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

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8-K - 8-K - ENDURANCE SPECIALTY HOLDINGS LTD	enh8-k9302014coverpage.htm
EX-99.1 - EX-99.1 - ENDURANCE SPECIALTY HOLDINGS LTD	enh8-k9302014pressrelease.htm

Exhibit 99.2

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT

THIRD QUARTER 2014

Endurance Specialty Holdings Ltd.

Waterloo House, 100 Pitts Bay Rd.

Pembroke HM 08, Bermuda

Investor Relations

Phone: (441) 278-0988

Fax: (441) 278-0493

email: investorrelations@endurance.bm

This report is for information purposes only. It should be read in conjunction

with other documents filed by Endurance Specialty Holdings Ltd. pursuant to

the Securities Act of 1933 and the Securities Exchange Act of 1934.

Financial Supplement Table of Contents



	Page
i. Basis of Presentation	i
I. Consolidated Financial Highlights	1
II. Consolidated Financial Statements
a. Consolidated Statements of Income - Quarterly	2
b. Consolidated Statements of Income - 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. Losses and Loss Expenses Incurred by Line of Business	26
e. Analysis of Unpaid Losses and Loss Expenses	27
V. Shareholder Return Analysis
a. Shareholder Return Analysis	28
b. Weighted Average Dilutive Shares Outstanding	29
c. Earnings per Share - Two Class Method	30
d. Operating Income Reconciliation - Two Class Method	31
e. Earnings per Share and Operating Income Reconciliation Excluding Proposed Acquisition Expenses	32
f. Book Value Per Share Analysis	33
VI. Regulation G	34

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

Some of the statements in this financial supplement may include and Endurance may make related oral 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,” “would,” “expect,” “intend,” “plan,” “believe,” “project,” “target,” “anticipate,” “seek,” “will,” “deliver” 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 materially from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2013 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.

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

ENDURANCE SPECIALTY HOLDINGS LTD.

BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION


•	All financial information contained herein is unaudited, except the balance sheet and/or income statement data for the years ended December 31, 2013 and 2012 which was derived from the Company’s audited financial statements.


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


•	As used in this financial supplement, “common shares” refers to our ordinary shares.

•

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


•	NM - Not meaningful.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL HIGHLIGHTS



		QUARTER ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,						Previous Quarter Change		Previous Year to Date Change
		2014			2013			2014			2013			Previous Quarter Change		Previous Year to Date Change
HIGHLIGHTS	Net income		$76,234			$83,416			$263,877			$244,734		(8.6	)%	7.8	%
	Net income available to common and participating common shareholders	68,046			75,228			239,313			220,170			(9.5	)%	8.7	%
	Net income allocated to common shareholders	66,116			73,231			232,406			215,428			(9.7	)%	7.9	%
	Operating income [a]	67,384			92,057			250,050			245,549			(26.8	)%	1.8	%
	Operating income available to common and participating common shareholders [a]	59,196			83,869			225,486			220,985			(29.4	)%	2.0	%
	Operating income allocated to common shareholders [a]	57,517			81,643			218,978			216,225			(29.6	)%	1.3	%
	Operating cash flow	32,505			(59,286		)	52,172			(16,574		)	NM		NM
	Net investment income	25,357			38,097			105,649			119,870			(33.4	)%	(11.9	)%
	Gross premiums written	626,110			544,363			2,473,050			2,294,435			15.0	%	7.8	%
	Net premiums written	390,106			395,333			1,700,238			1,768,869			(1.3	)%	(3.9	)%
	Net premiums earned	514,895			553,545			1,392,699			1,516,997			(7.0	)%	(8.2	)%
	Total assets	10,145,818			9,546,660			10,145,818			9,546,660			6.3	%	6.3	%
	Total shareholders’ equity	3,120,454			2,839,010			3,120,454			2,839,010			9.9	%	9.9	%

PER SHARE AND SHARES DATA	Basic and diluted earnings per common share
	Net income (as reported)		$1.52			$1.70			$5.36			$5.04		(10.6	)%	6.3	%
	Operating income (as reported) [a]		$1.32			$1.89			$5.05			$5.06		(30.2	)%	(0.2	)%
As Reported	Weighted average common shares outstanding	43,465			43,100			43,332			42,720			0.8	%	1.4	%
	Weighted average common shares outstanding & dilutive potential common shares [e]	43,510			43,100			43,356			42,720			1.0	%	1.5	%

	Common dividends paid per share	$0.34			$0.32			$1.02			$0.96			6.3	%	6.3	%

Book Value Per Common Share	Book value [b]	$61.90			$55.89			$61.90			$55.89			10.8	%	10.8	%
Book Value Per Common Share	Diluted book value (treasury stock method) [b]	$59.98			$54.33			$59.98			$54.33			10.4	%	10.4	%

FINANCIAL RATIOS	Return on average common equity (ROAE), net income [c]	2.5		%	3.2		%	9.3		%	9.4		%	(0.7	)	(0.1	)
FINANCIAL RATIOS	ROAE, operating income [a] [c]	2.2		%	3.6		%	8.8		%	9.4		%	(1.4	)	(0.6	)
	Return on beg. common equity (ROBE), net income [d]	2.5		%	3.3		%	9.7		%	9.7		%	(0.8	)	—
	ROBE, operating income [a] [d]	2.2		%	3.6		%	9.2		%	9.7		%	(1.4	)	(0.5	)

	Annualized ROAE, net income [c]	10.1		%	12.8		%	12.4		%	12.5		%	(2.7	)	(0.1	)
	Annualized ROAE, operating income [a] [c]	8.8		%	14.2		%	11.7		%	12.6		%	(5.4	)	(0.9	)
	Annualized ROBE, net income [d]	10.1		%	13.0		%	13.0		%	12.9		%	(2.9	)	0.1
	Annualized ROBE, operating income [a] [d]	8.8		%	14.5		%	12.2		%	12.9		%	(5.7	)	(0.7	)
	Annualized investment yield	1.6		%	2.4		%	2.2		%	2.5		%	(0.8	)	(0.3	)

GAAP	Loss ratio	56.4		%	61.3		%	52.2		%	60.4		%	(4.9	)	(8.2	)
	Acquisition expense ratio	18.1		%	14.2		%	17.5		%	14.7		%	3.9		2.8
	General and administrative expense ratio	15.7		%	12.2		%	17.3		%	14.2		%	3.5		3.1
	Combined ratio	90.2		%	87.7		%	87.0		%	89.3		%	2.5		(2.3	)

[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 31 for a reconciliation to net income.

[b] For detailed calculations, please refer to page 33.

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

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME - QUARTERLY



	QUARTERS ENDED
	SEPT. 30, 2014			JUNE 30, 2014			MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			SEPT. 30, 2012
UNDERWRITING REVENUES
Gross premiums written		$626,110			$689,425			$1,157,515			$370,809			$544,363			$621,255
Premiums ceded	(236,004		)	(177,998		)	(358,810		)	(90,745		)	(149,030		)	(107,175		)
Net premiums written		$390,106			$511,427			$798,705			$280,064			$395,333			$514,080
Change in unearned premiums	124,789			(29,889		)	(402,439		)	219,423			158,212			37,792
Net premiums earned		$514,895			$481,538			$396,266			$499,487			$553,545			$551,872
Other underwriting income (loss)	2,123			(4,824		)	(1,238		)	(2,740		)	(943		)	(1,347		)
Total underwriting revenues		$517,018			$476,714			$395,028			$496,747			$552,602			$550,525
UNDERWRITING EXPENSES
Net losses and loss expenses		$290,269			$259,196			$176,896			$302,620			$339,036			$407,523
Acquisition expenses	93,392			78,601			72,157			82,151			78,775			88,782
General and administrative expenses [c]	80,915			86,455			73,206			79,599			67,470			52,715
Total underwriting expenses		$464,576			$424,252			$322,259			$464,370			$485,281			$549,020
Underwriting income		$52,442			$52,462			$72,769			$32,377			$67,321			$1,505
OTHER OPERATING REVENUE
Net investment income		$25,357			$39,302			$40,990			$46,346			$38,097			$45,882
Interest expense [c]	(13,127		)	(9,732		)	(9,051		)	(9,050		)	(9,048		)	(9,041		)
Amortization of intangibles	(1,623		)	(1,623		)	(1,617		)	(1,634		)	(1,652		)	(2,434		)
Total other operating revenue		$10,607			$27,947			$30,322			$35,662			$27,397			$34,407
INCOME BEFORE OTHER ITEMS		$63,049			$80,409			$103,091			$68,039			$94,718			$35,912
OTHER
Net foreign exchange losses		($783	)		($319	)		($2,964	)		($5,718	)		($2,201	)		($3,774	)
Net realized and unrealized investment gains (losses)	9,788			3,411			4,872			5,197			(6,640		)	10,097

