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

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8-K - FORM 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	d481907d8k.htm
EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	d481907dex991.htm

Exhibit 99.2

LOGO

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

FOURTH QUARTER 2012

Endurance Specialty Holdings Ltd.

Wellesley House, 90 Pitts Bay Rd.

Pembroke HM 08, Bermuda

Investor Relations

Phone: (441) 278-0988

Fax: (441) 278-0493

email: investorrelations@endurance.bm

This report is for information purposes only. It should be read in conjunction with other documents filed by Endurance Specialty Holdings Ltd. pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.

Financial Supplement Table of Contents


			Page
i.	Basis of Presentation			i
I.	Consolidated Financial Highlights			1
II.	Consolidated Financial Statements
	a.	Consolidated Statements of (Loss) Income - Quarterly		2
	b.	Consolidated Statements of Income (Loss) - YTD		3
	c.	Consolidated Balance Sheets		4
III.	Other Financial Information
	a.	Probable Maximum Loss by Zone and Peril		5
	b.	Segment Distribution		6
	c.	Consolidated Segment Data		7
	d.	Return on Equity Analysis		19
	e.	ROE Component Analysis - Annualized Premium and Investment Leverage		20
	f.	Investment Portfolio Information		21
	g.	Largest Twenty-Five Corporate Holdings		22
IV.	Loss Reserve Analysis
	a.	Activity in Reserve for Losses and Loss Expenses		23
	b.	Prior Year Reserve Development by Segment		24
	c.	Prior Year Reserve Development by Line of Business		25
	d.	Analysis of Unpaid Losses and Loss Expenses		26
V.	Shareholder Return Analysis
	a.	Shareholder Return Analysis		27
	b.	Weighted Average Dilutive Shares Outstanding		28
	c.	(Losses) Earnings per Share - Two Class Method		29
	d.	Operating (Loss) Income Reconciliation - Two Class Method		30
	e.	Book Value Per Share Analysis		31

VI.	Regulation G			32

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:

Some of the statements in this financial supplement may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “should,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this financial supplement for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2011.

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

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, 2011 and 2010 which was derived from the Company’s audited financial statements.

•

Unless otherwise noted, all data is in thousands, except for per share, percentage and ratio information.

•

As used in this financial supplement, “common shares” refers to our ordinary shares and class A shares, collectively.

•

Endurance Specialty Holdings Ltd., along with others in the industry, uses underwriting ratios as measures of performance. The loss ratio is the ratio of claims and claims adjustment expense to earned premiums. The acquisition expense ratio is the ratio of underwriting expenses (commissions, taxes, licenses and fees, as well as other underwriting expenses) to earned premiums. The general and administrative expense ratio is the ratio of general and administrative expenses to earned premiums. The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.

•

NM - Not meaningful.


		i

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS


		QUARTER ENDED DECEMBER 31,						FOR THE YEAR ENDED DECEMBER 31,						Previous Quarter Change			Previous Year to Date Change
		2012			2011			2012			2011			Previous Quarter Change			Previous Year to Date Change

HIGHLIGHTS	Net (loss) income	($	32,627	)	($	27,376	)	$	162,516		($	93,734	)		19.2	%		NM
	Net (loss) income (attributable) available to common and participating common shareholders		(40,813	)		(35,563	)		129,766			(117,859	)		14.8	%		NM
	Net (loss) income allocated to common shareholders		(41,019	)		(35,784	)		127,653			(118,820	)		14.6	%		NM
	Operating (loss) income [a]		(68,258	)		(31,303	)		87,045			(128,178	)		118.1	%		NM
	Operating (loss) income (attributable) available to common and participating common shareholders [a]		(76,444	)		(39,490	)		54,295			(152,303	)		93.6	%		NM
	Operating (loss) income allocated to common shareholders [a]		(76,650	)		(39,711	)		53,411			(153,264	)		93.0	%		NM
	Operating cash flow		61,385			(56,214	)		272,834			281,285			NM			(3.0	)%
	Net investment income		38,603			40,594			173,326			147,037			(4.9	)%		17.9	%
	Gross premiums written		262,046			262,966			2,549,026			2,467,114			(0.3	)%		3.3	%
	Net premiums written		187,946			187,864			2,029,495			1,979,821			—			2.5	%
	Net premiums earned		531,053			500,489			2,013,900			1,931,393			6.1	%		4.3	%
	Total assets		8,794,972			8,292,615			8,794,972			8,292,615			6.1	%		6.1	%
	Total shareholders’ equity		2,710,597			2,611,165			2,710,597			2,611,165			3.8	%		3.8	%

PER SHARE AND SHARES DATA	Basic and diluted (losses) earnings per common share
	Net (loss) income (as reported)	($	0.96	)	($	0.88	)	$	3.00		($	2.95	)		9.1	%		NM
	Operating (loss) income (as reported) [a]	($	1.80	)	($	0.98	)	$	1.25		($	3.81	)		83.7	%		NM
As Reported	Weighted average common shares outstanding		42,604			40,641			42,568			40,215			4.8	%		5.9	%
	Weighted average common shares outstanding and dilutive potential common shares [e]		42,604			40,641			42,602			40,215			4.8	%		5.9	%

	Common dividends paid per share	$	0.31		$	0.30		$	1.24		$	1.20			3.3	%		3.3	%

Book Value Per Common Share	Book value [b]	$	53.75		$	51.48		$	53.75		$	51.48			4.4	%		4.4	%
	Diluted book value (treasury stock method) [b]	$	52.88		$	50.56		$	52.88		$	50.56			4.6	%		4.6	%

FINANCIAL RATIOS	Return on average common equity (ROAE), net (loss) income [c]		(1.8	)%		(1.6	)%		5.8	%		(4.9	)%		(0.2	)		10.7
	ROAE, operating (loss) income [a] [c]		(3.3	)%		(1.8	)%		2.4	%		(6.3	)%		(1.5	)		8.7
	Return on beg. common equity (ROBE), net (loss) income [d]		(1.7	)%		(1.6	)%		5.9	%		(4.5	)%		(0.1	)		10.4
	ROBE, operating (loss) income [a] [d]		(3.2	)%		(1.8	)%		2.5	%		(5.8	)%		(1.4	)		8.3

	Annualized ROAE, net (loss) income [c]		(7.0	)%		(6.5	)%		5.8	%		(4.9	)%		(0.5	)		10.7
	Annualized ROAE, operating (loss) income [a] [c]		(13.1	)%		(7.2	)%		2.4	%		(6.3	)%		(5.9	)		8.7
	Annualized ROBE, net (loss) income [d]		(6.9	)%		(6.4	)%		5.9	%		(4.5	)%		(0.5	)		10.4
	Annualized ROBE, operating (loss) income [a] [d]		(12.8	)%		(7.2	)%		2.5	%		(5.8	)%		(5.6	)		8.3
	Annualized investment yield		2.8	%		2.6	%		2.8	%		2.4	%		0.2			0.4

GAAP	Loss ratio		95.1	%		82.4	%		75.5	%		84.6	%		12.7			(9.1	)
	Acquisition expense ratio		13.9	%		15.4	%		15.1	%		14.6	%		(1.5	)		0.5
	General and administrative expense ratio		10.2	%		14.7	%		11.7	%		13.7	%		(4.5	)		(2.0	)

	Combined ratio		119.2	%		112.5	%		102.3	%		112.9	%		6.7			(10.6	)

[a]

Operating (loss) income represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses. Please see page 30 for a reconciliation to net (loss) income.

