Attached files

file filename
8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTDc20395e8vk.htm
EX-99.1 - EXHIBIT 99.1 - ENDURANCE SPECIALTY HOLDINGS LTDc20395exv99w1.htm
Exhibit 99.2
(ENDURANCE LOGO)
Endurance Specialty Holdings Ltd.
INVESTOR FINANCIAL SUPPLEMENT

SECOND QUARTER 2011

 

 


 

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  
ii. Corporate Organization Chart
    ii  
 
       
I. Consolidated Financial Highlights
    1  
 
       
II. Consolidated Financial Statements
       
a. Consolidated Statements of Income (Loss) — Quarterly
    2  
b. Consolidated Statements of (Loss) Income — YTD
    3  
c. Consolidated Balance Sheets
    4  
 
       
III. Other Financial Information
       
a. Probable Maximum Loss by Zone and Peril
    5  
b. Segment Distribution
    6  
c. Consolidated Segment Data
    7  
d. Return on Equity Analysis
    19  
e. ROE Component Analysis — Annualized Premium and Investment Leverage
    20  
f. Investment Portfolio Information
    21  
g. Structured Securities Detail
    22  
h. Largest Twenty-Five Corporate Holdings
    23  
 
       
IV. Loss Reserve Analysis
       
a. Activity in Reserve for Losses and Loss Expenses
    24  
b. Prior Year Reserve Development by Segment
    25  
c. Prior Year Reserve Development by Development Tail
    26  
d. Analysis of Unpaid Losses and Loss Expenses
    27  
 
       
V. Shareholder Return Analysis
       
a. Shareholder Return Analysis
    28  
b. Weighted Average Dilutive Shares Outstanding
    29  
c. Earnings (Losses) per Share — Two Class Method
    30  
d. Operating Income (Loss) Reconciliation — Two Class Method
    31  
e. Dilutive Shares Sensitivity Analysis
    32  
f. Book Value Per Share Analysis
    33  
 
       
VI. Regulation G
    34  
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 “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. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only to the date on which they are made. We undertake no obligation to publicly update or review any forward looking statement, when as a result of new information, future developments or otherwise.
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, as amended, for the year ended December 31, 2010.
(ENDURANCE 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, 2010 and 2009 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 and class B 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.
(ENDURANCE LOGO)

 

i


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CORPORATE ORGANIZATION CHART
(FLOW CHART)
(ENDURANCE LOGO)

 

ii


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL HIGHLIGHTS
                                                 
    QUARTER ENDED     SIX MONTHS ENDED     Previous     Previous  
    JUNE 30,     JUNE 30,     Quarter     Year to Date  
    2011     2010     2011     2010     Change     Change  
 
HIGHLIGHTS
                                               
Net income (loss)
  $ 41,077     $ 58,593     $ (46,340 )   $ 114,382       (29.9 )%     (140.5 )%
Net income (loss) available (attributable) to common and participating common shareholders
    37,202       54,718       (54,090 )     106,632       (32.0 )%     (150.7 )%
Net income (loss) allocated to common shareholders
    36,492       53,598       (54,606 )     104,581       (31.9 )%     (152.2 )%
Operating income (loss) [a]
    24,473       57,715       (72,170 )     117,887       (57.6 )%     (161.2 )%
Operating income (loss) available (attributable) to common and participating common shareholders [a]
    20,598       53,840       (79,920 )     110,137       (61.7 )%     (172.6 )%
Operating income (loss) allocated to common shareholders [a]
    20,199       52,738       (80,436 )     108,019       (61.7 )%     (174.5 )%
Operating cash flow
    106,970       88,464       288,252       216,174       20.9 %     33.3 %
Net investment income
    39,842       33,351       92,343       89,830       19.5 %     2.8 %
Gross premiums written
    502,924       489,568       1,503,282       1,308,437       2.7 %     14.9 %
Net premiums written
    441,758       450,803       1,240,630       1,153,745       (2.0 )%     7.5 %
Net premiums earned
    486,578       456,395       869,411       821,584       6.6 %     5.8 %
Total assets
    8,760,040       8,490,438       8,760,040       8,490,438       3.2 %     3.2 %
Total shareholders’ equity
    2,670,276       2,844,105       2,670,276       2,844,105       (6.1 )%     (6.1 )%
 
                                               
PER SHARE AND SHARES DATA
                                               
Basic earnings per common share
                                               
Net income (loss) (as reported)
  $ 0.92     $ 1.02     $ (1.36 )   $ 1.97       (9.8 )%     (169.0 )%
Operating income (loss) (as reported) [a]
  $ 0.51     $ 1.00     $ (2.00 )   $ 2.04       (49.0 )%     (198.0 )%
Diluted earnings (losses) per common share
                                               
Net income (loss) (as reported)
  $ 0.87     $ 0.97     $ (1.36 )   $ 1.88       (10.3 )%     (172.3 )%
Operating income (loss) (as reported) [a]
  $ 0.48     $ 0.96     $ (2.00 )   $ 1.94       (50.0 )%     (203.1 )%
 
                                               
As Reported
                                               
Weighted average common shares outstanding
    39,710       52,509       40,227       52,958       (24.4 )%     (24.0 )%
Weighted average common shares outstanding and dilutive potential common shares
    42,156       55,210       40,227       55,765       (23.6 )%     (27.9 )%
 
                                               
Book Value Per Common Share
                                               
Book value [b]
  $ 56.35     $ 51.17     $ 56.35     $ 51.17       10.1 %     10.1 %
Diluted book value (treasury stock method) [b]
  $ 52.20     $ 47.78     $ 52.20     $ 47.78       9.3 %     9.3 %
 
                                               
FINANCIAL RATIOS
                                               
Return on average common equity (ROAE), net income (loss) [c]
    1.7 %     2.1 %     (2.2 )%     4.1 %     (0.4 )     (6.3 )
ROAE, operating income (loss) [a] [c]
    0.9 %     2.0 %     (3.3 )%     4.2 %     (1.1 )     (7.5 )
Return on beg. common equity (ROBE), net income (loss) [d]
    1.7 %     2.1 %     (2.0 )%     4.1 %     (0.4 )     (6.1 )
ROBE, operating income (loss) [a] [d]
    0.9 %     2.1 %     (3.0 )%     4.3 %     (1.2 )     (7.3 )
 
                                               
Annualized ROAE, net income (loss) [c]
    6.7 %     8.3 %     (4.4 )%     8.2 %     (1.6 )     (12.6 )
Annualized ROAE, operating income (loss) [a] [c]
    3.7 %     8.2 %     (6.5 )%     8.4 %     (4.5 )     (14.9 )
Annualized ROBE, net income (loss) [d]
    6.7 %     8.4 %     (4.1 )%     8.2 %     (1.7 )     (12.3 )
Annualized ROBE, operating income (loss) [a] [d]
    3.7 %     8.2 %     (6.0 )%     8.5 %     (4.5 )     (14.5 )
Annualized investment yield
    2.6 %     2.2 %     3.0 %     3.0 %     0.4       0.0  
 
                                               
GAAP
                                               
Loss ratio
    74.4 %     64.2 %     87.9 %     64.0 %     10.2       23.9  
Acquisition expense ratio
    14.0 %     14.6 %     15.4 %     15.9 %     (0.6 )     (0.5 )
General and administrative expense ratio
    13.5 %     12.2 %     15.1 %     13.9 %     1.3       1.2  
 
                                   
Combined ratio
    101.9 %     91.0 %     118.4 %     93.8 %     10.9       24.6  
 
                                           
[a]   Operating income (loss) represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses. Please see page 31 for a reconciliation to net income (loss).
 
[b]   For detailed calculations, please refer to page 33.
 
[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 liquidation value of the preferred shares (beginning liquidation value of $200 million, ending liquidation value of $430 million).
 
[d]   Beginning common equity for the stated periods excludes the $200 million liquidation value of the preferred shares.
(ENDURANCE LOGO)

 

1


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) — QUARTERLY
                                                 
    QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
 
UNDERWRITING REVENUES
                                               
Gross premiums written
  $ 502,924     $ 1,000,358     $ 189,225     $ 555,574     $ 489,568     $ 559,155  
Premiums ceded
    (61,166 )     (201,486 )     (31,110 )     (103,690 )     (38,765 )     (79,128 )
 
                                   
Net premiums written
  $ 441,758     $ 798,872     $ 158,115     $ 451,884     $ 450,803     $ 480,027  
Change in unearned premiums
    44,820       (416,039 )     291,621       17,909       5,592       (45,807 )
 
                                   
Net premiums earned
  $ 486,578     $ 382,833     $ 449,736     $ 469,793     $ 456,395     $ 434,220  
Other underwriting income (loss)
    1,088       (1,069 )     410       322       (2,663 )     596  
 
                                   
Total underwriting revenues
  $ 487,666     $ 381,764     $ 450,146     $ 470,115     $ 453,732     $ 434,816  
 
                                   
 
                                               
UNDERWRITING EXPENSES
                                               
Losses and loss expenses
  $ 361,970     $ 401,853     $ 246,424     $ 266,132     $ 292,947     $ 270,816  
Acquisition expenses
    67,887       65,618       66,133       67,443       66,708       63,850  
General and administrative expenses
    65,886       65,961       67,756       59,523       55,676       54,529  
 
                                   
Total underwriting expenses
  $ 495,743     $ 533,432     $ 380,313     $ 393,098     $ 415,331     $ 389,195  
 
                                   
Underwriting (loss) income
  $ (8,077 )   $ (151,668 )   $ 69,833     $ 77,017     $ 38,401     $ 45,621  
 
                                   
 
                                               
OTHER OPERATING REVENUE
                                               
Net investment income
  $ 39,842     $ 52,501     $ 56,874     $ 53,654     $ 33,351     $ 88,834  
Interest expense
    (9,057 )     (9,054 )     (9,053 )     (9,051 )     (9,050 )     (7,538 )
Amortization of intangibles
    (3,026 )     (2,798 )     (2,696 )     (2,588 )     (2,588 )     (2,588 )
 
                                   
Total other operating revenue
  $ 27,759     $ 40,649     $ 45,125     $ 42,015     $ 21,713     $ 78,708  
 
                                   
 
