Exhibit 99.2

 

 

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

THIRD QUARTER 2013

---

Endurance Specialty Holdings Ltd.

Wellesley House, 90 Pitts Bay Rd.

Pembroke HM 08, Bermuda

Investor Relations

Phone: (441) 278-0988

Fax: (441) 278-0493

email: investorrelations@endurance.bm

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

---

Financial Supplement Table of Contents

 

		Page
i. Basis of Presentation			i
I. Consolidated Financial Highlights			1
II. Consolidated Financial Statements
a. Consolidated Statements of Income (Loss) - Quarterly			2
b. Consolidated Statements of Income (Loss) - YTD			3
c. Consolidated Balance Sheets			4
III. Other Financial Information
a. Probable Maximum Loss by Zone and Peril			5
b. Segment Distribution			6
c. Consolidated Segment Data			7
d. Return on Equity Analysis			19
e. ROE Component Analysis - Annualized Premium and Investment Leverage			20
f. Investment Portfolio Information			21
g. Largest Twenty-Five Corporate Holdings			22
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses			23
b. Prior Year Reserve Development by Segment			24
c. Prior Year Reserve Development by Line of Business			25
d. Analysis of Unpaid Losses and Loss Expenses			26
V. Shareholder Return Analysis
a. Shareholder Return Analysis			27
b. Weighted Average Dilutive Shares Outstanding			28
c. Earnings per Share - Two Class Method			29
d. Operating Income Reconciliation - Two Class Method			30
e. Book Value Per Share Analysis			31
VI. Regulation G			32

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

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

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2012.

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

 

---

ENDURANCE SPECIALTY HOLDINGS LTD.

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION

 

•

All financial information contained herein is unaudited, except the balance sheet and/or income statement data for the years ended December 31, 2012 and 2011 which was derived from the Company’s audited financial statements.

 

•

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

 

•

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

 

•

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

 

•

NM - Not meaningful.

 

		i

---

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS

 

				QUARTER ENDED SEPTEMBER 30,								NINE MONTHS ENDED SEPTEMBER 30,								Previous Quarter				Previous Year to Date
				2013				2012				2013				2012				Change				Change
HIGHLIGHTS		Net income		$	83,416			$	40,118			$	244,734			$	195,143				107.9	%			25.4	%
		Net income available to common and participating common shareholders			75,228				31,930				220,170				170,579				135.6	%			29.1	%
		Net income allocated to common shareholders			73,231				31,436				215,428				167,751				133.0	%			28.4	%
		Operating income [a]			92,057				34,325				245,549				155,315				168.2	%			58.1	%
		Operating income available to common and participating common shareholders [a]			83,869				26,137				220,985				130,751				220.9	%			69.0	%
		Operating income allocated to common shareholders [a]			81,643				25,733				216,225				128,583				217.3	%			68.2	%
		Operating cash flow			(59,286	)			141,154				(16,574	)			211,449				(142.0	)%			(107.8	)%
		Net investment income			38,097				45,882				119,870				134,723				(17.0	)%			(11.0	)%
		Gross premiums written			544,363				621,255				2,294,435				2,286,980				(12.4	)%			0.3	%
		Net premiums written			395,333				514,080				1,768,869				1,841,549				(23.1	)%			(3.9	)%
		Net premiums earned			553,545				551,872				1,516,997				1,482,847				0.3	%			2.3	%
		Total assets			9,546,660				9,754,355				9,546,660				9,754,355				(2.1	)%			(2.1	)%
		Total shareholders’ equity			2,839,010				2,810,874				2,839,010				2,810,874				1.0	%			1.0	%
PER SHARE AND SHARES DATA		Basic and diluted earnings per common share
		Net income (as reported)		$	1.70			$	0.74			$	5.04			$	3.94				129.7	%			27.9	%
		Operating income (as reported) [a]		$	1.89			$	0.60			$	5.06			$	3.02				215.0	%			67.5	%
		Diluted earnings per common share
		Net income (as reported)		$	1.70			$	0.74			$	5.04			$	3.94				129.7	%			27.9	%
		Operating income (as reported) [a]		$	1.89			$	0.60			$	5.06			$	3.02				215.0	%			67.5	%
As Reported		Weighted average common shares outstanding			43,100				42,628				42,720				42,556				1.1	%			0.4	%
		Weighted average common shares outstanding and dilutive potential common shares [e]			43,100				42,658				42,720				42,594				1.0	%			0.3	%
		Common dividends paid per share		$	0.32			$	0.31			$	0.96			$	0.93				3.2	%			3.2	%
Book Value Per		Book value [b]		$	55.89			$	55.85			$	55.89			$	55.85				0.1	%			0.1	%
Common Share		Diluted book value (treasury stock method) [b]		$	54.33			$	54.95			$	54.33			$	54.95				(1.1	)%			(1.1	)%
FINANCIAL RATIOS		Return on average common equity (ROAE), net income [c]			3.2	%			1.4	%			9.4	%			7.5	%			1.8				1.9
		ROAE, operating income [a] [c]			3.6	%			1.1	%			9.4	%			5.7	%			2.5				3.7
		Return on beg. common equity (ROBE), net income [d]			3.3	%			1.4	%			9.7	%			7.8	%			1.9				1.9
		ROBE, operating income [a] [d]			3.6	%			1.1	%			9.7	%			6.0	%			2.5				3.7
		Annualized ROAE, net income [c]			12.8	%			5.4	%			12.5	%			10.0	%			7.4				2.5
		Annualized ROAE, operating income [a] [c]			14.2	%			4.5	%			12.6	%			7.6	%			9.7				5.0
		Annualized ROBE, net income [d]			13.0	%			5.5	%			12.9	%			10.4	%			7.5				2.5
		Annualized ROBE, operating income [a] [d]			14.5	%			4.5	%			12.9	%			8.0	%			10.0				4.9
		Annualized investment yield			2.4	%			3.0	%			2.5	%			2.9	%			(0.6	)			(0.4	)
GAAP		Loss ratio			61.3	%			73.8	%			60.4	%			68.5	%			(12.5	)			(8.1	)
		Acquisition expense ratio			14.2	%			16.1	%			14.7	%			15.5	%			(1.9	)			(0.8	)
		General and administrative expense ratio			12.2	%			9.6	%			14.2	%			12.2	%			2.6				2.0
		Combined ratio			87.7	%			99.5	%			89.3	%			96.2	%			(11.8	)			(6.9	)

 

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

[b]	For detailed calculations, please refer to page 31.

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

[d]	Beginning common equity for the stated periods excludes the $430 million liquidation value of the preferred shares.