[b]

For detailed calculations, please refer to page 31.

[c]

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

[d]

Beginning common equity for the stated periods excludes the $430 million liquidation value of the preferred shares (2011 - $200 million).

[e]

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


		1

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF (LOSS) INCOME - QUARTERLY


	QUARTERS ENDED
	DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	262,046		$	621,255		$	604,076		$	1,061,649		$	262,966		$	189,225
Premiums ceded		(74,100	)		(107,175	)		(119,663	)		(218,593	)		(75,102	)		(31,110	)

Net premiums written	$	187,946		$	514,080		$	484,413		$	843,056		$	187,864		$	158,115
Change in unearned premiums		343,107			37,792			34,927			(431,421	)		312,625			291,621

Net premiums earned	$	531,053		$	551,872		$	519,340		$	411,635		$	500,489		$	449,736
Other underwriting (loss) income		(520	)		(1,347	)		19			(335	)		(1,425	)		410

Total underwriting revenues	$	530,533		$	550,525		$	519,359		$	411,300		$	499,064		$	450,146

UNDERWRITING EXPENSES
Net losses and loss expenses	$	504,808		$	407,523		$	345,897		$	262,767		$	412,152		$	246,424
Acquisition expenses		73,780			88,782			72,128			68,489			77,157			66,133
General and administrative expenses		54,324			52,715			62,609			66,041			73,731			67,756

Total underwriting expenses	$	632,912		$	549,020		$	480,634		$	397,297		$	563,040		$	380,313

Underwriting (loss) income	($	102,379	)	$	1,505		$	38,725		$	14,003		($	63,976	)	$	69,833

OTHER OPERATING REVENUE
Net investment income	$	38,603		$	45,882		$	31,766		$	57,075		$	40,594		$	56,874
Interest expense		(9,042	)		(9,041	)		(9,044	)		(9,047	)		(9,088	)		(9,053	)
Amortization of intangibles		(2,359	)		(2,434	)		(2,777	)		(2,777	)		(2,413	)		(2,696	)

Total other operating revenue	$	27,202		$	34,407		$	19,945		$	45,251		$	29,093		$	45,125

(LOSS) INCOME BEFORE OTHER ITEMS	($	75,177	)	$	35,912		$	58,670		$	59,254		($	34,883	)	$	114,958
OTHER
Net foreign exchange gains (losses)	$	1,212		($	3,774	)	$	336		$	18,137		($	233	)	($	3,476	)
Net realized and unrealized investment gains		41,881			10,097			14,958			5,203			5,331			7,314

Total other-than-temporary impairment losses		(90	)		(126	)		(148	)		—			(751	)		(48	)
Portion of loss recognised in other comprehensive income		—			(5	)		(259	)		(219	)		50			(663	)

Net impairment losses recognised in (losses) earnings		(90	)		(131	)		(407	)		(219	)		(701	)		(711	)

Income tax (expense) benefit		(453	)		(1,986	)		(1,074	)		167			3,110			(6,857	)

NET (LOSS) INCOME	($	32,627	)	$	40,118		$	72,483		$	82,542		($	27,376	)	$	111,228

Preferred dividends		(8,186	)		(8,188	)		(8,188	)		(8,188	)		(8,187	)		(3,875	)


NET (LOSS) INCOME (ATTRIBUTABLE) AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	($	40,813	)	$	31,930		$	64,295		$	74,354		($	35,563	)	$	107,353


KEY RATIOS/PER SHARE DATA

Loss ratio		95.1	%		73.8	%		66.5	%		63.9	%		82.4	%		54.8	%
Acquisition expense ratio		13.9	%		16.1	%		13.9	%		16.6	%		15.4	%		14.7	%
General and administrative expense ratio		10.2	%		9.6	%		12.1	%		16.0	%		14.7	%		15.1	%

Combined ratio		119.2	%		99.5	%		92.5	%		96.5	%		112.5	%		84.6	%


Basic (losses) earnings per common share	($	0.96	)	$	0.74		$	1.48		$	1.72		($	0.88	)	$	2.22
Diluted (losses) earnings per common share	($	0.96	)	$	0.74		$	1.48		$	1.72		($	0.88	)	$	2.09

ROAE, net (loss) income [a]		(1.8	)%		1.4	%		2.8	%		3.4	%		(1.6	)%		4.0	%

[a]

Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the liquidation value of the preferred shares of $430 million (2010 - $200 million).


		2

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - YTD


	YEAR ENDED
	DEC. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	2,549,026		$	2,467,114		$	2,053,236
Premiums ceded		(519,531	)		(487,293	)		(289,492	)

Net premiums written	$	2,029,495		$	1,979,821		$	1,763,744
Change in unearned premiums		(15,595	)		(48,428	)		(22,631	)

Net premiums earned	$	2,013,900		$	1,931,393		$	1,741,113
Other underwriting loss		(2,183	)		(3,547	)		(1,636	)

Total underwriting revenues	$	2,011,717		$	1,927,846		$	1,739,477

UNDERWRITING EXPENSES
Losses and loss expenses	$	1,520,995		$	1,632,666		$	1,038,100
Acquisition expenses		303,179			282,911			264,228
General and administrative expenses		235,689			264,152			241,920

Total underwriting expenses	$	2,059,863		$	2,179,729		$	1,544,248

Underwriting (loss) income	($	48,146	)	($	251,883	)	$	195,229

OTHER OPERATING REVENUE
Net investment income	$	173,326		$	147,037		$	200,358
Interest expense		(36,174	)		(36,254	)		(34,762	)
Amortization of intangibles		(10,347	)		(11,213	)		(10,460	)

Total other operating revenue	$	126,805		$	99,570		$	155,136

INCOME (LOSS) BEFORE OTHER ITEMS	$	78,659		($	152,313	)	$	350,365
OTHER
Net foreign exchange gains	$	15,911		$	7,422		$	2,989
Net realized and unrealized investment gains		72,139			31,671			22,488

Total other-than-temporary impairment losses		(364	)		(2,659	)		(2,695	)
Portion of loss recognised in other comprehensive income		(483	)		(861	)		(1,249	)

Net impairment losses recognised in earnings (losses)		(847	)		(3,520	)		(3,944	)

Income tax (expense) benefit		(3,346	)		23,006			(7,160	)

NET INCOME (LOSS)	$	162,516		($	93,734	)	$	364,738

Preferred dividends		(32,750	)		(24,125	)		(15,500	)

NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS	$	129,766		($	117,859	)	$	349,238


KEY RATIOS/PER SHARE DATA

Loss ratio		75.5	%		84.6	%		59.6	%
Acquisition expense ratio		15.1	%		14.6	%		15.2	%
General and administrative expense ratio		11.7	%		13.7	%		13.9	%

Combined ratio		102.3	%		112.9	%		88.7	%


Basic earnings (losses) per common share	$	3.00		($	2.95	)	$	6.73
Diluted earnings (losses) per common share	$	3.00		($	2.95	)	$	6.38

ROAE, net income (loss) [a]		5.8	%		(4.9	)%		13.3	%

[a]