                                               
INCOME (LOSS) BEFORE OTHER ITEMS
  $ 19,682     $ (111,019 )   $ 114,958     $ 119,032     $ 60,114     $ 124,329  
 
                                               
OTHER
                                               
Net foreign exchange (losses) gains
  $ (3,348 )   $ 6,918     $ (3,476 )   $ 12,565     $ (129 )   $ 27,723  
Net realized and unrealized investment gains (losses)
    21,532       3,775       7,314       8,973       2,657       (1,500 )
 
                                               
Total other-than-temporary impairment losses
    (484 )     (1,256 )     (48 )     (1,140 )     (738 )     (37,809 )
Portion of loss recognised in other comprehensive income
    (448 )     (391 )     (663 )     (240 )     (254 )     31,165  
 
                                   
Net impairment losses recognised in earnings (losses) [a]
    (932 )     (1,647 )     (711 )     (1,380 )     (992 )     (6,644 )
 
                                               
Income tax benefit (expense)
    4,143       14,556       (6,857 )     (62 )     (3,057 )     5,232  
 
                                   
 
                                               
NET INCOME (LOSS)
  $ 41,077     $ (87,417 )   $ 111,228     $ 139,128     $ 58,593     $ 149,140  
Preferred dividends
    (3,875 )     (3,875 )     (3,875 )     (3,875 )     (3,875 )     (3,875 )
 
                                   
NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS
  $ 37,202     $ (91,292 )   $ 107,353     $ 135,253     $ 54,718     $ 145,265  
 
                                   
 
                                               
KEY RATIOS/PER SHARE DATA
                                               
 
                                               
Loss ratio
    74.4 %     105.0 %     54.8 %     56.6 %     64.2 %     62.4 %
Acquisition expense ratio
    14.0 %     17.1 %     14.7 %     14.4 %     14.6 %     14.7 %
General and administrative expense ratio
    13.5 %     17.2 %     15.1 %     12.7 %     12.2 %     12.5 %
 
                                   
Combined ratio
    101.9 %     139.3 %     84.6 %     83.7 %     91.0 %     89.6 %
 
                                   
 
                                               
Basic earnings (losses) per common share
  $ 0.92     $ (2.25 )   $ 2.22     $ 2.64     $ 1.02     $ 2.53  
Diluted earnings (losses) per common share
  $ 0.87     $ (2.25 )   $ 2.09     $ 2.51     $ 0.97     $ 2.42  
 
                                               
ROAE, net income (loss) [b]
    1.7 %     (3.8 )%     4.0 %     5.0 %     2.1 %     6.7 %
[a]   Effective April 1, 2009, the Company adopted new accounting guidance related to the recognition and presentation of other-than-temporary impairments, which required the Company to identify whether an investment was in an unrealized loss position due to credit or non-credit related factors. Only credit related impairments are recognized in earnings.
 
[b]   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 (beginning liquidation value of $200 million, ending liquidation value of $430 million).
(ENDURANCE LOGO)

 

2


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME — YTD
                                         
    SIX MONTHS ENDED     YEAR ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
 
                                       
UNDERWRITING REVENUES
                                       
Gross premiums written
  $ 1,503,282     $ 1,308,437     $ 1,342,461     $ 2,053,236     $ 2,021,450  
Premiums ceded
    (262,652 )     (154,692 )     (279,519 )     (289,492 )     (415,400 )
 
                             
Net premiums written
  $ 1,240,630     $ 1,153,745     $ 1,062,942     $ 1,763,744     $ 1,606,050  
Change in unearned premiums
    (371,219 )     (332,161 )     (250,447 )     (22,631 )     27,142  
 
                             
Net premiums earned
  $ 869,411     $ 821,584     $ 812,495     $ 1,741,113     $ 1,633,192  
Other underwriting income (loss)
    19       (2,368 )     4,193       (1,636 )     3,914  
 
                             
Total underwriting revenues
  $ 869,430     $ 819,216     $ 816,688     $ 1,739,477     $ 1,637,106  
 
                             
 
                                       
UNDERWRITING EXPENSES
                                       
Losses and loss expenses
  $ 763,823     $ 525,544     $ 490,952     $ 1,038,100     $ 866,640  
Acquisition expenses
    133,505       130,652       132,124       264,228       267,971  
General and administrative expenses
    131,847       114,641       114,786       241,920       237,154  
 
                             
Total underwriting expenses
  $ 1,029,175     $ 770,837     $ 737,862     $ 1,544,248     $ 1,371,765  
 
                             
Underwriting (loss) income
  $ (159,745 )   $ 48,379     $ 78,826     $ 195,229     $ 265,341  
 
                             
 
                                       
OTHER OPERATING REVENUE
                                       
Net investment income
  $ 92,343     $ 89,830     $ 153,384     $ 200,358     $ 284,200  
Interest expense
    (18,111 )     (16,658 )     (15,093 )     (34,762 )     (30,174 )
Amortization of intangibles
    (5,824 )     (5,176 )     (5,176 )     (10,460 )     (10,463 )
 
                             
Total other operating revenue
  $ 68,408     $ 67,996     $ 133,115     $ 155,136     $ 243,563  
 
                             
 
                                       
(LOSS) INCOME BEFORE OTHER ITEMS
  $ (91,337 )   $ 116,375     $ 211,941     $ 350,365     $ 508,904  
 
                                       
OTHER
                                       
Net foreign exchange gains (losses)
  $ 3,570     $ (6,100 )   $ 27,785     $ 2,989     $ 29,740  
Net realized and unrealized investment gains
    25,307       6,201       1,741       22,488       6,303  
 
                                       
Total other-than-temporary impairment losses
    (1,740 )     (1,507 )     (49,935 )     (2,695 )     (50,993 )
Portion of loss recognised in other comprehensive income
    (839 )     (346 )     31,165       (1,249 )     30,742  
 
                             
Net impairment losses recognised in (losses) earnings [a]
    (2,579 )     (1,853 )     (18,770 )     (3,944 )     (20,251 )
 
                                       
Income tax benefit (expense)
    18,699       (241 )     4,740       (7,160 )     11,408  
 
                             
NET (LOSS) INCOME
  $ (46,340 )   $ 114,382     $ 227,437     $ 364,738     $ 536,104  
Preferred dividends
    (7,750 )     (7,750 )     (7,750 )     (15,500 )     (15,500 )
 
                             
NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS
  $ (54,090 )   $ 106,632     $ 219,687     $ 349,238     $ 520,604  
 
                             
 
                                       
KEY RATIOS/PER SHARE DATA
                                       
 
                                       
Loss ratio
    87.9 %     64.0 %     60.4 %     59.6 %     53.1 %
Acquisition expense ratio
    15.4 %     15.9 %     16.3 %     15.2 %     16.4 %
General and administrative expense ratio
    15.1 %     13.9 %     14.1 %     13.9 %     14.5 %
 
                             
Combined ratio
    118.4 %     93.8 %     90.8 %     88.7 %     84.0 %
 
                             
 
                                       
Basic (losses) earnings per common share
  $ (1.36 )   $ 1.97     $ 3.83     $ 6.73     $ 9.14  
Diluted (losses) earnings per common share
  $ (1.36 )   $ 1.88     $ 3.65     $ 6.38     $ 8.69  
 
                                       
ROAE, net (loss) income [b]
    (2.2 )%     4.1 %     10.3 %     13.3 %     22.7 %
[a]   Effective April 1, 2009, the Company adopted new accounting guidance related to the recognition and presentation of other-than-temporary impairments, which required the Company to identify whether an investment was in an unrealized loss position due to credit or non-credit related factors. Only credit related impairments are recognized in earnings.
 
[b]   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 (beginning liquidation value of $200 million, ending liquidation value of $430 million).
(ENDURANCE LOGO)

 

3


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
                                                 
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     MAR. 31, 2010  
ASSETS
                                               
Cash and cash equivalents
  $ 750,844     $ 568,770     $ 609,852     $ 600,227     $ 690,761     $ 668,049  
Fixed maturity investments available for sale, at fair value
    4,961,948       5,014,226       5,116,702       5,063,873       4,908,774       4,793,451  
Short term investments available for sale, at fair value
    303,895       48,186       70,444       326,846       272,706       389,937  
Equity securities available for sale, at fair value
    32,322       25,333       13,565       12,773       11,952       12,329  
Other investments
    395,078       401,450       376,652       360,629       346,938       368,035  
Premiums receivable, net
    1,154,480       1,049,129       827,609       1,039,689       1,086,818       935,244  
Deferred acquisition costs
    182,870       178,486       154,484       192,194       175,479       163,639  
Securities lending collateral
    84,652       72,657       59,886       127,680       281,391       128,299  
Prepaid reinsurance premiums
    198,708       248,275       107,977       160,070       143,438       179,603  
Losses recoverable
    369,081       340,908       319,349       324,757       247,888       246,583  
Accrued investment income
    31,189       29,164       32,934       32,315       30,880       28,746  
Goodwill and intangible assets
    186,835       189,501       181,954       184,543       186,657       189,246  
Deferred tax assets
    38,144       49,370       33,684       29,130       25,941       30,502  
Receivable on pending investment sales
    3,685       128,867       602       372       1,935       8,859  
Other assets
    66,309       71,859       73,711       80,139       78,880       54,031  
 
                                   
TOTAL ASSETS
  $ 8,760,040     $ 8,416,181     $ 7,979,405     $ 8,535,237     $ 8,490,438     $ 8,196,553  
 
                                   
 
                                               
LIABILITIES
                                               
Reserve for losses and loss expenses
  $ 3,748,124     $ 3,566,198     $ 3,319,927     $ 3,401,312     $ 3,274,637     $ 3,138,905  
Reserve for unearned premiums
    1,304,146       1,398,610       842,154       1,186,001       1,186,857       1,228,559  
Deposit liabilities
    30,300       32,768       32,505       36,952       39,641       39,729  
Reinsurance balances payable
    209,548       143,305       228,860       209,651       209,533       153,174  
Securities lending payable
    84,652       72,657       59,886       127,681       281,391       128,265  
Debt
    528,540       528,569       528,411       528,425       528,363       528,357  
Payable on pending investment purchases
    80,532       164,744             17,042       39,906       79,245  
Other liabilities
    103,922       101,066       119,509       108,488       86,005       79,232  
 
