ENDURANCE SPECIALTY HOLDINGS LTD - FORM 8-K - EX-99.1 - SLIDES FROM PRESENTATION BY MANAGEMENT

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d440032d8k.htm

Endurance Specialty Holdings

Investor Presentation

September 30, 2012

Exhibit 99.1

Diversified Portfolio of Businesses

Portfolio diversified by product, distribution source and geography

Trailing Twelve Months Net Premiums Written as of September 30, 2012: $2.0 BN

Reinsurance –

by Geographic Market

Insurance -

by Distribution Source

Casualty

Professional Liability

Property Per Risk

Small Business

Surety

International Property Catastrophe

US Property Catastrophe

Other Specialty (Aviation, Clash)

ARMtech Agriculture

US Property

US Casualty

US Miscellaneous E&O

Environmental

Healthcare

Excess Casualty

Professional Lines

International

Global Excess

10%

U.S. Wholesale

10%

Bermuda

21%

Americas

25%

Casualty

Professional Lines

Property

Marine

Trade Credit/Surety

Small Risk

26%

Independent Agents

Brokers –

Bermuda/U.S.

Wholesale

Balanced Portfolio of Diversified Risk Types

Adjusted product growth and capital deployment based on market conditions

Trailing Twelve Months Net Premiums Written as of September 30, 2012: $2.0 BN

Property

(34%)

Casualty

(34%)

Property reinsurance has started

to expand based on improved

pricing and growth in Europe

Catastrophe reinsurance

expanded at mid -year renewals

as pricing improved and capital

was transferred from all risk

insurance business line

Property insurance premiums

reduced due to transfer of

capital away from all risk

insurance business line

Agriculture insurance is not linked to

property-casualty pricing cycle

We have expanded policy count by

40.4% since 2007

Aerospace, marine, surety and other

reinsurance lines of business have declined

significantly from their peaks

Exited offshore energy following KRW

Reduced premiums as competition

has increased

Specialty

(32%)

Casualty reinsurance reduced significantly since its peak in 2004

Casualty insurance lines of business have increased modestly since 2005 as

growth in middle market U.S. based business has been partially offset by declines

in Bermuda based large account business

Opportunistic Reinsurance Portfolio Management

Reinsurance book has been actively managed through market cycles

Reinsurance Net Written Premiums

Managing the Reinsurance Portfolio

Current market conditions are improving within the catastrophe and property lines of business where

non-impacted areas are seeing modest price improvements while impacted areas are experiencing

significant price increases. Casualty pricing is showing signs of stabilization as the markets appear to be

coming out of the bottom of the cycle.

Catastrophe

Premiums have grown in line with

our capital base and pricing has improved

following global cat losses in 2011

Property -

Premiums have declined 29% since 2003

as prices softened, but have begun to grow in

more recent periods on improved pricing

Casualty

Casualty has declined 21% from its peak

in 2004 and recent growth is in shorter tail,

smaller case casualty lines

Aerospace and Marine -

Premiums have declined

76% from 2005 peak as we exited the offshore

energy market and managed exposures

Surety and Other Specialty -

Continue to maintain

a core portfolio while remaining disciplined in a

soft market

* Trailing Twelve Months

Diversified Insurance Portfolio

Continue to expand insurance capabilities while maintaining discipline

Insurance Net Written Premiums

Managing the Insurance Portfolio

Market conditions are improving as E&S casualty business is experiencing modest rate improvement,

especially for smaller contracts. Larger account professional lines and excess casualty are experiencing

a moderation of price reductions as the market approaches the bottom of the cycle.

Agriculture

–

Strong growth supported by industry

leading technology and customer service.

Professional

–

Recent growth driven by increase in

small case products in the U.S while reducing our

exposures to large case products

Casualty

–

Growth has focused on small case market

where competition has been lower

Property –

Reducing our exposures within E&S

property lines due to reallocating capital to

businesses with higher margin potential

Healthcare Liability –

Shrinking historically profitable

line that has attracted aggressive competition

Surety and Other Specialty –

Historically consisted

of California’s Workers’

Compensation that we

exited in 2009

* Trailing Twelve Months

Note:

Catastrophe loss values were obtained through publicly released information and company transcripts for each

quarter and include current quarter losses as well as announced loss reserve development associated with prior

quarter catastrophe losses. Catastrophe losses are compared with starting Total Shareholder Equity for each loss

quarter.

