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	d721490d8k.htm
EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	d721490dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

FIRST QUARTER 2014

Endurance Specialty Holdings Ltd.

Waterloo House, 100 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 - Quarterly		2
b. Consolidated Statements of Income - Prior Years		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		13
e. ROE Component Analysis - Annualized Premium and Investment Leverage		14
f. Investment Portfolio Information		15
g. Largest Twenty-Five Corporate Holdings		16
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses		17
b. Prior Year Reserve Development by Segment		18
c. Prior Year Reserve Development by Line of Business		19
d. Analysis of Unpaid Losses and Loss Expenses		20
V. Shareholder Return Analysis
a. Shareholder Return Analysis		21
b. Weighted Average Dilutive Shares Outstanding		22
c. Earnings per Share - Two Class Method		23
d. Operating Income Reconciliation - Two Class Method		24
e. Book Value Per Share Analysis		25
VI. Regulation G		26

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, 2013.

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, 2013 and 2012 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.

•

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						Previous
		MARCH 31,						Quarter
		2014			2013			Change
HIGHLIGHTS	Net income	$	104,480		$	100,299			4.2	%
	Net income available to common and participating common shareholders		96,292			92,111			4.5	%
	Net income allocated to common shareholders		93,523			90,601			3.2	%
	Operating income [a]		102,559			97,988			4.7	%
	Operating income available to common and participating common shareholders [a]		94,371			89,800			5.1	%
	Operating income allocated to common shareholders [a]		91,658			88,328			3.8	%
	Operating cash flow		(25,596	)		23,493			(209.0	)%
	Net investment income		40,990			49,305			(16.9	)%
	Gross premiums written		1,157,515			1,177,362			(1.7	)%
	Net premiums written		798,705			908,915			(12.1	)%
	Net premiums earned		396,266			420,117			(5.7	)%
	Total assets		9,794,782			9,431,481			3.9	%
	Total shareholders’ equity		3,001,109			2,766,250			8.5	%

PER SHARE	Basic and diluted earnings per common share
AND SHARES DATA	Net income (as reported)	$	2.17		$	2.13			1.9	%
	Operating income (as reported) [a]	$	2.12		$	2.08			1.9	%
As Reported	Weighted average common shares outstanding		43,160			42,431			1.7	%
	Weighted average common shares outstanding and dilutive potential common shares [e]		43,160			42,444			1.7	%
	Common dividends paid per share	$	0.34		$	0.32			6.3	%
Book Value Per	Book value [b]	$	59.42		$	55.10			7.8	%
Common Share	Diluted book value (treasury stock method) [b]	$	57.53		$	54.10			6.3	%

FINANCIAL RATIOS	Return on average common equity (ROAE), net income [c]		3.8	%		4.0	%		(0.2	)
	ROAE, operating income [a] [c]		3.8	%		3.9	%		(0.1	)
	Return on beg. common equity (ROBE), net income [d]		3.9	%		4.0	%		(0.1	)
	ROBE, operating income [a] [d]		3.8	%		3.9	%		(0.1	)
	Annualized ROAE, net income [c]		15.3	%		16.0	%		(0.7	)
	Annualized ROAE, operating income [a] [c]		15.0	%		15.6	%		(0.6	)
	Annualized ROBE, net income [d]		15.7	%		16.2	%		(0.5	)
	Annualized ROBE, operating income [a] [d]		15.4	%		15.8	%		(0.4	)
	Annualized investment yield		2.6	%		3.1	%		(0.5	)
GAAP	Loss ratio		44.6	%		52.1	%		(7.5	)
	Acquisition expense ratio		18.2	%		17.1	%		1.1
	General and administrative expense ratio		18.5	%		15.8	%		2.7

	Combined ratio		81.3	%		85.0	%		(3.7	)

[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 24 for a reconciliation to net income.

[b]

For detailed calculations, please refer to page 25.

[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—QUARTERLY


	QUARTERS ENDED
	MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			JUNE 30, 2013			MAR. 31, 2013			MAR. 31, 2012
UNDERWRITING REVENUES
Gross premiums written	$	1,157,515		$	370,809		$	544,363		$	572,710		$	1,177,362		$	1,061,649
Premiums ceded		(358,810	)		(90,745	)		(149,030	)		(108,089	)		(268,447	)		(218,593	)

Net premiums written	$	798,705		$	280,064		$	395,333		$	464,621		$	908,915		$	843,056
Change in unearned premiums		(402,439	)		219,423			158,212			78,714			(488,798	)		(431,421	)

Net premiums earned	$	396,266		$	499,487		$	553,545		$	543,335		$	420,117		$	411,635
Other underwriting (loss) income		(1,238	)		(2,740	)		(943	)		888			749			(335	)

Total underwriting revenues	$	395,028		$	496,747		$	552,602		$	544,223		$	420,866		$	411,300

UNDERWRITING EXPENSES
Net losses and loss expenses	$	176,896		$	302,620		$	339,036		$	359,058		$	218,970		$	262,767
Acquisition expenses		72,157			82,151			78,775			71,868			71,636			68,489
General and administrative expenses		73,206			79,599			67,470			81,359			66,478			66,041

Total underwriting expenses	$	322,259		$	464,370		$	485,281		$	512,285		$	357,084		$	397,297

Underwriting income	$	72,769		$	32,377		$	67,321		$	31,938		$	63,782		$	14,003

OTHER OPERATING REVENUE
Net investment income	$	40,990		$	46,346		$	38,097		$	32,468		$	49,305		$	57,075
Interest expense		(9,051	)		(9,050	)		(9,048	)		(9,052	)		(9,038	)		(9,047	)
Amortization of intangibles		(1,617	)		(1,634	)		(1,652	)		(1,625	)		(2,101	)		(2,777	)