Total other-than-temporary impairment losses	(102		)	(198		)	(111		)	(41		)	(190		)	(126		)
Portion of loss recognised in other comprehensive (loss) income	—			—			—			—			—			(5		)
Net impairment losses recognised in earnings	(102		)	(198		)	(111		)	(41		)	(190		)	(131		)
Income tax benefit (expense)	4,282			(140		)	(408		)	(296		)	(2,271		)	(1,986		)
NET INCOME		$76,234			$83,163			$104,480			$67,181			$83,416			$40,118
Preferred dividends	(8,188		)	(8,188		)	(8,188		)	(8,186		)	(8,188		)	(8,188		)
NET INCOME AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS [d]		$68,046			$74,975			$96,292			$58,995			$75,228			$31,930

KEY RATIOS/PER SHARE DATA
Loss ratio	56.4		%	53.8		%	44.6		%	60.7		%	61.3		%	73.8		%
Acquisition expense ratio	18.1		%	16.3		%	18.2		%	16.4		%	14.2		%	16.1		%
General and administrative expense ratio	15.7		%	18.0		%	18.5		%	15.9		%	12.2		%	9.6		%
Combined ratio	90.2		%	88.1		%	81.3		%	93.0		%	87.7		%	99.5		%

Basic earnings per common share		$1.52			$1.68			$2.17			$1.33			$1.70			$0.74
Diluted earnings per common share [b] [d]		$1.52			$1.68			$2.17			$1.33			$1.70			$0.74

ROAE, net income [a]	2.5		%	2.9		%	3.8		%	2.4		%	3.2		%	1.4		%

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

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

[c] The quarter ended September 30, 2014 includes $2.3 million and $4.1 million of general and administrative expenses and interest expense, respectively, incurred in relation to the Company’s proposed acquisition of Aspen Insurance Holdings Limited (“Aspen”).

[d] For the quarter ended September 30, 2014, adding back the $6.4 million of expenses incurred related to the Company’s proposed acquisition of Aspen, net income available to common and participating common shareholders would increase to $74.4 million or $1.66 diluted earnings per common share. See reconciliation on page 32.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME - YTD



	NINE MONTHS ENDED									YEAR ENDED
	SEPT. 30, 2014			SEPT. 30, 2013			SEPT. 30, 2012			DEC. 31, 2013			DEC. 31, 2012
UNDERWRITING REVENUES
Gross premiums written		$2,473,050			$2,294,435			$2,286,980			$2,665,244			$2,549,026
Premiums ceded	(772,812		)	(525,566		)	(445,431		)	(616,311		)	(519,531		)
Net premiums written		$1,700,238			$1,768,869			$1,841,549			$2,048,933			$2,029,495
Change in unearned premiums	(307,539		)	(251,872		)	(358,702		)	(32,449		)	(15,595		)
Net premiums earned		$1,392,699			$1,516,997			$1,482,847			$2,016,484			$2,013,900
Other underwriting (loss) income	(3,939		)	694			(1,663		)	(2,046		)	(2,183		)
Total underwriting revenues		$1,388,760			$1,517,691			$1,481,184			$2,014,438			$2,011,717
UNDERWRITING EXPENSES
Net losses and loss expenses		$726,361			$917,064			$1,016,187			$1,219,684			$1,520,995
Acquisition expenses	244,150			222,279			229,399			304,430			303,179
General and administrative expenses [c]	240,576			215,307			181,365			294,906			235,689
Total underwriting expenses		$1,211,087			$1,354,650			$1,426,951			$1,819,020			$2,059,863
Underwriting income (loss)		$177,673			$163,041			$54,233			$195,418			($48,146	)
OTHER OPERATING REVENUE
Net investment income		$105,649			$119,870			$134,723			$166,216			$173,326
Interest expense [c]	(31,910		)	(27,138		)	(27,132		)	(36,188		)	(36,174		)
Amortization of intangibles	(4,863		)	(5,378		)	(7,988		)	(7,012		)	(10,347		)
Total other operating revenue		$68,876			$87,354			$99,603			$123,016			$126,805
INCOME BEFORE OTHER ITEMS		$246,549			$250,395			$153,836			$318,434			$78,659
OTHER
Net foreign exchange (losses) gains		($4,066	)		($8,496	)		$14,699			($14,214	)		$15,911
Net realized and unrealized investment gains	18,071			9,967			30,258			15,164			72,139

Total other-than-temporary impairment losses	(411		)	(1,575		)	(274		)	(1,616		)	(364		)
Portion of loss recognised in other comprehensive (loss) income	—			—			(483		)	—			(483		)
Net impairment losses recognised in earnings	(411		)	(1,575		)	(757		)	(1,616		)	(847		)
Income tax expense	3,734			(5,557		)	(2,893		)	(5,853		)	(3,346		)
NET INCOME		$263,877			$244,734			$195,143			$311,915			$162,516
Preferred dividends	(24,564		)	(24,564		)	(24,564		)	(32,750		)	(32,750		)
NET INCOME AVAILABLE TO COMMON AND PARTICIPATING COMMON SHAREHOLDERS [d]		$239,313			$220,170			$170,579			$279,165			$129,766

KEY RATIOS/PER SHARE DATA
Loss ratio	52.2		%	60.4		%	68.5		%	60.5		%	75.5		%
Acquisition expense ratio	17.5		%	14.7		%	15.5		%	15.1		%	15.1		%
General and administrative expense ratio	17.3		%	14.2		%	12.2		%	14.6		%	11.7		%
Combined ratio	87.0		%	89.3		%	96.2		%	90.2		%	102.3		%

Basic earnings per common share		$5.36			$5.04			$3.94			$6.37			$3.00
Diluted earnings per common share [b] [d]		$5.36			$5.04			$3.94			$6.37			$3.00

ROAE, net income [a]	9.3		%	9.4		%	7.5		%	11.8		%	5.8		%

[c] The nine months ended September 30, 2014, includes $15.3 million and $4.8 million of general and administrative expenses and interest expense, respectively, incurred in relation to the Company’s proposed acquisition of Aspen.