Endurance is World Class at Risk Management

Endurance has performed well versus peers in recent large catastrophe events

Endurance’s Financial Results

Diluted book value per common share has grown tremendously in absolute terms…

Note:

Diluted Book Value Per Share calculated on weighted number of average diluted shares outstanding.

2005 –

Hurricanes Katrina, Rita

and Wilma

2008 –

Credit crisis and related

impact of marking assets to

market

2011 –

High frequency of

global catastrophes

(Earthquakes impacting New

Zealand and Japan, Hurricane

Irene, Texas wildfires, Thailand

and Australian Floods, Danish

Cloudburst, and a record level

of tornadoes in the United

States)

Significant Impacts to Book Value

Endurance’s Financial Results

Book value per common share growth compares favorably to peers

Diluted Book Value Per Share Plus Dividend Growth

From December 31, 2006 –

September 30, 2012

Note: Fully Diluted Book value per share and dividend data provided by company press releases and filings. For those

companies that do not disclose fully diluted book value per share, the dilution was calculated using average diluted

shares outstanding.

Growing Capital Base while returning Capital to Investors

Diluted shares outstanding have been reduced by approximately 39% in the last five years

Endurance has proven its ability to generate capital which has allowed for the return to its shareholders of

$1.9 billion through share repurchases and dividends while also supporting organic growth. Current capital

levels exceed rating agency minimum levels allowing for the possibility of opportunistic growth in the event

that markets harden.

Strong Balance Sheet

Endurance maintains a high quality, short duration investment portfolio

$6.5 B Investment Portfolio at September 30, 2012

Investment Portfolio Highlights

Fixed maturity portfolio duration remains short at 2.52

years

Investment quality (AA average) has remained high as

the portfolio is conservatively managed in challenging

economy

•

53.0% of investments are cash/short term or US backed

•

No direct exposure to sovereign debt or bank debt of

European peripheral countries

Expanded into equities in 2011 to diversify portfolio

and reduce interest rate risk

Other investments of $478.9 million consist of

alternative funds (70.2%) and specialty funds (29.8%)

•

Alternative funds include hedge funds and private equity

funds

•

Specialty funds include high yield loan and convertible debt

funds

•

Other investments returns have significantly outperformed

S&P 500 with half the volatility since programs incepted

Cash and

Short Term

14.3%

U.S. Government /

and U.S. Government

Backed –

38.7%

Municipals and Foreign

Government

2.6%

Other Investments

and Equities

8.6%

Asset Backed and

Non Agency Mortgage

Backed –

17.4%

Corporate

Securities

18.4%

Conclusion

Endurance is a compelling investment opportunity

Strategically manage our businesses

•

Selectively reduced reinsurance premiums, especially in competitive longer tail lines

•

Shifted capital from all risk insurance business line to property catastrophe reinsurance business line

•

Efficient capital management

Reduced diluted shares outstanding by approximately 39% in the last five years

Maintain excellent balance sheet strength and liquidity

•

High quality, short duration investment portfolio; fixed maturity investments have an average credit

quality of AA

•

Prudent

reserving

philosophy

and

strong

reserve

position;

strong

history

favorable

development

•

Capital levels well in excess of rating agency minimums provide flexibility to grow in potentially hardening

markets

The outlook for Endurance’s book of business remains attractive

•

Experiencing improved pricing across most of our lines of business

•

Catastrophe lines have remained disciplined and profitable and market conditions are improving

•

Small account casualty insurance lines are experiencing rate hardening

Appendix

Overview of ARMtech

Overview of ARMtech

Acquisition of ARMtech has been a great success for Endurance

ARMtech was founded by software developers and has maintained a strong focus on providing

industry leading service through leveraging technology

•

Writes crop insurance through independent agents across 44 states

•

Based

Lubbock,

Texas

with

historic

concentration

Texas

and

southern

states

•

Recent growth has further balanced the portfolio geographically and by crop

ARMtech built a leading specialty crop insurance business from scratch over the last 11 years