Total other operating revenue	$	30,322		$	35,662		$	27,397		$	21,791		$	38,166		$	45,251

INCOME BEFORE OTHER ITEMS	$	103,091		$	68,039		$	94,718		$	53,729		$	101,948		$	59,254
OTHER
Net foreign exchange (losses) gains	($	2,964	)	($	5,718	)	($	2,201	)	($	3,368	)	($	2,927	)	$	18,137
Net realized and unrealized investment gains (losses)		4,872			5,197			(6,640	)		10,372			6,235			5,203
Total other-than-temporary impairment losses		(111	)		(41	)		(190	)		(579	)		(806	)		—
Portion of loss recognised in other comprehensive income (loss)		—			—			—			—			—			(219	)

Net impairment losses recognised in earnings		(111	)		(41	)		(190	)		(579	)		(806	)		(219	)
Income tax (expense) benefit		(408	)		(296	)		(2,271	)		865			(4,151	)		167

NET INCOME	$	104,480		$	67,181		$	83,416		$	61,019		$	100,299		$	82,542
Preferred dividends		(8,188	)		(8,186	)		(8,188	)		(8,188	)		(8,188	)		(8,188	)

NET INCOME AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	96,292		$	58,995		$	75,228		$	52,831		$	92,111		$	74,354

KEY RATIOS/PER SHARE DATA
Loss ratio		44.6	%		60.7	%		61.3	%		66.1	%		52.1	%		63.9	%
Acquisition expense ratio		18.2	%		16.4	%		14.2	%		13.2	%		17.1	%		16.6	%
General and administrative expense ratio		18.5	%		15.9	%		12.2	%		15.0	%		15.8	%		16.0	%

Combined ratio		81.3	%		93.0	%		87.7	%		94.3	%		85.0	%		96.5	%

Basic earnings per common share	$	2.17		$	1.33		$	1.70		$	1.21		$	2.13		$	1.72
Diluted earnings per common share [b]	$	2.17		$	1.33		$	1.70		$	1.21		$	2.13		$	1.72
ROAE, net income [a]		3.8	%		2.4	%		3.2	%		2.3	%		4.0	%		3.4	%

[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—PRIOR YEARS


	YEAR ENDED
	DEC. 31, 2013			DEC. 31, 2012
UNDERWRITING REVENUES
Gross premiums written	$	2,665,244		$	2,549,026
Premiums ceded		(616,311	)		(519,531	)

Net premiums written	$	2,048,933		$	2,029,495
Change in unearned premiums		(32,449	)		(15,595	)

Net premiums earned	$	2,016,484		$	2,013,900
Other underwriting loss		(2,046	)		(2,183	)

Total underwriting revenues	$	2,014,438		$	2,011,717

UNDERWRITING EXPENSES
Net losses and loss expenses	$	1,219,684		$	1,520,995
Acquisition expenses		304,430			303,179
General and administrative expenses		294,906			235,689

Total underwriting expenses	$	1,819,020		$	2,059,863

Underwriting income (loss)	$	195,418		($	48,146	)

OTHER OPERATING REVENUE
Net investment income	$	166,216		$	173,326
Interest expense		(36,188	)		(36,174	)
Amortization of intangibles		(7,012	)		(10,347	)

Total other operating revenue	$	123,016		$	126,805

INCOME BEFORE OTHER ITEMS	$	318,434		$	78,659
OTHER
Net foreign exchange (losses) gains	($	14,214	)	$	15,911
Net realized and unrealized investment gains		15,164			72,139
Total other-than-temporary impairment losses		(1,616	)		(364	)
Portion of loss recognised in other comprehensive (loss) income		—			(483	)

Net impairment losses recognised in earnings		(1,616	)		(847	)
Income tax expense		(5,853	)		(3,346	)

NET INCOME	$	311,915		$	162,516
Preferred dividends		(32,750	)		(32,750	)

NET INCOME AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	279,165		$	129,766

KEY RATIOS/PER SHARE DATA
Loss ratio		60.5	%		75.5	%
Acquisition expense ratio		15.1	%		15.1	%
General and administrative expense ratio		14.6	%		11.7	%

Combined ratio		90.2	%		102.3	%

Basic earnings per common share	$	6.37		$	3.00
Diluted earnings per common share [b]	$	6.37		$	3.00
ROAE, net income [a]		11.8	%		5.8	%

[a]

[b]


		3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			JUNE 30, 2013			MAR. 31, 2013
ASSETS
Cash and cash equivalents	$	916,665		$	845,851		$	789,999		$	942,062		$	857,187
Fixed maturity investments available for sale, at fair value		4,794,445			4,823,964			4,800,838			4,755,091			5,008,753
Short term investments available for sale, at fair value		46,167			35,028			11,599			15,382			1,400
Equity securities available for sale, at fair value		271,530			252,466			262,866			232,919			188,927
Other investments		621,914			617,478			594,156			569,393			554,715
Premiums receivable, net		1,265,371			669,198			1,006,227			1,271,818			1,193,578
Insurance and reinsurance balances receivable		136,733			127,722			123,777			111,405			106,222
Deferred acquisition costs		231,167			186,027			197,048			210,740			212,953
Prepaid reinsurance premiums		443,498			187,209			263,499			292,911			340,066
Reinsurance recoverable on unpaid losses		534,335			593,755			513,080			594,020			588,576
Reinsurance recoverable on paid losses		59,784			164,220			428,300			101,753			11,891
Accrued investment income		23,161			24,104			21,783			25,404			24,865
Goodwill and intangible assets		163,761			165,378			167,000			168,621			169,899
Deferred tax assets		48,496			51,703			50,148			52,240			41,505
Receivable on pending investment sales		83,445			54,910			124,236			78,243			35,608
Other assets		154,310			179,109			192,104			128,446			95,336