		3

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS


	DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011
ASSETS
Cash and cash equivalents	$	1,124,019		$	895,776		$	842,180		$	679,634		$	890,914
Fixed maturity investments available for sale, at fair value		4,868,150			5,052,963			5,081,814			5,131,035			4,831,966
Short term investments available for sale, at fair value		42,230			62,713			40,913			54,919			67,802
Equity securities available for sale, at fair value		86,997			83,085			70,652			67,238			59,767
Other investments		517,546			478,911			478,860			432,428			432,658
Premiums receivable, net		601,952			1,136,130			1,289,478			1,188,186			544,017
Insurance and reinsurance balances receivable		105,663			112,926			115,904			95,840			92,710
Deferred acquisition costs		168,252			215,811			196,693			191,690			166,049
Prepaid reinsurance premiums		166,702			228,854			258,522			280,094			149,670
Losses recoverable		774,942			1,076,647			618,447			497,522			666,928
Accrued investment income		27,166			23,937			27,383			25,669			29,708
Goodwill and intangible assets		172,000			174,309			176,743			179,051			181,828
Deferred tax assets		43,501			36,092			36,376			34,802			33,355
Receivable on pending investment sales		9,144			76,907			30,776			33,969			77,821
Other assets		86,708			99,294			75,387			76,751			67,422

TOTAL ASSETS	$	8,794,972		$	9,754,355		$	9,340,128		$	8,968,828		$	8,292,615


LIABILITIES
Reserve for losses and loss expenses	$	4,240,876		$	4,509,442		$	3,984,622		$	3,760,829		$	3,824,224
Reserve for unearned premiums		965,244			1,370,491			1,437,482			1,494,324			932,108
Deposit liabilities		22,220			23,557			24,938			26,950			26,887
Reinsurance balances payable		110,843			256,674			306,122			293,726			189,488
Debt		527,339			527,341			527,299			527,180			528,118
Payable on pending investment purchases		81,469			102,874			186,652			65,385			55,243
Other liabilities		136,384			153,102			125,771			115,896			125,382

TOTAL LIABILITIES	$	6,084,375		$	6,943,481		$	6,592,886		$	6,284,290		$	5,681,450

SHAREHOLDERS’ EQUITY
Preferred shares
Series A, non-cumulative	$	8,000		$	8,000		$	8,000		$	8,000		$	8,000
Series B, non-cumulative		9,200			9,200			9,200			9,200			9,200
Common shares		43,116			43,294			43,296			43,387			43,087
Additional paid-in capital		527,915			533,284			531,145			528,677			526,910
Accumulated other comprehensive income		152,463			193,239			150,252			140,795			130,392
Retained earnings		1,969,903			2,023,857			2,005,349			1,954,479			1,893,576

TOTAL SHAREHOLDERS’ EQUITY	$	2,710,597		$	2,810,874		$	2,747,242		$	2,684,538		$	2,611,165

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,794,972		$	9,754,355		$	9,340,128		$	8,968,828		$	8,292,615


Book value per common share	$	53.75		$	55.85		$	54.37		$	52.97		$	51.48
Diluted book value per common share (treasury stock method)	$	52.88		$	54.95		$	53.48		$	51.90		$	50.56

RATIOS
Debt-to-capital		16.3	%		15.8	%		16.1	%		16.4	%		16.8	%


		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, 2013 is equal to 15.8% of Shareholders’ Equity as of December 31, 2012


		Estimated Occurrence Net Loss as of January 1, 2013										Jan. 1, 2012		Jan. 1, 2011
Zone	Peril	10 Year Return Period		25 Year Return Period		50 Year Return Period		100 Year Return Period		250 Year Return Period		100 Year Return Period		100 Year Return Period

United States	Hurricane*	$	215	$	309	$	370	$	429	$	515	$	574	$	567
Europe	Windstorm		85		170		254		346		457		384		463
California	Earthquake		51		223		343		395		518		409		456
Japan	Windstorm		17		89		160		201		227		317		363
Northwest U.S.	Earthquake		—		7		51		154		265		206		238
Japan	Earthquake		9		54		82		111		172		189		143
United States	Tornado/Hail		36		53		69		86		111		123		84
Australia	Earthquake		—		6		28		88		183		73		71
New Zealand	Earthquake		—		2		7		24		55		29		44
Australia	Windstorm		3		11		29		53		98		48		36
New Madrid	Earthquake		—		—		—		10		88		12		12

The net loss estimates by zone above represent estimated losses related to our property, catastrophe and aerospace and marine lines of business, based upon our catastrophe models and assumptions regarding the location, size, magnitude, and frequency of the catastrophe events utilized to determine the above estimates. The net loss estimates are presented on an occurrence basis, before income tax and net of reinsurance recoveries and reinstatement premiums, if applicable. Return period refers to the frequency with which the related size of a catastrophic event is expected to occur.

Actual realized catastrophic losses could differ materially from our net loss estimates and our net loss estimates should not be considered as representative of the actual losses that we may incur in connection with any particular catastrophic event. The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by management’s assumptions regarding event characteristics, construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurance’s underwriting portfolio risk control mechanisms and other factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011.

*	United States Windstorm estimated net losses as of January 1, 2013 are based on RMS version 11.0 and include reinstatement premiums, if applicable.


		5

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE YEAR ENDED DECEMBER 31, 2012

LOGO

[a]

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


		6

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE QUARTERS ENDED
	DEC. 31, 2012									DEC. 31, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	177,116		$	84,930		$	262,046		$	167,766		$	95,200		$	262,966

Net premiums written	$	106,652		$	81,294		$	187,946		$	96,478		$	91,386		$	187,864

Net premiums earned	$	244,101		$	286,952		$	531,053		$	251,101		$	249,388		$	500,489
Other underwriting loss		—			(520	)		(520	)		(493	)		(932	)		(1,425	)

Total underwriting revenues	$	244,101		$	286,432		$	530,533		$	250,608		$	248,456		$	499,064


UNDERWRITING EXPENSES
Net losses and loss expenses	$	244,985		$	259,823		$	504,808		$	214,681		$	197,471		$	412,152
Acquisition expenses		17,332			56,448			73,780			20,388			56,769			77,157
General and administrative expenses		28,445			25,879			54,324			43,754			29,977			73,731

Total expenses	$	290,762		$	342,150		$	632,912		$	278,823		$	284,217		$	563,040


UNDERWRITING LOSS	($	46,661	)	($	55,718	)	($	102,379	)	($	28,215	)	($	35,761	)	($	63,976	)


GAAP RATIOS
Loss ratio		100.3	%		90.5	%		95.1	%		85.5	%		79.2	%		82.4	%
Acquisition expense ratio		7.1	%		19.7	%		13.9	%		8.1	%		22.8	%		15.4	%
General and administrative expense ratio		11.7	%		9.0	%		10.2	%		17.4	%		12.0	%		14.7	%

Combined ratio AS REPORTED		119.1	%		119.2	%		119.2	%		111.0	%		114.0	%		112.5	%


Effect of favorable prior accident year reserve development		3.0	%		7.2	%		5.3	%		0.2	%		16.6	%		8.4	%


Combined ratio net of prior accident year reserve development		122.1	%		126.4	%		124.5	%		111.2	%		130.6	%		120.9	%


		7

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	177,116		$	324,808		$	292,659		$	635,347		$	167,766		$	112,664

Net premiums written	$	106,652		$	221,265		$	186,659		$	427,781		$	96,478		$	81,643

Net premiums earned	$	244,101		$	283,273		$	266,085		$	161,630		$	251,101		$	205,528
Other underwriting (loss) income		—			(1,384	)		(1,300	)		—			(493	)		4

Total underwriting revenues	$	244,101		$	281,889		$	264,785		$	161,630		$	250,608		$	205,532