•

Approximate

market

and

largest

industry

participants

•

Has grown to approximately 159,000 policies in force

•

2012 crop year* gross written premiums estimated to be $879 million

Endurance

purchased

ARMtech

December

2007

purchase

price

approximately

$125

million

•

Since the acquisition, ARMtech has generated in excess of $120 million in operating profit

•

ARMtech has grown MPCI policy count by 29.8% since 2007

Agriculture insurance provides strong return potential, diversification in Endurance’s

portfolio of (re)insurance risks and is an efficient user of capital

* 2012 crop year is defined as July 1, 2011 through June 30, 2012 which is the period covered by crop

insurance and reinsurance

ARMtech is a Leader in the Crop Insurance Space

ARMtech’s focus on technology and service has allowed it to steadily grow its business

Written Premiums and Policy Counts by Crop Year

Using technology and service to expand premiums

ARMtech has demonstrated its ability to grow market share and premiums over time through its leading

edge technology and superior delivery of service and compliance.

ARMtech has built a market leading specialty

crop insurance business through its focus on

offering excellent service supported by industry

leading technology.

Policy count has grown 39.2% over the past five

years in a line of business not subject to the

property/casualty pricing cycle.

ARMtech is a leader in using technology to

deliver high quality service and to satisfy the

very intense compliance and documentation

standards imposed on the industry by the U.S.

Federal Government.

ARMtech has generated strong underwriting

profits since inception.

ARMtech is Gaining Market Share in Broader Geographic Areas

2012 was a very strong marketing year for ARMtech

MPCI Net Written Premiums by Crop Year and State Grouping*

Estimated 2012 Net Written Crop Year Premiums

ARMtech continues to focus on diversifying its business geographically while managing its exposure to

Texas through active use of available reinsurance protections.

Estimated 2012 crop year MPCI net written

premiums of $489.2 million are 7.0% lower than

crop year 2011

•

Growth from geographically diverse states as

technology focused service offering is attracting

new customers and agents,

•

Partially offset by 11.0% decline in Texas due to

higher cessions, and

•

Partially offset by lower commodity prices on corn,

cotton and soybeans.

The portfolio of crop risk is more balanced in

2012 through greater crop and geographic

diversification and through greater cessions in

Texas (cotton concentration)

* Group One States –

IL, IN, IA, MN, NE

Group Two States –

States other than Group One and Group Three states

Group Three States –

CT, DE, MA, MD, NV, NH, NJ, NY, PA, UT, WY

Agriculture Insurance is Not Correlated with the P&C Business Cycle

FCIC reinsurance lowers volatility

Historic Loss Ratio Results

–

Pre and Post Federal Retrocessions

Stable Results in Volatile Times

While individual states can produce highly varied gross loss ratios on a year to year basis, the U.S.

Federal reinsurance program has historically mitigated that volatility and leaves ARMtech with a

business which is not correlated to the traditional P&C pricing cycle and has high risk adjusted return

potential.

While individual states can produce large loss

ratios, the U.S. Federal reinsurance program has

historically reduced loss ratio volatility.

ARMtech’s business has historically produced

stable profits over time after reflecting the

reinsurance terms set out in the current standard

crop reinsurance agreement

•

Historic average loss ratio post U.S. Federal cessions

has been 78.7% [adjusted for the 2011 Federal

reinsurance terms]

•

The best year was 2007 with a 69.8% net loss ratio

and the worst 2011 with a 90.5% net loss ratio

•

ARMtech’s current expense run rate after the A&O

subsidy is approximately 7%

ARMtech has built a differentiated business with

high risk adjusted return potential

Overview of ARMtech

ARMtech’s recognition of premiums and earnings are influenced by growing

seasons

Seasonality of MPCI Business

Recognition of

annual written

premiums

60% -

65%

Spring crops

10% -

15%

Spring crop

adjustments due to

actual cessions

20% -

25%

Spring crop report

adjustments

Winter crops

5% -

10%

Winter crop

adjustments

Recognition of

annual earned

premiums

10%-15%

Largely driven by

winter crops

25% -

30%

Driven by spring

crops and winter

crops

30% -

35%

Largely driven by

spring crops

25% -

30%

Largely driven by

spring crops

Commodity

price setting

Setting of prices for

spring crops (forward

commodity price for

fourth quarter)