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

 

		1

---

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - QUARTERLY

 

		QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
UNDERWRITING REVENUES
Gross premiums written		$	544,363			$	572,710			$	1,177,362			$	262,046			$	621,255			$	700,866
Premiums ceded			(149,030	)			(108,089	)			(268,447	)			(74,100	)			(107,175	)			(149,539	)
Net premiums written		$	395,333			$	464,621			$	908,915			$	187,946			$	514,080			$	551,327
Change in unearned premiums			158,212				78,714				(488,798	)			343,107				37,792				10,166
Net premiums earned		$	553,545			$	543,335			$	420,117			$	531,053			$	551,872			$	561,493
Other underwriting (loss) income			(943	)			888				749				(520	)			(1,347	)			(2,141	)
Total underwriting revenues		$	552,602			$	544,223			$	420,866			$	530,533			$	550,525			$	559,352
UNDERWRITING EXPENSES
Net losses and loss expenses		$	339,036			$	359,058			$	218,970			$	504,808			$	407,523			$	456,691
Acquisition expenses			78,775				71,868				71,636				73,780				88,782				72,249
General and administrative expenses			67,470				81,359				66,478				54,324				52,715				58,574
Total underwriting expenses		$	485,281			$	512,285			$	357,084			$	632,912			$	549,020			$	587,514
Underwriting income (loss)		$	67,321			$	31,938			$	63,782			($	102,379	)		$	1,505			($	28,162	)
OTHER OPERATING REVENUE
Net investment income		$	38,097			$	32,468			$	49,305			$	38,603			$	45,882			$	14,100
Interest expense			(9,048	)			(9,052	)			(9,038	)			(9,042	)			(9,041	)			(9,055	)
Amortization of intangibles			(1,652	)			(1,625	)			(2,101	)			(2,359	)			(2,434	)			(2,976	)
Total other operating revenue		$	27,397			$	21,791			$	38,166			$	27,202			$	34,407			$	2,069
INCOME (LOSS) BEFORE OTHER ITEMS		$	94,718			$	53,729			$	101,948			($	75,177	)		$	35,912			($	26,093	)
OTHER
Net foreign exchange (losses) gains		($	2,201	)		($	3,368	)		($	2,927	)		$	1,212			($	3,774	)		$	4,085
Net realized and unrealized investment (losses) gains			(6,640	)			10,372				6,235				41,881				10,097				1,033
Total other-than-temporary impairment losses			(190	)			(579	)			(806	)			(90	)			(126	)			(168	)
Portion of loss recognised in other comprehensive income (loss)			—				—				—				—				(5	)			(72	)
Net impairment losses recognised in earnings (losses)			(190	)			(579	)			(806	)			(90	)			(131	)			(240	)
Income tax (expense) benefit			(2,271	)			865				(4,151	)			(453	)			(1,986	)			1,197
NET INCOME (LOSS)		$	83,416			$	61,019			$	100,299			($	32,627	)		$	40,118			($	20,018	)
Preferred dividends			(8,188	)			(8,188	)			(8,188	)			(8,186	)			(8,188	)			(8,188	)
NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS		$	75,228			$	52,831			$	92,111			($	40,813	)		$	31,930			($	28,206	)
KEY RATIOS/PER SHARE DATA
Loss ratio			61.3	%			66.1	%			52.1	%			95.1	%			73.8	%			81.3	%
Acquisition expense ratio			14.2	%			13.2	%			17.1	%			13.9	%			16.1	%			12.9	%
General and administrative expense ratio			12.2	%			15.0	%			15.8	%			10.2	%			9.6	%			10.4	%
Combined ratio			87.7	%			94.3	%			85.0	%			119.2	%			99.5	%			104.6	%
Basic earnings (losses) per common share		$	1.70			$	1.21			$	2.14			($	0.96	)		$	0.74			($	0.71	)
Diluted earnings (losses) per common share [b]		$	1.70			$	1.21			$	2.13			($	0.96	)		$	0.74			($	0.71	)
ROAE, net income (loss) [a]			3.2	%			2.3	%			4.0	%			(1.8	)%			1.4	%			(1.3	)%

 

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

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

 

		2

---

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME (LOSS) - YTD

 

		NINE MONTHS ENDED												YEAR ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written		$	2,294,435			$	2,286,980			$	2,204,148			$	2,549,026			$	2,467,114
Premiums ceded			(525,566	)			(445,431	)			(412,191	)			(519,531	)			(487,293	)
Net premiums written		$	1,768,869			$	1,841,549			$	1,791,957			$	2,029,495			$	1,979,821
Change in unearned premiums			(251,872	)			(358,702	)			(361,053	)			(15,595	)			(48,428	)
Net premiums earned		$	1,516,997			$	1,482,847			$	1,430,904			$	2,013,900			$	1,931,393
Other underwriting income (loss)			694				(1,663	)			(2,122	)			(2,183	)			(3,547	)
Total underwriting revenues		$	1,517,691			$	1,481,184			$	1,428,782			$	2,011,717			$	1,927,846
UNDERWRITING EXPENSES
Net losses and loss expenses		$	917,064			$	1,016,187			$	1,220,514			$	1,520,995			$	1,632,666
Acquisition expenses			222,279				229,399				205,754				303,179				282,911
General and administrative expenses			215,307				181,365				190,421				235,689				264,152
Total underwriting expenses		$	1,354,650			$	1,426,951			$	1,616,689			$	2,059,863			$	2,179,729
Underwriting income (loss)		$	163,041			$	54,233			($	187,907	)		($	48,146	)		($	251,883	)
OTHER OPERATING REVENUE
Net investment income		$	119,870			$	134,723			$	106,443			$	173,326			$	147,037
Interest expense			(27,138	)			(27,132	)			(27,166	)			(36,174	)			(36,254	)
Amortization of intangibles			(5,378	)			(7,988	)			(8,800	)			(10,347	)			(11,213	)
Total other operating revenue		$	87,354			$	99,603			$	70,477			$	126,805			$	99,570
INCOME (LOSS) BEFORE OTHER ITEMS		$	250,395			$	153,836			($	117,430	)		$	78,659			($	152,313	)
OTHER
Net foreign exchange (losses) gains		($	8,496	)		$	14,699			$	7,655			$	15,911			$	7,422
Net realized and unrealized investment gains			9,967				30,258				26,340				72,139				31,671
Total other-than-temporary impairment losses			(1,575	)			(274	)			(1,908	)			(364	)			(2,659	)
Portion of loss recognised in other comprehensive income (loss)			—				(483	)			(911	)			(483	)			(861	)
Net impairment losses recognised in earnings (losses)			(1,575	)			(757	)			(2,819	)			(847	)			(3,520	)
Income tax (expense) benefit			(5,557	)			(2,893	)			19,896				(3,346	)			23,006
NET INCOME (LOSS)		$	244,734			$	195,143			($	66,358	)		$	162,516			($	93,734	)
Preferred dividends			(24,564	)			(24,564	)			(15,938	)			(32,750	)			(24,125	)
NET INCOME (LOSS) AVAILABLE (ATTRIBUTABLE) TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS		$	220,170			$	170,579			($	82,296	)		$	129,766			($	117,859	)
KEY RATIOS/PER SHARE DATA
Loss ratio			60.4	%			68.5	%			85.3	%			75.5	%			84.6	%
Acquisition expense ratio			14.7	%			15.5	%			14.4	%			15.1	%			14.6	%
General and administrative expense ratio			14.2	%			12.2	%			13.3	%			11.7	%			13.7	%
Combined ratio			89.3	%			96.2	%			113.0	%			102.3	%			112.9	%
Basic earnings (losses) per common share		$	5.04			$	3.94			($	2.07	)		$	3.00			($	2.95	)
Diluted earnings (losses) per common share [b]		$	5.04			$	3.94			($	2.07	)		$	3.00			($	2.95	)
ROAE, net income (loss) [a]			9.4	%			7.5	%			(3.4	)%			5.8	%			(4.9	)%

 

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

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

 

		3

---

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

 