TOTAL ASSETS	$	9,794,782		$	8,978,122		$	9,546,660		$	9,550,448		$	9,431,481

LIABILITIES
Reserve for losses and loss expenses		3,847,774			4,002,259			4,052,102			4,145,581		$	4,026,536
Reserve for unearned premiums		1,678,233			1,018,851			1,314,687			1,500,253			1,625,883
Deposit liabilities		18,684			19,458			17,577			17,785			22,533
Reinsurance balances payable		307,569			181,061			347,048			262,582			203,048
Debt		527,539			527,478			527,506			527,401			527,421
Payable on pending investment purchases		239,313			129,047			224,473			181,060			111,969
Other liabilities		174,561			213,419			224,257			179,732			147,841

TOTAL LIABILITIES	$	6,793,673		$	6,091,573		$	6,707,650		$	6,814,394		$	6,665,231

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		44,601			44,369			44,250			44,331			43,169
Additional paid-in capital		575,684			569,116			560,204			556,255			520,257
Accumulated other comprehensive income		89,359			62,731			69,457			31,438			137,439
Retained earnings		2,274,265			2,193,133			2,147,899			2,086,830			2,048,185

TOTAL SHAREHOLDERS’ EQUITY	$	3,001,109		$	2,886,549		$	2,839,010		$	2,736,054		$	2,766,250

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	9,794,782		$	8,978,122		$	9,546,660		$	9,550,448		$	9,431,481

Book value per common share	$	59.42		$	56.99		$	55.89		$	53.51		$	55.10
Diluted book value per common share (treasury stock method)	$	57.53		$	55.18		$	54.33		$	51.95		$	54.10
RATIOS
Debt-to-capital		15.0	%		15.5	%		15.7	%		16.2	%		16.0	%


		4

ENDURANCE SPECIALTY HOLDINGS LTD.

Probable Maximum Loss by Zone and Peril

(in millions of dollars)

Largest 1 in 100 year PML as of January 1, 2014 is equal to 10.6% of Shareholders’ Equity as of March 31, 2014.


	Estimated Occurrence Net Loss as of January 1, 2014											Jan. 1, 2013		Jan. 1, 2012
		10 Year		25 Year		50 Year		100 Year		250 Year		100 Year		100 Year
		Return		Return		Return		Return		Return		Return		Return
Zone	Peril	Period		Period		Period		Period		Period		Period		Period
United States	Hurricane	$	135	$	191	$	237	$	293	$	357	$	429	$	574
Europe	Windstorm		92		173		233		317		428		346		384
California	Earthquake		42		155		199		238		326		395		409
Japan	Windstorm		32		102		140		144		154		201		317
Northwest U.S.	Earthquake		—		5		32		95		192		154		206
Japan	Earthquake		9		45		81		109		142		111		189
United States	Tornado/Hail		37		56		72		88		114		86		123
Australia	Earthquake		1		6		27		86		138		88		73
New Zealand	Earthquake		1		4		10		24		55		24		29
Australia	Windstorm		3		11		29		52		96		53		48
New Madrid	Earthquake		—		—		—		9		69		10		12

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, 2013.


		5

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE QUARTER ENDED MARCH 31, 2014


Net Premiums Written = $798.7 million

[a]

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


		6

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2014									MAR. 31, 2013
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	652,276		$	505,239		$	1,157,515		$	652,943		$	524,419		$	1,177,362

Net premiums written	$	343,027		$	455,678		$	798,705		$	404,694		$	504,221		$	908,915

Net premiums earned	$	144,021		$	252,245		$	396,266		$	151,152		$	268,965		$	420,117
Other underwriting (loss) income		—			(1,238	)		(1,238	)		—			749			749

Total underwriting revenues	$	144,021		$	251,007		$	395,028		$	151,152		$	269,714		$	420,866

UNDERWRITING EXPENSES
Net losses and loss expenses	$	88,533		$	88,363		$	176,896		$	99,464		$	119,506		$	218,970
Acquisition expenses		12,261			59,896			72,157			14,616			57,020			71,636
General and administrative expenses		41,288			31,918			73,206			35,627			30,851			66,478

Total expenses	$	142,082		$	180,177		$	322,259		$	149,707		$	207,377		$	357,084

UNDERWRITING INCOME	$	1,939		$	70,830		$	72,769		$	1,445		$	62,337		$	63,782

GAAP RATIOS
Loss ratio		61.5	%		35.0	%		44.6	%		65.7	%		44.4	%		52.1	%
Acquisition expense ratio		8.5	%		23.7	%		18.2	%		9.7	%		21.2	%		17.1	%
General and administrative expense ratio		28.7	%		12.7	%		18.5	%		23.6	%		11.5	%		15.8	%

Combined ratio AS REPORTED		98.7	%		71.4	%		81.3	%		99.0	%		77.1	%		85.0	%

Effect of favorable prior accident year reserve development		8.1	%		15.3	%		12.7	%		11.4	%		12.4	%		12.1	%