                                   
TOTAL LIABILITIES
  $ 6,089,764     $ 6,007,917     $ 5,131,252     $ 5,615,552     $ 5,646,333     $ 5,375,466  
 
                                   
 
                                               
SHAREHOLDERS’ EQUITY
                                               
Preferred shares
                                               
Series A, non-cumulative
  $ 8,000     $ 8,000     $ 8,000     $ 8,000     $ 8,000     $ 8,000  
Series B, non-cumulative
    9,200                                
Common shares
    40,509       40,325       47,218       49,685       52,664       54,230  
Additional paid-in capital
    509,165       289,920       613,915       715,834       822,572       882,684  
Accumulated other comprehensive income
    141,140       132,806       138,571       201,172       138,605       95,413  
Retained earnings
    1,962,262       1,937,213       2,040,449       1,944,994       1,822,264       1,780,760  
 
                                   
TOTAL SHAREHOLDERS’ EQUITY
  $ 2,670,276     $ 2,408,264     $ 2,848,153     $ 2,919,685     $ 2,844,105     $ 2,821,087  
 
                                   
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 8,760,040     $ 8,416,181     $ 7,979,405     $ 8,535,237     $ 8,490,438     $ 8,196,553  
 
                                   
 
                                               
Book value per common share
  $ 56.35     $ 55.91     $ 57.25     $ 55.83     $ 51.17     $ 49.44  
Diluted book value per common share (treasury stock method)
  $ 52.20     $ 51.52     $ 52.74     $ 51.83     $ 47.78     $ 45.89  
 
                                               
RATIOS
                                               
Debt-to-capital
    16.5 %     18.0 %     15.6 %     15.3 %     15.7 %     15.8 %
(ENDURANCE LOGO)

 

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 , 2011 is equal to 21.2% of Shareholders’ Equity as of June 30, 2011
                                                                     
            Estimated Occurrence Net Loss as of Jan. 1, 2011         July 1, 2010     July 1, 2009  
            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   $ 203     $ 336     $ 446     $ 567     $ 745         $ 578     $ 551  
Europe
  Windstorm     79       213       334       463       620           427       421  
California
  Earthquake     37       190       323       456       643           439       369  
Japan
  Windstorm     56       166       269       363       454           369       242  
Northwest U.S.
  Earthquake     0       10       82       238       474           239       204  
Japan
  Earthquake     8       46       95       143       212           137       139  
United States
  Tornado/Hail     27       47       65       84       111           80       71  
Australia
  Earthquake     0       4       23       71       170           54       34  
New Zealand
  Earthquake     0       3       15       44       89           39       32  
Australia
  Windstorm     1       6       17       36       68           28       24  
New Madrid
  Earthquake     0       0       0       12       109           12       14  
The net loss estimates by zone above represent estimated losses related to our property, catastrophe and aerospace and marine lines of business, based upon our catastrophe models and assumptions regarding the location, size, magnitude, and frequency of the catastrophe events utilized to determine the above estimates. The net loss estimates are presented on an occurrence basis, before income tax and net of reinstatement premiums and reinsurance recoveries, 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, as amended, for the year ended December 31, 2010 and on Form 10-Q for the quarter ended March 31, 2011.
(ENDURANCE LOGO)

 

5


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT DISTRIBUTION

FOR THE SIX MONTHS ENDED JUNE 30, 2011
Net Premiums Written = $1,241 million
     
(PIE CHART)   (PIE CHART)
     
(PIE CHART)   (PIE CHART)
[a]   Other specialty includes the agriculture line in the Insurance segment and aerospace and marine and surety and other specialty lines in the Reinsurance segment.
(ENDURANCE LOGO)

 

6


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     JUNE 30, 2010  
    Insurance     Reinsurance     Totals     Insurance     Reinsurance     Totals  
UNDERWRITING REVENUES
                                               
Gross premiums written
  $ 225,750     $ 277,174     $ 502,924     $ 231,626     $ 257,942     $ 489,568  
 
                                   
Net premiums written
  $ 173,506     $ 268,252     $ 441,758     $ 194,987     $ 255,816     $ 450,803  
 
                                   
Net premiums earned
  $ 249,397     $ 237,181     $ 486,578     $ 227,858     $ 228,537     $ 456,395  
Other underwriting income (loss)
          1,088       1,088             (2,663 )     (2,663 )
 
                                   
Total underwriting revenues
  $ 249,397     $ 238,269     $ 487,666     $ 227,858     $ 225,874     $ 453,732  
 
                                   
 
                                               
UNDERWRITING EXPENSES
                                               
Losses and loss expenses
  $ 191,396     $ 170,574     $ 361,970     $ 170,773     $ 122,174     $ 292,947  
Acquisition expenses
    15,861       52,026       67,887       16,554       50,154       66,708  
General and administrative expenses
    36,227       29,659       65,886       27,146       28,530       55,676  
 
                                   
Total expenses
  $ 243,484     $ 252,259     $ 495,743     $ 214,473     $ 200,858     $ 415,331  
 
                                   
 
                                               
UNDERWRITING INCOME (LOSS)
  $ 5,913     $ (13,990 )   $ (8,077 )   $ 13,385     $ 25,016     $ 38,401  
 
                                   
 
                                               
GAAP RATIOS
                                               
Loss ratio
    76.7 %     71.9 %     74.4 %     74.9 %     53.5 %     64.2 %
Acquisition expense ratio
    6.4 %     22.0 %     14.0 %     7.3 %     21.9 %     14.6 %
General and administrative expense ratio
    14.5 %     12.5 %     13.5 %     11.9 %     12.5 %     12.2 %
 
                                   
Combined ratio AS REPORTED
    97.6 %     106.4 %     101.9 %     94.1 %     87.9 %     91.0 %
 
                                   
 
                                               
Effect of favorable prior accident year reserve development
    9.3 %     9.1 %     9.2 %     3.6 %     9.4 %     6.5 %
 
                                   
 
                                               
Combined ratio net of prior accident year reserve development
    106.9 %     115.5 %     111.1 %     97.7 %     97.3 %     97.5 %
 
                                   
(ENDURANCE LOGO)

 

7


 

ENDURANCE SPECIALTY HOLDINGS LTD.
INSURANCE SEGMENT DATA
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
UNDERWRITING REVENUES
                                               
Gross premiums written
  $ 225,750     $ 625,831     $ 112,664     $ 303,561     $ 231,626     $ 230,792  
 
                                   
Net premiums written
  $ 173,506     $ 432,296     $ 81,643     $ 204,293     $ 194,987     $ 153,762  
 
                                   
Net premiums earned
  $ 249,397     $ 162,492     $ 205,528     $ 242,766     $ 227,858     $ 223,588  
Other underwriting income
                4       473             103  
 
                                   
Total underwriting revenues
  $ 249,397     $ 162,492     $ 205,532     $ 243,239     $ 227,858     $ 223,691  
 
                                   
 
                                               
UNDERWRITING EXPENSES
                                               
Losses and loss expenses
  $ 191,396     $ 98,836     $ 129,168     $ 172,015     $ 170,773     $ 166,046  
Acquisition expenses
    15,861       16,308       12,220       17,356       16,554       20,855  
General and administrative expenses
    36,227       36,806       36,812       29,256       27,146       25,179  
 
                                   
Total expenses
  $ 243,484     $ 151,950     $ 178,200     $ 218,627     $ 214,473     $ 212,080  
 
                                   
 
                                               
UNDERWRITING INCOME
  $ 5,913     $ 10,542     $ 27,332     $ 24,612     $ 13,385     $ 11,611  
 
                                   
 
                                               
GAAP RATIOS
                                               
Loss ratio
    76.7 %     60.8 %     62.9 %     70.9 %     74.9 %     74.3 %
Acquisition expense ratio
    6.4 %     10.0 %     5.9 %     7.1 %     7.3 %     9.3 %
General and administrative expense ratio
    14.5 %     22.7 %     17.9 %     12.1 %     11.9 %     11.3 %
 
                                   
Combined ratio AS REPORTED
    97.6 %     93.5 %     86.7 %     90.1 %     94.1 %     94.9 %
 
                                   
 
                                               
Effect of favorable prior accident year reserve development
    9.3 %     21.3 %     5.6 %     3.9 %     3.6 %     8.9 %
 
                                   
Combined ratio net of prior accident year reserve development
    106.9 %     114.8 %     92.3 %     94.0 %     97.7 %     103.8 %
 
                                   
(ENDURANCE LOGO)

 

8


 

ENDURANCE SPECIALTY HOLDINGS LTD.
REINSURANCE SEGMENT DATA
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
UNDERWRITING REVENUES
                                               
Gross premiums written
  $ 277,174     $ 374,527     $ 76,561     $ 252,013     $ 257,942     $ 328,363  
 
                                   
Net premiums written
  $ 268,252     $ 366,576     $ 76,472     $ 247,591     $ 255,816     $ 326,265  
 
                                   
Net premiums earned
  $ 237,181     $ 220,341     $ 244,208     $ 227,027     $ 228,537     $ 210,632  
Other underwriting income (loss)
    1,088       (1,069 )     406       (151 )     (2,663 )     493  
 
                                   
Total underwriting revenues
  $ 238,269     $ 219,272     $ 244,614     $ 226,876     $ 225,874     $ 211,125  
 
                                   
 
                                               
UNDERWRITING EXPENSES
                                               
Losses and loss expenses
  $ 170,574     $ 303,017     $ 117,256     $ 94,117     $ 122,174     $ 104,770  
Acquisition expenses
    52,026       49,310       53,913       50,087       50,154       42,995  
General and administrative expenses
    29,659       29,155       30,944       30,267       28,530       29,350  
 
                                   
Total expenses
  $ 252,259     $ 381,482     $ 202,113     $ 174,471     $ 200,858     $ 177,115  
 
                                   
 
                                               
UNDERWRITING (LOSS) INCOME
  $ (13,990 )   $ (162,210 )   $ 42,501     $ 52,405     $ 25,016     $ 34,010  
 
                                   
 
                                               
GAAP RATIOS
                                               
Loss ratio
    71.9 %     137.5 %     48.0 %     41.5 %     53.5 %     49.8 %
Acquisition expense ratio
    22.0 %     22.4 %     22.1 %     22.1 %     21.9 %     20.4 %
General and administrative expense ratio
    12.5 %     13.2 %     12.7 %     13.3 %     12.5 %     13.9 %
 