UNDERWRITING EXPENSES
Net losses and loss expenses	$	244,985		$	288,750		$	208,504		$	113,702		$	214,681		$	129,168
Acquisition expenses		17,332			24,506			17,545			16,214			20,388			12,220
General and administrative expenses		28,445			29,409			32,819			34,435			43,754			36,812

Total expenses	$	290,762		$	342,665		$	258,868		$	164,351		$	278,823		$	178,200


UNDERWRITING (LOSS) INCOME	($	46,661	)	($	60,776	)	$	5,917		($	2,721	)	($	28,215	)	$	27,332


GAAP RATIOS
Loss ratio		100.3	%		101.9	%		78.4	%		70.4	%		85.5	%		62.9	%
Acquisition expense ratio		7.1	%		8.7	%		6.6	%		10.0	%		8.1	%		5.9	%
General and administrative expense ratio		11.7	%		10.4	%		12.3	%		21.3	%		17.4	%		17.9	%

Combined ratio AS REPORTED		119.1	%		121.0	%		97.3	%		101.7	%		111.0	%		86.7	%


Effect of favorable prior accident year reserve development		3.0	%		6.2	%		5.1	%		4.9	%		0.2	%		5.6	%

Combined ratio net of prior accident year reserve development		122.1	%		127.2	%		102.4	%		106.6	%		111.2	%		92.3	%


		8

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE QUARTERS ENDED
	DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	84,930		$	296,447		$	311,417		$	426,302		$	95,200		$	76,561

Net premiums written	$	81,294		$	292,815		$	297,754		$	415,275		$	91,386		$	76,472

Net premiums earned	$	286,952		$	268,599		$	253,255		$	250,005		$	249,388		$	244,208
Other underwriting (loss) income		(520	)		37			1,319			(335	)		(932	)		406

Total underwriting revenues	$	286,432		$	268,636		$	254,574		$	249,670		$	248,456		$	244,614


UNDERWRITING EXPENSES
Net losses and loss expenses	$	259,823		$	118,773		$	137,393		$	149,065		$	197,471		$	117,256
Acquisition expenses		56,448			64,276			54,583			52,275			56,769			53,913
General and administrative expenses		25,879			23,306			29,790			31,606			29,977			30,944

Total expenses	$	342,150		$	206,355		$	221,766		$	232,946		$	284,217		$	202,113


UNDERWRITING (LOSS) INCOME	($	55,718	)	$	62,281		$	32,808		$	16,724		($	35,761	)	$	42,501


GAAP RATIOS
Loss ratio		90.5	%		44.2	%		54.2	%		59.7	%		79.2	%		48.0	%
Acquisition expense ratio		19.7	%		23.9	%		21.6	%		20.9	%		22.8	%		22.1	%
General and administrative expense ratio		9.0	%		8.7	%		11.8	%		12.6	%		12.0	%		12.7	%

Combined ratio AS REPORTED		119.2	%		76.8	%		87.6	%		93.2	%		114.0	%		82.8	%


Effect of favorable prior accident year reserve development		7.2	%		14.2	%		2.3	%		3.6	%		16.6	%		4.9	%

Combined ratio net of prior accident year reserve development		126.4	%		91.0	%		89.9	%		96.8	%		130.6	%		87.7	%


		9

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	64,798	$	171,826	$	133,439	$	533,667	$	46,260	$	6,930
Casualty and other specialty		59,942		90,873		90,019		55,491		57,727		46,910
Professional lines		39,242		43,209		51,019		36,345		45,110		36,690
Property		13,134		18,900		18,182		9,844		18,669		22,134

TOTAL INSURANCE	$	177,116	$	324,808	$	292,659	$	635,347	$	167,766	$	112,664


REINSURANCE SEGMENT
Catastrophe	$	24,112	$	38,871	$	172,222	$	143,182	$	15,250	$	17,896
Property		31,065		157,742		54,026		106,746		15,087		8,628
Casualty		24,961		77,781		58,897		121,674		59,231		47,970
Other specialty		4,792		22,053		26,272		54,700		5,632		2,067

TOTAL REINSURANCE	$	84,930	$	296,447	$	311,417	$	426,302	$	95,200	$	76,561



REPORTED TOTALS	$	262,046	$	621,255	$	604,076	$	1,061,649	$	262,966	$	189,225


		10

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	25,413	$	106,180	$	67,249	$	354,920	$	9,121	$	2,372
Casualty and other specialty		43,683		66,686		64,588		41,823		40,287		34,205
Professional lines		30,044		34,804		42,832		30,205		38,402		33,171
Property		7,512		13,595		11,990		833		8,668		11,895

TOTAL INSURANCE	$	106,652	$	221,265	$	186,659	$	427,781	$	96,478	$	81,643


REINSURANCE SEGMENT
Catastrophe	$	22,073	$	36,484	$	158,865	$	133,718	$	14,753	$	17,896
Property		31,065		157,742		54,033		106,746		15,087		8,628
Casualty		24,960		77,781		58,895		120,437		59,234		47,965
Other specialty		3,196		20,808		25,961		54,374		2,312		1,983

TOTAL REINSURANCE	$	81,294	$	292,815	$	297,754	$	415,275	$	91,386	$	76,472



REPORTED TOTALS	$	187,946	$	514,080	$	484,413	$	843,056	$	187,864	$	158,115


		11

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE QUARTERS ENDED
	DEC. 31, 2012		SEPT. 30, 2012		JUNE 30, 2012		MAR. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	142,851	$	183,277	$	162,703	$	59,969	$	146,068	$	100,177
Casualty and other specialty		55,425		53,060		53,757		53,234		50,718		47,822
Professional lines		35,530		35,577		36,719		33,884		37,580		37,167
Property		10,295		11,359		12,906		14,543		16,735		20,362

TOTAL INSURANCE	$	244,101	$	283,273	$	266,085	$	161,630	$	251,101	$	205,528


REINSURANCE SEGMENT
Catastrophe	$	95,050	$	85,983	$	81,334	$	82,337	$	82,197	$	79,617
Property		92,757		74,818		70,546		68,378		67,911		64,229
Casualty		73,911		79,135		74,049		73,252		73,838		74,702
Other specialty		25,234		28,663		27,326		26,038		25,442		25,660

TOTAL REINSURANCE	$	286,952	$	268,599	$	253,255	$	250,005	$	249,388	$	244,208



REPORTED TOTALS	$	531,053	$	551,872	$	519,340	$	411,635	$	500,489	$	449,736


		12

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA


	FOR THE YEARS ENDED
	DEC. 31, 2012									DEC. 31, 2011
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written	$	1,429,930		$	1,119,096		$	2,549,026		$	1,469,798		$	997,316		$	2,467,114

Net premiums written	$	942,357		$	1,087,138		$	2,029,495		$	1,005,490		$	974,331		$	1,979,821

Net premiums earned	$	955,089		$	1,058,811		$	2,013,900		$	981,592		$	949,801		$	1,931,393
Other underwriting (loss) income		(2,684	)		501			(2,183	)		(3,368	)		(179	)		(3,547	)

Total underwriting revenues	$	952,405		$	1,059,312		$	2,011,717		$	978,224		$	949,622		$	1,927,846


UNDERWRITING EXPENSES
Losses and loss expenses	$	855,941		$	665,054		$	1,520,995		$	765,119		$	867,547		$	1,632,666
Acquisition expenses		75,597			227,582			303,179			71,295			211,616			282,911
General and administrative expenses		125,108			110,581			235,689			146,115			118,037			264,152

Total expenses	$	1,056,646		$	1,003,217		$	2,059,863		$	982,529		$	1,197,200		$	2,179,729