Combined ratio net of prior accident year reserve development		106.8	%		86.7	%		94.0	%		110.4	%		89.5	%		97.1	%


		7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			JUNE 30, 2013			MAR. 31, 2013			MAR. 31, 2012
UNDERWRITING REVENUES
Gross premiums written	$	652,276		$	200,726		$	344,819		$	276,941		$	652,943		$	635,347

Net premiums written	$	343,027		$	111,976		$	224,338		$	191,502		$	404,694		$	427,781

Net premiums earned	$	144,021		$	235,967		$	291,477		$	267,878		$	151,152		$	161,630
Other underwriting income		—			—			—			—			—			—

Total underwriting revenues	$	144,021		$	235,967		$	291,477		$	267,878		$	151,152		$	161,630

UNDERWRITING EXPENSES
Net losses and loss expenses	$	88,533		$	230,708		$	228,409		$	215,844		$	99,464		$	113,702
Acquisition expenses		12,261			16,754			18,440			14,968			14,616			16,214
General and administrative expenses		41,288			42,804			35,641			43,524			35,627			34,435

Total expenses	$	142,082		$	290,266		$	282,490		$	274,336		$	149,707		$	164,351

UNDERWRITING INCOME (LOSS)	$	1,939		($	54,299	)	$	8,987		($	6,458	)	$	1,445		($	2,721	)

GAAP RATIOS
Loss ratio		61.5	%		97.8	%		78.4	%		80.6	%		65.7	%		70.4	%
Acquisition expense ratio		8.5	%		7.1	%		6.3	%		5.6	%		9.7	%		10.0	%
General and administrative expense ratio		28.7	%		18.1	%		12.2	%		16.2	%		23.6	%		21.3	%

Combined ratio AS REPORTED		98.7	%		123.0	%		96.9	%		102.4	%		99.0	%		101.7	%

Effect of favorable prior accident year reserve development		8.1	%		2.0	%		2.1	%		2.1	%		11.4	%		4.9	%

Combined ratio net of prior accident year reserve development		106.8	%		125.0	%		99.0	%		104.5	%		110.4	%		106.6	%


		8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			JUNE 30, 2013			MAR. 31, 2013			MAR. 31, 2012
UNDERWRITING REVENUES
Gross premiums written	$	505,239		$	170,083		$	199,544		$	295,769		$	524,419		$	426,302

Net premiums written	$	455,678		$	168,088		$	170,995		$	273,119		$	504,221		$	415,275

Net premiums earned	$	252,245		$	263,520		$	262,068		$	275,457		$	268,965		$	250,005
Other underwriting (loss) income		(1,238	)		(2,740	)		(943	)		888			749			(335	)

Total underwriting revenues	$	251,007		$	260,780		$	261,125		$	276,345		$	269,714		$	249,670

UNDERWRITING EXPENSES
Net losses and loss expenses	$	88,363		$	71,912		$	110,627		$	143,214		$	119,506		$	149,065
Acquisition expenses		59,896			65,397			60,335			56,900			57,020			52,275
General and administrative expenses		31,918			36,795			31,829			37,835			30,851			31,606

Total expenses	$	180,177		$	174,104		$	202,791		$	237,949		$	207,377		$	232,946

UNDERWRITING INCOME	$	70,830		$	86,676		$	58,334		$	38,396		$	62,337		$	16,724

GAAP RATIOS
Loss ratio		35.0	%		27.3	%		42.3	%		52.0	%		44.4	%		59.7	%
Acquisition expense ratio		23.7	%		24.8	%		23.0	%		20.7	%		21.2	%		20.9	%
General and administrative expense ratio		12.7	%		14.0	%		12.1	%		13.7	%		11.5	%		12.6	%

Combined ratio AS REPORTED		71.4	%		66.1	%		77.4	%		86.4	%		77.1	%		93.2	%

Effect of favorable prior accident year reserve development		15.3	%		21.3	%		16.0	%		20.8	%		12.4	%		3.6	%

Combined ratio net of prior accident year reserve development		86.7	%		87.4	%		93.4	%		107.2	%		89.5	%		96.8	%


		9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		JUNE 30, 2013		MAR. 31, 2013		MAR. 31, 2012
INSURANCE SEGMENT
Agriculture	$	527,894	$	58,220	$	200,062	$	131,633	$	564,474	$	533,667
Casualty and other specialty		74,895		76,666		95,862		87,614		56,467		55,491
Professional lines		38,780		55,056		34,221		38,296		20,964		36,345
Property		10,707		10,784		14,674		19,398		11,038		9,844

TOTAL INSURANCE	$	652,276	$	200,726	$	344,819	$	276,941	$	652,943	$	635,347

REINSURANCE SEGMENT
Catastrophe	$	126,648	$	13,778	$	38,676	$	155,431	$	147,866	$	143,182
Property		166,413		9,358		91,653		48,384		148,411		106,746
Casualty		84,982		29,900		27,649		54,417		129,392		106,003
Professional lines		25,619		113,089		25,670		12,528		12,307		708
Specialty		101,577		3,958		15,896		25,009		86,443		69,663

TOTAL REINSURANCE	$	505,239	$	170,083	$	199,544	$	295,769	$	524,419	$	426,302

REPORTED TOTALS	$	1,157,515	$	370,809	$	544,363	$	572,710	$	1,177,362	$	1,061,649


		10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		JUNE 30, 2013		MAR. 31, 2013		MAR. 31, 2012
INSURANCE SEGMENT
Agriculture	$	281,645	$	24,454	$	120,617	$	84,537	$	341,130	$	354,920
Casualty and other specialty		41,721		50,022		72,431		63,373		43,261		41,823
Professional lines		14,570		32,138		20,972		27,788		14,203		30,205
Property		5,091		5,362		10,318		15,804		6,100		833