                                   
Combined ratio AS REPORTED
    106.4 %     173.1 %     82.8 %     76.9 %     87.9 %     84.1 %
 
                                   
 
                                               
Effect of favorable prior accident year reserve development
    9.1 %     6.4 %     4.9 %     11.3 %     9.4 %     7.7 %
 
                                   
Combined ratio net of prior accident year reserve development
    115.5 %     179.5 %     87.7 %     88.2 %     97.3 %     91.8 %
 
                                   
(ENDURANCE LOGO)

 

9


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
INSURANCE SEGMENT
                                               
Agriculture
  $ 57,125     $ 508,705     $ 6,930     $ 156,162     $ 54,170     $ 56,235  
Professional lines
    49,181       35,469       36,690       43,381       56,567       62,079  
Casualty
    63,178       38,882       37,377       40,538       55,406       50,605  
Property
    35,904       24,690       22,134       30,295       43,158       40,084  
Healthcare liability
    20,454       18,137       10,811       34,024       22,442       23,202  
Workers’ compensation
    (92 )     (52 )     (1,278 )     (839 )     (117 )     (1,413 )
 
                                   
TOTAL INSURANCE
  $ 225,750     $ 625,831     $ 112,664     $ 303,561     $ 231,626     $ 230,792  
 
                                   
 
                                               
REINSURANCE SEGMENT
                                               
Catastrophe
  $ 146,249     $ 138,247     $ 17,896     $ 45,513     $ 123,808     $ 148,380  
Casualty
    45,619       116,352       47,970       81,167       56,919       83,813  
Property
    52,185       70,087       8,628       111,395       39,999       55,245  
Aerospace and Marine
    26,743       20,838       2,380       4,184       24,131       23,568  
Surety and other specialty
    6,378       29,003       (313 )     9,754       13,085       17,357  
 
                                   
TOTAL REINSURANCE
  $ 277,174     $ 374,527     $ 76,561     $ 252,013     $ 257,942     $ 328,363  
 
                                   
 
                                               
REPORTED TOTALS
  $ 502,924     $ 1,000,358     $ 189,225     $ 555,574     $ 489,568     $ 559,155  
 
                                   
(ENDURANCE LOGO)

 

10


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
INSURANCE SEGMENT
                                               
Agriculture
  $ 46,049     $ 346,472     $ 2,372     $ 89,119     $ 45,169     $ 28,713  
Professional lines
    37,624       31,124       33,171       38,522       49,422       54,370  
Casualty
    43,811       25,759       25,536       23,700       37,527       28,291  
Property
    25,996       12,585       11,895       21,366       40,950       22,125  
Healthcare liability
    20,115       16,406       9,946       32,393       22,031       22,871  
Workers’ compensation
    (89 )     (50 )     (1,277 )     (807 )     (112 )     (2,608 )
 
                                   
TOTAL INSURANCE
  $ 173,506     $ 432,296     $ 81,643     $ 204,293     $ 194,987     $ 153,762  
 
                                   
 
                                               
REINSURANCE SEGMENT
                                               
Catastrophe
  $ 139,337     $ 131,123     $ 17,896     $ 41,154     $ 123,808     $ 148,380  
Casualty
    45,617       115,554       47,965       81,163       56,831       83,805  
Property
    52,185       70,087       8,628       111,395       39,999       55,245  
Aerospace and Marine
    24,726       20,839       2,380       4,184       22,101       21,540  
Surety and other specialty
    6,387       28,973       (397 )     9,695       13,077       17,295  
 
                                   
TOTAL REINSURANCE
  $ 268,252     $ 366,576     $ 76,472     $ 247,591     $ 255,816     $ 326,265  
 
                                   
 
                                               
REPORTED TOTALS
  $ 441,758     $ 798,872     $ 158,115     $ 451,884     $ 450,803     $ 480,027  
 
                                   
(ENDURANCE LOGO)

 

11


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS
                                                 
    FOR THE QUARTERS ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     JUNE 30, 2009  
INSURANCE SEGMENT
                                               
Agriculture
  $ 142,952     $ 59,808     $ 100,177     $ 134,864     $ 115,990     $ 93,806  
Professional lines
    37,788       36,175       37,167       38,085       39,626       42,473  
Casualty
    28,735       29,742       28,415       25,682       26,315       19,694  
Property
    19,566       16,593       20,362       24,000       26,153       20,677  
Healthcare liability
    20,445       20,224       20,684       20,942       19,886       19,940  
Workers’ compensation
    (89 )     (50 )     (1,277 )     (807 )     (112 )     26,998  
 
                                   
TOTAL INSURANCE
  $ 249,397     $ 162,492     $ 205,528     $ 242,766     $ 227,858     $ 223,588  
 
                                   
 
                                               
REINSURANCE SEGMENT
                                               
Catastrophe
  $ 81,747     $ 76,335     $ 79,617     $ 74,675     $ 79,528     $ 77,987  
Casualty
    70,441       64,953       74,702       71,844       64,906       49,949  
Property
    58,643       52,452       64,229       56,975       56,646       55,021  
Aerospace and Marine
    13,154       13,587       11,312       8,602       12,751       11,789  
Surety and other specialty
    13,196       13,014       14,348       14,931       14,706       15,886  
 
                                   
TOTAL REINSURANCE
  $ 237,181     $ 220,341     $ 244,208     $ 227,027     $ 228,537     $ 210,632  
 
                                   
 
                                               
REPORTED TOTALS
  $ 486,578     $ 382,833     $ 449,736     $ 469,793     $ 456,395     $ 434,220  
 
                                   
(ENDURANCE LOGO)

 

12


 

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
                                                 
    FOR THE SIX MONTHS ENDED  
    JUNE 30, 2011     JUNE 30, 2010  
    Insurance     Reinsurance     Totals     Insurance     Reinsurance     Totals  
UNDERWRITING REVENUES
                                               
Gross premiums written
  $ 851,581     $ 651,701     $ 1,503,282     $ 695,967     $ 612,470     $ 1,308,437  
 
                                   
Net premiums written
  $ 605,802     $ 634,828     $ 1,240,630     $ 543,928     $ 609,817     $ 1,153,745  
 
                                   
Net premiums earned
  $ 411,889     $ 457,522     $ 869,411     $ 373,534     $ 448,050     $ 821,584  
Other underwriting income (loss)
          19       19       (2 )     (2,366 )     (2,368 )
 
                                   
Total underwriting revenues
  $ 411,889     $ 457,541     $ 869,430     $ 373,532     $ 445,684     $ 819,216  
 
                                   
 
                                               
UNDERWRITING EXPENSES
                                               
Losses and loss expenses
  $ 290,232     $ 473,591     $ 763,823     $ 256,857     $ 268,687     $ 525,544  
Acquisition expenses
    32,169       101,336       133,505       33,980       96,672       130,652  
General and administrative expenses
    73,033       58,814       131,847       57,267       57,374       114,641  
 
                                   
Total expenses
  $ 395,434     $ 633,741     $ 1,029,175     $ 348,104     $ 422,733     $ 770,837  
 
                                   
 
                                               
UNDERWRITING INCOME (LOSS)
  $ 16,455     $ (176,200 )   $ (159,745 )   $ 25,428     $ 22,951     $ 48,379  
 
                                   
 
                                               
GAAP RATIOS
                                               
Loss ratio
    70.5 %     103.5 %     87.9 %     68.8 %     59.9 %     64.0 %
Acquisition expense ratio
    7.8 %     22.1 %     15.4 %     9.1 %     21.6 %     15.9 %
General and administrative expense ratio
    17.7 %     12.9 %     15.1 %     15.3 %     12.8 %     13.9 %
 
                                   
Combined ratio AS REPORTED
    96.0 %     138.5 %     118.4 %     93.2 %     94.3 %     93.8 %
 
                                   
 
                                               
Effect of favorable prior accident year reserve development
    14.0 %     7.8 %     10.8 %     6.9 %     9.4 %     8.3 %
 
                                   
 
                                               
Combined ratio net of prior accident year reserve development
    110.0 %     146.3 %     129.2 %     100.1 %     103.7 %     102.1 %
 
                                   
(ENDURANCE LOGO)

 

13


 

ENDURANCE SPECIALTY HOLDINGS LTD.
INSURANCE SEGMENT DATA
                                         
    FOR THE SIX MONTHS ENDED     FOR THE YEARS ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
UNDERWRITING REVENUES
                                       
Gross premiums written
  $ 851,581     $ 695,967     $ 753,006     $ 1,112,192     $ 1,152,150  
 
                             
Net premiums written
  $ 605,802     $ 543,928     $ 476,192     $ 829,864     $ 740,310  
 
                             
Net premiums earned
  $ 411,889     $ 373,534     $ 404,262     $ 821,828     $ 823,703  
Other underwriting (loss) income
          (2 )     3,062       475       3,533  
 
                             
Total underwriting revenues
  $ 411,889     $ 373,532     $ 407,324     $ 822,303     $ 827,236  
 
                             
 
                                       
UNDERWRITING EXPENSES
                                       
Losses and loss expenses
  $ 290,232     $ 256,857     $ 264,850     $ 558,040     $ 553,008  
Acquisition expenses
    32,169       33,980       45,696       63,556       84,724  
General and administrative expenses
    73,033       57,267       54,938       123,335       119,766  
 
                             
Total expenses
  $ 395,434     $ 348,104     $ 365,484     $ 744,931     $ 757,498  
 
                             
 
                                       
UNDERWRITING INCOME
  $ 16,455     $ 25,428     $ 41,840     $ 77,372     $ 69,738  
 
                             
 
                                       
GAAP RATIOS
                                       
Loss ratio
    70.5 %     68.8 %     65.5 %     67.9 %     67.1 %
Acquisition expense ratio
    7.8 %     9.1 %     11.3 %     7.7 %     10.3 %
General and administrative expense ratio
    17.7 %     15.3 %     13.6 %     15.0 %     14.6 %
 
                             
Combined ratio AS REPORTED
    96.0 %     93.2 %     90.4 %     90.6 %     92.0 %
 
                             
 
                                       
Effect of favorable prior accident year reserve development
    14.0 %     6.9 %     14.0 %     5.7 %     11.2 %
 