Price setting of winter

crops (forward

commodity price for

second quarter)

Harvest

Harvest of winter

crops

Harvest of spring

crops

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Geographic Diversification of Crop Insurance Business

ARMtech maintains a diversified portfolio of risk both geographically and by crop

1.4%

2.2%

3.9%

3.6%

3.1%

1.8%

2.0%

4.2%

10.3%

1.3%

2.2%

7.6%

3.3%

2.8%

6.6%

4.6%

1.2%

1.8%

1.6%

3.3%

1.8%

21.5%

1.3%

0.9%

1.2%

0.7%

0.9%

0.6%

0.4%

2012 Crop Year Estimated Net Written Premiums

Diversification of Crops Within ARMtech’s Portfolio

Underwritten risks diversified by geography and commodity type

ARMtech’s Estimated 2012 Crop Year MPCI Net Written Premiums

Iowa –

7.1%

Nebraska –

4.6%

Minnesota –

3.4%

Texas –

2.7%

Indiana –

2.6%

South Dakota –

1.6%

Illinois –

1.5%

Colorado –

1.5%

Missouri –

1.5%

North Dakota –

1.3%

Kentucky –

1.0%

Tennessee –

0.7%

Mississippi –

0.6%

All other states –

3.7%

Corn

(33.8%)

Texas –

11.5%

Georgia –

1.4%

Mississippi –

0.7%

Alabama –

0.7%

South Carolina –

0.5%

All other states –

1.3%

Cotton

(16.1%)

Iowa –

3.1%

Minnesota –

2.4%

Nebraska –

1.7%

Mississippi –

1.5%

Indiana –1.5%

Missouri –

1.1%

Arkansas –

1.0%

North Dakota –

1.0%

Kentucky –

0.8%

All other states –

4.5%

Soybeans

(18.6%)

Other Crops

(18.5%)

Wheat

(13.0%)

Texas –

2.4%

Colorado –

1.8%

North Dakota –

1.1%

Idaho –

1.1%

Minnesota –

0.9%

Montana –

0.9%

South Dakota –

0.8%

Oklahoma –

0.7%

All other states –

3.2%

Citrus, Nursery & Orange

Trees -

3.4%

Grain Sorghum –

3.0%

Peanuts –

1.6%

Barley –

1.2%

Potatoes –

1.1%

Pasture, Rangeland, Forage –

0.9%

Apples –

0.8%

Rice –

0.7%

All other crops –

5.8%

Agriculture Insurance Contains Three Layers of Risk Mitigation

Farmers retention, ceding premiums to the U.S. Federal Government and limitations on

losses and gains

2012 Crop Year

Gross Liability

Assigned Risk Fund

“Higher Risk Policies”

70.2% of risk retained by

ARMtech

29.8% of first dollar risk retained

by farmers

Commercial Fund

“Lower Risk Policies”

41.2% of MPCI Premiums Ceded to U.S. Federal Government

Loss Sharing

(% of loss retained by

Loss Ratio

Group 1 States

Group 2 & 3 States

ARMtech within each

100 - 160

7.5%

100 - 160

65.0%

42.5%

applicable band when

160 - 220

6.0%

160 - 220

45.0%

20.0%

the loss raio is above 100%.)

220 - 500

3.0%

220 - 500

10.0%

5.0%

Gain Sharing

(% of gain retained by

Loss Ratio

Group 1 States

Group 2 & 3 States

ARMtech within each

65 - 100

22.5%

65 - 100

75.0%

97.5%

applicable band when

50 - 65

13.5%

50 - 65

40.0%

the loss raio is below 100%.)