[d] For the nine months ended September 30, 2014, adding back the $20.1 million of expenses incurred related to the Company’s proposed acquisition of Aspen, net income available to common and participating common shareholders would increase to $259.4 million or $5.81 diluted earnings per common share. See reconciliation of page 32.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS



	SEPT. 30, 2014			JUNE 30, 2014			MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013
ASSETS
Cash and cash equivalents		$805,716			$801,028			$916,665			$845,851			$789,999
Fixed maturity investments available for sale, at fair value	4,871,420			4,993,099			4,794,445			4,823,964			4,800,838
Short term investments available for sale, at fair value	11,844			24,564			46,167			35,028			11,599
Equity securities available for sale, at fair value	267,728			287,642			271,530			252,466			262,866
Other investments	658,678			648,642			621,914			617,478			594,156
Premiums receivable, net	1,452,228			1,380,858			1,265,371			669,198			1,006,227
Insurance and reinsurance balances receivable	123,432			134,750			136,733			127,722			123,777
Deferred acquisition costs	246,437			257,262			231,167			186,027			197,048
Prepaid reinsurance premiums	414,013			424,133			443,498			187,209			263,499
Reinsurance recoverable on unpaid losses	566,329			606,140			534,335			593,755			513,080
Reinsurance recoverable on paid losses	165,592			145,694			59,784			164,220			428,300
Accrued investment income	23,652			26,385			23,161			24,104			21,783
Goodwill and intangible assets	160,560			162,178			163,761			165,378			167,000
Deferred tax assets	53,403			45,782			48,496			51,703			50,148
Receivable on pending investment sales	84,699			67,578			83,445			54,910			124,236
Other assets	240,087			172,912			154,310			179,109			192,104
TOTAL ASSETS		$10,145,818			$10,178,647			$9,794,782			$8,978,122			$9,546,660

LIABILITIES
Reserve for losses and loss expenses		$3,897,483			$3,963,393			$3,847,774			$4,002,259			$4,052,102
Reserve for unearned premiums	1,552,168			1,689,819			1,678,233			1,018,851			1,314,687
Deposit liabilities	17,521			21,987			18,684			19,458			17,577
Reinsurance balances payable	482,093			378,295			307,569			181,061			347,048
Debt	527,732			527,714			527,539			527,478			527,506
Payable on pending investment purchases	238,038			272,696			239,313			129,047			224,473
Other liabilities	310,329			209,068			174,561			213,419			224,257
TOTAL LIABILITIES		$7,025,364			$7,062,972			$6,793,673			$6,091,573			$6,707,650
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	44,751			44,706			44,601			44,369			44,250
Additional paid-in capital	590,330			583,691			575,684			569,116			560,204
Accumulated other comprehensive income	81,299			136,038			89,359			62,731			69,457
Retained earnings	2,386,874			2,334,040			2,274,265			2,193,133			2,147,899
TOTAL SHAREHOLDERS’ EQUITY		$3,120,454			$3,115,675			$3,001,109			$2,886,549			$2,839,010
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$10,145,818			$10,178,647			$9,794,782			$8,978,122			$9,546,660

Book value per common share		$61.90			$61.80			$59.42			$56.99			$55.89
Diluted book value per common share (treasury stock method)		$59.98			$60.00			$57.53			$55.18			$54.33

RATIOS
Debt-to-capital	14.5		%	14.5		%	15.0		%	15.5		%	15.7		%

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, 2014 is equal to 11.1% of Shareholders’ Equity as of September 30, 2014.



		Estimated Occurrence Net Loss as of July 1, 2014										July 1, 2013		July 1, 2012
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		$123		$176		$232		$284		$362		$350		$468
Europe	Windstorm	98		202		276		345		422		331		344
California	Earthquake	36		147		205		250		329		284		412
Japan	Windstorm	33		100		140		158		175		230		247
Northwest U.S.	Earthquake	—		5		36		91		185		89		184
Japan	Earthquake	10		83		127		163		205		137		138
United States	Tornado/Hail	35		50		63		78		99		89		96
Australia	Earthquake	1		11		44		121		218		87		83
New Zealand	Earthquake	1		5		14		35		87		23		22
Australia	Windstorm	7		24		51		88		155		58		37
New Madrid	Earthquake	—		—		—		6		72		7		11

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

Actual realized catastrophic losses could differ materially from our net loss estimates and our net loss estimates should not be considered as representative of the actual losses that we may incur in connection with any particular catastrophic event. The net loss estimates above rely significantly on computer models created to simulate the effect of catastrophes on insured properties based upon data emanating from past catastrophic events. Since comprehensive data collection regarding insured losses from catastrophe events is a relatively recent development in the insurance industry, the data upon which catastrophe models is based is limited, which has the potential to introduce inaccuracies into estimates of losses from catastrophic events, in particular those that occur infrequently. In addition, catastrophe models are significantly influenced by management’s assumptions regarding event characteristics, construction of insured property and the cost and duration of rebuilding after the catastrophe. Lastly, changes in Endurance’s underwriting portfolio risk control mechanisms and other factors, either before or after the date of the above net loss estimates, may also cause actual results to vary considerably from the net loss estimates above. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013.

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT DISTRIBUTION

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

Net Premiums Written = $1,700.2 million

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

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014									SEPT. 30, 2013
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written		$420,343			$205,767			$626,110			$344,819			$199,544			$544,363
Net premiums written		$197,639			$192,467			$390,106			$224,338			$170,995			$395,333
Net premiums earned		$253,583			$261,312			$514,895			$291,477			$262,068			$553,545
Other underwriting income (loss)	—			2,123			2,123			—			(943		)	(943		)
Total underwriting revenues		$253,583			$263,435			$517,018			$291,477			$261,125			$552,602

UNDERWRITING EXPENSES
Net losses and loss expenses		$196,677			$93,592			$290,269			$228,409			$110,627			$339,036
Acquisition expenses	20,170			73,222			93,392			18,440			60,335			78,775
General and administrative expenses	44,957			35,958			80,915			35,641			31,829			67,470
Total expenses		$261,804			$202,772			$464,576			$282,490			$202,791			$485,281

UNDERWRITING (LOSS) INCOME		($8,221	)		$60,663			$52,442			$8,987			$58,334			$67,321

GAAP RATIOS
Loss ratio	77.5		%	35.8		%	56.4		%	78.4		%	42.3		%	61.3		%
Acquisition expense ratio	8.0		%	28.0		%	18.1		%	6.3		%	23.0		%	14.2		%
General and administrative expense ratio	17.7		%	13.8		%	15.7		%	12.2		%	12.1		%	12.2		%
Combined ratio AS REPORTED	103.2		%	77.6		%	90.2		%	96.9		%	77.4		%	87.7		%

Effect of favorable prior accident year reserve development	8.0		%	15.4		%	11.7		%	2.1		%	16.0		%	8.7		%

Combined ratio net of prior accident year reserve development	111.2		%	93.0		%	101.9		%	99.0		%	93.4		%	96.4		%

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014			JUNE 30, 2014			MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			SEPT. 30, 2012
UNDERWRITING REVENUES
Gross premiums written		$420,343			$321,526			$652,276			$200,726			$344,819			$324,808
Net premiums written		$197,639			$179,038			$343,027			$111,976			$224,338			$221,265
Net premiums earned		$253,583			$218,563			$144,021			$235,967			$291,477			$283,273
Other underwriting loss	—			—			—			—			—			(1,384		)
Total underwriting revenues		$253,583			$218,563			$144,021			$235,967			$291,477			$281,889

UNDERWRITING EXPENSES
Net losses and loss expenses		$196,677			$149,567			$88,533			$230,708			$228,409			$288,750
Acquisition expenses	20,170			15,128			12,261			16,754			18,440			24,506
General and administrative expenses	44,957			47,237			41,736			42,804			35,641			29,409
Total expenses		$261,804			$211,932			$142,530			$290,266			$282,490			$342,665

UNDERWRITING (LOSS) INCOME		($8,221	)		$6,631			$1,491			($54,299	)		$8,987			($60,776	)

GAAP RATIOS
Loss ratio	77.5		%	68.5		%	61.5		%	97.8		%	78.4		%	101.9		%
Acquisition expense ratio	8.0		%	6.9		%	8.5		%	7.1		%	6.3		%	8.7		%
General and administrative expense ratio	17.7		%	21.6		%	29.0		%	18.1		%	12.2		%	10.4		%
Combined ratio AS REPORTED	103.2		%	97.0		%	99.0		%	123.0		%	96.9		%	121.0		%

Effect of favorable prior accident year reserve development	8.0		%	10.1		%	8.1		%	2.0		%	2.1		%	6.2		%

Combined ratio net of prior accident year reserve development	111.2		%	107.1		%	107.1		%	125.0		%	99.0		%	127.2		%

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014			JUNE 30, 2014			MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			SEPT. 30, 2012
UNDERWRITING REVENUES
Gross premiums written		$205,767			$367,899			$505,239			$170,083			$199,544			$296,447
Net premiums written		$192,467			$332,389			$455,678			$168,088			$170,995			$292,815
Net premiums earned		$261,312			$262,975			$252,245			$263,520			$262,068			$268,599
Other underwriting income (loss)	2,123			(4,824		)	(1,238		)	(2,740		)	(943		)	37
Total underwriting revenues		$263,435			$258,151			$251,007			$260,780			$261,125			$268,636