                             
Combined ratio net of prior accident year reserve development
    110.0 %     100.1 %     104.4 %     96.3 %     103.2 %
 
                             
(ENDURANCE LOGO)

 

14


 

ENDURANCE SPECIALTY HOLDINGS LTD.
REINSURANCE SEGMENT DATA
                                         
    FOR THE SIX MONTHS ENDED     FOR THE YEARS ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
UNDERWRITING REVENUES
                                       
Gross premiums written
  $ 651,701     $ 612,470     $ 589,455     $ 941,044     $ 869,300  
 
                             
Net premiums written
  $ 634,828     $ 609,817     $ 586,750     $ 933,880     $ 865,740  
 
                             
Net premiums earned
  $ 457,522     $ 448,050     $ 408,233     $ 919,285     $ 809,489  
Other underwriting (loss) income
    19       (2,366 )     1,131       (2,111 )     381  
 
                             
Total underwriting revenues
  $ 457,541     $ 445,684     $ 409,364     $ 917,174     $ 809,870  
 
                             
 
                                       
UNDERWRITING EXPENSES
                                       
Losses and loss expenses
  $ 473,591     $ 268,687     $ 226,102     $ 480,060     $ 313,632  
Acquisition expenses
    101,336       96,672       86,428       200,672       183,247  
General and administrative expenses
    58,814       57,374       59,848       118,585       117,388  
 
                             
Total expenses
  $ 633,741     $ 422,733     $ 372,378     $ 799,317     $ 614,267  
 
                             
 
                                       
UNDERWRITING INCOME
  $ (176,200 )   $ 22,951     $ 36,986     $ 117,857     $ 195,603  
 
                             
 
                                       
GAAP RATIOS
                                       
Loss ratio
    103.5 %     59.9 %     55.4 %     52.2 %     38.8 %
Acquisition expense ratio
    22.1 %     21.6 %     21.2 %     21.8 %     22.6 %
General and administrative expense ratio
    12.9 %     12.8 %     14.6 %     12.9 %     14.5 %
 
                             
Combined ratio AS REPORTED
    138.5 %     94.3 %     91.2 %     86.9 %     75.9 %
 
                             
 
                                       
Effect of favorable prior accident year reserve development
    7.8 %     9.4 %     4.6 %     8.7 %     7.3 %
 
                             
Combined ratio net of prior accident year reserve development
    146.3 %     103.7 %     95.8 %     95.6 %     83.2 %
 
                             
(ENDURANCE LOGO)

 

15


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS
                                         
    FOR THE SIX MONTHS ENDED     FOR THE YEARS ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
INSURANCE SEGMENT
                                       
Agriculture
  $ 565,830     $ 404,369     $ 434,645     $ 567,461     $ 572,096  
Professional lines
    84,650       90,075       97,216       170,146       193,799  
Casualty
    102,060       89,634       81,229       167,549       152,580  
Property
    60,594       69,681       67,835       122,110       124,621  
Healthcare liability
    38,591       42,758       42,915       87,593       82,955  
Workers’ compensation
    (144 )     (550 )     29,166       (2,667 )     26,099  
 
                             
TOTAL INSURANCE
  $ 851,581     $ 695,967     $ 753,006     $ 1,112,192     $ 1,152,150  
 
                             
 
                                       
REINSURANCE SEGMENT
                                       
Catastrophe
  $ 284,496     $ 246,477     $ 257,829     $ 309,886     $ 303,404  
Casualty
    161,971       164,893       159,205       294,030       255,142  
Property
    122,272       104,521       90,032       224,544       215,085  
Aerospace and Marine
    47,581       42,197       35,795       48,761       44,696  
Surety and other specialty
    35,381       54,382       46,594       63,823       50,973  
 
                             
TOTAL REINSURANCE
  $ 651,701     $ 612,470     $ 589,455     $ 941,044     $ 869,300  
 
                             
 
                                       
REPORTED TOTALS
  $ 1,503,282     $ 1,308,437     $ 1,342,461     $ 2,053,236     $ 2,021,450  
 
                             
(ENDURANCE LOGO)

 

16


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS
                                         
    FOR THE SIX MONTHS ENDED     FOR THE YEARS ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
INSURANCE SEGMENT
                                       
Agriculture
  $ 392,521     $ 313,276     $ 252,016     $ 404,767     $ 324,480  
Professional lines
    68,748       77,024       83,992       148,717       167,091  
Casualty
    69,570       58,565       46,171       107,801       91,071  
Property
    38,581       55,038       39,612       88,299       68,011  
Healthcare liability
    36,521       40,554       40,080       82,893       78,284  
Workers’ compensation
    (139 )     (529 )     14,321       (2,613 )     11,373  
 
                             
TOTAL INSURANCE
  $ 605,802     $ 543,928     $ 476,192     $ 829,864     $ 740,310  
 
                             
 
                                       
REINSURANCE SEGMENT
                                       
Catastrophe
  $ 270,460     $ 246,567     $ 257,829     $ 305,617     $ 302,218  
Casualty
    161,171       164,094       158,974       293,222       254,897  
Property
    122,272       104,521       90,032       224,544       215,085  
Aerospace and Marine
    45,565       40,132       33,670       46,696       42,563  
Surety and other specialty
    35,360       54,503       46,245       63,801       50,977  
 
                             
TOTAL REINSURANCE
  $ 634,828     $ 609,817     $ 586,750     $ 933,880     $ 865,740  
 
                             
 
                                       
REPORTED TOTALS
  $ 1,240,630     $ 1,153,745     $ 1,062,942     $ 1,763,744     $ 1,606,050  
 
                             
(ENDURANCE LOGO)

 

17


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS
                                         
    FOR THE SIX MONTHS ENDED     FOR THE YEARS ENDED  
    JUNE 30, 2011     JUNE 30, 2010     JUNE 30, 2009     DEC. 31, 2010     DEC. 31, 2009  
INSURANCE SEGMENT
                                       
Agriculture
  $ 202,760     $ 162,602     $ 143,074     $ 397,643     $ 331,960  
Professional lines
    73,963       79,232       72,969       154,484       152,547  
Casualty
    58,477       50,973       41,426       105,070       89,340  
Property
    36,159       41,946       42,368       86,308       76,245  
Healthcare liability
    40,669       39,474       39,929       81,100       80,219  
Workers’ compensation
    (139 )     (693 )     64,496       (2,777 )     93,392  
 
                             
TOTAL INSURANCE
  $ 411,889     $ 373,534     $ 404,262     $ 821,828     $ 823,703  
 
                             
 
                                       
REINSURANCE SEGMENT
                                       
Catastrophe
  $ 158,082     $ 161,416     $ 152,703     $ 315,708     $ 296,982  
Casualty
    135,394       126,422       100,366       272,968       208,865  
Property
    111,095       106,078       99,329       227,282       198,606  
Aerospace and Marine
    26,741       25,004       26,395       44,918       49,088  
Surety and other specialty
    26,210       29,130       29,440       58,409       55,948  
 
                             
TOTAL REINSURANCE
  $ 457,522     $ 448,050     $ 408,233     $ 919,285     $ 809,489  
 
                             
 
                                       
REPORTED TOTALS
  $ 869,411     $ 821,584     $ 812,495     $ 1,741,113     $ 1,633,192  
 
                             
(ENDURANCE LOGO)

 

18


 

ENDURANCE SPECIALTY HOLDINGS LTD.
RETURN ON EQUITY ANALYSIS
         
    FOR THE SIX MONTHS  
    ENDED JUNE 30, 2011  
 
       
Average common equity [a]
  $ 2,444,215  
 
       
Net premiums earned
  $ 869,411  
Combined ratio
    118.4 %
Operating margin
    (18.4 )%
Premium leverage
    0.36 x
 
     
Implied ROAE from underwriting activity
    (6.6 )%
 
     
 
       
Average cash and invested assets at amortized cost
  $ 6,148,188  
Investment leverage
    2.52 x
Year to date investment income yield, pretax
    1.5 %
 
     
Implied ROAE from investment activity
    3.8 %
 
     
 
       
Financing Costs [b]
    (1.1 )%
 
     
 
       
Implied Pre-tax Operating ROAE, for period [c]
    (3.9 )%
 
     
 
       
Implied Pre-tax Operating ROAE, annualized [c]
    (7.8 )%
 
     
     
[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 (beginning liquidation value of $200 million, ending liquidation value of $430 million).
 
[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.
(ENDURANCE LOGO)

 

19


 

ENDURANCE SPECIALTY HOLDINGS LTD.
ANNUALIZED PREMIUM & INVESTMENT LEVERAGE
                                                 
    FOR THE QUARTERS ENDED     YEARS ENDED DECEMBER 31,  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     2010     2009  
 
                                               
Average common equity [a]
  $ 2,224,270     $ 2,428,209     $ 2,683,919     $ 2,681,895     $ 2,617,718     $ 2,297,283  
 
                                               
Net premiums earned
  $ 486,578     $ 382,833     $ 449,736     $ 469,793     $ 1,741,113     $ 1,633,192  
 
                                               
Premium leverage
    0.22 x     0.16 x     0.17 x     0.18 x     0.67 x     0.71 x
 
                                   
 
                                               
Annualized premium leverage
    0.88 x     0.64 x     0.68 x     0.72 x     0.67 x     0.71 x
 
                                   
 
                                               
Average cash and invested assets at amortized cost
  $ 6,069,548     $ 5,979,366     $ 6,107,765     $ 6,107,817     $ 5,997,489     $ 5,716,443  
 
                                   
 
                                               
Investment leverage
    2.73 x     2.46 x     2.28 x     2.28 x     2.29 x     2.49 x
 
                                   
     
[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 (beginning liquidation value of $200 million, ending liquidation value of $430 million).
(ENDURANCE LOGO)

 

20


 