		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012
ASSETS
Cash and cash equivalents		$	789,999			$	942,062			$	857,187			$	1,124,019			$	895,776
Fixed maturity investments available for sale, at fair value			4,800,838				4,755,091				5,008,753				4,868,150				5,052,963
Short term investments available for sale, at fair value			11,599				15,382				1,400				42,230				62,713
Equity securities available for sale, at fair value			262,866				232,919				188,927				86,997				83,085
Other investments			594,156				569,393				554,715				517,546				478,911
Premiums receivable, net			1,006,227				1,271,818				1,193,578				601,952				1,136,130
Insurance and reinsurance balances receivable			123,777				111,405				106,222				105,663				112,926
Deferred acquisition costs			197,048				210,740				212,953				168,252				215,811
Prepaid reinsurance premiums			263,499				292,911				340,066				166,702				228,854
Reinsurance recoverable on unpaid losses			513,080				594,020				588,576				691,783				1,058,362
Reinsurance recoverable on paid losses			428,300				101,753				11,891				83,159				18,285
Accrued investment income			21,783				25,404				24,865				27,166				23,937
Goodwill and intangible assets			167,000				168,621				169,899				172,000				174,309
Deferred tax assets			50,148				52,240				41,505				43,501				36,092
Receivable on pending investment sales			124,236				78,243				35,608				9,144				76,907
Other assets			192,104				128,446				95,336				86,708				99,294
TOTAL ASSETS		$	9,546,660			$	9,550,448			$	9,431,481			$	8,794,972			$	9,754,355
LIABILITIES
Reserve for losses and loss expenses			4,052,102				4,145,581			$	4,026,536			$	4,240,876			$	4,509,442
Reserve for unearned premiums			1,314,687				1,500,253				1,625,883				965,244				1,370,491
Deposit liabilities			17,577				17,785				22,533				22,220				23,557
Reinsurance balances payable			347,048				262,582				203,048				110,843				256,674
Debt			527,506				527,401				527,421				527,339				527,341
Payable on pending investment purchases			224,473				181,060				111,969				81,469				102,874
Other liabilities			224,257				179,732				147,841				136,384				153,102
TOTAL LIABILITIES		$	6,707,650			$	6,814,394			$	6,665,231			$	6,084,375			$	6,943,481
SHAREHOLDERS’ EQUITY
Preferred shares
Series A, non-cumulative		$	8,000			$	8,000			$	8,000			$	8,000			$	8,000
Series B, non-cumulative			9,200				9,200				9,200				9,200				9,200
Common shares			44,250				44,331				43,169				43,116				43,294
Additional paid-in capital			560,204				556,255				520,257				527,915				533,284
Accumulated other comprehensive income			69,457				31,438				137,439				152,463				193,239
Retained earnings			2,147,899				2,086,830				2,048,185				1,969,903				2,023,857
TOTAL SHAREHOLDERS’ EQUITY		$	2,839,010			$	2,736,054			$	2,766,250			$	2,710,597			$	2,810,874
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	9,546,660			$	9,550,448			$	9,431,481			$	8,794,972			$	9,754,355
Book value per common share		$	55.89			$	53.51			$	55.10			$	53.75			$	55.85
Diluted book value per common share (treasury stock method)		$	54.33			$	51.95			$	54.10			$	52.88			$	54.95
RATIOS
Debt-to-capital			15.7	%			16.2	%			16.0	%			16.3	%			15.8	%

 

		4

---

ENDURANCE SPECIALTY HOLDINGS LTD.

Probable Maximum Loss by Zone and Peril

(in millions of dollars)

Largest 1 in 100 year PML as of July 1, 2013 is equal to 12.3% of Shareholders’ Equity as of September 30, 2013.

 

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

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

Actual realized catastrophic losses could differ materially from our net loss estimates and our net loss estimates should not be considered as representative of the actual losses that we may incur in connection with any particular catastrophic event. The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by management’s assumptions regarding event characteristics, construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurance’s underwriting portfolio risk control mechanisms and other factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012.

 

		5

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

Net Premiums Written = $1,768.9 million

 

 

 

[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
		SEPT. 30, 2013												SEPT. 30, 2012
		Insurance				Reinsurance				Totals				Insurance				Reinsurance				Totals
UNDERWRITING REVENUES
Gross premiums written		$	344,819			$	199,544			$	544,363			$	324,808			$	296,447			$	621,255
Net premiums written		$	224,338			$	170,995			$	395,333			$	221,265			$	292,815			$	514,080
Net premiums earned		$	291,477			$	262,068			$	553,545			$	283,273			$	268,599			$	551,872
Other underwriting (loss) income			—				(943	)			(943	)			(1,384	)			37				(1,347	)
Total underwriting revenues		$	291,477			$	261,125			$	552,602			$	281,889			$	268,636			$	550,525
UNDERWRITING EXPENSES
Net losses and loss expenses		$	228,409			$	110,627			$	339,036			$	288,750			$	118,773			$	407,523
Acquisition expenses			18,440				60,335				78,775				24,506				64,276				88,782
General and administrative expenses			35,641				31,829				67,470				29,409				23,306				52,715
Total expenses		$	282,490			$	202,791			$	485,281			$	342,665			$	206,355			$	549,020
UNDERWRITING INCOME (LOSS)		$	8,987			$	58,334			$	67,321			($	60,776	)		$	62,281			$	1,505
GAAP RATIOS
Loss ratio			78.4	%			42.3	%			61.3	%			101.9	%			44.2	%			73.8	%
Acquisition expense ratio			6.3	%			23.0	%			14.2	%			8.7	%			23.9	%			16.1	%
General and administrative expense ratio			12.2	%			12.1	%			12.2	%			10.4	%			8.7	%			9.6	%
Combined ratio AS REPORTED			96.9	%			77.4	%			87.7	%			121.0	%			76.8	%			99.5	%
Effect of favorable prior accident year reserve development			2.1	%			16.0	%			8.7	%			6.2	%			14.2	%			10.1	%
Combined ratio net of prior accident year reserve development			99.0	%			93.4	%			96.4	%			127.2	%			91.0	%			109.6	%

 

		7

---

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA

 

		FOR THE QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
UNDERWRITING REVENUES
Gross premiums written		$	344,819			$	276,941			$	652,943			$	177,116			$	324,808			$	450,451
Net premiums written		$	224,338			$	191,502			$	404,694			$	106,652			$	221,265			$	303,210
Net premiums earned		$	291,477			$	267,878			$	151,152			$	244,101			$	283,273			$	318,602
Other underwriting loss			—				—				—				—				(1,384	)			(2,875	)
Total underwriting revenues		$	291,477			$	267,878			$	151,152			$	244,101			$	281,889			$	315,727
UNDERWRITING EXPENSES
Net losses and loss expenses		$	228,409			$	215,844			$	99,464			$	244,985			$	288,750			$	260,206
Acquisition expenses			18,440				14,968				14,616				17,332				24,506				18,738
General and administrative expenses			35,641				43,524				35,627				28,445				29,409				29,328
Total expenses		$	282,490			$	274,336			$	149,707			$	290,762			$	342,665			$	308,272
UNDERWRITING INCOME (LOSS)		$	8,987			($	6,458	)		$	1,445			($	46,661	)		($	60,776	)		$	7,455
GAAP RATIOS
Loss ratio			78.4	%			80.6	%			65.7	%			100.3	%			101.9	%			81.7	%
Acquisition expense ratio			6.3	%			5.6	%			9.7	%			7.1	%			8.7	%			5.9	%
General and administrative expense ratio			12.2	%			16.2	%			23.6	%			11.7	%			10.4	%			9.2	%
Combined ratio AS REPORTED			96.9	%			102.4	%			99.0	%			119.1	%			121.0	%			96.8	%
Effect of favorable prior accident year reserve development			2.1	%			2.1	%			11.4	%			3.0	%			6.2	%			3.9	%
Combined ratio net of prior accident year reserve development			99.0	%			104.5	%			110.4	%			122.1	%			127.2	%			100.7	%

 

		8

---

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA

 