UNDERWRITING EXPENSES
Net losses and loss expenses		$93,592			$109,629			$88,363			$71,912			$110,627			$118,773
Acquisition expenses	73,222			63,473			59,896			65,397			60,335			64,276
General and administrative expenses	35,958			39,218			31,470			36,795			31,829			23,306
Total expenses		$202,772			$212,320			$179,729			$174,104			$202,791			$206,355

UNDERWRITING INCOME		$60,663			$45,831			$71,278			$86,676			$58,334			$62,281

GAAP RATIOS
Loss ratio	35.8		%	41.7		%	35.0		%	27.3		%	42.3		%	44.2		%
Acquisition expense ratio	28.0		%	24.1		%	23.7		%	24.8		%	23.0		%	23.9		%
General and administrative expense ratio	13.8		%	14.9		%	12.6		%	14.0		%	12.1		%	8.7		%
Combined ratio AS REPORTED	77.6		%	80.7		%	71.3		%	66.1		%	77.4		%	76.8		%

Effect of favorable prior accident year reserve development	15.4		%	12.2		%	15.3		%	21.3		%	16.0		%	14.2		%

Combined ratio net of prior accident year reserve development	93.0		%	92.9		%	86.6		%	87.4		%	93.4		%	91.0		%

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014		JUNE 30, 2014		MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		SEPT. 30, 2012
INSURANCE SEGMENT
Agriculture		$188,011		$80,540		$527,894		$58,220		$200,062		$171,826
Casualty and other specialty	144,706		146,728		74,895		76,666		95,862		90,873
Professional lines	62,631		74,650		38,780		55,056		34,221		43,209
Property	24,995		19,608		10,707		10,784		14,674		18,900
TOTAL INSURANCE		$420,343		$321,526		$652,276		$200,726		$344,819		$324,808

REINSURANCE SEGMENT
Catastrophe		$47,173		$158,372		$126,648		$13,778		$38,676		$38,871
Property	73,807		42,887		166,413		9,358		91,653		157,742
Casualty	23,409		30,875		84,982		29,900		27,649		40,712
Professional lines	21,520		84,117		25,619		113,089		25,670		36,735
Specialty	39,858		51,648		101,577		3,958		15,896		22,387
TOTAL REINSURANCE		$205,767		$367,899		$505,239		$170,083		$199,544		$296,447

REPORTED TOTALS		$626,110		$689,425		$1,157,515		$370,809		$544,363		$621,255

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014		JUNE 30, 2014		MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		SEPT. 30, 2012
INSURANCE SEGMENT
Agriculture		$103,536		$45,826		$281,645		$24,454		$120,617		$106,180
Casualty and other specialty	58,390		89,765		41,721		50,022		72,431		66,686
Professional lines	20,216		29,846		14,570		32,138		20,972		34,804
Property	15,497		13,601		5,091		5,362		10,318		13,595
TOTAL INSURANCE		$197,639		$179,038		$343,027		$111,976		$224,338		$221,265

REINSURANCE SEGMENT
Catastrophe		$41,157		$123,411		$78,963		$12,270		$12,551		$36,484
Property	73,807		42,886		166,322		9,417		90,528		157,742
Casualty	23,409		30,868		83,392		29,495		27,648		40,712
Professional lines	21,520		84,117		25,619		113,089		25,670		36,735
Specialty	32,574		51,107		101,382		3,817		14,598		21,142
TOTAL REINSURANCE		$192,467		$332,389		$455,678		$168,088		$170,995		$292,815

REPORTED TOTALS		$390,106		$511,427		$798,705		$280,064		$395,333		$514,080

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS



	FOR THE QUARTERS ENDED
	SEPT. 30, 2014		JUNE 30, 2014		MAR. 31, 2014		DEC. 31, 2013		SEPT. 30, 2013		SEPT. 30, 2012
INSURANCE SEGMENT
Agriculture		$162,710		$127,421		$56,313		$143,876		$200,739		$183,277
Casualty and other specialty	55,979		57,828		54,470		57,905		55,929		53,060
Professional lines	24,795		24,219		24,341		25,816		24,220		35,577
Property	10,099		9,095		8,897		8,370		10,589		11,359
TOTAL INSURANCE		$253,583		$218,563		$144,021		$235,967		$291,477		$283,273

REINSURANCE SEGMENT
Catastrophe		$61,613		$65,705		$62,926		$66,026		$67,778		$85,983
Property	68,481		76,705		76,918		87,032		88,195		74,818
Casualty	44,668		50,102		48,254		61,218		61,244		55,705
Professional lines	39,534		36,325		33,194		24,793		15,181		20,234
Specialty	47,016		34,138		30,953		24,451		29,670		31,859
TOTAL REINSURANCE		$261,312		$262,975		$252,245		$263,520		$262,068		$268,599

REPORTED TOTALS		$514,895		$481,538		$396,266		$499,487		$553,545		$551,872

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED SEGMENT DATA



	FOR THE NINE MONTHS ENDED
	SEPT. 30, 2014									SEPT. 30, 2013
	Insurance			Reinsurance			Totals			Insurance			Reinsurance			Totals
UNDERWRITING REVENUES
Gross premiums written		$1,394,145			$1,078,905			$2,473,050			$1,274,703			$1,019,732			$2,294,435
Net premiums written		$719,704			$980,534			$1,700,238			$820,534			$948,335			$1,768,869
Net premiums earned		$616,167			$776,532			$1,392,699			$710,507			$806,490			$1,516,997
Other underwriting (loss) income	—			(3,939		)	(3,939		)	—			694			694
Total underwriting revenues		$616,167			$772,593			$1,388,760			$710,507			$807,184			$1,517,691

UNDERWRITING EXPENSES
Losses and loss expenses		$434,777			$291,584			$726,361			$543,717			$373,347			$917,064
Acquisition expenses	47,559			196,591			244,150			48,024			174,255			222,279
General and administrative expenses	133,930			106,646			240,576			114,792			100,515			215,307
Total expenses		$616,266			$594,821			$1,211,087			$706,533			$648,117			$1,354,650

UNDERWRITING (LOSS) INCOME		($99	)		$177,772			$177,673			$3,974			$159,067			$163,041

GAAP RATIOS
Loss ratio	70.6		%	37.6		%	52.2		%	76.4		%	46.3		%	60.4		%
Acquisition expense ratio	7.7		%	25.3		%	17.5		%	6.8		%	21.6		%	14.7		%
General and administrative expense ratio	21.7		%	13.7		%	17.3		%	16.2		%	12.5		%	14.2		%
Combined ratio AS REPORTED	100.0		%	76.6		%	87.0		%	99.4		%	80.4		%	89.3		%

Effect of favorable prior accident year reserve development	8.8		%	14.3		%	11.8		%	4.1		%	16.4		%	10.6		%

Combined ratio net of prior accident year reserve development	108.8		%	90.9		%	98.8		%	103.5		%	96.8		%	99.9		%

ENDURANCE SPECIALTY HOLDINGS LTD.