ENDURANCE SPECIALTY HOLDINGS LTD.
INVESTMENT PORTFOLIO
AS OF JUNE 30, 2011 AND DECEMBER 31, 2010
                                 
    June 30, 2011     December 31, 2010  
Type of Investment   Fair Value     Percentage     Fair Value     Percentage  
Cash and equivalents [a]
  $ 673,997       10.6 %   $ 610,454       9.9 %
Short-term investments
    303,895       4.8 %     70,444       1.1 %
U.S. government and government agencies notes
    914,977       14.4 %     1,010,819       16.3 %
Government and agency guaranteed corporates
    521,422       8.2 %     671,150       10.8 %
U.S. government agency residential mortgage-backed securities
    962,979       15.1 %     883,948       14.3 %
U.S. government agency commercial mortgage-backed securities
    28,041       0.4 %     22,889       0.4 %
Municipals
    57,647       0.9 %     29,979       0.5 %
Foreign government
    95,817       1.5 %     140,461       2.3 %
Corporate securities
    1,254,207       19.7 %     1,232,511       19.9 %
Non-agency residential mortgage-backed securities
    228,152       3.6 %     246,410       4.0 %
Non-agency commercial mortgage-backed securities
    567,315       8.9 %     604,820       9.8 %
Asset-backed securities
    331,391       5.2 %     273,715       4.4 %
Equity securities
    32,322       0.5 %     13,565       0.2 %
Other investments [b]
    395,078       6.2 %     376,652       6.1 %
 
                       
Total
  $ 6,367,240       100.0 %   $ 6,187,817       100.0 %
 
                       
                                 
Ratings [e]   Fair Value     Percentage     Fair Value     Percentage  
U.S. government and government agencies notes
  $ 914,977       16.2 %   $ 1,010,819       18.2 %
AAA/Aaa
    2,722,066       48.0 %     2,639,682       47.3 %
AA/Aa
    437,538       7.7 %     465,315       8.4 %
A/A
    803,480       14.2 %     793,980       14.3 %
BBB
    176,678       3.1 %     50,733       0.9 %
Below BBB
    206,712       3.7 %     221,848       4.0 %
Not Rated
    4,392       0.1 %     4,769       0.1 %
Other investments [b]
    395,078       7.0 %     376,652       6.8 %
 
                       
Total
  $ 5,660,921       100.0 %   $ 5,563,798       100.0 %
 
                       
                 
Performance   June 30, 2011     December 31, 2010  
Yield [c]
    2.6 %     3.3 %
Duration in years [d]
    2.28       2.39  
                                         
    Quarter Ended     Quarter Ended     Quarter Ended     Quarter Ended     Quarter Ended  
Investment Income   June 30, 2011     Mar. 31, 2011     Dec. 31, 2010     Sept. 30, 2010     June 30, 2010  
Cash and fixed income securities
  $ 38,661     $ 38,744     $ 40,425     $ 39,839     $ 40,302  
Other Investments
    1,181       13,757       16,449       13,815       (6,951 )
 
                             
Total net investment income
  $ 39,842     $ 52,501     $ 56,874     $ 53,654     $ 33,351  
 
                             
     
Note:  [a]   Cash and equivalents, including operating cash, are shown net of investments pending settlement.
 
  [b] Other investments includes investments in alternative and high yield bank loan funds.
 
  [c] Annualized earned yield for the quarter ending 6/30/11 and twelve months ending 12/31/10 excludes realized and unrealized gains and losses on fixed maturity investments.
 
  [d] Duration excludes other investments and operating cash.
 
  [e] Excludes cash and equivalents and equity securities.
(ENDURANCE LOGO)

 

21


 

ENDURANCE SPECIALTY HOLDINGS LTD.
STRUCTURED SECURITIES DETAIL
AS OF JUNE 30, 2011
                         
                    Percentage of  
Securitized (RMBS, CMBS, ABS and CDO) securities ratings   Fair Value     Percentage     Investment Portfolio  
U.S. Government and agencies
  $ 991,020       46.8 %     15.6 %
AAA/Aaa
    770,866       36.4 %     12.1 %
AA/Aa
    67,328       3.2 %     1.1 %
A/A
    91,506       4.3 %     1.4 %
BBB
    48,477       2.3 %     0.8 %
Below BBB
    147,633       7.0 %     2.3 %
Not Rated
    1,048              
 
                 
Total
  $ 2,117,878       100.0 %     33.3 %
 
                 
                         
                    Percentage of  
Structured securities sectors (RMBS, CMBS, ABS, CDO and CLO)   Fair Value     Percentage     Investment Portfolio  
Commercial
                       
Agency
  $ 28,041       1.3 %     0.5 %
Non Agency
    637,379       30.1 %     10.0 %
Residential
                       
Agency
    962,979       45.5 %     15.1 %
Non Agency
    230,256       10.9 %     3.6 %
Consumer
                       
Agency
    3,919       0.2 %     0.1 %
Non Agency
    255,304       12.0 %     4.0 %
 
                 
Total
  $ 2,117,878       100.0 %     33.3 %
 
                 
Spread Duration 3.31 years
                         
                    Percentage of  
Commercial real estate collateralized debt obligations ( CRE CDO’s)   Fair Value     Percentage     Investment Portfolio  
AAA/Aaa
  $ 15,973       47.9 %     0.3 %
AA/Aa
    5,230       15.7 %     0.1 %
A/A
    5,330       16.0 %     0.1 %
BBB
    2,140       6.4 %      
Below BBB
    4,659       14.0 %      
 
                 
Total
  $ 33,332       100.0 %     0.5 %
 
                 
Spread Duration 1.91 years
(ENDURANCE LOGO)

 

22


 

ENDURANCE SPECIALTY HOLDINGS LTD.
LARGEST TWENTY-FIVE CORPORATE HOLDINGS
AS OF JUNE 30, 2011
                             
    June 30, 2011
    Amortized             Unrealized     Credit
ISSUER (1) (2) (4)   Cost     Fair Value     Gain (Loss)     Quality (3)
 
                           
METLIFE INC
  $ 39,535     $ 40,257     $ 722     A
MORGAN STANLEY
    39,255       39,882       627     A
JPMORGAN CHASE & CO
    38,281       38,920       639     A+
CREDIT SUISSE GROUP AG
    32,703       34,072       1,369     A+
HSBC HOLDINGS PLC
    29,348       29,919       571     AA-
NOVARTIS AG
    27,646       28,675       1,029     AA-
AT&T INC
    27,324       28,510       1,186     A-
BANK OF AMERICA CORP
    27,927       28,153       226     A
WAL-MART STORES INC
    26,387       26,817       430     AA
VERIZON COMMUNICATIONS INC
    25,005       26,209       1,204     A-
US BANCORP
    21,679       22,111       432     A+
PEPSICO INC
    18,382       19,832       1,450     A
EDISON INTERNATIONAL
    17,172       17,769       597     A
LOWES COMPANIES INC
    16,398       17,040       642     A
GOLDMAN SACHS GROUP INC/THE
    16,579       16,533       (46 )   A
CITIGROUP INC
    15,929       16,006       77     A
NEW YORK LIFE INSURANCE COMPANY
    15,530       15,972       442     AAA
BANK OF NOVA SCOTIA
    15,562       15,874       312     AA-
GENERAL ELECTRIC CO
    15,618       15,696       78     AA+
ROYAL DUTCH SHELL PLC
    14,386       14,925       539     AA
PHILIP MORRIS INTERNATIONAL INC
    14,456       14,712       256     A
NATIONAL GRID PLC
    13,925       14,477       552     A-
NORDEA BANK AB
    13,907       14,091       184     AA-
TOTAL SA
    13,932       14,068       136     AA-
MEDTRONIC INC
    13,399       13,912       513     AA-
     
(1)   Corporate issuers exclude government-backed, government-sponsored enterprises, covered bonds and cash and cash equivalents.
 
(2)   Credit exposures represent only direct exposure to fixed maturities and short term investments of the parent issuer and its major subsidiaries.
 
(3)   Represents weighted average credit quality of underlying issues.
 
(4)   Includes preferred equity securities.
(ENDURANCE LOGO)

 

23


 

ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES
                                                 
    THREE MONTHS ENDED JUNE 30, 2011     SIX MONTHS ENDED JUNE 30, 2011  
    GROSS     RECOVERIES     NET     GROSS     RECOVERIES     NET  
Reserve for losses and loss expenses
                                               
Balance, beginning of period
  $ 3,566,198     $ (340,908 )   $ 3,225,290       3,319,927       (319,349 )     3,000,578  
 
                                               
Incurred related to:
                                               
Current year
    481,148       (74,397 )     406,751       1,011,439       (154,130 )     857,309  
Prior years
    (78,736 )     33,955       (44,781 )     (150,799 )     57,313       (93,486 )
 
                                   
Total Incurred
    402,412       (40,442 )     361,970       860,640       (96,817 )     763,823  
 
                                   
 
                                               
Paid related to:
                                               
Current year
    (93,313 )     26,572       (66,741 )     (96,403 )     26,704       (69,699 )
Prior years
    (137,532 )     (14,294 )     (151,826 )     (352,720 )     20,440       (332,280 )
 
                                   
Total Paid
    (230,845 )     12,278       (218,567 )     (449,123 )     47,144       (401,979 )
 
                                   
 
                                               
Foreign currency translation
    10,359       (9 )     10,350       16,680       (59 )     16,621  
 
                                   
 
                                               
Balance, end of period
  $ 3,748,124     $ (369,081 )   $ 3,379,043     $ 3,748,124     $ (369,081 )   $ 3,379,043  
 
                                   
(ENDURANCE LOGO)

 

24


 

ENDURANCE SPECIALTY HOLDINGS LTD.
PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIODS ENDED JUNE 30, 2011
                         
                    Total  
    Insurance     Reinsurance     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 )
 
                 
Six months ended June 30, 2011
  $ (57,802 )   $ (35,684 )   $ (93,486 )
 
                 
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2010
                         
                    Total  
    Insurance     Reinsurance     Company  
 
                       
Incurred related to prior years
                       
 
                       
Quarter ended March 31, 2010
  $ (17,679 )   $ (20,915 )   $ (38,594 )
Quarter ended June 30, 2010
    (8,099 )     (21,379 )     (29,478 )
Quarter ended September 30, 2010
    (9,568 )     (25,566 )     (35,134 )
Quarter ended December 31, 2010
    (11,525 )     (12,071 )     (23,596 )
 
                 
Year ended December 31, 2010
  $ (46,871 )   $ (79,931 )   $ (126,802 )
 
                 
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2009
                         
                    Total  
    Insurance     Reinsurance     Company  
 
                       
Incurred related to prior years
                       
 
                       
