Case reserves	$	242,751		$	307,116		$	84,276		$	30,242		$	664,385		$	185,675		$	227,867		$	289,296		$	132,809		$	835,647		$	1,500,032
Total reserves	$	392,441		$	1,199,318		$	465,439		$	56,625		$	2,113,823		$	286,360		$	350,377		$	963,890		$	270,172		$	1,870,799		$	3,984,622

Case reserves / Total reserves		61.9	%		25.6	%		18.1	%		53.4	%		31.4	%		64.8	%		65.0	%		30.0	%		49.2	%		44.7	%		37.6	%


IBNR / Total reserves		38.1	%		74.4	%		81.9	%		46.6	%		68.6	%		35.2	%		35.0	%		70.0	%		50.8	%		55.3	%		62.4	%


		26

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	SIX MONTHS ENDED			YEARS ENDED DECEMBER 31,						INCEPTION TO
	JUNE 30, 2013			2012			2011			JUNE 30, 2013
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders	$	144,942		$	129,766		($	117,859	)	$	2,616,089

Operating income (loss) available (attributable) to common and participating common shareholders		137,116			54,295			(152,303	)		2,527,811

Average Shareholders’ equity [a]		2,293,326			2,230,881			2,414,659			2,008,648

Net income (loss) return on average equity		6.3	%		5.8	%		(4.9	)%		11.3	% [c]
Operating return on average equity		6.0	%		2.4	%		(6.3	)%		10.9	% [c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	51.95		$	52.88		$	50.56		$	51.95

Dividends paid per share		0.64			1.24			1.20			10.21


Change in diluted book value per common share		(1.8	)%		4.6	%		(4.1	)%		14.6	% [c]


Total return to common shareholders [b]		(0.5	)%		7.0	%		(1.9	)%		19.2	% [c]

[a]

Excludes the $430 million (2010 - $200 million) liquidation value of the preferred shares.

[b]

Total return to common shareholders is calculated as the change in diluted book value per common share plus dividends paid divided by beginning diluted book value per share.

[c]

Represents average non-compounded annual returns since December 31, 2001.


		27

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION - TWO CLASS METHOD


		QUARTERS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
		2013			2012			2013			2012

DILUTIVE SHARES OUTSTANDING: AS REPORTED	Average market price per share	$	49.35		$	39.22		$	46.72		$	38.96
	Basic weighted average common shares outstanding [a]		42,621			42,599			42,527			42,519
	Add: weighted avg. unvested restricted share units		1			1			1			4
	Weighted average exercise price per share		—			—			—			—
	Proceeds from unrecognized restricted share unit expense	$	9		$	27		$	9		$	27
	Less: restricted share units bought back via treasury method		—			(1	)		(1	)		(1	)
	Add: weighted avg. dilutive options outstanding		305			95			169			102
	Weighted average exercise price per share	$	47.49		$	24.27		$	45.63		$	23.81
	Proceeds from unrecognized option expense	$	7,814			—		$	7,814			—
	Less: options bought back via treasury method		(305	)		(59	)		(169	)		(62	)

	Weighted average dilutive shares outstanding [b]		42,622			42,635			42,527			42,562


Notes:	[a]	Excludes unvested restricted shares outstanding which are considered participating securities under the two-class method for calculation of EPS.
	[b]	Options that are anti-dilutive are not included in the calculation of diluted shares outstanding. Options are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected in the calculations above as additional treasury method repurchases.


		28

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD


	QUARTERS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2013			2012			2013			2012

Net income	$	61,019		$	72,483		$	161,318		$	155,025
Less preferred dividends		(8,188	)		(8,188	)		(16,376	)		(16,376	)

Net income available to common and participating common shareholders	$	52,831		$	64,295		$	144,942		$	138,649
Less amount allocated to participating common shareholders [a]		(1,132	)		(1,085	)		(2,745	)		(2,377	)

Net income available allocated to common shareholders	$	51,699		$	63,210		$	142,197		$	136,272


Denominator:
Weighted average shares - basic		42,621			42,599			42,527			42,519


Share Equivalents
Options		—			36			—			40
Restricted share units		1			—			—			3

Weighted average shares - diluted		42,622			42,635			42,527			42,562


Basic earnings per common share	$	1.21		$	1.48		$	3.34		$	3.20


Diluted earnings per common share [b]	$	1.21		$	1.48		$	3.34		$	3.20

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

[b]