0 - 50

3.0%

0 - 50

5.0%

14.8% of 2012

Crop Year NWP

85.2% of 2012

Crop Year NWP

Overview of MPCI Program

Multi Peril Crop Insurance provides an essential product to American farmers

Multi Peril Crop Insurance (MPCI) is an

insurance product regulated by the

USDA that provides farmers with yield

or revenue protection

•

Offered by 16 licensed companies

•

Pricing is set by the government -

pricing cycle exists

•

Commissions payable to independent

agents are capped

Premiums are directly linked to

commodity prices for the underlying

crops

•

As commodity prices increase or decline –

margins stay flat but volume of profits

will increase or decrease

•

For crop year 2012, commodity base

prices mainly declined after posting

strong increases in 2011

Cotton declined 24.4%

Corn declined 5.5%

Wheat (fall) grew by 20.7%

Soybeans declined 7.0%

In recent years the MPCI program has

undergone several changes:

•

Expense reimbursement has been reduced

•

Reinsurance under the standard reinsurance

agreement has been simplified into two

categories

•

Allowable agent commissions have been

capped

•

Underserved states such as Texas have been

granted rate increases

In 2011 rates for corn and soybeans were

reduced approximately 7%

•

Based on actuarial studies to recognize the

favorable impact of technology

improvements

•

Reductions varied by state with largest

reductions being in the mid west

•

All other crops are being reviewed in 2012

Other Miscellaneous Information

The net loss estimates by zone above represent estimated losses related to our property, catastrophe and aerospace and marine lines of business, based upon our catastrophe models and

assumptions regarding the location, size, magnitude, and frequency of the catastrophe events utilized to determine the above estimates. The net loss estimates are presented on an

occurrence basis, before income tax and net of reinsurance recoveries and reinstatement premiums, if applicable. Return period refers to the frequency with which the related size of a

catastrophic event is expected to occur.

Actual realized catastrophic losses could differ materially from

our net loss estimates and our net loss estimates should not be

considered as representative of the actual losses that

we may incur in connection with any particular catastrophic event.

The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on

insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent

development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from

catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by management's assumptions regarding event characteristics,

construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurance's underwriting portfolio risk control mechanisms and other

factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to

Endurance and its future performance, please see "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2011.

* United

States

Windstorm

estimated

net

losses

July

2012

are

based

RMS

version

11.0

and

include

reinstatement

premiums,

applicable.

Probable Maximum Loss by Zone and Peril

Largest 1 in 100 year PML as of July 1, 2012 is equal to 16.6% of Shareholders’

Equity

as of September 30, 2012

Values in $ Millions

Estimated Occurrence Net Loss as of July 1, 2012

July 1, 2011

July 1, 2010

1-in-10

1-in-25

1-in-50

1-in-100

1-in-250

1-in-100

Year

Zone

Peril

Return

United States

Hurricane

$238

$340

$407

$468

$571

$564

$510

Europe

Windstorm

104

187

260

344

456

445

399

California

Earthquake

228

350

412

547

442

435

Japan

Windstorm

104

173

247

290

268

349

Northwest U.S.

Earthquake

184

356

241

236

Japan

Earthquake

138

201

185

133

United States

Tornado/Hail

123

Australia

Earthquake

175

New Zealand

Earthquake

Australia

Windstorm

New Madrid

Earthquake

100

Third Quarter 2012 Highlights

Strong results offset drought impact on agriculture insurance business

Book value per common share, adjusted for dividends, increased 3.3% during third quarter 2012

•

Net income available to common shareholders of $31.9 million

Includes catastrophe losses of $13.2 million related to Hurricane Isaac and other small loss events

Net investment income was $45.9million, improved results on alternatives was partially offset by

lower book yield on fixed income investments

Agriculture insurance losses were $62.8 million in the quarter

Net written premiums of $514.1 million declined 6.8% over third quarter 2011

•

Insurance net written premiums of $221.3 million declined 27.0% from third quarter 2011