Quarter ended March 31, 2009
  $ (36,798 )   $ (2,520 )   $ (39,318 )
Quarter ended June 30, 2009
    (19,842 )     (16,132 )     (35,974 )
Quarter ended September 30, 2009
    (13,952 )     (20,449 )     (34,401 )
Quarter ended December 31, 2009
    (21,486 )     (19,710 )     (41,196 )
 
                 
Year ended December 31, 2009
  $ (92,078 )   $ (58,811 )   $ (150,889 )
 
                 
(ENDURANCE LOGO)

 

25


 

ENDURANCE SPECIALTY HOLDINGS LTD.
PRIOR YEAR RESERVE DEVELOPMENT BY DEVELOPMENT TAIL
(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT
                                                 
                                            FOR THE  
    FOR THE QUARTERS ENDED     YEAR ENDED  
    JUNE 30, 2011     MAR. 31, 2011     DEC. 31, 2010     SEPT. 30, 2010     JUNE 30, 2010     DEC. 31, 2010  
INSURANCE SEGMENT
                                               
Short tail[a]
  $ (5,150 )   $ (9,274 )   $ (4,445 )   $ (5,359 )   $ (5,632 )   $ (21,349 )
Long tail[b]
    (5,490 )     (2,560 )     (7,075 )     (3,480 )     347       (11,649 )
Other[c]
    (12,550 )     (22,778 )     (5 )     (729 )     (2,814 )     (13,873 )
 
                                   
TOTAL INSURANCE
    (23,190 )     (34,612 )     (11,525 )     (9,568 )     (8,099 )     (46,871 )
 
                                   
 
                                               
REINSURANCE SEGMENT
                                               
Short tail[a]
    (19,245 )     (14,163 )     (10,418 )     (17,743 )     (19,366 )     (68,865 )
Long tail[b]
    335       275       (1,628 )     (6,902 )     794       (7,700 )
Other[c]
    (2,681 )     (205 )     (25 )     (921 )     (2,807 )     (3,366 )
 
                                   
TOTAL REINSURANCE
    (21,591 )     (14,093 )     (12,071 )     (25,566 )     (21,379 )     (79,931 )
 
                                   
 
                                               
REPORTED TOTALS
  $ (44,781 )   $ (48,705 )   $ (23,596 )   $ (35,134 )   $ (29,478 )   $ (126,802 )
 
                                   
     
[a]   Short tail business is that for which development typically emerges within a period of several quarters. The Company’s short tail line of business in the Insurance segment includes its property line of business. The Company’s short tail lines in its Reinsurance segment include property, catastrophe, aerospace and marine and surety.
 
[b]   Long tail business is that for which development emerges over many years. The Company’s long tail lines of business in the Insurance segment includes casualty, healthcare liability, workers’ compensation and professional lines. The Company’s long tail line of business in the Reinsurance segment includes its casualty line of business and some units included in its surety and other specialty line of business.
 
[c]   The Company writes certain specialty lines of business for which the loss emergence is considered to be unique in nature and thus, has been included as other. The Company’s other lines of business included in the Insurance segment is agriculture and in the Reinsurance segment is the agriculture unit included in its surety and other specialty line of business.
(ENDURANCE LOGO)

 

26


 

ENDURANCE SPECIALTY HOLDINGS LTD.
ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES
                                                                         
    Insurance     Reinsurance     Reported  
    Short Tail     Long Tail     Other     Total     Short Tail     Long Tail     Other     Total     Totals  
AT JUNE 30, 2011
                                                                       
Case reserves
  $ 19,410     $ 375,869     $ 247,145     $ 642,424     $ 431,972     $ 268,802     $ 1,187     $ 701,961     $ 1,344,385  
Total reserves
  $ 48,268     $ 1,568,198     $ 276,347     $ 1,892,813     $ 893,835     $ 950,506     $ 10,970     $ 1,855,311     $ 3,748,124  
 
                                                     
Case reserves / Total reserves
    40.2 %     24.0 %     89.4 %     33.9 %     48.3 %     28.3 %     10.8 %     37.8 %     35.9 %
 
                                                     
IBNR / Total reserves
    59.8 %     76.0 %     10.6 %     66.1 %     51.7 %     71.7 %     89.2 %     62.2 %     64.1 %
 
                                                     
 
                                                                       
AT MAR. 31, 2011
                                                                       
Case reserves
  $ 18,089     $ 378,010     $ 73,374     $ 469,473     $ 322,587     $ 255,397     $ 455     $ 578,439     $ 1,047,912  
Total reserves
  $ 45,739     $ 1,539,977     $ 187,017     $ 1,772,733     $ 861,084     $ 919,839     $ 12,542     $ 1,793,465     $ 3,566,198  
 
                                                     
Case reserves / Total reserves
    39.5 %     24.5 %     39.2 %     26.5 %     37.5 %     27.8 %     3.6 %     32.3 %     29.4 %
 
                                                     
IBNR / Total reserves
    60.5 %     75.5 %     60.8 %     73.5 %     62.5 %     72.2 %     96.4 %     67.7 %     70.6 %
 
                                                     
 
                                                                       
AT DEC. 31, 2010
                                                                       
Case reserves
  $ 14,730     $ 325,750     $ 116,687     $ 457,167     $ 319,322     $ 248,870     $ 990     $ 569,182     $ 1,026,349  
Total reserves
  $ 45,330     $ 1,493,398     $ 190,865     $ 1,729,593     $ 670,750     $ 907,384     $ 12,200     $ 1,590,334     $ 3,319,927  
 
                                                     
Case reserves / Total reserves
    32.5 %     21.8 %     61.1 %     26.4 %     47.6 %     27.4 %     8.1 %     35.8 %     30.9 %
 
                                                     
IBNR / Total reserves
    67.5 %     78.2 %     38.9 %     73.6 %     52.4 %     72.6 %     91.9 %     64.2 %     69.1 %
 
                                                     
 
                                                                       
AT SEPT. 30, 2010
                                                                       
Case reserves
  $ 15,019     $ 378,887     $ 205,079     $ 598,985     $ 319,096     $ 244,711     $ 475     $ 564,282     $ 1,163,267  
Total reserves
  $ 48,572     $ 1,545,195     $ 233,189     $ 1,826,956     $ 674,075     $ 889,506     $ 10,775     $ 1,574,356     $ 3,401,312  
 
                                                     
Case reserves / Total reserves
    30.9 %     24.5 %     87.9 %     32.8 %     47.3 %     27.5 %     4.4 %     35.8 %     34.2 %
 
                                                     
IBNR / Total reserves
    69.1 %     75.5 %     12.1 %     67.2 %     52.7 %     72.5 %     95.6 %     64.2 %     65.8 %
 
                                                     
 
                                                                       
AT JUNE 30, 2010
                                                                       
Case reserves
  $ 21,529     $ 305,802     $ 164,639     $ 491,970     $ 319,558     $ 247,493     $ 5     $ 567,056     $ 1,059,026  
Total reserves
  $ 48,703     $ 1,480,283     $ 182,932     $ 1,711,918     $ 680,660     $ 873,184     $ 8,875     $ 1,562,719     $ 3,274,637  
 
                                                     
Case reserves / Total reserves
    44.2 %     20.7 %     90.0 %     28.7 %     46.9 %     28.3 %     0.1 %     36.3 %     32.3 %
 
                                                     
IBNR / Total reserves
    55.8 %     79.3 %     10.0 %     71.3 %     53.1 %     71.7 %     99.9 %     63.7 %     67.7 %
 
                                                     
(ENDURANCE LOGO)

 

27


 

ENDURANCE SPECIALTY HOLDINGS LTD.
SHAREHOLDER RETURN ANALYSIS
                                                 
    SIX MONTHS ENDED     YEARS ENDED DECEMBER 31,     INCEPTION TO  
    JUNE 30, 2011     2010     2009     2008     2007     JUNE 30, 2011  
(Loss) Income and Return on Equity:
                                               
Net (loss) income available to common and participating common shareholders
  $ (54,090 )   $ 349,238     $ 520,604     $ 83,121     $ 505,607     $ 2,384,992  
 
                                               
Operating (loss) income available to common and participating common shareholders
    (79,920 )     330,035       505,202       182,539       525,450       2,440,857  
 
                                               
Average Shareholders’ equity [a]
    2,444,215       2,617,718       2,297,283       2,159,771       2,205,067       1,950,458  
 
                                   
 
                                               
Net (loss) income return on average equity
    (2.2 )%     13.3 %     22.7 %     3.8 %     22.9 %     12.9 %[c]
Operating return on average equity
    (3.3 )%     12.6 %     22.0 %     8.5 %     23.8 %     13.2 %[c]
 
                                   
 
                                               
Book value and dividends per share:
                                               
Dilutive book value per common share (treasury stock method)
  $ 52.20     $ 52.74     $ 44.61     $ 33.06     $ 35.05     $ 52.20  
 
                                               
Dividends paid per share
    0.60       1.00       1.00       1.00       1.00       7.73  
 
                                   
 
                                               
Change in diluted book value per common share
    (1.0 )%     18.2 %     34.9 %     (5.7 )%     21.4 %     17.8 %[c]
 
                                   
 
                                               
Total return to common shareholders [b]
    0.1 %     20.5 %     38.0 %     (2.8 )%     24.9 %     22.0 %[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.
(ENDURANCE LOGO)

 

28


 

ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES FOR EPS CALCULATION — TWO CLASS METHOD
                                 
    QUARTERS ENDED     SIX MONTHS ENDED  
    JUNE 30,     JUNE 30,  
    2011     2010     2011     2010  
 
DILUTIVE SHARES OUTSTANDING:
                               
AS REPORTED
                               
 
                               
Average market price per share
  $ 43.10     $ 37.40     $ 45.12     $ 37.27  
 
                               
Basic weighted average common shares outstanding (1)
    39,710       52,509       40,227       52,958  
 
                               
Add: weighted avg. unvested restricted share units
    9       13       12       19  
Weighted average exercise price per share
                       
Proceeds from unrecognized restricted share unit expense
  $ 248     $ 349     $ 248     $ 349  
Less: restricted share units bought back via treasury method
    (6 )     (9 )     (12 )     (10 )
 
                               
Add: weighted avg. dilutive warrants outstanding
    2,896       2,995       2,925       2,995  
Weighted average exercise price per share
  $ 12.27     $ 13.37     $ 12.27     $ 13.37  
Less: warrants bought back via treasury method
    (824 )     (1,071 )     (2,925 )     (1,074 )
 