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


		29

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING INCOME RECONCILIATION

EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD


	Two-Class Method						Two-Class Method
	QUARTERS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2013			2012			2013			2012
Net income	$	61,019		$	72,483		$	161,318		$	155,025
Add (less) after-tax items:
Net foreign exchange losses (gains)		3,341			(365	)		6,250			(16,625	)
Net realized and unrealized investment gains		(9,435	)		(13,050	)		(15,427	)		(18,018	)
Net impairment losses recognized in earnings		579			387			1,351			606

Operating income before preferred dividends	$	55,504		$	59,455		$	153,492		$	120,988
Preferred dividends		(8,188	)		(8,188	)		(16,376	)		(16,376	)

Operating income available to common and participating common shareholders	$	47,316		$	51,267		$	137,116		$	104,612
Less amount allocated to participating common shareholders [a]		(1,014	)		(865	)		(2,597	)		(1,794	)

Operating income allocated to common shareholders	$	46,302		$	50,402		$	134,519		$	102,818


Weighted average common shares outstanding
Basic		42,621			42,599			42,527			42,519
Dilutive		42,622			42,635			42,527			42,562

Basic per common share data
Net income allocated to common shareholders	$	1.21		$	1.48		$	3.34		$	3.20
Add (less) after-tax items:
Net foreign exchange losses (gains)		0.08			(0.01	)		0.15			(0.39	)
Net realized and unrealized investment gains		(0.21	)		(0.30	)		(0.36	)		(0.41	)
Net impairment losses recognized in earnings		0.01			0.01			0.03			0.02

Operating income allocated to common shareholders	$	1.09		$	1.18		$	3.16		$	2.42


Diluted per common share data
Net income allocated to common shareholders	$	1.21		$	1.48		$	3.34		$	3.20
Add (less) after-tax items:
Net foreign exchange losses (gains)		0.08			(0.01	)		0.15			(0.39	)
Net realized and unrealized investment gains		(0.21	)		(0.30	)		(0.36	)		(0.41	)
Net impairment losses recognized in earnings		0.01			0.01			0.03			0.02

Operating income allocated to common shareholders [b]	$	1.09		$	1.18		$	3.16		$	2.42

[a]

[b]

Represents diluted earnings 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.

BOOK VALUE PER SHARE


		JUNE 30,						DEC. 31,
		2013			2012			2012
DILUTIVE COMMON SHARES OUTSTANDING: AS-IF CONVERTED [a]	Price per share at period end	$	51.45		$	38.32		$	39.69
	Basic common shares outstanding		43,094			42,617			42,432
	Add: unvested restricted shares and restricted share units		1,237			681			686
	Add: dilutive options outstanding		815			88			40
	Weighted average exercise price per share	$	47.94		$	24.59		$	27.76
	Book Value [b]	$	2,306,054		$	2,317,242		$	2,280,597
	Add: proceeds from converted options		39,071			2,164			1,110

	Pro forma book value	$	2,345,125		$	2,319,406		$	2,281,707
	Dilutive shares outstanding		45,146			43,386			43,158
	Basic book value per common share	$	53.51		$	54.37		$	53.75
	Diluted book value per common share	$	51.95		$	53.46		$	52.87

DILUTIVE COMMON SHARES OUTSTANDING: TREASURY STOCK METHOD	Price per share at period end	$	51.45		$	38.32		$	39.69
	Basic common shares outstanding		43,094			42,617			42,432
	Add: unvested restricted shares and restricted share units		1,237			681			686
	Add: dilutive options outstanding		815			88			40
	Weighted average exercise price per share	$	47.94		$	24.59		$	27.76
	Less: options bought back via treasury method		(759	)		(56	)		(28	)

	Dilutive shares outstanding		44,387			43,330			43,130
	Basic book value per common share	$	53.51		$	54.37		$	53.75
	Diluted book value per common share	$	51.95		$	53.48		$	52.88

[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.


		31

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 is an internal performance measure used by the Company in the management of its operations. Operating income 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 determined in accordance with GAAP, the Company believes that showing operating income 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 should not be viewed as a substitute for GAAP net income. Please see page 30 for a reconciliation of operating income to net income.

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


		32

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