TOTAL INSURANCE	$	343,027	$	111,976	$	224,338	$	191,502	$	404,694	$	427,781

REINSURANCE SEGMENT
Catastrophe	$	78,963	$	12,270	$	12,551	$	138,041	$	131,398	$	133,718
Property		166,322		9,417		90,528		44,516		148,411		106,746
Casualty		83,392		29,495		27,648		54,419		127,963		104,766
Professional lines		25,619		113,089		25,670		12,528		12,307		708
Specialty		101,382		3,817		14,598		23,615		84,142		69,337

TOTAL REINSURANCE	$	455,678	$	168,088	$	170,995	$	273,119	$	504,221	$	415,275

REPORTED TOTALS	$	798,705	$	280,064	$	395,333	$	464,621	$	908,915	$	843,056


		11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		JUNE 30, 2013		MAR. 31, 2013		MAR. 31, 2012
INSURANCE SEGMENT
Agriculture	$	56,313	$	143,876	$	200,739	$	172,492	$	56,431	$	59,969
Casualty and other specialty		54,470		57,905		55,929		55,872		54,123		53,234
Professional lines		24,341		25,816		24,220		27,757		30,924		33,884
Property		8,897		8,370		10,589		11,757		9,674		14,543

TOTAL INSURANCE	$	144,021	$	235,967	$	291,477	$	267,878	$	151,152	$	161,630

REINSURANCE SEGMENT
Catastrophe	$	62,926	$	66,026	$	67,778	$	86,560	$	84,795	$	82,337
Property		76,918		87,032		88,195		90,934		86,555		68,378
Casualty		48,254		61,218		61,244		53,814		53,048		54,425
Professional lines		33,194		24,793		15,181		13,691		14,304		15,383
Specialty		30,953		24,451		29,670		30,458		30,263		29,482

TOTAL REINSURANCE	$	252,245	$	263,520	$	262,068	$	275,457	$	268,965	$	250,005

REPORTED TOTALS	$	396,266	$	499,487	$	553,545	$	543,335	$	420,117	$	411,635


		12

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE QUARTER
	ENDED MAR. 31, 2014
Average common equity [a]	$	2,513,829
Net premiums earned	$	396,266
Combined ratio		81.3	%
Operating margin		18.7	%
Premium leverage		0.16x

Implied ROAE from underwriting activity		3.0	%

Average cash and invested assets at amortized cost	$	6,448,260
Investment leverage		2.57x
Year to date investment income yield, pretax		0.6	%

Implied ROAE from investment activity		1.5	%

Financing Costs [b]		(0.7	)%

Implied Pre-tax Operating ROAE, for period [c]		3.8	%

Implied Pre-tax Operating ROAE, annualized [c]		15.2	%

[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.


		13

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE


	FOR THE QUARTERS ENDED								YEARS ENDED DECEMBER 31,
	MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		JUNE 30, 2013		2013		2012
Average common equity [a]	$	2,513,829	$	2,432,780	$	2,357,532	$	2,321,152	$	2,425,853	$	2,230,881
Net premiums earned	$	396,266	$	499,487	$	553,545	$	543,335	$	2,016,484	$	2,013,900
Premium leverage		0.16x		0.21x		0.23x		0.23x		0.83x		0.90x

Annualized premium leverage		0.64x		0.84x		0.92x		0.92x		0.83x		0.90x

Average cash and invested assets at amortized cost	$	6,448,260	$	6,377,107	$	6,340,454	$	6,389,569	$	6,425,209	$	6,303,881

Investment leverage		2.57x		2.62x		2.69x		2.75x		2.65x		2.83x

[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 outstanding at the beginning and end of each period.


		14

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF MARCH 31, 2014 AND DECEMBER 31, 2013


	March 31, 2014					December 31, 2013
	Fair Value		Percentage			Fair Value		Percentage
Type of Investment
Cash and equivalents [a]	$	760,797		11.7	%	$	771,714		11.9	%
Short-term investments		46,167		0.7	%		35,028		0.5	%
Fixed maturity investments
U.S. government and government agencies notes		627,748		9.7	%		769,343		11.8	%
Government and agency guaranteed corporates		49,626		0.8	%		35,145		0.5	%
U.S. government agency residential mortgage-backed securities		1,102,015		16.9	%		1,116,433		17.3	%
U.S. government agency commercial mortgage-backed securities		57,028		0.9	%		49,431		0.8	%
Municipals		28,132		0.4	%		26,854		0.4	%
Foreign government		204,425		3.1	%		182,647		2.8	%
Corporate securities		1,255,579		19.2	%		1,227,299		18.9	%
Non-agency residential mortgage-backed securities		81,406		1.3	%		80,788		1.2	%
Non-agency commercial mortgage-backed securities		914,931		14.1	%		903,456		13.9	%
Asset-backed securities		473,555		7.3	%		432,568		6.7	%
Equity securities
Equity investments		194,583		3.0	%		174,669		2.7	%
Emerging market debt fund		61,790		1.0	%		60,844		0.9	%
Preferred equity investments		9,828		0.2	%		8,223		0.1	%
Short-term fixed income fund		5,329		0.1	%		8,730		0.1	%
Other investments [b]		621,914		9.6	%		617,478		9.5	%