                               
Add: weighted avg. dilutive options outstanding
    561       1,415       884       1,580  
Weighted average exercise price per share
  $ 14.57     $ 16.96     $ 15.42     $ 16.59  
Proceeds from unrecognized option expense
                       
Less: options bought back via treasury method
    (190 )     (642 )     (884 )     (703 )
 
                       
 
                               
Weighted average dilutive shares outstanding
    42,156       55,210       40,227       55,765  
 
                       
     
Notes:  (1)  Excludes unvested restricted shares outstanding which are considered participating securities under the two-class method for calculation of EPS.
(ENDURANCE LOGO)

 

29


 

ENDURANCE SPECIALTY HOLDINGS LTD.
EARNINGS (LOSSES) PER SHARE INFORMATION — TWO CLASS METHOD
                                 
    QUARTERS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,  
    2011     2010     2011     2010  
 
                               
Net income (loss)
  $ 41,077     $ 58,593     $ (46,340 )   $ 114,382  
Less preferred dividends
    (3,875 )     (3,875 )     (7,750 )     (7,750 )
 
                       
Net income (loss) available (attributable) to common and participating common shareholders
  $ 37,202     $ 54,718     $ (54,090 )   $ 106,632  
Less amount allocated to participating common shareholders [a]
    (710 )     (1,120 )     (516 )     (2,051 )
 
                       
Net income (loss) allocated (attributable) to common shareholders
  $ 36,492     $ 53,598     $ (54,606 )   $ 104,581  
 
                       
 
                               
Denominator:
                               
Weighted average shares — basic
                               
Outstanding
    39,710       52,509       40,227       52,954  
Vested restricted share units
                      4  
 
                       
 
    39,710       52,509       40,227       52,958  
 
                       
 
                               
Share Equivalents
                               
Warrants
    2,072       1,924             1,921  
Options
    371       773             877  
Restricted share units
    3       4             9  
 
                       
Weighted average shares — diluted
    42,156       55,210       40,227       55,765  
 
                       
 
                               
Basic earnings (losses) per common share
  $ 0.92     $ 1.02     $ (1.36 )   $ 1.97  
 
                       
 
                               
Diluted earnings (losses) per common share [b]
  $ 0.87     $ 0.97     $ (1.36 )   $ 1.88  
 
                       
     
[a]   Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Company’s stock compensation plans that are considered participating securities related to the calculation of earnings (losses) per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders.
 
[b]   Represents diluted earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method.
(ENDURANCE LOGO)

 

30


 

ENDURANCE SPECIALTY HOLDINGS LTD.
OPERATING INCOME (LOSS) RECONCILIATION
EARNINGS (LOSSES) PER SHARE INFORMATION — TWO CLASS METHOD
                                 
    Two-Class Method     Two-Class Method  
    QUARTERS ENDED JUNE 30,     SIX MONTHS ENDED JUNE 30,  
    2011     2010     2011     2010  
 
Net income (loss)
  $ 41,077     $ 58,593     $ (46,340 )   $ 114,382  
(Less) Add after-tax items:
                               
Net foreign exchange losses (gains)
    3,181       97       (3,670 )     5,969  
Net realized and unrealized investment gains
    (20,717 )     (1,967 )     (24,739 )     (4,317 )
Net impairment losses recognized in earnings (losses)
    932       992       2,579       1,853  
 
                       
Operating income (loss) before preferred dividends
  $ 24,473     $ 57,715     $ (72,170 )   $ 117,887  
Preferred dividends
    (3,875 )     (3,875 )     (7,750 )     (7,750 )
 
                       
Operating income (loss) available (attributable) to common and participating common shareholders
  $ 20,598     $ 53,840     $ (79,920 )   $ 110,137  
Less amount allocated to participating common shareholders [a]
    (399 )     (1,102 )     (516 )     (2,118 )
 
                       
Operating income (loss) allocated to common shareholders
  $ 20,199     $ 52,738     $ (80,436 )   $ 108,019  
 
                       
 
                               
Weighted average common shares outstanding
                               
Basic
    39,710       52,509       40,227       52,958  
Dilutive
    42,156       55,210       40,227       55,765  
 
                               
Basic per common share data
                               
Net income (loss) allocated to common shareholders
  $ 0.92     $ 1.02     $ (1.36 )   $ 1.97  
(Less) Add after-tax items:
                               
Net foreign exchange losses (gains)
    0.08             (0.09 )     0.11  
Net realized and unrealized investment gains
    (0.52 )     (0.04 )     (0.61 )     (0.08 )
Net impairment losses recognized in earnings (losses)
    0.03       0.02       0.06       0.04  
 
                       
Operating income (loss) allocated to common shareholders
  $ 0.51     $ 1.00     $ (2.00 )   $ 2.04  
 
                       
 
                               
Diluted per common share data
                               
Net income (loss) allocated to common shareholders
  $ 0.87     $ 0.97     $ (1.36 )   $ 1.88  
(Less) Add after-tax items:
                               
Net foreign exchange losses (gains)
    0.08             (0.09 )     0.11  
Net realized and unrealized investment gains
    (0.49 )     (0.03 )     (0.61 )     (0.08 )
Net impairment losses recognized in earnings (losses)
    0.02       0.02       0.06       0.03  
 
                       
Operating income (loss) allocated to common shareholders [b]
  $ 0.48     $ 0.96     $ (2.00 )   $ 1.94  
 
                       
     
[a]   Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Company’s stock compensation plans that are considered participating securities related to the calculation of earnings (losses) per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders.
 
[b]   Represents diluted earnings per share calculated under the two-class method which was the lower of the two-class method and the treasury stock method.
(ENDURANCE LOGO)

 

31


 

ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES SENSITIVITY ANALYSIS
                                                                                     
DILUTIVE SHARES OUSTANDING  
Market Price per Share  
$ 35.00     $ 36.00     $ 37.00     $ 38.00     $ 39.00     $ 40.00     $ 41.00     $ 42.00     $ 43.00     $ 44.00     $ 45.00  
                                                               
  42,727       42,762       42,795       42,826       42,855       42,884       42,910       42,935       42,960       42,982       43,004  
(ENDURANCE LOGO)

 

32


 

ENDURANCE SPECIALTY HOLDINGS LTD.
BOOK VALUE PER SHARE
                         
    JUNE 30,     DEC. 31,  
    2011     2010     2010  
 
DILUTIVE COMMON SHARES OUTSTANDING:
                       
AS-IF CONVERTED [a]
                       
Price per share at period end
  $ 41.33     $ 37.53     $ 46.07  
 
                       
Basic common shares outstanding [b]
    39,756       51,673       46,259  
 
                       
Add: unvested restricted shares and restricted share units
    763       1,007       980  
 
                       
Add: dilutive warrants outstanding
    2,896       2,986       2,986  
Weighted average exercise price per share
  $ 12.27     $ 13.37     $ 12.87  
 
                       
Add: dilutive options outstanding
    561       1,335       1,278  
Weighted average exercise price per share
  $ 14.57     $ 16.96     $ 16.50  
 
                       
Book Value [c]
  $ 2,240,276     $ 2,644,105     $ 2,648,153  
Add: proceeds from converted warrants
    35,534       39,923       38,430  
Add: proceeds from converted options
    8,174       22,642       21,087  
 
                 
Pro forma book value
  $ 2,283,984     $ 2,706,670     $ 2,707,670  
 
                       
Dilutive shares outstanding
    43,976       57,001       51,503  
 
                 
 
                       
Basic book value per common share
  $ 56.35     $ 51.17     $ 57.25  
Diluted book value per common share
  $ 51.94     $ 47.48     $ 52.57  
 
                 
 
                       
DILUTIVE COMMON SHARES OUTSTANDING:
                       
TREASURY STOCK METHOD
                       
Price per share at period end
  $ 41.33     $ 37.53     $ 46.07  
 
                       
Basic common shares outstanding [b]
    39,756       51,673       46,259  
 
                       
Add: unvested restricted shares and restricted share units
    763       1,007       980  
 
                       
Add: dilutive warrants outstanding
    2,896       2,986       2,986  
Weighted average exercise price per share
  $ 12.27     $ 13.37     $ 12.87  
Less: warrants bought back via treasury method
    (860 )     (1,064 )     (834 )
 
                       
Add: dilutive options outstanding
    561       1,335       1,278  
Weighted average exercise price per share
  $ 14.57     $ 16.96     $ 16.50  
Less: options bought back via treasury method
    (198 )     (603 )     (458 )
 
                 
 
                       
Dilutive shares outstanding
    42,918       55,334       50,211  
 
                 
 
                       
Basic book value per common share
  $ 56.35     $ 51.17     $ 57.25  
Diluted book value per common share
  $ 52.20     $ 47.78     $ 52.74  
 
                 
     
[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]   Basic common shares includes vested restricted share units.
 
[c]   Excludes the $430 million (2010 — $200 million) liquidation value of the preferred shares.
(ENDURANCE LOGO)

 

33


 

ENDURANCE SPECIALTY HOLDINGS LTD.
REGULATION G
In presenting the Company’s results, management has included and discussed certain non-GAAP measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.
Operating income (loss) is an internal performance measure used by the Company in the management of its operations. Operating income (loss) represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. The Company believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income (loss) determined in accordance with GAAP, the Company believes that showing operating income (loss) enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company’s results of operations in a manner similar to how management analyzes the Company’s underlying business performance. Operating income (loss) should not be viewed as a substitute for GAAP net income (loss) . Please see page 31 for a reconciliation of operating income (loss) to net income (loss).
Return on Average Equity (ROAE) is comprised using the average common equity calculated as the arithmetic average of the beginning and ending common equity balances for stated periods. Return on Beginning Equity (ROBE) is comprised using the beginning common equity for stated periods. The Company presents various measures of Return on Equity that are commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
Investment yield is provided by the Company’s investment managers and is calculated by dividing net investment income by average invested assets at amortized cost. The Company utilizes and presents the investment yield in order to better disclose the performance of the Company’s investments and to show the components of the Company’s ROE.
The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share. Please see page 33 for a reconciliation of diluted book value per common share to basic book value per common share.
(ENDURANCE LOGO)

 

34