		FOR THE QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
UNDERWRITING REVENUES
Gross premiums written		$	199,544			$	295,769			$	524,419			$	84,930			$	296,447			$	250,415
Net premiums written		$	170,995			$	273,119			$	504,221			$	81,294			$	292,815			$	248,117
Net premiums earned		$	262,068			$	275,457			$	268,965			$	286,952			$	268,599			$	242,891
Other underwriting (loss) income			(943	)			888				749				(520	)			37				734
Total underwriting revenues		$	261,125			$	276,345			$	269,714			$	286,432			$	268,636			$	243,625
UNDERWRITING EXPENSES
Net losses and loss expenses		$	110,627			$	143,214			$	119,506			$	259,823			$	118,773			$	196,485
Acquisition expenses			60,335				56,900				57,020				56,448				64,276				53,511
General and administrative expenses			31,829				37,835				30,851				25,879				23,306				29,246
Total expenses		$	202,791			$	237,949			$	207,377			$	342,150			$	206,355			$	279,242
UNDERWRITING INCOME (LOSS)		$	58,334			$	38,396			$	62,337			($	55,718	)		$	62,281			($	35,617	)
GAAP RATIOS
Loss ratio			42.3	%			52.0	%			44.4	%			90.5	%			44.2	%			81.0	%
Acquisition expense ratio			23.0	%			20.7	%			21.2	%			19.7	%			23.9	%			22.0	%
General and administrative expense ratio			12.1	%			13.7	%			11.5	%			9.0	%			8.7	%			12.0	%
Combined ratio AS REPORTED			77.4	%			86.4	%			77.1	%			119.2	%			76.8	%			115.0	%
Effect of favorable prior accident year reserve development			16.0	%			20.8	%			12.4	%			7.2	%			14.2	%			13.2	%
Combined ratio net of prior accident year reserve development			93.4	%			107.2	%			89.5	%			126.4	%			91.0	%			128.2	%

 

		9

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS

 

		FOR THE QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
INSURANCE SEGMENT
Agriculture		$	200,062			$	131,633			$	564,474			$	64,798			$	171,826			$	289,656
Casualty and other specialty			95,862				87,614				56,467				59,942				90,873				91,187
Professional lines			34,221				38,296				20,964				39,242				43,209				39,559
Property			14,674				19,398				11,038				13,134				18,900				30,049
TOTAL INSURANCE		$	344,819			$	276,941			$	652,943			$	177,116			$	324,808			$	450,451
REINSURANCE SEGMENT
Catastrophe		$	38,676			$	155,431			$	147,866			$	24,112			$	38,871			$	46,275
Property			91,653				48,384				148,411				31,065				157,742				129,203
Casualty			53,691				67,209				151,702				24,961				77,781				56,293
Other specialty			15,524				24,745				76,440				4,792				22,053				18,644
TOTAL REINSURANCE		$	199,544			$	295,769			$	524,419			$	84,930			$	296,447			$	250,415
REPORTED TOTALS		$	544,363			$	572,710			$	1,177,362			$	262,046			$	621,255			$	700,866

 

		10

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS

 

		FOR THE QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
INSURANCE SEGMENT
Agriculture		$	120,617			$	84,537			$	341,130			$	25,413			$	106,180			$	185,017
Casualty and other specialty			72,431				63,373				43,261				43,683				66,686				69,700
Professional lines			20,972				27,788				14,203				30,044				34,804				30,812
Property			10,318				15,804				6,100				7,512				13,595				17,681
TOTAL INSURANCE		$	224,338			$	191,502			$	404,694			$	106,652			$	221,265			$	303,210
REINSURANCE SEGMENT
Catastrophe		$	12,551			$	138,041			$	131,398			$	22,073			$	36,484			$	43,868
Property			90,528				44,516				148,411				31,065				157,742				129,203
Casualty			53,690				67,211				150,273				24,960				77,781				56,292
Other specialty			14,226				23,351				74,139				3,196				20,808				18,754
TOTAL REINSURANCE		$	170,995			$	273,119			$	504,221			$	81,294			$	292,815			$	248,117
REPORTED TOTALS		$	395,333			$	464,621			$	908,915			$	187,946			$	514,080			$	551,327

 

		11

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS

 

		FOR THE QUARTERS ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				SEPT. 30, 2011
INSURANCE SEGMENT
Agriculture		$	200,739			$	172,492			$	56,431			$	142,851			$	183,277			$	215,830
Casualty and other specialty			55,929				55,872				54,123				55,425				53,060				51,793
Professional lines			24,220				27,757				30,924				35,530				35,577				34,343
Property			10,589				11,757				9,674				10,295				11,359				16,636
TOTAL INSURANCE		$	291,477			$	267,878			$	151,152			$	244,101			$	283,273			$	318,602
REINSURANCE SEGMENT
Catastrophe		$	67,778			$	86,560			$	84,795			$	95,050			$	85,983			$	86,395
Property			88,195				90,934				86,555				92,757				74,818				62,519
Casualty			79,101				70,104				71,070				73,911				79,135				68,882
Other specialty			26,994				27,859				26,545				25,234				28,663				25,095
TOTAL REINSURANCE		$	262,068			$	275,457			$	268,965			$	286,952			$	268,599			$	242,891
REPORTED TOTALS		$	553,545			$	543,335			$	420,117			$	531,053			$	551,872			$	561,493

 

		12

---

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA

 

		FOR THE NINE MONTHS ENDED
		SEPT. 30, 2013												SEPT. 30, 2012
		Insurance				Reinsurance				Totals				Insurance				Reinsurance				Totals
UNDERWRITING REVENUES
Gross premiums written		$	1,274,703			$	1,019,732			$	2,294,435			$	1,252,814			$	1,034,166			$	2,286,980
Net premiums written		$	820,534			$	948,335			$	1,768,869			$	835,705			$	1,005,844			$	1,841,549
Net premiums earned		$	710,507			$	806,490			$	1,516,997			$	710,988			$	771,859			$	1,482,847
Other underwriting income (loss)			—				694				694				(2,684	)			1,021				(1,663	)
Total underwriting revenues		$	710,507			$	807,184			$	1,517,691			$	708,304			$	772,880			$	1,481,184
UNDERWRITING EXPENSES
Losses and loss expenses		$	543,717			$	373,347			$	917,064			$	610,956			$	405,231			$	1,016,187
Acquisition expenses			48,024				174,255				222,279				58,265				171,134				229,399
General and administrative expenses			114,792				100,515				215,307				96,663				84,702				181,365
Total expenses		$	706,533			$	648,117			$	1,354,650			$	765,884			$	661,067			$	1,426,951
UNDERWRITING INCOME (LOSS)		$	3,974			$	159,067			$	163,041			($	57,580	)		$	111,813			$	54,233
GAAP RATIOS
Loss ratio			76.4	%			46.3	%			60.4	%			85.9	%			52.4	%			68.5	%
Acquisition expense ratio			6.8	%			21.6	%			14.7	%			8.2	%			22.2	%			15.5	%
General and administrative expense ratio			16.2	%			12.5	%			14.2	%			13.6	%			11.0	%			12.2	%
Combined ratio AS REPORTED			99.4	%			80.4	%			89.3	%			107.7	%			85.6	%			96.2	%
Effect of favorable prior accident year reserve development			4.1	%			16.4	%			10.6	%			5.5	%			6.9	%			6.2	%
Combined ratio net of prior accident year reserve development			103.5	%			96.8	%			99.9	%			113.2	%			92.5	%			102.4	%

 

		13

---

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA

 

