PEMBROKE, Bermuda, Oct. 28, 2010 (GLOBE NEWSWIRE) -- Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income of $139.1 million and $2.51 per diluted common share for the third quarter of 2010 versus net income of $153.8 million and $2.51 per diluted common share in the third quarter of 2009.

For the nine months ended September 30, 2010, net income was $253.5 million and $4.33 per diluted common share versus net income of $381.3 million and $6.15 per diluted common share for the nine months ended September 30, 2009.

Operating highlights for the quarter ended September 30, 2010 were as follows:
  • Net premiums written of $451.9 million, an increase of 13.9% over the same period in 2009;
  • Combined ratio of 83.7%, which included 7.5 percentage points of favorable prior year loss reserve development;
  • Net investment income of $53.7 million, a decrease of $17.9 million over the same period in 2009;
  • Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $119.4 million and $2.14 per diluted common share;
  • Operating return on average common equity for the quarter of 4.3%, or 17.2% on an annualized basis; and
  • Book value of $51.83 per diluted common share, up 8.5% from June 30, 2010.

Operating highlights for the nine months ended September 30, 2010 were as follows:
  • Net premiums written of $1,605.6 million, an increase of 10.0% over the same period in 2009;
  • Combined ratio of 90.1%, which included 8.0 percentage points of favorable prior year loss reserve development;
  • Net investment income of $143.5 million, a decrease of $81.5 million over the same period in 2009;
  • Operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, of $237.3 million and $4.04 per diluted common share;
  • Operating return on average common equity for the first nine months of the year of 8.5%, or 11.3% on an annualized basis; and
  • Book value of $51.83 per diluted common share, up 16.2% from December 31, 2009.

David Cash, Chief Executive Officer, commented, "Endurance generated strong returns in the quarter in spite of historically low investment yields and strong competitive forces in many of the underwriting markets in which we operate. During the quarter, we found a number of good opportunities in which to deploy our capital, including the expansion and diversification of our international catastrophe reinsurance portfolio through a renewal rights transaction. Our agriculture insurance line of business continues to outperform our expectations, generating improved margins on a growing premium base. In addition, we repurchased nearly three million shares of our common stock at a significant discount to book value."

Insurance Segment

Operating highlights for Endurance's Insurance segment for the quarter ended September 30, 2010 were as follows:
  • Net premiums written of $204.3 million, an increase of 16.3% from the third quarter of 2009;
  • Combined ratio of 90.1%, an improvement of 8.6 percentage points from the third quarter of 2009; and
  • Favorable prior year loss reserve development of 3.9 percentage points during the current period, compared to 6.1 percentage points of favorable prior year loss reserve development in the third quarter of 2009.

Operating highlights for Endurance's Insurance segment for the nine months ended September 30, 2010 were as follows:
  • Net premiums written of $748.2 million, an increase of 14.8% from the same period in 2009;
  • Combined ratio of 92.0%, an improvement of 1.4 percentage points from the same period in 2009; and
  • Favorable prior year loss reserve development of 5.7 percentage points during the current period, compared to 11.2 percentage points of favorable prior year loss reserve development in the same period in 2009.

Net premiums written increased in the Insurance segment for the current period compared to the same period in 2009, driven by increases in the agriculture, property and healthcare lines of business. Increased premiums in the agriculture line of business resulted from growth in policies in force and higher wheat commodity prices in the United States. Within the property line of business, gross premiums were flat during the current quarter compared to a year ago but net retentions were higher, due to changes to our third party reinsurance program implemented in 2009. The healthcare line of business experienced modest growth in the quarter, as we were able to identify and underwrite several new accounts. For the nine months ended September 30, 2010, net written premiums increased 14.8% compared to a year ago as growth in agriculture, casualty and property premiums was partially offset by a decline in professional lines premiums.

The improvement in the Insurance segment combined ratio in the third quarter of 2010 compared to 2009 was driven by lower general and administrative expense, lower net loss and lower acquisition expense ratios. The agriculture line of business generated stronger margins in the current quarter compared to the same period a year ago due to favorable crop growing conditions. The current quarter loss ratio was also impacted by a current quarter casualty net loss of $9.8 million or 4.0 percentage points. The net loss ratio in the current quarter benefitted from 3.9 percentage points of favorable loss development compared to 6.1 percentage points of favorable loss development during the same period a year ago.

For the nine months ended September 30, 2010, the Insurance segment combined ratio improved 1.4 percentage points compared to the same period in 2009. The improved combined ratio was due to lower general and administrative and acquisition expenses, partially offset by lower levels of favorable prior year loss reserve development compared to a year ago. Favorable loss reserve development emerged in both the third quarter and first nine months of 2010 across each of the short tail, long tail and other lines of business in the Insurance segment, as claims did not develop as originally estimated. 

Reinsurance Segment

Operating highlights for Endurance's Reinsurance segment for the quarter ended September 30, 2010 were as follows:
  • Net premiums written of $247.6 million, an increase of 12.0% from the third quarter of 2009;
  • Combined ratio of 76.9%, an increase of 19.5 percentage points from the third quarter of 2009; and
  • Favorable prior year loss reserve development of 11.3 percentage points during the current period, compared to 10.3 percentage points of favorable prior year loss reserve development in the third quarter of 2009.

Operating highlights for Endurance's Reinsurance segment for the nine months ended September 30, 2010 were as follows:
  • Net premiums written of $857.4 million, an increase of 6.2% from the same period in 2009;
  • Combined ratio of 88.5%, an increase of 8.4 percentage points from the same period in 2009; and
  • Favorable prior year loss reserve development of 10.1 percentage points during the current period, compared to 6.4 percentage points of favorable prior year loss reserve development in the same period in 2009.