UNDERWRITING (LOSS) INCOME	($	104,241	)	$	56,095		($	48,146	)	($	4,305	)	($	247,578	)	($	251,883	)


GAAP RATIOS
Loss ratio		89.6	%		62.8	%		75.5	%		77.9	%		91.3	%		84.6	%
Acquisition expense ratio		7.9	%		21.5	%		15.1	%		7.3	%		22.3	%		14.6	%
General and administrative expense ratio		13.1	%		10.4	%		11.7	%		14.9	%		12.4	%		13.7	%

Combined ratio AS REPORTED		110.6	%		94.7	%		102.3	%		100.1	%		126.0	%		112.9	%


Effect of favorable prior accident year reserve development		4.8	%		7.0	%		6.0	%		7.2	%		11.5	%		9.3	%


Combined ratio net of prior accident year reserve development		115.4	%		101.7	%		108.3	%		107.3	%		137.5	%		122.2	%


		13

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA


	FOR THE YEARS ENDED
	DEC. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,429,930		$	1,469,798		$	1,112,192

Net premiums written	$	942,357		$	1,005,490		$	829,864

Net premiums earned	$	955,089		$	981,592		$	821,828
Other underwriting (loss) income		(2,684	)		(3,368	)		475

Total underwriting revenues	$	952,405		$	978,224		$	822,303


UNDERWRITING EXPENSES
Losses and loss expenses	$	855,941		$	765,119		$	558,040
Acquisition expenses		75,597			71,295			63,556
General and administrative expenses		125,108			146,115			123,335

Total expenses	$	1,056,646		$	982,529		$	744,931


UNDERWRITING (LOSS) INCOME	($	104,241	)	($	4,305	)	$	77,372


GAAP RATIOS
Loss ratio		89.6	%		77.9	%		67.9	%
Acquisition expense ratio		7.9	%		7.3	%		7.7	%
General and administrative expense ratio		13.1	%		14.9	%		15.0	%

Combined ratio AS REPORTED		110.6	%		100.1	%		90.6	%


Effect of favorable prior accident year reserve development		4.8	%		7.2	%		5.7	%

Combined ratio net of prior accident year reserve development		115.4	%		107.3	%		96.3	%


		14

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA


	FOR THE YEARS ENDED
	DEC. 31, 2012			DEC. 31, 2011			DEC. 31, 2010
UNDERWRITING REVENUES
Gross premiums written	$	1,119,096		$	997,316		$	941,044

Net premiums written	$	1,087,138		$	974,331		$	933,880

Net premiums earned	$	1,058,811		$	949,801		$	919,285
Other underwriting income (loss)		501			(179	)		(2,111	)

Total underwriting revenues	$	1,059,312		$	949,622		$	917,174


UNDERWRITING EXPENSES
Losses and loss expenses	$	665,054		$	867,547		$	480,060
Acquisition expenses		227,582			211,616			200,672
General and administrative expenses		110,581			118,037			118,585

Total expenses	$	1,003,217		$	1,197,200		$	799,317


UNDERWRITING INCOME (LOSS)	$	56,095		($	247,578	)	$	117,857


GAAP RATIOS
Loss ratio		62.8	%		91.3	%		52.2	%
Acquisition expense ratio		21.5	%		22.3	%		21.8	%
General and administrative expense ratio		10.4	%		12.4	%		12.9	%

Combined ratio AS REPORTED		94.7	%		126.0	%		86.9	%


Effect of favorable prior accident year reserve development		7.0	%		11.5	%		8.7	%

Combined ratio net of prior accident year reserve development		101.7	%		137.5	%		95.6	%


		15

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE YEARS ENDED
	DEC. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	903,730	$	901,746	$	567,461
Casualty and other specialty		296,325		289,421		252,475
Professional lines		169,815		169,319		170,146
Property		60,060		109,312		122,110

TOTAL INSURANCE	$	1,429,930	$	1,469,798	$	1,112,192


REINSURANCE SEGMENT
Catastrophe	$	378,387	$	346,021	$	309,886
Property		349,579		266,562		224,544
Casualty		283,313		277,495		294,030
Other specialty		107,817		107,238		112,584

TOTAL REINSURANCE	$	1,119,096	$	997,316	$	941,044



REPORTED TOTALS	$	2,549,026	$	2,467,114	$	2,053,236


		16

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS


	FOR THE YEARS ENDED
	DEC. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	553,762	$	586,659	$	404,767
Casualty and other specialty		216,780		215,939		188,081
Professional lines		137,885		137,962		148,717
Property		33,930		64,930		88,299

TOTAL INSURANCE	$	942,357	$	1,005,490	$	829,864


REINSURANCE SEGMENT
Catastrophe	$	351,140	$	329,081	$	305,617
Property		349,586		266,562		224,544
Casualty		282,073		276,697		293,222
Other specialty		104,339		101,991		110,497

TOTAL REINSURANCE	$	1,087,138	$	974,331	$	933,880



REPORTED TOTALS	$	2,029,495	$	1,979,821	$	1,763,744


		17

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS


	FOR THE YEARS ENDED
	DEC. 31, 2012		DEC. 31, 2011		DEC. 31, 2010
INSURANCE SEGMENT
Agriculture	$	548,800	$	564,658	$	397,643
Casualty and other specialty		215,476		201,518		183,393
Professional lines		141,710		145,886		154,484
Property		49,103		69,530		86,308

TOTAL INSURANCE	$	955,089	$	981,592	$	821,828


REINSURANCE SEGMENT
Catastrophe	$	344,704	$	326,674	$	315,708
Property		306,499		241,525		227,282
Casualty		300,347		278,114		272,968
Other specialty		107,261		103,488		103,327

TOTAL REINSURANCE	$	1,058,811	$	949,801	$	919,285



REPORTED TOTALS	$	2,013,900	$	1,931,393	$	1,741,113


		18

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS


	FOR THE YEAR ENDED DEC. 31, 2012

Average common equity [a]	$	2,230,881

Net premiums earned	$	2,013,900
Combined ratio		102.3	%
Operating margin		(2.3	)%
Premium leverage		0.90	x
Implied ROAE from underwriting activity		(2.1	)%

Average cash and invested assets at amortized cost	$	6,303,881
Investment leverage		2.83	x
Year to date investment income yield, pretax		2.7	%
Implied ROAE from investment activity		7.6	%

Financing Costs [b]		(3.1	)%

Implied Pre-tax Operating ROAE, for period [c]		2.4	%

[a]

[b]

Financing costs include interest expense and preferred dividends.