Total	$	6,494,853		100.0	%	$	6,500,650		100.0	%


	Fair Value		Percentage			Fair Value		Percentage
Ratings [c]
U.S. government and government agencies notes	$	627,748		13.0	%	$	769,343		15.8	%
AAA/Aaa		996,691		20.6	%		972,820		20.0	%
AA/Aa		1,789,744		36.9	%		1,771,156		36.5	%
A/A		935,778		19.3	%		895,549		18.4	%
BBB		385,759		8.0	%		363,722		7.5	%
Below BBB		81,104		1.7	%		66,791		1.4	%
Not Rated		23,788		0.5	%		19,611		0.4	%

Total	$	4,840,612		100.0	%	$	4,858,992		100.0	%


	March 31, 2014			December 31, 2013
Performance
Yield [d]		2.6	%		2.6	%
Duration in years [e]		2.94			3.11


Investment Income	Quarter Ended Mar. 31, 2014		Quarter Ended Dec. 31, 2013		Quarter Ended Sept. 30, 2013		Quarter Ended June 30, 2013		Quarter Ended Mar. 31, 2013		Year Ended Dec. 31, 2013
Cash and available for sale securities	$	27,448	$	25,108	$	24,853	$	25,688	$	26,246	$	101,895
Other investments		13,542		21,238		13,244		6,780		23,059		64,321

Total net investment income	$	40,990	$	46,346	$	38,097	$	32,468	$	49,305	$	166,216

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]

Excludes cash and equivalents, equity securities and other investments

[d]

Earned yield for the quarter ending 3/31/14 and twelve months ending 12/31/13 excludes realized and unrealized gains and losses on fixed maturity investments

[e]

Duration excludes equity securities, other investments and operating cash.


		15

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF MARCH 31, 2014


	March 31, 2014
	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Credit Quality (4)
ISSUER (1) (2) (3)
MORGAN STANLEY	$	49,607	$	50,527	$	920			A-
JPMORGAN CHASE & CO		43,641		43,927		286			A
BANK OF AMERICA CORP		42,851		43,155		304			A-
CITIGROUP INC		39,769		40,156		387			A-
GOLDMAN SACHS GROUP INC/THE		39,227		39,728		501			A-
GENERAL ELECTRIC CO		34,208		34,364		156			AA+
COMCAST CORPORATION		29,944		30,479		535			A-
AMERICAN EXPRESS COMPANY		26,192		26,226		34			A-
VERIZON COMMUNICATIONS INC		24,389		24,790		401			BBB+
MITSUBISHI UFJ FINANCIAL GROUP INC		22,156		22,448		292			A+
WELLS FARGO & COMPANY		21,725		21,844		119			A+
BB& T CORP		19,199		19,230		31			A-
AT&T INC		19,022		19,102		80			A-
NEW YORK LIFE INSURANCE COMPANY		17,111		17,299		188			AA+
NATIONAL GRID PLC		14,657		16,009		1,352			A-
BP PLC		13,959		13,901		(58	)		A
ANHEUSER-BUSCH INVEB SA/NV		12,471		12,429		(42	)		A
FORD MOTOR COMPANY		11,969		12,095		126			BBB-
MERCK & CO INC		12,067		12,008		(59	)		AA
PRINCIPAL FINANCIAL GROUP INC		11,928		11,993		65			A+
BNP PARIBAS SA		11,797		11,791		(6	)		A+
INTERNATIONAL BUSINESS MACHINES CORP		11,284		11,421		137			AA-
ABBVIE INC		11,261		11,244		(17	)		A
PFIZER INC		10,167		10,169		2			AA
HSBC HOLDINGS PLC		9,708		9,720		12			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.


		16

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES


	THREE MONTHS ENDED MAR. 31, 2014
	GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	4,002,259		($	593,755	)	$	3,408,504

Incurred related to:
Current year		353,294			(126,086	)		227,208
Prior years		(47,026	)		(3,286	)		(50,312	)

Total Incurred		306,268			(129,372	)		176,896

Paid related to:
Current year		(6,722	)		1,927			(4,795	)
Prior years		(459,088	)		186,820			(272,268	)

Total Paid		(465,810	)		188,747			(277,063	)

Foreign currency translation and other		5,057			45			5,102

Balance, end of period	$	3,847,774		($	534,335	)	$	3,313,439


		17

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIOD ENDED MAR. 31, 2014


	Insurance			Reinsurance			Total Company
Incurred related to prior years
Quarter ended March 31, 2014	($	11,648	)	($	38,664	)	($	50,312	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 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	)
Quarter ended September 30, 2013		(6,210	)		(41,850	)		(48,060	)
Quarter ended December 31, 2013		(11,648	)		(38,664	)		(50,312	)

Year ended December 31, 2013	($	40,778	)	($	171,067	)	($	211,845	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2012


							Total
	Insurance			Reinsurance			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	)


		18

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
	MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			JUNE 30, 2013			MAR. 31, 2013			DEC. 31, 2013
INSURANCE SEGMENT
Agriculture	($	2,140	)	($	15	)	($	616	)	($	233	)	($	4,733	)	($	5,597	)
Casualty and other specialty		(6,716	)		(1,183	)		(4,263	)		(4,976	)		(4,942	)		(15,364	)
Professional lines		(1,128	)		(2,891	)		(427	)		1,672			667			(979	)
Property		(1,664	)		(684	)		(904	)		(2,088	)		(8,287	)		(11,963	)

TOTAL INSURANCE		(11,648	)		(4,773	)		(6,210	)		(5,625	)		(17,295	)		(33,903	)