		FOR THE NINE MONTHS ENDED												FOR THE YEARS ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written		$	1,274,703			$	1,252,814			$	1,302,032			$	1,429,930			$	1,469,798
Net premiums written		$	820,534			$	835,705			$	909,012			$	942,357			$	1,005,490
Net premiums earned		$	710,507			$	710,988			$	730,491			$	955,089			$	981,592
Other underwriting loss			—				(2,684	)			(2,875	)			(2,684	)			(3,368	)
Total underwriting revenues		$	710,507			$	708,304			$	727,616			$	952,405			$	978,224
UNDERWRITING EXPENSES
Losses and loss expenses		$	543,717			$	610,956			$	550,438			$	855,941			$	765,119
Acquisition expenses			48,024				58,265				50,907				75,597				71,295
General and administrative expenses			114,792				96,663				102,361				125,108				146,115
Total expenses		$	706,533			$	765,884			$	703,706			$	1,056,646			$	982,529
UNDERWRITING INCOME (LOSS)		$	3,974			($	57,580	)		$	23,910			($	104,241	)		($	4,305	)
GAAP RATIOS
Loss ratio			76.4	%			85.9	%			75.3	%			89.6	%			77.9	%
Acquisition expense ratio			6.8	%			8.2	%			7.0	%			7.9	%			7.3	%
General and administrative expense ratio			16.2	%			13.6	%			14.0	%			13.1	%			14.9	%
Combined ratio AS REPORTED			99.4	%			107.7	%			96.3	%			110.6	%			100.1	%
Effect of favorable prior accident year reserve development			4.1	%			5.5	%			9.6	%			4.8	%			7.2	%
Combined ratio net of prior accident year reserve development			103.5	%			113.2	%			105.9	%			115.4	%			107.3	%

 

		14

---

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA

 

		FOR THE NINE MONTHS ENDED												FOR THE YEARS ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
UNDERWRITING REVENUES
Gross premiums written		$	1,019,732			$	1,034,166			$	902,116			$	1,119,096			$	997,316
Net premiums written		$	948,335			$	1,005,844			$	882,945			$	1,087,138			$	974,331
Net premiums earned		$	806,490			$	771,859			$	700,413			$	1,058,811			$	949,801
Other underwriting income (loss)			694				1,021				753				501				(179	)
Total underwriting revenues		$	807,184			$	772,880			$	701,166			$	1,059,312			$	949,622
UNDERWRITING EXPENSES
Losses and loss expenses		$	373,347			$	405,231			$	670,076			$	665,054			$	867,547
Acquisition expenses			174,255				171,134				154,847				227,582				211,616
General and administrative expenses			100,515				84,702				88,060				110,581				118,037
Total expenses		$	648,117			$	661,067			$	912,983			$	1,003,217			$	1,197,200
UNDERWRITING INCOME (LOSS)		$	159,067			$	111,813			($	211,817	)		$	56,095			($	247,578	)
GAAP RATIOS
Loss ratio			46.3	%			52.4	%			95.6	%			62.8	%			91.3	%
Acquisition expense ratio			21.6	%			22.2	%			22.1	%			21.5	%			22.3	%
General and administrative expense ratio			12.5	%			11.0	%			12.6	%			10.4	%			12.4	%
Combined ratio AS REPORTED			80.4	%			85.6	%			130.3	%			94.7	%			126.0	%
Effect of favorable prior accident year reserve development			16.4	%			6.9	%			9.7	%			7.0	%			11.5	%
Combined ratio net of prior accident year reserve development			96.8	%			92.5	%			140.0	%			101.7	%			137.5	%

 

		15

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS

 

		FOR THE NINE MONTHS ENDED												FOR THE YEARS ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
INSURANCE SEGMENT
Agriculture		$	896,169			$	838,932			$	855,486			$	903,730			$	901,746
Casualty and other specialty			239,943				236,383				231,694				296,325				289,421
Professional lines			93,481				130,573				124,209				169,815				169,319
Property			45,110				46,926				90,643				60,060				109,312
TOTAL INSURANCE		$	1,274,703			$	1,252,814			$	1,302,032			$	1,429,930			$	1,469,798
REINSURANCE SEGMENT
Catastrophe		$	341,973			$	354,275			$	330,771			$	378,387			$	346,021
Property			288,448				318,514				251,475				349,579				266,562
Casualty			272,602				258,352				218,264				283,313				277,495
Other specialty			116,709				103,025				101,606				107,817				107,238
TOTAL REINSURANCE		$	1,019,732			$	1,034,166			$	902,116			$	1,119,096			$	997,316
REPORTED TOTALS		$	2,294,435			$	2,286,980			$	2,204,148			$	2,549,026			$	2,467,114

 

		16

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS

 

		FOR THE NINE MONTHS ENDED												FOR THE YEARS ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
INSURANCE SEGMENT
Agriculture		$	546,284			$	528,349			$	577,538			$	553,762			$	586,659
Casualty and other specialty			179,065				173,097				175,652				216,780				215,939
Professional lines			62,963				107,841				99,560				137,885				137,962
Property			32,222				26,418				56,262				33,930				64,930
TOTAL INSURANCE		$	820,534			$	835,705			$	909,012			$	942,357			$	1,005,490
REINSURANCE SEGMENT
Catastrophe		$	281,990			$	329,067			$	314,328			$	351,140			$	329,081
Property			283,455				318,521				251,475				349,586				266,562
Casualty			271,174				257,113				217,463				282,073				276,697
Other specialty			111,716				101,143				99,679				104,339				101,991
TOTAL REINSURANCE		$	948,335			$	1,005,844			$	882,945			$	1,087,138			$	974,331
REPORTED TOTALS		$	1,768,869			$	1,841,549			$	1,791,957			$	2,029,495			$	1,979,821

 

		17

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS

 

		FOR THE NINE MONTHS ENDED												FOR THE YEARS ENDED
		SEPT. 30, 2013				SEPT. 30, 2012				SEPT. 30, 2011				DEC. 31, 2012				DEC. 31, 2011
INSURANCE SEGMENT
Agriculture		$	429,662			$	405,949			$	418,590			$	548,800			$	564,658
Casualty and other specialty			165,924				160,051				150,800				215,476				201,518
Professional lines			82,901				106,180				108,306				141,710				145,886
Property			32,020				38,808				52,795				49,103				69,530
TOTAL INSURANCE		$	710,507			$	710,988			$	730,491			$	955,089			$	981,592
REINSURANCE SEGMENT
Catastrophe		$	239,133			$	249,654			$	244,477			$	344,704			$	326,674
Property			265,684				213,742				173,614				306,499				241,525
Casualty			220,275				226,436				204,276				300,347				278,114
Other specialty			81,398				82,027				78,046				107,261				103,488
TOTAL REINSURANCE		$	806,490			$	771,859			$	700,413			$	1,058,811			$	949,801
REPORTED TOTALS		$	1,516,997			$	1,482,847			$	1,430,904			$	2,013,900			$	1,931,393

 

		18

---

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS

 

		FOR THE NINE MONTHS ENDED SEPT. 30, 2013
Average common equity [a]		$	2,344,804
Net premiums earned		$	1,516,997
Combined ratio			89.3	%
Operating margin			10.7	%
Premium leverage			0.65	x
Implied ROAE from underwriting activity			7.0	%
Average cash and invested assets at amortized cost		$	6,362,200
Investment leverage			2.71	x
Year to date investment income yield, pretax			1.9	%
Implied ROAE from investment activity			5.1	%
Financing Costs [b]			(2.2	)%
Implied Pre-tax Operating ROAE, for period [c]			9.9	%
Implied Pre-tax Operating ROAE, annualized [c]			13.2	%

 

[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 (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 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,
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				2012				2011
Average common equity [a]		$	2,357,532			$	2,321,152			$	2,308,424			$	2,330,736			$	2,230,881			$	2,451,346
Net premiums earned		$	553,545			$	543,335			$	420,117			$	531,053			$	2,013,900			$	1,931,393
Premium leverage			0.23	x			0.23	x			0.18	x			0.23	x			0.90	x			0.79	x
Annualized premium leverage			0.92	x			0.92	x			0.72	x			0.92	x			0.90	x			0.79	x
Average cash and invested assets at amortized cost		$	6,340,454			$	6,389,569			$	6,411,315			$	6,394,427			$	6,303,881			$	6,130,518
Investment leverage			2.69	x			2.75	x			2.78	x			2.74	x			2.83	x			2.50	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 outstanding at the beginning and end of each period.