[c]

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


		19

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE


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

Average common equity [a]	$	2,330,736		$	2,349,058		$	2,285,890		$	2,217,852		$	2,230,881		$	2,451,346

Net premiums earned	$	531,053		$	551,872		$	519,340		$	411,635		$	2,013,900		$	1,931,393

Premium leverage		0.23	x		0.23	x		0.23	x		0.19	x		0.90	x		0.79	x

Annualized premium leverage		0.92	x		0.92	x		0.92	x		0.76	x		0.90	x		0.79	x

Average cash and invested assets at amortized cost	$	6,394,427		$	6,288,639		$	6,206,710		$	6,191,489		$	6,303,881		$	6,130,518

Investment leverage		2.74	x		2.68	x		2.72	x		2.79	x		2.83	x		2.50	x

[a]


		20

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF DECEMBER 31, 2012 AND DECEMBER 31, 2011


	December 31, 2012					December 31, 2011
Type of Investment	Fair Value		Percentage			Fair Value		Percentage
Cash and equivalents [a]	$	1,051,694		16.0	%	$	913,492		14.5	%
Short-term investments		42,230		0.6	%		67,802		1.1	%
U.S. government and government agencies notes		737,535		11.2	%		1,269,123		20.1	%
Government and agency guaranteed corporates		64,464		1.0	%		351,825		5.6	%
U.S. government agency residential mortgage-backed securities		1,197,788		18.2	%		965,019		15.3	%
U.S. government agency commercial mortgage-backed securities		25,684		0.4	%		28,807		0.5	%
Municipals		38,894		0.6	%		53,517		0.8	%
Foreign government		109,337		1.7	%		74,997		1.2	%
Corporate securities		1,373,671		20.9	%		1,139,899		18.1	%
Non-agency residential mortgage-backed securities		82,791		1.3	%		114,662		1.8	%
Non-agency commercial mortgage-backed securities		774,897		11.8	%		518,483		8.2	%
Asset-backed securities [b]		463,089		7.1	%		315,634		5.0	%
Equity securities		86,997		1.3	%		59,767		0.9	%
Other investments [c]		517,546		7.9	%		432,658		6.9	%

Total	$	6,566,617		100.0	%	$	6,305,685		100.0	%


Ratings [d]	Fair Value		Percentage			Fair Value		Percentage
U.S. government and government agencies notes	$	737,535		15.0	%	$	1,269,123		25.9	%
AAA/Aaa		993,277		20.2	%		941,500		19.2	%
AA/Aa		1,821,249		37.1	%		1,665,593		34.1	%
A/A		993,307		20.2	%		776,251		15.8	%
BBB		219,017		4.5	%		130,864		2.7	%
Below BBB		143,199		2.9	%		114,716		2.3	%
Not Rated		2,796		0.1	%		1,721		—

Total	$	4,910,380		100.0	%	$	4,899,768		100.0	%


Performance					December 31, 2012						December 31, 2011
Yield [e]						2.8	%					2.4	%
Duration in years [f]						2.49						2.39

Investment Income	Year Ended Dec. 31, 2012		Quarter Ended Dec. 31, 2012		Quarter Ended Sept. 30, 2012			Quarter Ended June 30, 2012			Quarter Ended Mar. 31, 2012
Cash and available for sale securities	$	124,267	$	27,645	$	30,832		$	31,840		$	33,950
Other investments		49,059		10,958		15,050			(74	)		23,125

Total net investment income	$	173,326	$	38,603	$	45,882		$	31,766		$	57,075


Note:	[a]	Cash and equivalents, including operating cash, are shown net of investments pending settlement.
	[b]	Includes CLOs of $80.3 million (2011: $48.9 million) and CDOs of $27.7 million (2011: $17.2 million).
	[c]	Other investments includes investments in alternative and specialty funds.
	[d]	Excludes cash and equivalents, equity securities and other investments.
	[e]	Earned yield for the twelve months ending 12/31/12 and twelve months ending 12/31/11 excludes realized and unrealized gains and losses on fixed maturity investments.
	[f]	Duration excludes other investments and operating cash.


		21

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF DEC. 31, 2012


	December 31, 2012
ISSUER (1) (2) (3)	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Credit Quality (4)

MORGAN STANLEY	$	41,075	$	41,890	$	815		A-
GOLDMAN SACHS GROUP INC/THE		40,801		41,221		420		A-
JPMORGAN CHASE & CO		39,335		40,196		861		A
CITIGROUP INC		39,339		39,724		385		A-
BANK OF AMERICA CORP		38,814		39,417		603		A-
METLIFE INC		32,424		32,840		416		A-
AT&T INC		26,021		26,464		443		A-
US BANCORP		24,393		25,264		871		A+
NEW YORK LIFE INSURANCE COMPANY		24,077		24,876		799		AA+
GENERAL ELECTRIC CO		24,585		24,687		102		AA+
NOVARTIS AG		22,949		24,146		1,197		AA-
WAL-MART STORES INC		22,302		23,094		792		AA
PHILIP MORRIS INTERNATIONAL INC		21,429		22,263		834		A
VERIZON COMMUNICATIONS INC		18,337		19,731		1,394		A-
FORD MOTOR COMPANY		18,514		18,744		230		BB+
PEPSICO INC		17,552		18,501		949		A
PRINCIPAL LIFE GLOBAL FUNDING II		17,624		17,706		82		A+
EDISON INTERNATIONAL		16,614		17,508		894		A
INTERNATIONAL BUSINESS MACHINES CORP		16,753		17,151		398		AA-
ANALOG DEVICES INC		16,110		16,817		707		A-
NATIONAL GRID PLC		13,897		16,059		2,162		A-
AMERICAN EXPRESS COMPANY		15,401		15,323		(78	)	A-
PRUDENTIAL FINANCIAL INC		14,678		15,009		331		A+
SOUTHERN COMPANY (THE)		14,631		14,635		4		A
MEDTRONIC INC		13,399		14,066		667		A+

(1)	Corporate issuers exclude government-backed, government-sponsored enterprises, covered bonds and cash and cash equivalents.

(2)	Credit exposures represent only direct exposure to fixed maturities and short term investments of the parent issuer and its major subsidiaries.

(3)	Includes preferred equity securities.

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


		22

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES


	THREE MONTHS ENDED DEC. 31, 2012									YEAR ENDED DEC. 31, 2012
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period	$	4,509,442		($	1,076,647	)	$	3,432,795		$	3,824,224		($	666,928	)	$	3,157,296

Incurred related to:
Current year		544,572			(11,702	)		532,870			2,400,506			(759,354	)		1,641,152
Prior years		(34,276	)		6,214			(28,062	)		(141,669	)		21,512			(120,157	)

Total Incurred		510,296			(5,488	)		504,808			2,258,837			(737,842	)		1,520,995


Paid related to:
Current year		(140,171	)		3,757			(136,414	)		(446,461	)		152,719			(293,742	)
Prior years		(629,304	)		303,468			(325,836	)		(1,391,400	)		477,231			(914,169	)

Total Paid		(769,475	)		307,225			(462,250	)		(1,837,861	)		629,950			(1,207,911	)


Foreign currency translation		(9,387	)		(32	)		(9,419	)		(4,324	)		(122	)		(4,446	)

Balance, end of period	$	4,240,876		($	774,942	)	$	3,465,934		$	4,240,876		($	774,942	)	$	3,465,934


		23

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

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


	Insurance			Reinsurance			Total Company

Incurred related to prior years

Quarter ended March 31, 2012	($	7,847	)	($	9,054	)	($	16,901	)
Quarter ended June 30, 2012		(13,633	)		(5,919	)		(19,552	)
Quarter ended September 30, 2012		(17,439	)		(38,203	)		(55,642	)
Quarter ended December 31, 2012		(7,267	)		(20,795	)		(28,062	)

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

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2011


	Insurance			Reinsurance			Total Company

Incurred related to prior years

Quarter ended March 31, 2011	($	34,612	)	($	14,093	)	($	48,705	)
Quarter ended June 30, 2011		(23,190	)		(21,591	)		(44,781	)
Quarter ended September 30, 2011		(12,411	)		(32,002	)		(44,413	)
Quarter ended December 31, 2011		(566	)		(41,513	)		(42,079	)

Year ended December 31, 2011	($	70,779	)	($	109,199	)	($	179,978	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2010