REINSURANCE SEGMENT
Catastrophe		(7,761	)		(13,602	)		(9,234	)		(26,439	)		(11,911	)	($	61,186	)
Property		(14,757	)		(11,217	)		(21,107	)		(23,444	)		(1,626	)		(57,394	)
Casualty		(2,751	)		(9,590	)		(1,640	)		(900	)		(8,240	)		(20,370	)
Professional lines		(2,029	)		(2,735	)		(4,558	)		(996	)		(5,658	)		(13,947	)
Specialty		(11,366	)		(18,942	)		(5,311	)		(5,401	)		(5,938	)		(35,592	)

TOTAL REINSURANCE		(38,664	)		(56,086	)		(41,850	)		(57,180	)		(33,373	)		(188,489	)

REPORTED TOTALS	($	50,312	)	($	60,859	)	($	48,060	)	($	62,805	)	($	50,668	)	($	222,392	)


		19

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			Professional lines			Specialty			Subtotal			Total
AT MAR. 31, 2014
Case reserves	$	66,471		$	320,049		$	113,911		$	23,553		$	523,984		$	155,088		$	180,130		$	241,452		$	60,856		$	98,289		$	735,815		$	1,259,799
Total reserves	$	199,656		$	1,284,231		$	501,131		$	38,801		$	2,023,819		$	255,949		$	308,471		$	768,394		$	226,711		$	264,430		$	1,823,955		$	3,847,774
Case reserves / Total reserves		33.3	%		24.9	%		22.7	%		60.7	%		25.9	%		60.6	%		58.4	%		31.4	%		26.8	%		37.2	%		40.3	%		32.7	%

IBNR / Total reserves		66.7	%		75.1	%		77.3	%		39.3	%		74.1	%		39.4	%		41.6	%		68.6	%		73.2	%		62.8	%		59.7	%		67.3	%

AT DEC. 31, 2013
Case reserves	$	257,939		$	316,170		$	110,880		$	23,410		$	708,399		$	167,152		$	196,715		$	239,385		$	65,353		$	101,716		$	770,321		$	1,478,720
Total reserves	$	342,368		$	1,276,300		$	501,755		$	38,467		$	2,158,890		$	265,626		$	323,798		$	769,067		$	215,235		$	269,643		$	1,843,369		$	4,002,259
Case reserves / Total reserves		75.3	%		24.8	%		22.1	%		60.9	%		32.8	%		62.9	%		60.8	%		31.1	%		30.4	%		37.7	%		41.8	%		36.9	%

IBNR / Total reserves		24.7	%		75.2	%		77.9	%		39.1	%		67.2	%		37.1	%		39.2	%		68.9	%		69.6	%		62.3	%		58.2	%		63.1	%

AT SEPT. 30, 2013
Case reserves	$	279,916		$	309,162		$	131,741		$	24,337		$	745,156		$	164,615		$	201,127		$	231,990		$	67,671		$	106,517		$	771,920		$	1,517,076
Total reserves	$	310,092		$	1,271,903		$	525,084		$	39,057		$	2,146,136		$	290,357		$	355,104		$	757,882		$	213,916		$	288,707		$	1,905,966		$	4,052,102
Case reserves / Total reserves		90.3	%		24.3	%		25.1	%		62.3	%		34.7	%		56.7	%		56.6	%		30.6	%		31.6	%		36.9	%		40.5	%		37.4	%

IBNR / Total reserves		9.7	%		75.7	%		74.9	%		37.7	%		65.3	%		43.3	%		43.4	%		69.4	%		68.4	%		63.1	%		59.5	%		62.6	%

AT JUNE 30, 2013
Case reserves	$	271,424		$	331,791		$	127,378		$	25,667		$	756,260		$	140,909		$	221,468		$	223,392		$	70,091		$	101,973		$	757,833		$	1,514,093
Total reserves	$	415,026		$	1,274,263		$	513,875		$	39,730		$	2,242,894		$	294,752		$	375,388		$	738,074		$	215,216		$	279,257		$	1,902,687		$	4,145,581
Case reserves / Total reserves		65.4	%		26.0	%		24.8	%		64.6	%		33.7	%		47.8	%		59.0	%		30.3	%		32.6	%		36.5	%		39.8	%		36.5	%

IBNR / Total reserves		34.6	%		74.0	%		75.2	%		35.4	%		66.3	%		52.2	%		41.0	%		69.7	%		67.4	%		63.5	%		60.2	%		63.5	%

AT MAR. 31, 2013
Case reserves	$	171,382		$	327,726		$	127,426		$	27,993		$	654,527		$	173,606		$	249,203		$	216,559		$	68,928		$	106,774		$	815,070		$	1,469,597
Total reserves	$	307,140		$	1,252,914		$	517,849		$	42,962		$	2,120,865		$	288,537		$	394,088		$	727,572		$	214,821		$	280,653		$	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	%		32.1	%		38.0	%		42.8	%		36.5	%

IBNR / Total reserves		44.2	%		73.8	%		75.4	%		34.8	%		69.1	%		39.8	%		36.8	%		70.2	%		67.9	%		62.0	%		57.2	%		63.5	%


		20

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	QUARTER ENDED			YEARS ENDED DECEMBER 31,						INCEPTION TO
	MAR. 31, 2014			2013			2012			MAR. 31, 2014
Income and Return on Equity:
Net income available to common and participating common shareholders	$	96,292		$	279,165		$	129,766		$	2,846,604
Operating income available to common and participating common shareholders		94,371			281,021			54,295			2,766,122
Average Shareholders’ equity [a]		2,513,829			2,456,549			2,230,881			2,036,720

Net income return on average equity		3.8	%		11.4	%		5.8	%		11.4	% [c]
Operating return on average equity		3.8	%		11.4	%		2.4	%		11.1	% [c]


Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	57.53		$	55.18		$	52.88		$	57.53
Dividends paid per share		0.34			1.28			1.24			11.19

Change in diluted book value per common share		4.3	%		4.3	%		4.6	%		16.1	% [c]

Total return to common shareholders [b]		4.9	%		6.8	%		7.0	%		20.8	% [c]

[a]

Excludes the $430 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.