INSURANCE SEGMENT DATA



	FOR THE NINE MONTHS ENDED									FOR THE YEAR ENDED
	SEPT. 30, 2014			SEPT. 30, 2013			SEPT. 30, 2012			DEC. 31, 2013			DEC. 31, 2012
UNDERWRITING REVENUES
Gross premiums written		$1,394,145			$1,274,703			$1,252,814			$1,475,429			$1,429,930
Net premiums written		$719,704			$820,534			$835,705			$932,510			$942,357
Net premiums earned		$616,167			$710,507			$710,988			$946,474			$955,089
Other underwriting loss	—			—			(2,684		)	—			(2,684		)
Total underwriting revenues		$616,167			$710,507			$708,304			$946,474			$952,405

UNDERWRITING EXPENSES
Losses and loss expenses		$434,777			$543,717			$610,956			$774,425			$855,941
Acquisition expenses	47,559			48,024			58,265			64,778			75,597
General and administrative expenses	133,930			114,792			96,663			157,596			125,108
Total expenses		$616,266			$706,533			$765,884			$996,799			$1,056,646

UNDERWRITING (LOSS) INCOME		($99	)		$3,974			($57,580	)		($50,325	)		($104,241	)

GAAP RATIOS
Loss ratio	70.6		%	76.4		%	85.9		%	81.8		%	89.6		%
Acquisition expense ratio	7.7		%	6.8		%	8.2		%	6.8		%	7.9		%
General and administrative expense ratio	21.7		%	16.2		%	13.6		%	16.7		%	13.1		%
Combined ratio AS REPORTED	100.0		%	99.4		%	107.7		%	105.3		%	110.6		%

Effect of favorable prior accident year reserve development	8.8		%	4.1		%	5.5		%	3.6		%	4.8		%

Combined ratio net of prior accident year reserve development	108.8		%	103.5		%	113.2		%	108.9		%	115.4		%

ENDURANCE SPECIALTY HOLDINGS LTD.

REINSURANCE SEGMENT DATA



	FOR THE NINE MONTHS ENDED									FOR THE YEARS ENDED
	SEPT. 30, 2014			SEPT. 30, 2013			SEPT. 30, 2012			DEC. 31, 2013			DEC. 31, 2012
UNDERWRITING REVENUES
Gross premiums written		$1,078,905			$1,019,732			$1,034,166			$1,189,815			$1,119,096
Net premiums written		$980,534			$948,335			$1,005,844			$1,116,423			$1,087,138
Net premiums earned		$776,532			$806,490			$771,859			$1,070,010			$1,058,811
Other underwriting (loss) income	(3,939		)	694			1,021			(2,046		)	501
Total underwriting revenues		$772,593			$807,184			$772,880			$1,067,964			$1,059,312

UNDERWRITING EXPENSES
Losses and loss expenses		$291,584			$373,347			$405,231			$445,259			$665,054
Acquisition expenses	196,591			174,255			171,134			239,652			227,582
General and administrative expenses	106,646			100,515			84,702			137,310			110,581
Total expenses		$594,821			$648,117			$661,067			$822,221			$1,003,217

UNDERWRITING INCOME		$177,772			$159,067			$111,813			$245,743			$56,095

GAAP RATIOS
Loss ratio	37.6		%	46.3		%	52.4		%	41.6		%	62.8		%
Acquisition expense ratio	25.3		%	21.6		%	22.2		%	22.4		%	21.5		%
General and administrative expense ratio	13.7		%	12.5		%	11.0		%	12.8		%	10.4		%
Combined ratio AS REPORTED	76.6		%	80.4		%	85.6		%	76.8		%	94.7		%

Effect of favorable prior accident year reserve development	14.3		%	16.4		%	6.9		%	17.6		%	7.0		%

Combined ratio net of prior accident year reserve development	90.9		%	96.8		%	92.5		%	94.4		%	101.7		%

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS



	FOR THE NINE MONTHS ENDED						FOR THE YEARS ENDED
	SEPT. 30, 2014		SEPT. 30, 2013		SEPT. 30, 2012		DEC. 31, 2013		DEC. 31, 2012
INSURANCE SEGMENT
Agriculture		$796,445		$896,169		$838,932		$954,389		$903,730
Casualty and other specialty	366,329		239,943		236,383		316,609		296,325
Professional lines	176,061		93,481		130,573		148,537		169,815
Property	55,310		45,110		46,926		55,894		60,060
TOTAL INSURANCE		$1,394,145		$1,274,703		$1,252,814		$1,475,429		$1,429,930

REINSURANCE SEGMENT
Catastrophe		$332,193		$341,973		$354,275		$355,751		$378,387
Property	283,107		288,448		318,514		297,806		349,579
Casualty	139,266		211,458		192,444		241,358		208,353
Professional lines	131,256		50,505		50,228		163,594		59,076
Specialty	193,083		127,348		118,705		131,306		123,701
TOTAL REINSURANCE		$1,078,905		$1,019,732		$1,034,166		$1,189,815		$1,119,096

REPORTED TOTALS		$2,473,050		$2,294,435		$2,286,980		$2,665,244		$2,549,026

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS



	FOR THE NINE MONTHS ENDED						FOR THE YEARS ENDED
	SEPT. 30, 2014		SEPT. 30, 2013		SEPT. 30, 2012		DEC. 31, 2013		DEC. 31, 2012
INSURANCE SEGMENT
Agriculture		$431,007		$546,284		$528,349		$570,738		$553,762
Casualty and other specialty	189,876		179,065		173,097		229,087		216,780
Professional lines	64,632		62,963		107,841		95,101		137,885
Property	34,189		32,222		26,418		37,584		33,930
TOTAL INSURANCE		$719,704		$820,534		$835,705		$932,510		$942,357

REINSURANCE SEGMENT
Catastrophe		$243,531		$281,990		$329,067		$294,260		$351,140
Property	283,015		283,455		318,521		292,872		349,586
Casualty	137,669		210,030		191,206		239,525		207,113
Professional lines	131,256		50,505		50,227		163,594		59,076
Specialty	185,063		122,355		116,823		126,172		120,223
TOTAL REINSURANCE		$980,534		$948,335		$1,005,844		$1,116,423		$1,087,138

REPORTED TOTALS		$1,700,238		$1,768,869		$1,841,549		$2,048,933		$2,029,495

ENDURANCE SPECIALTY HOLDINGS LTD.

SEGMENT NET PREMIUMS EARNED BY LINE OF BUSINESS



	FOR THE NINE MONTHS ENDED						FOR THE YEARS ENDED
	SEPT. 30, 2014		SEPT. 30, 2013		SEPT. 30, 2012		DEC. 31, 2013		DEC. 31, 2012
INSURANCE SEGMENT
Agriculture		$346,444		$429,662		$405,949		$573,538		$548,800
Casualty and other specialty	168,277		165,924		160,051		223,829		215,476
Professional lines	73,355		82,901		106,180		108,717		141,710
Property	28,091		32,020		38,808		40,390		49,103
TOTAL INSURANCE		$616,167		$710,507		$710,988		$946,474		$955,089

REINSURANCE SEGMENT
Catastrophe		$190,244		$239,133		$249,654		$305,159		$344,704
Property	222,104		265,684		213,742		352,716		306,499
Casualty	143,024		168,106		167,882		229,324		224,813
Professional lines	109,053		43,176		48,728		67,969		62,622
Specialty	112,107		90,391		91,853		114,842		120,173
TOTAL REINSURANCE		$776,532		$806,490		$771,859		$1,070,010		$1,058,811

REPORTED TOTALS		$1,392,699		$1,516,997		$1,482,847		$2,016,484		$2,013,900

ENDURANCE SPECIALTY HOLDINGS LTD.

RETURN ON EQUITY ANALYSIS



	FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

Average common equity [a]		$2,573,502

Net premiums earned		$1,392,699
Combined ratio	87.0		%
Operating margin	13.0		%
Premium leverage	0.54x

Implied ROAE from underwriting activity	7.0		%

Average cash and invested assets at amortized cost		$6,422,062
Investment leverage	2.49x
Year to date investment income yield, pretax	1.6		%

Implied ROAE from investment activity	4.1		%

Financing Costs [b]	(2.2		)%

Implied Pre-tax Operating ROAE, for period [c]	8.9		%

Implied Pre-tax Operating ROAE, annualized [c]	11.9		%

[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.

ENDURANCE SPECIALTY HOLDINGS LTD.