Decline in agriculture premiums driven by lower premium adjustments, decreases in commodity prices

for spring crops and greater cessions of premiums

Reductions in property insurance premiums as we reduced our all risk insurance business line

exposures to reallocate capital to lines with greater profit potential

•

Reinsurance net written premiums of $292.8 million increased 18.0% over third quarter 2011

Growth in property was driven by higher renewal premiums and multiple new contracts generated by

the U.S., Zurich and Singapore offices

Casualty grew due to higher levels of both new business and premium adjustments

Financial Results for Third Quarter 2012

$MM (except per share data and %)

Sep 30,

2 0 1 2

Sep. 30,

2 0 1 1

Change

Net premiums written

514.1

551.3

(37.2)

-6.7%

Net premiums earned

551.9

561.5

(9.6)

-1.7%

Net investment income

45.9

14.1

31.8

225.5%

Net underwriting income (loss)

1.5

(28.2)

29.7

105.3%

Net income (loss)

40.1

(20.0)

60.1

300.5%

Operating income (loss)

34.3

(24.7)

59.0

238.9%

Fully diluted net income (loss) EPS

0.74

(0.71)

1.45

204.2%

Fully diluted operating income (loss) EPS

0.60

(0.83)

1.43

172.3%

Financial highlights

Sep. 30,

2 0 1 2

Sep. 30,

2 0 1 1

Operating ROE

4.5%

-5.9%

Net loss ratio

73.8%

81.3%

Acquisition expense ratio

16.1%

12.9%

General and administrative expense ratio

9.6%

10.4%

Combined ratio

99.5%

104.6%

Diluted book value per share

$54.95

$51.63

Investment leverage

2.68

2.80

Key operating ratios

Third Quarter 2012 Net Written Premiums

In $MM

Sep. 30,

2 0 1 2

Sep. 30,

2 0 1 1

Change

Property

13.6

17.7

-4.1

-23.2%

Casualty

32.4

37.7

-5.3

-14.1%

Healthcare liability

32.2

32.0

0.2

0.6%

Surety and other specialty

2.1

0.0

2.1

Agriculture

106.2

185.0

-78.8

-42.6%

Professional lines

34.8

30.8

4.0

13.0%

Total insurance

221.3

303.2

-81.9

-27.0%

Insurance Segment

In $MM

Sep. 30,

2 0 1 2

Sep. 30,

2 0 1 1

Change

Casualty

77.8

56.3

21.5

38.2%

Property

157.7

129.2

28.5

22.1%

Catastrophe

36.5

43.9

-7.4

-16.9%

Aerospace and marine

9.9

6.0

3.9

65.0%

Surety and other specialty

10.9

12.7

-1.8

-14.2%

Total reinsurance

292.8

248.1

44.7

18.0%

Reinsurance Segment

Financial Overview: 10 Year Financial Performance

In $MM

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2002

through 3Q

2012

Net premiums written

765

1,598

1,697

1,619

1,586

1,575

1,784

1,606

1,764

1,980

17,815

Net premiums earned

369

1,174

1,633

1,724

1,639

1,595

1,766

1,633

1,741

1,931

16,688

Net underwriting

income (loss)

179

232

-410

304

322

111

265

195

-252

1,060

Net investment income

122

180

257

281

130

284

200

147

1,853

Net income (loss)

before preferred

dividend

102

263

356

-220

498

521

100

555

365

-94

2,640

Net income (loss)

available to common

shareholders

102

263

356

-223

483

506

539

349

-118

2,512

Diluted EPS

$1.73

$4.00

$5.28

($3.60)

$6.73

$7.17

$1.33

$9.00

$6.38

($2.95)

$39.01

Financial highlights from 2002 through September 30, 2012

Key Operating Ratios

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Inception-to-

date

Combined ratio

86.2%

84.7%

85.8%

123.5%

81.5%

79.9%

93.5%

84.0%

88.7%

112.9%

93.6%

Operating ROE

7.8%

17.3%

19.9%

(11.9%)

25.7%

23.8%

8.5%

22.0%

12.6%

(6.3%)

11.6%

Book value per share

$21.73

$24.03

$27.91

$23.17

$28.87

$35.05

$33.06

$44.61

$52.74

$50.56

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