		21

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION—TWO CLASS METHOD


		QUARTERS ENDED MAR. 31,
		2014			2013
DILUTIVE SHARES OUTSTANDING:	Average market price per share	$	53.15		$	43.92
AS REPORTED	Basic weighted average common shares outstanding [a]		43,160			42,431
	Add: weighted avg. unvested restricted share units		—			1
	Weighted average exercise price per share		—			—
	Proceeds from unrecognized restricted share unit expense		—		$	10
	Less: restricted share units bought back via treasury method		—			—
	Add: weighted avg. dilutive options outstanding		815			32
	Weighted average exercise price per share	$	47.94		$	27.67
	Proceeds from unrecognized option expense	$	4,623			—
	Less: options bought back via treasury method		(815	)		(20	)

	Weighted average dilutive shares outstanding [b]		43,160			42,444


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.


		22

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS PER SHARE INFORMATION—TWO CLASS METHOD


	QUARTERS ENDED MAR. 31,
	2014			2013
Net income	$	104,480		$	100,299
Less preferred dividends		(8,188	)		(8,188	)

Net income available to common and participating common shareholders	$	96,292		$	92,111
Less amount allocated to participating common shareholders [a]		(2,769	)		(1,510	)

Net income allocated to common shareholders	$	93,523		$	90,601

Denominator:
Weighted average shares—basic		43,160			42,431

Share Equivalents
Options		—			12
Restricted share units		—			1

Weighted average shares—diluted		43,160			42,444

Basic earnings per common share	$	2.17		$	2.13

Diluted earnings per common share [b]	$	2.17		$	2.13

[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.


		23

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING INCOME RECONCILIATION

EARNINGS PER SHARE INFORMATION—TWO CLASS METHOD


	Two-Class Method
	QUARTERS ENDED MAR. 31,
	2014			2013
Net income	$	104,480		$	100,299
Add (less) after-tax items:
Net foreign exchange losses		2,972			2,909
Net realized and unrealized investment gains		(5,004	)		(5,992	)
Net impairment losses recognized in earnings		111			772

Operating income before preferred dividends	$	102,559		$	97,988
Preferred dividends		(8,188	)		(8,188	)

Operating income available to common and participating common shareholders	$	94,371		$	89,800
Less amount allocated to participating common shareholders [a]		(2,713	)		(1,472	)

Operating income allocated to common shareholders	$	91,658		$	88,328

Weighted average common shares outstanding
Basic		43,160			42,431
Dilutive		43,160			42,444

Basic per common share data
Net income allocated to common shareholders	$	2.17		$	2.13
Add (less) after-tax items:
Net foreign exchange losses		0.07			0.07
Net realized and unrealized investment gains		(0.12	)		(0.14	)
Net impairment losses recognized in earnings		—			0.02

Operating income allocated to common shareholders	$	2.12		$	2.08

Diluted per common share data
Net income allocated to common shareholders	$	2.17		$	2.13
Add (less) after-tax items:
Net foreign exchange losses		0.07			0.07
Net realized and unrealized investment gains		(0.12	)		(0.14	)
Net impairment losses recognized in earnings		—			0.02

Operating income allocated to common shareholders [b]	$	2.12		$	2.08

[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.


		24

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE


		MAR. 31,						DEC. 31,
		2014			2013			2013
DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	53.83		$	47.81		$	58.67
AS-IF CONVERTED [a]	Basic common shares outstanding		43,268			42,398			43,108
	Add: unvested restricted shares and restricted share units		1,333			772			1,261
	Add: dilutive options outstanding		815			28			815
	Weighted average exercise price per share	$	47.94		$	27.61		$	47.94
	Book Value [b]	$	2,571,109		$	2,336,250		$	2,456,549
	Add: proceeds from converted options		39,071			773			39,071

	Pro forma book value	$	2,610,180		$	2,337,023		$	2,495,620
	Dilutive shares outstanding		45,416			43,198			45,184

	Basic book value per common share	$	59.42		$	55.10		$	56.99
	Diluted book value per common share	$	57.47		$	54.10		$	55.23

DILUTIVE COMMON SHARES OUTSTANDING:	Price per share at period end	$	53.83		$	47.81		$	58.67
TREASURY STOCK METHOD	Basic common shares outstanding		43,268			42,398			43,108
	Add: unvested restricted shares and restricted share units		1,333			772			1,261
	Add: dilutive options outstanding		815			28			815
	Weighted average exercise price per share	$	47.94		$	27.61		$	47.94
	Less: options bought back via treasury method		(726	)		(16	)		(666	)

	Dilutive shares outstanding		44,690			43,182			44,518

	Basic book value per common share	$	59.42		$	55.10		$	56.99
	Diluted book value per common share	$	57.53		$	54.10		$	55.18

[a]

The as-if converted method assumes that the proceeds received upon exercise of options 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.


		25

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 24 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 25 for a reconciliation of diluted book value per common share to basic book value per common share.


		26

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