ANNUALIZED PREMIUM & INVESTMENT LEVERAGE



	FOR THE QUARTERS ENDED								YEARS ENDED DECEMBER 31,
	SEPT. 30, 2014		JUNE 30, 2014		MAR. 31, 2014		DEC. 31, 2013		2013		2012

Average common equity [a]		$2,688,065		$2,628,392		$2,513,829		$2,432,780		$2,368,573		$2,230,881

Net premiums earned		$514,895		$481,538		$396,266		$499,487		$2,016,484		$2,013,900

Premium leverage	0.19x		0.18x		0.16x		0.21x		0.85x		0.90x

Annualized premium leverage	0.77x		0.72x		0.64x		0.84x		0.85x		0.90x

Average cash and invested assets at amortized cost		$6,416,146		$6,434,200		$6,448,260		$6,377,107		$6,439,797		$6,303,881

Investment leverage	2.39x		2.45x		2.57x		2.62x		2.72x		2.83x

ENDURANCE SPECIALTY HOLDINGS LTD.

INVESTMENT PORTFOLIO

AS OF SEPTEMBER 30, 2014 AND DECEMBER 31, 2013



	September 30, 2014				December 31, 2013
Type of Investment	Fair Value		Percentage		Fair Value			Percentage
Cash and equivalents [a]		$652,377	10.1	%		$771,714		11.9	%
Short-term investments	11,844		0.2	%	35,028			0.5	%
Fixed maturity investments
U.S. government and government agencies notes	514,672		8.0	%	769,343			11.8	%
Government and agency guaranteed corporates	46,201		0.7	%	35,145			0.5	%
U.S. government agency residential mortgage-backed securities	1,114,554		17.2	%	1,106,403			17.1	%
U.S. government agency commercial mortgage-backed securities	48,429		0.7	%	49,431			0.8	%
Municipals	31,487		0.5	%	26,854			0.4	%
Foreign government	205,693		3.2	%	182,647			2.8	%
Corporate securities	1,280,366		19.9	%	1,227,299			18.9	%
Non-agency residential mortgage-backed securities	88,768		1.4	%	80,788			1.2	%
Non-agency commercial mortgage-backed securities	917,267		14.2	%	898,246			13.9	%
Asset-backed securities	416,769		6.4	%	353,256			5.4	%
Collateralized loan and debt obligations	207,214		3.2	%	94,552			1.5	%
Equity securities
Equity investments	182,514		2.8	%	174,669			2.7	%
Emerging market debt fund	61,862		1.0	%	60,844			0.9	%
Preferred equity investments	14,317		0.2	%	8,223			0.1	%
Short-term fixed income fund	9,035		0.1	%	8,730			0.1	%
Other investments [b]	658,678		10.2	%	617,478			9.5	%
Total		$6,462,047	100.0	%		$6,500,650		100.0	%

Ratings [c]	Fair Value		Percentage		Fair Value			Percentage
U.S. government and government agencies notes		$514,672	10.5	%		$769,343		15.8	%
AAA/Aaa	1,153,558		23.7	%	972,820			20.0	%
AA/Aa	1,738,964		35.7	%	1,771,156			36.5	%
A/A	952,894		19.5	%	895,549			18.4	%
BBB	407,093		8.3	%	363,722			7.5	%
Below BBB	94,824		1.9	%	66,791			1.4	%
Not Rated	21,259		0.4	%	19,611			0.4	%
Total		$4,883,264	100.0	%		$4,858,992		100.0	%

Performance					September 30, 2014			December 31, 2013
Yield [d]					1.6		%	2.6	%
Duration in years [e]					2.77			3.11



Investment Income	Quarter Ended Sept. 30, 2014			Quarter Ended June 30, 2014		Quarter Ended Mar. 31, 2014		Quarter Ended Dec. 31, 2013		Quarter Ended Sept. 30, 2013		Year Ended Dec. 31, 2013
Cash and available for sale securities		$27,142			$28,517		$27,448		$25,108		$24,853		$101,895
Other investments	(1,785		)	10,785		13,542		21,238		13,244		64,321
Total net investment income		$25,357			$39,302		$40,990		$46,346		$38,097		$166,216

[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 September 30, 2014 and twelve months ending December 31, 2013 excludes realized and unrealized gains and losses on fixed maturity investments.

[e] Duration excludes equity securities, other investments and operating cash.

ENDURANCE SPECIALTY HOLDINGS LTD.

LARGEST TWENTY-FIVE CORPORATE HOLDINGS

AS OF SEPTEMBER 30, 2014



	September 30, 2014
ISSUER (1) (2) (3)	Amortized Cost		Fair Value		Unrealized Gain (Loss)			Credit Quality (4)
MORGAN STANLEY		$54,418		$55,083		$665		A-
BANK OF AMERICA CORP	45,174		45,195		21			A-
GOLDMAN SACHS GROUP INC/THE	40,684		40,909		225			A-
JPMORGAN CHASE & CO	37,081		37,403		322			A
COMCAST CORPORATION	29,509		30,042		533			A-
CITIGROUP INC	29,229		29,557		328			A-
GENERAL ELECTRIC CO	28,711		28,927		216			AA+
FORD MOTOR COMPANY	24,017		24,106		89			BBB-
VERIZON COMMUNICATIONS INC	24,085		23,886		(199		)	BBB+
AMERICAN EXPRESS COMPANY	23,071		23,085		14			A-
MITSUBISHI UFJ FINANCIAL GROUP INC	22,203		22,395		192			A+
BB&T CORP	19,194		19,290		96			A-
WELLS FARGO & COMPANY	17,696		17,705		9			A+
NATIONAL GRID PLC	15,960		17,409		1,449			A-
NEW YORK LIFE INSURANCE COMPANY	15,236		15,334		98			AA+
AT&T INC	13,950		13,982		32			A-
UBS AG	13,332		13,267		(65		)	A
PNC FINANCIAL SERVICES GROUP INC (THE)	11,715		11,739		24			A
HSBC HOLDINGS PLC	11,387		11,467		80			A+
INTERNATIONAL BUSINESS MACHINES CORP	11,288		11,377		89			AA-
CREDIT SUISSE GROUP AG	10,808		11,018		210			BBB+
BP PLC	11,075		11,007		(68		)	A
EBAY INC.	10,851		10,838		(13		)	A
ANHEUSER-BUSCH INBEV SA/NV	10,717		10,616		(101		)	A
CAPITAL ONE FINANCIAL CORPORATION	10,133		10,133		—			BBB


(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.

ENDURANCE SPECIALTY HOLDINGS LTD.

ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES



	THREE MONTHS ENDED SEPT. 30, 2014									NINE MONTHS ENDED SEPT. 30, 2014
	GROSS			RECOVERIES			NET			GROSS			RECOVERIES			NET
Reserve for losses and loss expenses
Balance, beginning of period		$3,963,393			($606,140	)		$3,357,253			$4,002,259			($593,755	)		$3,408,504

Incurred related to:
Current year	508,220			(157,482		)	350,738			1,337,783			(446,440		)	891,343
Prior years	(67,046		)	6,577			(60,469		)	(154,566		)	(10,416		)	(164,982		)
Total Incurred	441,174			(150,905		)	290,269			1,183,217			(456,856		)	726,361

Paid related to:
Current year	(316,123		)	171,231			(144,892		)	(418,687		)	235,285			(183,402		)
Prior years	(154,630		)	18,463			(136,167		)	(842,874		)	248,001			(594,873		)
Total Paid	(470,753		)	189,694			(281,059		)	(1,261,561		)	483,286			(778,275		)

Foreign currency translation and other	(36,331		)	1,022			(35,309		)	(26,432		)	996			(25,436		)

Balance, end of period		$3,897,483			($566,329	)		$3,331,154			$3,897,483			($566,329	)		$3,331,154

ENDURANCE SPECIALTY HOLDINGS LTD.