 

		20

---

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012

 

		September 30, 2013								December 31, 2012
Type of Investment		Fair Value				Percentage				Fair Value				Percentage
Cash and equivalents [a]		$	689,762				10.8	%		$	1,051,694				16.0	%
Short-term investments			11,599				0.2	%			42,230				0.6	%
Fixed maturity investments
U.S. government and government agencies notes			823,761				13.0	%			737,535				11.2	%
Government and agency guaranteed corporates			34,520				0.5	%			64,464				1.0	%
U.S. government agency residential mortgage-backed securities			1,176,967				18.6	%			1,197,788				18.2	%
U.S. government agency commercial mortgage-backed securities			59,878				0.9	%			25,684				0.4	%
Municipals			27,370				0.4	%			38,894				0.6	%
Foreign government			175,509				2.8	%			109,337				1.7	%
Corporate securities			1,139,451				17.9	%			1,373,671				20.9	%
Non-agency residential mortgage-backed securities			63,255				1.0	%			82,791				1.3	%
Non-agency commercial mortgage-backed securities			829,582				13.0	%			755,695				11.6	%
Asset-backed securities			470,545				7.4	%			482,291				7.3	%
Equity securities
Equity investments			166,828				2.6	%			66,309				0.9	%
Emerging market debt fund			60,505				1.0	%			10,576				0.2	%
Preferred equity investments			12,003				0.2	%			10,112				0.2	%
Short-term fixed income fund			23,530				0.4	%			—				—
Other investments [b]			594,156				9.3	%			517,546				7.9	%
Total		$	6,359,221				100.0	%		$	6,566,617				100.0	%

 

Ratings [c]		Fair Value				Percentage				Fair Value				Percentage
U.S. government and government agencies notes		$	823,761				17.1	%		$	737,535				15.0	%
AAA/Aaa			1,031,149				21.4	%			993,277				20.2	%
AA/Aa			1,781,679				37.0	%			1,821,250				37.1	%
A/A			807,509				16.8	%			993,307				20.2	%
BBB			296,489				6.2	%			219,017				4.5	%
Below BBB			67,269				1.4	%			143,198				2.9	%
Not Rated			4,581				0.1	%			2,796				0.1	%
Total		$	4,812,437				100.0	%		$	4,910,380				100.0	%

 

Performance		September 30, 2013				December 31, 2012
Yield [d]			2.4	%			2.8	%
Duration in years [e]			3.10				2.49

 

Investment Income		Quarter Ended Sept. 30, 2013				Quarter Ended June 30, 2013				Quarter Ended Mar. 31, 2013				Quarter Ended Dec. 31, 2012				Quarter Ended Sept. 30, 2012
Cash and available for sale securities		$	24,853			$	25,688			$	26,246			$	27,645			$	30,832
Other investments			13,244				6,780				23,059				10,958				15,050
Total net investment income		$	38,097			$	32,468			$	49,305			$	38,603			$	45,882

 

Note:		[a]		Cash and equivalents, including operating cash, are shown net of investments pending settlement.
		[b]		Other investments includes investments in alternative and specialty funds.
		[c]		Excludes cash and equivalents, equity securities and other investments.
		[d]		Earned yield for the quarter ending 9/30/13 and twelve months ending 12/31/12 excludes realized and unrealized gains and losses on fixed maturity investments.
		[e]		Duration excludes equity securities, other investments and operating cash.

 

		21

---

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF SEPTEMBER 30, 2013

 

		September 30, 2013
ISSUER (1) (2) (3)		Amortized Cost				Fair Value				Unrealized Gain (Loss)				Credit Quality (4)
JPMORGAN CHASE & CO		$	40,999			$	41,099			$	100			A
MORGAN STANLEY			36,701				37,513				812			A-
BANK OF AMERICA CORP			35,796				35,946				150			A-
CITIGROUP INC			33,560				33,904				344			A-
GOLDMAN SACHS GROUP INC/THE			32,533				32,651				118			A-
VERIZON COMMUNICATIONS INC			26,785				27,772				987			BBB+
GENERAL ELECTRIC CO			27,130				27,104				(26	)		AA+
WELLS FARGO & COMPANY			25,989				26,160				171			A+
AMERICAN EXPRESS COMPANY			23,640				23,571				(69	)		A-
COMCAST CORPORATION			22,017				22,544				527			A-
AT&T INC			20,872				20,985				113			A-
FORD MOTOR COMPANY			18,854				18,930				76			BBB-
US BANCORP			15,931				16,280				349			A+
PRINCIPAL LIFE GLOBAL FUNDING II			15,624				15,725				101			A+
BB& T CORP			15,465				15,428				(37	)		A-
NATIONAL GRID PLC			13,883				15,336				1,453			A-
ORACLE CORPORATION			14,586				14,313				(273	)		A+
NEW YORK LIFE INSURANCE COMPANY			13,115				13,318				203			AA+
MERCK & CO INC			13,170				13,112				(58	)		AA
INTERNATIONAL BUSINESS MACHINES CORP			12,733				12,808				75			AA-
ANHEUSER-BUSCH INVEB SA/NV			12,846				12,757				(89	)		A
PHILIP MORRIS INTERNATIONAL INC			12,224				12,624				400			A
PRFIZER INC			12,331				12,448				117			AA
CAPITAL ONE FINANCIAL CORPORATION			11,908				11,781				(127	)		BBB
METLIFE INC			11,597				11,476				(121	)		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 SEPT. 30, 2013												NINE MONTHS ENDED SEPT. 30, 2013
		GROSS				RECOVERIES				NET				GROSS				RECOVERIES				NET
Reserve for losses and loss expenses
Balance, beginning of period		$	4,145,581			($	594,020	)		$	3,551,561			$	4,240,876			($	691,783	)		$	3,549,093
Incurred related to:
Current year			608,737				(221,641	)			387,096				1,625,678				(547,081	)			1,078,597
Prior years			(55,690	)			7,630				(48,060	)			(150,470	)			(11,063	)			(161,533	)
Total Incurred			553,047				(214,011	)			339,036				1,475,208				(558,144	)			917,064
Paid related to:
Current year			(493,376	)			361,105				(132,271	)			(628,247	)			363,528				(264,719	)
Prior years			(178,687	)			(65,679	)			(244,366	)			(1,034,700	)			373,523				(661,177	)
Total Paid			(672,063	)			295,426				(376,637	)			(1,662,947	)			737,051				(925,896	)
Foreign currency translation			25,537				(475	)			25,062				(1,035	)			(204	)			(1,239	)
Balance, end of period		$	4,052,102			($	513,080	)		$	3,539,022			$	4,052,102			($	513,080	)		$	3,539,022

 

		23

---

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

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

 