	Insurance			Reinsurance			Total Company

Incurred related to prior years

Quarter ended March 31, 2010	($	17,679	)	($	20,915	)	($	38,594	)
Quarter ended June 30, 2010		(8,099	)		(21,379	)		(29,478	)
Quarter ended September 30, 2010		(9,568	)		(25,566	)		(35,134	)
Quarter ended December 31, 2010		(11,525	)		(12,071	)		(23,596	)

Year ended December 31, 2010	($	46,871	)	($	79,931	)	($	126,802	)


		24

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY LINE OF BUSINESS

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT


	FOR THE QUARTERS ENDED												FOR THE YEAR ENDED
	DEC. 31, 2012			SEPT. 30, 2012			JUNE 30, 2012			MAR. 31, 2012			DEC. 31, 2012			DEC. 31, 2011
INSURANCE SEGMENT
Agriculture	($	768	)	($	2,701	)	($	2,766	)	($	3,069	)	($	9,304	)	($	34,574	)
Casualty and other specialty		(6,506	)		(4,146	)		(7,902	)		852			(17,702	)		(3,481	)
Professional lines		1,424			(5,937	)		(347	)		(1,183	)		(6,043	)		(13,986	)
Property		(1,417	)		(4,655	)		(2,618	)		(4,447	)		(13,137	)		(18,738	)

TOTAL INSURANCE		(7,267	)		(17,439	)		(13,633	)		(7,847	)		(46,186	)		(70,779	)


REINSURANCE SEGMENT
Catastrophe		(7,134	)		(5,745	)		(8,485	)		(9,050	)	($	30,414	)		(61,339	)
Property		(6,707	)		(10,527	)		5,474			12,030			270			(4,514	)
Casualty		(3,302	)		(9,350	)		(1,253	)		(5,060	)		(18,965	)		(20,604	)
Other specialty		(3,652	)		(12,581	)		(1,655	)		(6,974	)		(24,862	)		(22,742	)

TOTAL REINSURANCE		(20,795	)		(38,203	)		(5,919	)		(9,054	)		(73,971	)		(109,199	)


REPORTED TOTALS	($	28,062	)	($	55,642	)	($	19,552	)	($	16,901	)	($	120,157	)	($	179,978	)


		25

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES


	Insurance															Reinsurance															Reported Totals
	Agriculture			Casualty and other specialty			Professional lines			Property			Subtotal			Catastrophe			Property			Casualty			Other specialty			Subtotal			Total
AT DEC. 31, 2012
Case reserves	$	392,457		$	308,611		$	110,441		$	54,196		$	865,705		$	201,105		$	281,681		$	296,494		$	119,261		$	898,541		$	1,764,246
Total reserves	$	464,043		$	1,252,900		$	497,260		$	72,849		$	2,287,052		$	298,328		$	415,460		$	976,476		$	263,560		$	1,953,824		$	4,240,876
Case reserves / Total reserves		84.6	%		24.6	%		22.2	%		74.4	%		37.9	%		67.4	%		67.8	%		30.4	%		45.3	%		46.0	%		41.6	%

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

AT SEPT. 30, 2012
Case reserves	$	730,853		$	314,101		$	87,156		$	24,669		$	1,156,779		$	177,506		$	237,824		$	288,979		$	123,213		$	827,522		$	1,984,301
Total reserves	$	868,497		$	1,238,957		$	477,427		$	50,205		$	2,635,086		$	277,304		$	354,069		$	968,913		$	274,070		$	1,874,356		$	4,509,442
Case reserves / Total reserves		84.2	%		25.4	%		18.3	%		49.1	%		43.9	%		64.0	%		67.2	%		29.8	%		45.0	%		44.1	%		44.0	%

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

AT JUNE 30, 2012
Case reserves	$	242,751		$	307,116		$	84,276		$	30,242		$	664,385		$	185,675		$	227,867		$	289,296		$	132,809		$	835,647		$	1,500,032
Total reserves	$	392,441		$	1,199,318		$	465,439		$	56,625		$	2,113,823		$	286,360		$	350,377		$	963,890		$	270,172		$	1,870,799		$	3,984,622
Case reserves / Total reserves		61.9	%		25.6	%		18.1	%		53.4	%		31.4	%		64.8	%		65.0	%		30.0	%		49.2	%		44.7	%		37.6	%

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

AT MAR. 31, 2012
Case reserves	$	52,447		$	325,364		$	83,340		$	29,992		$	491,143		$	202,634		$	212,539		$	276,351		$	136,051		$	827,575		$	1,318,718
Total reserves	$	172,143		$	1,197,280		$	444,979		$	55,935		$	1,870,337		$	319,233		$	349,473		$	950,766		$	271,020		$	1,890,492		$	3,760,829
Case reserves / Total reserves		30.5	%		27.2	%		18.7	%		53.6	%		26.3	%		63.5	%		60.8	%		29.1	%		50.2	%		43.8	%		35.1	%

IBNR / Total reserves		69.5	%		72.8	%		81.3	%		46.4	%		73.7	%		36.5	%		39.2	%		70.9	%		49.8	%		56.2	%		64.9	%

AT DEC. 31, 2011
Case reserves	$	203,844		$	311,241		$	93,136		$	31,408		$	639,629		$	207,311		$	164,318		$	268,448		$	142,164		$	782,241		$	1,421,870
Total reserves	$	255,601		$	1,182,406		$	441,900		$	57,635		$	1,937,542		$	338,301		$	333,949		$	935,274		$	279,158		$	1,886,682		$	3,824,224
Case reserves / Total reserves		79.8	%		26.3	%		21.1	%		54.5	%		33.0	%		61.3	%		49.2	%		28.7	%		50.9	%		41.5	%		37.2	%

IBNR / Total reserves		20.2	%		73.7	%		78.9	%		45.5	%		67.0	%		38.7	%		50.8	%		71.3	%		49.1	%		58.5	%		62.8	%


		26

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS


	YEARS ENDED DECEMBER 31,									INCEPTION TO
	2012			2011			2010			DEC. 31, 2012
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders	$	129,766		($	117,859	)	$	349,238		$	2,471,147

Operating income (loss) available (attributable) to common and participating common shareholders		54,295			(152,303	)		330,035			2,391,796

Average Shareholders’ equity [a]		2,230,881			2,414,659			2,617,718			1,995,708

Net income (loss) return on average equity		5.8	%		(4.9	)%		13.3	%		11.3	%[c]
Operating return on average equity		2.4	%		(6.3	)%		12.6	%		10.9	%[c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)	$	52.88		$	50.56		$	52.74		$	52.88

Dividends paid per share		1.24			1.20			1.00			9.57

Change in diluted book value per common share		4.6	%		(4.1	)%		18.2	%		15.7	%[c]

Total return to common shareholders [b]		7.0	%		(1.9	)%		20.5	%		20.2	%[c]

[a]

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

[b]

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

[c]

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


		27

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION - TWO CLASS METHOD


		QUARTERS ENDED DEC. 31,						YEARS ENDED DEC. 31,
		2012			2011			2012			2011

DILUTIVE SHARES OUTSTANDING: AS REPORTED	Average market price per share	$	39.76		$	36.21		$	38.10		$	40.93

	Basic weighted average common shares outstanding [a]		42,604			40,641			42,568			40,215

	Add: weighted avg. unvested restricted share units		2			10			3			11
	Weighted average exercise price per share		—			—			—			—
	Proceeds from unrecognized restricted share unit expense	$	22		$	100		$	22		$	100
	Less: restricted share units bought back via treasury method		(2	)		(10	)		(1	)		(11	)

	Add: weighted avg. dilutive warrants outstanding		—			1,944			—			2,670
	Weighted average exercise price per share		—		$	11.67			—		$	11.67
	Less: warrants bought back via treasury method		—			(1,944	)		—			(2,670	)

	Add: weighted avg. dilutive options outstanding		64			369			88			673
	Weighted average exercise price per share	$	26.23		$	15.44		$	24.37		$	15.04
	Proceeds from unrecognized option expense		—			—			—			—
	Less: options bought back via treasury method		(64	)		(369	)		(56	)		(673	)

	Weighted average dilutive shares outstanding [b]		42,604			40,641			42,602			40,215


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


		28

ENDURANCE SPECIALTY HOLDINGS LTD.