PRIOR YEAR RESERVE DEVELOPMENT BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIOD ENDED SEPT. 30, 2014



	Insurance			Reinsurance			Total Company
Incurred related to prior years
Quarter ended March 31, 2014		($11,648	)		($38,664	)		($50,312	)
Quarter ended June 30, 2014	(22,048		)	(32,153		)	(54,201		)
Quarter ended September 30, 2014	(20,311		)	(40,158		)	(60,469		)
Nine months ended September 30, 2014		($54,007	)		($110,975	)		($164,982	)

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DEC. 31, 2013



	Insurance			Reinsurance			Total Company
Incurred related to prior years
Quarter ended March 31, 2013		($17,295	)		($33,373	)		($50,668	)
Quarter ended June 30, 2013	(5,625		)	(57,180		)	(62,805		)
Quarter ended September 30, 2013	(6,210		)	(41,850		)	(48,060		)
Quarter ended December 31, 2013	(4,773		)	(56,086		)	(60,859		)
Year ended December 31, 2013		($33,903	)		($188,489	)		($222,392	)

(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	)

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, 2014			JUNE 30, 2014			MAR. 31, 2014			DEC. 31, 2013			SEPT. 30, 2013			DEC. 31, 2013
INSURANCE SEGMENT
Agriculture		($1,260	)		($2,188	)		($2,140	)		($15	)		($616	)		($5,597	)
Casualty and other specialty	(15,340		)	(11,350		)	(6,716		)	(1,183		)	(4,263		)	(15,364		)
Professional lines	(866		)	(3,991		)	(1,128		)	(2,891		)	(427		)	(979		)
Property	(2,845		)	(4,519		)	(1,664		)	(684		)	(904		)	(11,963		)
TOTAL INSURANCE		($20,311	)		($22,048	)		($11,648	)		($4,773	)		($6,210	)		($33,903	)

REINSURANCE SEGMENT
Catastrophe		($16,012	)		($7,713	)		($7,761	)		($13,602	)		($9,234	)		($61,186	)
Property	(9,043		)	(9,502		)	(14,757		)	(11,217		)	(21,107		)	(57,394		)
Casualty	(5,269		)	(2,821		)	(2,751		)	(9,590		)	(1,640		)	(20,370		)
Professional lines	(3,162		)	(2,551		)	(2,029		)	(2,735		)	(4,558		)	(13,947		)
Specialty	(6,672		)	(9,566		)	(11,366		)	(18,942		)	(5,311		)	(35,592		)
TOTAL REINSURANCE		($40,158	)		($32,153	)		($38,664	)		($56,086	)		($41,850	)		($188,489	)

REPORTED TOTALS		($60,469	)		($54,201	)		($50,312	)		($60,859	)		($48,060	)		($222,392	)

ENDURANCE SPECIALTY HOLDINGS LTD.

LOSSES AND LOSS EXPENSES INCURRED BY LINE OF BUSINESS



	FOR THE QUARTERS ENDED													FOR THE YEAR ENDED
	SEPT. 30, 2014			JUNE 30, 2014			MAR. 31, 2014		DEC. 31, 2013			SEPT. 30, 2013		DEC. 31, 2013
INSURANCE SEGMENT
Agriculture		$158,564			$111,685			$48,216		$178,467			$177,304		$559,838
Casualty and other specialty	24,931			26,459			19,227		37,316			34,406		142,506
Professional lines	14,509			12,513			16,912		13,592			15,215		72,578
Property	(1,327		)	(1,090		)	4,178		1,333			1,484		(497		)
TOTAL INSURANCE		$196,677			$149,567			$88,533		$230,708			$228,409		$774,425

REINSURANCE SEGMENT
Catastrophe		$1,013			$15,907			$8,047		($538	)		$16,886		$74,221
Property	24,011			34,127			29,814		20,695			27,879		136,155
Casualty	23,765			25,636			25,916		38,669			45,568		159,512
Professional lines	19,797			18,414			17,936		8,097			6,858		27,167
Specialty	25,006			15,545			6,650		4,989			13,436		48,204
TOTAL REINSURANCE		$93,592			$109,629			$88,363		$71,912			$110,627		$445,259

REPORTED TOTALS		$290,269			$259,196			$176,896		$302,620			$339,036		$1,219,684

ENDURANCE SPECIALTY HOLDINGS LTD.

ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSES



	Insurance															Reinsurance																		Reported Totals
	Agriculture			Casualty and other specialty			Professional lines			Property			Subtotal			Catastrophe			Property			Casualty			Professional lines			Specialty			Subtotal			Total
AT SEPT. 30, 2014
Case reserves		$272,485			$358,426			$110,988			$18,046			$759,945			$139,400			$173,326			$246,483			$58,261			$97,691			$715,161			$1,475,106
Total reserves		$307,994			$1,298,445			$500,457			$28,089			$2,134,985			$213,001			$272,421			$789,713			$249,836			$237,527			$1,762,498			$3,897,483
Case reserves/Total reserves	88.5		%	27.6		%	22.2		%	64.2		%	35.6		%	65.4		%	63.6		%	31.2		%	23.3		%	41.1		%	40.6		%	37.8		%

IBNR / Total reserves	11.5		%	72.4		%	77.8		%	35.8		%	64.4		%	34.6		%	36.4		%	68.8		%	76.7		%	58.9		%	59.4		%	62.2		%

AT JUNE 30, 2014
Case reserves		$213,720			$349,230			$96,271			$18,138			$677,359			$151,530			$183,619			$252,827			$62,612			$88,683			$739,271			$1,416,630
Total reserves		$335,172			$1,294,919			$481,541			$32,289			$2,143,921			$246,809			$298,901			$802,621			$236,771			$234,370			$1,819,472			$3,963,393
Case reserves/Total reserves	63.8		%	27.0		%	20.0		%	56.2		%	31.6		%	61.4		%	61.4		%	31.5		%	26.4		%	37.8		%	40.6		%	35.7		%

IBNR / Total reserves	36.2		%	73.0		%	80.0		%	43.8		%	68.4		%	38.6		%	38.6		%	68.5		%	73.6		%	62.2		%	59.4		%	64.3		%

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

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

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

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

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

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

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS



	NINE MONTHS ENDED			YEARS ENDED DECEMBER 31,						INCEPTION TO
	SEPT. 30, 2014			2013			2012			SEPT. 30, 2014
Income and Return on Equity:
Net income available to common and participating common shareholders		$239,313			$279,165			$129,766			$2,989,625

Operating income available to common and participating common shareholders	225,486			281,021			54,295			2,897,346

Average Shareholders’ equity [a]	2,573,502			2,368,573			2,230,881			2,058,940

Net income return on average equity	9.3		%	11.8		%	5.8		%	11.4		%	[c]
Operating return on average equity	8.8		%	11.9		%	2.4		%	11.0		%	[c]

Book value and dividends per share:
Dilutive book value per common share (treasury stock method)		$59.98			$55.18			$52.88			$59.98

Dividends paid per share	1.02			1.28			1.24			11.87

Change in diluted book value per common share	8.7		%	4.3		%	4.6		%	16.4		%	[c]

Total return to common shareholders [b]	10.5		%	6.8		%	7.0		%	21.2		%	[c]

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

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

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

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION - TWO CLASS METHOD



		QUARTERS ENDED SEPT. 30,						NINE MONTHS ENDED SEPT. 30,
		2014			2013			2014			2013
DILUTIVE SHARES OUTSTANDING: AS REPORTED	Average market price per share		$55.33			$51.92			$53.50			$48.49

	Basic weighted average common shares outstanding [a]	43,465			43,100			43,332			42,720

	Add: weighted avg. unvested restricted share units	—			—			—			1
	Weighted average exercise price per share	—			—			—			—
	Proceeds from unrecognized restricted share unit expense		$—			$6			$—			$6
	Less: restricted share units bought back via treasury method	—			—			—			(1		)

	Add: weighted avg. dilutive options outstanding	800			815			809			387
	Weighted average exercise price per share		$48.20			$47.94			$48.04			$47.27
	Proceeds from unrecognized option expense		$3,177			$6,750			$3,177			$6,750
	Less: options bought back via treasury method	(755		)	(815		)	(785		)	(387		)
	Weighted average dilutive shares outstanding [b]	43,510			43,100			43,356			42,720

[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.

ENDURANCE SPECIALTY HOLDINGS LTD.