		Insurance				Reinsurance				Total Company
Incurred related to prior years
Quarter ended March 31, 2013		($	17,295	)		($	33,373	)		($	50,668	)
Quarter ended June 30, 2013			(5,625	)			(57,180	)			(62,805	)
Quarter ended September 30, 2013			(6,210	)			(41,850	)			(48,060	)
Nine months ended September 30, 2013		($	29,130	)		($	132,403	)		($	161,533	)

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

 

		Insurance				Reinsurance				Total Company
Incurred related to prior years
Quarter ended March 31, 2012		($	7,847	)		($	9,054	)		($	16,901	)
Quarter ended June 30, 2012			(13,633	)			(5,919	)			(19,552	)
Quarter ended September 30, 2012			(17,439	)			(38,203	)			(55,642	)
Quarter ended December 31, 2012			(7,267	)			(20,795	)			(28,062	)
Year ended December 31, 2012		($	46,186	)		($	73,971	)		($	120,157	)

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

 

		Insurance				Reinsurance				Total Company
Incurred related to prior years
Quarter ended March 31, 2011		($	34,612	)		($	14,093	)		($	48,705	)
Quarter ended June 30, 2011			(23,190	)			(21,591	)			(44,781	)
Quarter ended September 30, 2011			(12,411	)			(32,002	)			(44,413	)
Quarter ended December 31, 2011			(566	)			(41,513	)			(42,079	)
Year ended December 31, 2011		($	70,779	)		($	109,199	)		($	179,978	)

 

		24

---

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY LINE OF BUSINESS

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT

 

		FOR THE QUARTERS ENDED																				FOR THE YEAR ENDED
		SEPT. 30, 2013				JUNE 30, 2013				MAR. 31, 2013				DEC. 31, 2012				SEPT. 30, 2012				DEC. 31, 2012
INSURANCE SEGMENT
Agriculture		($	616	)		($	233	)		($	4,733	)		($	768	)		($	2,701	)		($	9,304	)
Casualty and other specialty			(2,388	)			(2,701	)			(4,577	)			(6,506	)			(4,146	)			(17,702	)
Professional lines			(2,302	)			(603	)			302				1,424				(5,937	)			(6,043	)
Property			(904	)			(2,088	)			(8,287	)			(1,417	)			(4,655	)			(13,137	)
TOTAL INSURANCE			(6,210	)			(5,625	)			(17,295	)			(7,267	)			(17,439	)			(46,186	)
REINSURANCE SEGMENT
Catastrophe			(9,234	)			(26,439	)			(11,911	)			(7,134	)			(5,745	)		($	30,414	)
Property			(21,157	)			(24,783	)			(1,205	)			(6,707	)			(10,527	)			270
Casualty			(6,268	)			(805	)			(14,156	)			(3,302	)			(9,350	)			(18,965	)
Other specialty			(5,191	)			(5,153	)			(6,101	)			(3,652	)			(12,581	)			(24,862	)
TOTAL REINSURANCE			(41,850	)			(57,180	)			(33,373	)			(20,795	)			(38,203	)			(73,971	)
REPORTED TOTALS		($	48,060	)		($	62,805	)		($	50,668	)		($	28,062	)		($	55,642	)		($	120,157	)

 

		25

---

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES

 

		Insurance																				Reinsurance																				Reported Totals
		Agriculture				Casualty and other specialty				Professional lines				Property				Subtotal				Catastrophe				Property				Casualty				Other specialty				Subtotal				Total
AT SEPT. 30, 2013
Case reserves		$	279,916			$	309,162			$	131,741			$	24,337			$	745,156			$	164,615			$	201,127			$	305,906			$	100,272			$	771,920			$	1,517,076
Total reserves		$	310,092			$	1,271,903			$	525,084			$	39,057			$	2,146,136			$	290,357			$	355,104			$	1,003,878			$	256,627			$	1,905,966			$	4,052,102
Case reserves / Total reserves			90.3	%			24.3	%			25.1	%			62.3	%			34.7	%			56.7	%			56.6	%			30.5	%			39.1	%			40.5	%			37.4	%
IBNR / Total reserves			9.7	%			75.7	%			74.9	%			37.7	%			65.3	%			43.3	%			43.4	%			69.5	%			60.9	%			59.5	%			62.6	%
AT JUNE 30, 2013
Case reserves		$	271,424			$	331,791			$	127,378			$	25,667			$	756,260			$	140,909			$	221,468			$	299,194			$	96,262			$	757,833			$	1,514,093
Total reserves		$	415,026			$	1,274,263			$	513,875			$	39,730			$	2,242,894			$	294,752			$	375,388			$	985,751			$	246,796			$	1,902,687			$	4,145,581
Case reserves / Total reserves			65.4	%			26.0	%			24.8	%			64.6	%			33.7	%			47.8	%			59.0	%			30.4	%			39.0	%			39.8	%			36.5	%
IBNR / Total reserves			34.6	%			74.0	%			75.2	%			35.4	%			66.3	%			52.2	%			41.0	%			69.6	%			61.0	%			60.2	%			63.5	%
AT MAR. 31, 2013
Case reserves		$	171,382			$	327,726			$	127,426			$	27,993			$	654,527			$	173,606			$	249,203			$	290,399			$	101,862			$	815,070			$	1,469,597
Total reserves		$	307,140			$	1,252,914			$	517,849			$	42,962			$	2,120,865			$	288,537			$	394,088			$	975,821			$	247,225			$	1,905,671			$	4,026,536
Case reserves / Total reserves			55.8	%			26.2	%			24.6	%			65.2	%			30.9	%			60.2	%			63.2	%			29.8	%			41.2	%			42.8	%			36.5	%
IBNR / Total reserves			44.2	%			73.8	%			75.4	%			34.8	%			69.1	%			39.8	%			36.8	%			70.2	%			58.8	%			57.2	%			63.5	%
AT DEC. 31, 2012
Case reserves		$	392,457			$	308,611			$	110,441			$	54,196			$	865,705			$	201,105			$	281,681			$	296,494			$	119,261			$	898,541			$	1,764,246
Total reserves		$	464,043			$	1,252,900			$	497,260			$	72,849			$	2,287,052			$	298,328			$	415,460			$	976,476			$	263,560			$	1,953,824			$	4,240,876
Case reserves / Total reserves			84.6	%			24.6	%			22.2	%			74.4	%			37.9	%			67.4	%			67.8	%			30.4	%			45.3	%			46.0	%			41.6	%
IBNR / Total reserves			15.4	%			75.4	%			77.8	%			25.6	%			62.1	%			32.6	%			32.2	%			69.6	%			54.7	%			54.0	%			58.4	%
AT SEPT. 30, 2012
Case reserves		$	730,853			$	314,101			$	87,156			$	24,669			$	1,156,779			$	177,506			$	237,824			$	288,979			$	123,213			$	827,522			$	1,984,301
Total reserves		$	868,497			$	1,238,957			$	477,427			$	50,205			$	2,635,086			$	277,304			$	354,069			$	968,913			$	274,070			$	1,874,356			$	4,509,442
Case reserves / Total reserves			84.2	%			25.4	%			18.3	%			49.1	%			43.9	%			64.0	%			67.2	%			29.8	%			45.0	%			44.1	%			44.0	%
IBNR / Total reserves			15.8	%			74.6	%			81.7	%			50.9	%			56.1	%			36.0	%			32.8	%			70.2	%			55.0	%			55.9	%			56.0	%

 

		26

---

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS

 

		NINE MONTHS ENDED				YEARS ENDED DECEMBER 31,								INCEPTION TO
		SEPT. 30, 2013				2012				2011				SEPT. 30, 2013
Income (Loss) and Return on Equity:
Net income (loss) available (attributable) to common and participating common shareholders		$	220,170			$	129,766			($	117,859	)		$	2,691,317
Operating income (loss) available (attributable) to common and participating common shareholders			220,985				54,295				(152,303	)			2,612,070
Average Shareholders’ equity [a]			2,344,804				2,230,881				2,414,659				2,017,990
Net income (loss) return on average equity			9.4	%			5.8	%			(4.9	)%			11.4	% [c]
Operating return on average equity			9.4	%			2.4	%			(6.3	)%			11.0	% [c]
Book value and dividends per share:
Dilutive book value per common share (treasury stock method)		$	54.33			$	52.88			$	50.56			$	54.33
Dividends paid per share			0.96				1.24				1.20				10.53
Change in diluted book value per common share			2.7	%			4.6	%			(4.1	)%			15.4	% [c]
Total return to common shareholders [b]			4.6	%			7.0	%			(1.9	)%			20.0	% [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.