(LOSSES) EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD


	QUARTERS ENDED DEC. 31,						YEARS ENDED DEC. 31,
	2012			2011			2012			2011

Net (loss) income	($	32,627	)	($	27,376	)	$	162,516		($	93,734	)
Less preferred dividends		(8,186	)		(8,187	)		(32,750	)		(24,125	)

Net (loss) income (attributable) available to common and participating common shareholders	($	40,813	)	($	35,563	)	$	129,766		($	117,859	)
Less amount allocated to participating common shareholders [a]		(206	)		(221	)		(2,113	)		(961	)

Net (loss) income available allocated to common shareholders	($	41,019	)	($	35,784	)	$	127,653		($	118,820	)


Denominator:
Weighted average shares - basic		42,604			40,641			42,568			40,215


Share Equivalents
Options		—			—			32			—
Restricted share units		—			—			2			—

Weighted average shares - diluted		42,604			40,641			42,602			40,215


Basic (losses) earnings per common share	($	0.96	)	($	0.88	)	$	3.00		($	2.95	)


Diluted (losses) earnings per common share [b]	($	0.96	)	($	0.88	)	$	3.00		($	2.95	)

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

[b]

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


		29

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING (LOSS) INCOME RECONCILIATION

(LOSSES) EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD


	Two-Class Method						Two-Class Method
	QUARTERS ENDED DEC. 31,						YEARS ENDED DEC. 31,
	2012			2011			2012			2011

Net (loss) income	($	32,627	)	($	27,376	)	$	162,516		($	93,734	)
(Less) add after-tax items:
Net foreign exchange (gains) losses		(1,220	)		208			(14,077	)		(7,614	)
Net realized and unrealized investment gains		(34,500	)		(4,836	)		(62,208	)		(30,350	)
Net impairment losses recognized in (losses) earnings		89			701			814			3,520

Operating (loss) income before preferred dividends	($	68,258	)	($	31,303	)	$	87,045		($	128,178	)
Preferred dividends		(8,186	)		(8,187	)		(32,750	)		(24,125	)

Operating (loss) income (attributable) available to common and participating common shareholders	($	76,444	)	($	39,490	)	$	54,295		($	152,303	)
Less amount allocated to participating common shareholders [a]		(206	)		(221	)		(884	)		(961	)

Operating (loss) income allocated to common shareholders	($	76,650	)	($	39,711	)	$	53,411		($	153,264	)


Weighted average common shares outstanding
Basic		42,604			40,641			42,568			40,215
Dilutive		42,604			40,641			42,602			40,215

Basic per common share data
Net (loss) income allocated to common shareholders	($	0.96	)	($	0.88	)	$	3.00		($	2.95	)
(Less) add after-tax items:
Net foreign exchange (gains) losses		(0.03	)		0.01			(0.32	)		(0.19	)
Net realized and unrealized investment gains		(0.81	)		(0.12	)		(1.45	)		(0.76	)
Net impairment losses recognized in (losses) earnings		—			0.01			0.02			0.09

Operating (loss) income allocated to common shareholders	($	1.80	)	($	0.98	)	$	1.25		($	3.81	)


Diluted per common share data
Net (loss) income allocated to common shareholders	($	0.96	)	($	0.88	)	$	3.00		($	2.95	)
(Less) add after-tax items:
Net foreign exchange (gains) losses		(0.03	)		0.01			(0.32	)		(0.19	)
Net realized and unrealized investment gains		(0.81	)		(0.12	)		(1.45	)		(0.76	)
Net impairment losses recognized in (losses) earnings		—			0.01			0.02			0.09

Operating (loss) income allocated to common shareholders [b]	($	1.80	)	($	0.98	)	$	1.25		($	3.81	)

[a]

[b]

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


		30

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE


		DEC. 31,
		2012			2011
DILUTIVE COMMON SHARES OUTSTANDING: AS-IF CONVERTED [a]	Price per share at period end	$	39.69		$	38.25

	Basic common shares outstanding		42,432			42,367
	Add: unvested restricted shares and restricted share units		686			730
	Add: dilutive warrants outstanding		—			—
	Weighted average exercise price per share		—			—
	Add: dilutive options outstanding		40			115
	Weighted average exercise price per share	$	27.76		$	23.14

	Book Value [b]	$	2,280,597		$	2,181,165
	Add: proceeds from converted warrants		—			—
	Add: proceeds from converted options		1,110			2,661

	Pro forma book value	$	2,281,707		$	2,183,826
	Dilutive shares outstanding		43,158			43,212
	Basic book value per common share	$	53.75		$	51.48
	Diluted book value per common share	$	52.87		$	50.54

DILUTIVE COMMON SHARES OUTSTANDING: TREASURY STOCK METHOD	Price per share at period end	$	39.69		$	38.25

	Basic common shares outstanding		42,432			42,367

	Add: unvested restricted shares and restricted share units		686			730
	Add: dilutive warrants outstanding		—			—
	Weighted average exercise price per share		—			—
	Less: warrants bought back via treasury method		—			—
	Add: dilutive options outstanding		40			115
	Weighted average exercise price per share	$	27.76		$	23.14
	Less: options bought back via treasury method		(28	)		(70	)

	Dilutive shares outstanding		43,130			43,142
	Basic book value per common share	$	53.75		$	51.48
	Diluted book value per common share	$	52.88		$	50.56

[a]

The as-if converted method assumes that the proceeds received upon exercise of options and warrants will be retained by the Company and the resulting common shares from exercise will remain outstanding

[b]

Excludes the $430 million liquidation value of the preferred shares.


		31

ENDURANCE SPECIALTY HOLDINGS LTD.

REGULATION G

In presenting the Company’s results, management has included and discussed certain non-GAAP measures. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain the Company’s results of operations in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP.

Operating (loss) income is an internal performance measure used by the Company in the management of its operations. Operating (loss) income represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. The Company believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net (loss) income determined in accordance with GAAP, the Company believes that showing operating (loss) income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company’s results of operations in a manner similar to how management analyzes the Company’s underlying business performance. Operating (loss) income should not be viewed as a substitute for GAAP net (loss) income. Please see page 30 for a reconciliation of operating (loss) income to net (loss) income.

Return on Average Equity (ROAE) is comprised using the average common equity calculated as the arithmetic average of the beginning and ending common equity balances for stated periods. Return on Beginning Equity (ROBE) is comprised using the beginning common equity for stated periods. The Company presents various measures of Return on Equity that are commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

Investment yield is provided by the Company’s investment managers and is calculated by dividing net investment income by average invested assets at amortized cost. The Company utilizes and presents the investment yield in order to better disclose the performance of the Company’s investments and to show the components of the Company’s ROE.

The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share. Please see page 31 for a reconciliation of diluted book value per common share to basic book value per common share.


		32

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