EARNINGS PER SHARE INFORMATION - TWO CLASS METHOD



	QUARTERS ENDED SEPT. 30,						NINE MONTHS ENDED SEPT. 30,
	2014			2013			2014			2013

Net income		$76,234			$83,416			$263,877			$244,734
Less preferred dividends	(8,188		)	(8,188		)	(24,564		)	(24,564		)
Net income available to common and participating common shareholders		$68,046			$75,228			$239,313			$220,170
Less amount allocated to participating common shareholders [a]	(1,930		)	(1,997		)	(6,907		)	(4,742		)
Net income allocated to common shareholders		$66,116			$73,231			$232,406			$215,428

Denominator:
Weighted average shares - basic	43,465			43,100			43,332			42,720

Share Equivalents
Options	45			—			24			—
Restricted share units	—			—			—			—
Weighted average shares - diluted	43,510			43,100			43,356			42,720

Basic earnings per common share		$1.52			$1.70			$5.36			$5.04

Diluted earnings per common share [b]		$1.52			$1.70			$5.36			$5.04

[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.

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,
	2014			2013			2014			2013

Net income		$76,234			$83,416			$263,877			$244,734
Add (less) after-tax items:
Net foreign exchange losses	641			2,395			3,918			8,645
Net realized and unrealized investment gains (losses)	(9,593		)	6,056			(18,156		)	(9,371		)
Net impairment losses recognized in earnings	102			190			411			1,541
Operating income before preferred dividends		$67,384			$92,057			$250,050			$245,549
Preferred dividends	(8,188		)	(8,188		)	(24,564		)	(24,564		)
Operating income available to common and participating common shareholders		$59,196			$83,869			$225,486			$220,985
Less amount allocated to participating common shareholders [a]	(1,679		)	(2,226		)	(6,508		)	(4,760		)
Operating income allocated to common shareholders		$57,517			$81,643			$218,978			$216,225

Weighted average common shares outstanding
Basic	43,465			43,100			43,332			42,720
Dilutive	43,510			43,100			43,356			42,720

Basic and diluted per common share data
Net income allocated to common shareholders		$1.52			$1.70			$5.36			$5.04
Add (less) after-tax items:
Net foreign exchange losses	0.02			0.05			0.10			0.20
Net realized and unrealized investment gains (losses)	(0.22		)	0.14			(0.42		)	(0.22		)
Net impairment losses recognized in earnings	—			—			0.01			0.04
Operating income allocated to common shareholders [b]		$1.32			$1.89			$5.05			$5.06

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

ENDURANCE SPECIALTY HOLDINGS LTD.

NET INCOME AND OPERATING INCOME EXCLUDING EXPENSES

INCURRED RELATED TO THE PROPOSED ACQUISITON OF ASPEN



	QUARTER ENDED SEPT. 30, 2014									NINE MONTHS ENDED SEPT. 30, 2014
	As reported			Expenses Incurred Related to the Proposed Acquisition of Aspen [a]			Excluding Expenses Incurred Related to the Proposed Acquisition of Aspen			As reported			Expenses Incurred Related to the Proposed Acquisition of Aspen [a]			Excluding Expenses Incurred Related to the Proposed Acquisition of Aspen
Net income available to common and participating common shareholders		$68,046			$6,353			$74,399			$239,313			$20,089			$259,402
Less amount allocated to participating common shareholders [a]	(1,930		)	(180		)	(2,110		)	(6,907		)	(579		)	(7,486		)
Net income allocated to common shareholders		$66,116			$6,173			$72,289			$232,406			$19,510			$251,916

Basic and diluted earnings per common share [c]		$1.52			$0.14			$1.66			$5.36			$0.45			$5.81

ROAE, net income [d]	2.5		%	0.3		%	2.8		%	9.3		%	0.8		%	10.1		%
Annualized ROAE, net income [d]	10.1		%	1.0		%	11.1		%	12.4		%	1.0		%	13.4		%

Operating income available to common and participating common shareholders		$59,196			$6,353			$65,549			$225,486			$20,089			$245,575
Less amount allocated to participating common shareholders [a]	(1,679		)	(180		)	(1,859		)	(6,508		)	(579		)	(7,087		)
Operating income allocated to common shareholders		$57,517			$6,173			$63,690			$218,978			$19,510			$238,488

Basic operating income per common share [c]		$1.32			$0.15			$1.47			$5.05			$0.45			$5.50
Diluted operating income per common share [c]		$1.32			$0.14			$1.46			$5.05			$0.45			$5.50

ROAE, operating income [d]	2.2		%	0.2		%	2.4		%	8.8		%	0.7		%	9.5		%
Annualized ROAE, operating income [d]	8.8		%	1.0		%	9.8		%	11.7		%	1.0		%	12.7		%

[a] The Company incurred $2.3 million and $4.1 million of general and administrative expenses and interest expense, respectively, in relation to the Company's proposed acquisition of Aspen for the quarter ended September 30, 2014. For the nine months ended September 30, 2014, the Company incurred $15.3 million and $4.8 million of general and administrative expenses and interest expense, respectively, in relation to the Company's proposed acquisition of Aspen.

[b] 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.

[c] 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.

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

ENDURANCE SPECIALTY HOLDINGS LTD.

BOOK VALUE PER SHARE



		SEPT. 30,						DEC. 31,
		2014			2013			2013
DILUTIVE COMMON SHARES OUTSTANDING: AS-IF CONVERTED [a]	Price per share at period end		$55.18			$53.72			$58.67

	Basic common shares outstanding	43,467			43,102			43,108
	Add: unvested restricted shares and restricted share units	1,284			1,148			1,261
	Add: dilutive options outstanding	800			815			815
	Weighted average exercise price per share		$48.20			$47.94			$47.94

	Book Value [b]		$2,690,454			$2,409,010			$2,456,549
	Add: proceeds from converted options	38,560			39,071			39,071
	Pro forma book value		$2,729,014			$2,448,081			$2,495,620
	Dilutive shares outstanding	45,551			45,065			45,184
	Basic book value per common share		$61.90			$55.89			$56.99
	Diluted book value per common share		$59.91			$54.32			$55.23

DILUTIVE COMMON SHARES OUTSTANDING: TREASURY STOCK METHOD	Price per share at period end		$55.18			$53.72			$58.67

	Basic common shares outstanding	43,467			43,102			43,108
	Add: unvested restricted shares and restricted share units	1,284			1,148			1,261
	Add: dilutive options outstanding	800			815			815
	Weighted average exercise price per share		$48.20			$47.94			$47.94
	Less: options bought back via treasury method	(699		)	(727		)	(666		)
	Dilutive shares outstanding	44,852			44,338			44,518
	Basic book value per common share		$61.90			$55.89			$56.99
	Diluted book value per common share		$59.98			$54.33			$55.18

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

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

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.

Net income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen Insurance Holdings Limited (“Aspen”), or net income per basic or diluted common share, excluding expenses incurred related to the proposed acquisition of Aspen, reflect the current period impact of these costs incurred by the Company and reflects the results of operations in a manner similar to that used by management to analyze the Company’s underlying business performance. Net income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen or net income per basic or diluted common share, excluding expenses incurred related to the proposed acquisition of Aspen, should not be viewed as a substitute for GAAP net income available to common and participating common shareholders, or basic or diluted earnings per common share, respectively. Please see page 32 for a reconciliation of net income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen to net income available to common and participating common shareholders.

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 to that used by management to analyze the Company’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. Please see page 31 for a reconciliation of operating income to net income.

Operating income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen, or net operating per basic or diluted common share, excluding expenses incurred related to the proposed acquisition of Aspen, reflect the current period impact of these costs incurred by the Company and reflect the results of operations in a manner similar to that used by management to analyze the Company’s underlying business performance. Operating income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen or net operating per basic or diluted common share, excluding expenses incurred related to the proposed acquisition of Aspen, should not be viewed as a substitute for GAAP net income available to common and participating common shareholders, or basic or diluted earnings per common share, respectively. Please see page 32 for a reconciliation of operating income available to common and participating common shareholders, excluding expenses incurred related to the proposed acquisition of Aspen to net income available to common and participating common shareholders.

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

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

The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share. Please see page 33 for a reconciliation of diluted book value per common share to basic book value per common share.

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