 

		27

---

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION - TWO CLASS METHOD

 

				QUARTERS ENDED								NINE MONTHS ENDED
				SEPT. 30,								SEPT. 30,
				2013				2012				2013				2012
DILUTIVE SHARES OUTSTANDING:		Average market price per share		$	51.92			$	37.28			$	48.49			$	38.40
AS REPORTED		Basic weighted average common shares outstanding [a]			43,100				42,628				42,720				42,556
		Add: weighted avg. unvested restricted share units			—				2				1				3
		Weighted average exercise price per share			—				—				—				—
		Proceeds from unrecognized restricted share unit expense		$	6			$	26			$	6			$	26
		Less: restricted share units bought back via treasury method			—				(1	)			(1	)			(1	)
		Add: weighted avg. dilutive options outstanding			815				85				387				96
		Weighted average exercise price per share		$	47.94			$	24.68			$	47.27			$	24.02
		Proceeds from unrecognized option expense		$	6,750				—			$	6,750				—
		Less: options bought back via treasury method			(815	)			(56	)			(387	)			(60	)
		Weighted average dilutive shares outstanding [b]			43,100				42,658				42,720				42,594

 

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

 

		28

---

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD

 

		QUARTERS ENDED SEPT. 30,								NINE MONTHS ENDED SEPT. 30,
		2013				2012				2013				2012
Net income		$	83,416			$	40,118			$	244,734			$	195,143
Less preferred dividends			(8,188	)			(8,188	)			(24,564	)			(24,564	)
Net income available to common and participating common shareholders		$	75,228			$	31,930			$	220,170			$	170,579
Less amount allocated to participating common shareholders [a]			(1,997	)			(494	)			(4,742	)			(2,828	)
Net income available allocated to common shareholders		$	73,231			$	31,436			$	215,428			$	167,751
Denominator:
Weighted average shares - basic			43,100				42,628				42,720				42,556
Share Equivalents
Options			—				29				—				36
Restricted share units			—				1				—				2
Weighted average shares - diluted			43,100				42,658				42,720				42,594
Basic earnings per common share		$	1.70			$	0.74			$	5.04			$	3.94
Diluted earnings per common share [b]		$	1.70			$	0.74			$	5.04			$	3.94

 

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

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

 

		29

---

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING INCOME RECONCILIATION

EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD

 

		Two-Class Method								Two-Class Method
		QUARTERS ENDED SEPT. 30,								NINE MONTHS ENDED SEPT. 30,
		2013				2012				2013				2012
Net income		$	83,416			$	40,118			$	244,734			$	195,143
Add (less) after-tax items:
Net foreign exchange losses (gains)			2,395				3,767				8,645				(12,857	)
Net realized and unrealized investment losses (gains)			6,056				(9,691	)			(9,371	)			(27,708	)
Net impairment losses recognized in earnings			190				131				1,541				737
Operating income before preferred dividends		$	92,057			$	34,325			$	245,549			$	155,315
Preferred dividends			(8,188	)			(8,188	)			(24,564	)			(24,564	)
Operating income available to common and participating common shareholders		$	83,869			$	26,137			$	220,985			$	130,751
Less amount allocated to participating common shareholders [a]			(2,226	)			(404	)			(4,760	)			(2,168	)
Operating income allocated to common shareholders		$	81,643			$	25,733			$	216,225			$	128,583
Weighted average common shares outstanding
Basic			43,100				42,628				42,720				42,556
Dilutive			43,100				42,658				42,720				42,594
Basic per common share data
Net income allocated to common shareholders		$	1.70			$	0.74			$	5.04			$	3.94
Add (less) after-tax items:
Net foreign exchange losses (gains)			0.05				0.09				0.20				(0.30	)
Net realized and unrealized investment losses (gains)			0.14				(0.23	)			(0.22	)			(0.64	)
Net impairment losses recognized in earnings			—				—				0.04				0.02
Operating income allocated to common shareholders		$	1.89			$	0.60			$	5.06			$	3.02
Diluted per common share data
Net income allocated to common shareholders		$	1.70			$	0.74			$	5.04			$	3.94
Add (less) after-tax items:
Net foreign exchange losses (gains)			0.05				0.09				0.20				(0.30	)
Net realized and unrealized investment losses (gains)			0.14				(0.23	)			(0.22	)			(0.64	)
Net impairment losses recognized in earnings			—				—				0.04				0.02
Operating income allocated to common shareholders [b]		$	1.89			$	0.60			$	5.06			$	3.02

 

[a]

Represents earnings and dividends allocated to holders of unvested restricted shares issued under the Company’s stock compensation plans that are considered participating securities related to the calculation of earnings per share under the two-class method. In periods of loss, no losses are allocated to participating common shareholders.

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

 

		30

---

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE

 

				SEPT. 30,								DEC. 31,
				2013				2012				2012
DILUTIVE COMMON SHARES OUTSTANDING:		Price per share at period end		$	53.72			$	38.50			$	39.69
AS-IF CONVERTED [a]		Basic common shares outstanding			43,102				42,631				42,432
		Add: unvested restricted shares and restricted share units			1,148				665				686
		Add: dilutive options outstanding			815				85				40
		Weighted average exercise price per share		$	47.94			$	24.80			$	27.76
		Book Value [b]		$	2,409,010			$	2,380,874			$	2,280,597
		Add: proceeds from converted options			39,071				2,108				1,110
		Pro forma book value		$	2,448,081			$	2,382,982			$	2,281,707
		Dilutive shares outstanding			45,065				43,381				43,158
		Basic book value per common share		$	55.89			$	55.85			$	53.75
		Diluted book value per common share		$	54.32			$	54.93			$	52.87
DILUTIVE COMMON SHARES OUTSTANDING:		Price per share at period end		$	53.72			$	38.50			$	39.69
TREASURY STOCK METHOD		Basic common shares outstanding			43,102				42,631				42,432
		Add: unvested restricted shares and restricted share units			1,148				665				686
		Add: dilutive options outstanding			815				85				40
		Weighted average exercise price per share		$	47.94			$	24.80			$	27.76
		Less: options bought back via treasury method			(727	)			(55	)			(28	)
		Dilutive shares outstanding			44,338				43,326				43,130
		Basic book value per common share		$	55.89			$	55.85			$	53.75
		Diluted book value per common share		$	54.33			$	54.95			$	52.88

 

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

[b]	Excludes the $430 million liquidation value of the preferred shares.

 

		31

---

ENDURANCE SPECIALTY HOLDINGS LTD.

REGULATION G

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

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

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

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

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

 

		32