The increase in net premiums written in the Reinsurance segment during the third quarter of 2010 resulted from an increase in the catastrophe, casualty and surety and other lines of business. Within the catastrophe line of business, the increase in premiums from the same period a year ago resulted from business acquired from Glacier Re in a renewal rights transaction completed during the third quarter. Casualty premiums increased in the current quarter as a large contract historically renewed in the second quarter was renewed in the third quarter this year. Within the surety and other line of business, premium growth was driven by the addition of new business in the current quarter. The growth in the Reinsurance segment's premiums was partially offset by declines in the Reinsurance segment's property and aerospace and marine lines of business, as certain contracts within these lines have been non-renewed due to competitive conditions. For the nine months ended September 30, 2010, net premiums written increased 6.2% compared to a year ago as growth in casualty, property and surety and other specialty premiums was partially offset by a modest decline in catastrophe premiums.

The combined ratios in the Reinsurance segment for the current periods increased from the same periods a year ago due to higher loss ratios, as the Company experienced a greater frequency of large loss events during 2010. During the third quarter of 2010, the Company incurred $11.6 million of net losses related to the earthquake in New Zealand. In the first nine months of 2010, the Company also incurred net losses of approximately $63 million related to the earthquake in Chile and European Windstorm Xynthia. Partially offsetting the increase in the net loss ratios in the current periods was the recognition of greater favorable prior year loss reserve development compared to the same periods in 2009. 

The Company's acquisition expense ratios increased modestly in the current periods compared to the same periods in 2009, while the Company's general and administrative expense ratios declined in the current periods largely due to an increase in earned premiums.

Investments

Endurance's net investment income declined 25.0% or $17.9 million in the quarter ended September 30, 2010 and 36.2% or $81.5 million in the nine months ended September 30, 2010, as compared to the same periods in 2009. During the third quarter and nine months ended September 30, 2010, Endurance's net investment income included gains of $13.8 million and $23.8 million on its alternative investments and high yield loan funds, which are included in other investments, as compared to gains of $30.4 million and $81.3 million in the third quarter and first nine months of 2009. Investment income generated from Endurance's fixed maturity investments decreased by $19.4 million for the nine months ended September 30, 2010 compared to the same period in 2009 due to lower reinvestment rates during the current period and a higher allocation of investments to cash, cash equivalents and short duration securities, partially offset by higher average portfolio balances. As a result, the ending book yield on Endurance's fixed maturity investments at September 30, 2010 was 3.08%, down from 3.29% at December 31, 2009.

At September 30, 2010, Endurance's fixed income investments, which comprise approximately 93.7% of Endurance's investments, maintained an average credit quality of AA. Endurance's fixed maturity portfolio was in an unrealized gain position of $190.2 million at September 30, 2010, an improvement of $55.1 million in the third quarter and $151.9 million in the first nine months of 2010. Endurance recorded net realized gains on investment sales of $9.0 million and $15.2 million during the third quarter and first nine months of 2010 compared to net realized gains on investment sales of $1.4 million and $3.1 million during the same periods in 2009. 

Endurance ended the third quarter of 2010 with cash and invested assets of $6.3 billion, which represents a 6.2% increase from December 31, 2009. Net operating cash flow was $390.6 million for the nine months ended September 30, 2010 versus $431.2 million for the same period in 2009. 

Capitalization and Shareholders' Equity

At September 30, 2010, Endurance's shareholders' equity was $2.9 billion or $51.83 per diluted common share versus $2.8 billion or $44.61 per diluted common share at December 31, 2009. During the three months ended September 30, 2010, Endurance repurchased 2,977,477 of its ordinary shares for an aggregate repurchase price of $112.8 million. For the nine months ended September 30, 2010, Endurance has repurchased 6,188,253 shares and share equivalents for an aggregate repurchase price of $230.5 million.

Earnings Call

Endurance will host a conference call on October 29, 2010 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (866) 416-5346 or (913) 312-1411 (international) and entering pass code: 2246686. Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call. A telephone replay of the conference call will be available through November 12, 2010 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 2246686. 

The public may access a live broadcast of the conference call at the "Investors" section of Endurance's website, www.endurance.bm. Following the live broadcast, an archived version will continue to be available on Endurance's website.

A copy of Endurance's financial supplement for the third quarter of 2009 will be available on Endurance's website at www.endurance.bm shortly after the release of earnings.

Operating income, operating return on average common equity, operating income per dilutive common share, operating income allocated to common shareholders and combined ratio excluding prior year net loss reserve development are non-GAAP measures. Reconciliations of these measures to the appropriate GAAP measures are included in the attached tables. 

About Endurance Specialty Holdings

Endurance Specialty Holdings Ltd. is a global specialty provider of property and casualty insurance and reinsurance. Through its operating subsidiaries, Endurance writes property, casualty, healthcare liability, agriculture, workers' compensation, professional lines of insurance and property, catastrophe, casualty, agriculture, marine, aerospace, and surety and other specialty lines of reinsurance. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) from Standard and Poor's on our principal operating subsidiaries. Endurance's headquarters are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and its mailing address is Endurance Specialty Holdings Ltd., Suite No. 784, No. 48 Par-la-Ville Road, Hamilton HM 11, Bermuda. For more information about Endurance, please visit www.endurance.bm.

Safe Harbor for Forward-Looking Statements

Some of the statements in this press release 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 press release 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, 2009.

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.
CONSOLIDATED BALANCE SHEETS
(in thousands of United States dollars, except share and per share amounts)
     
   September 30, 2010 December 31, 2009
Assets    
Cash and cash equivalents $ 600,227 $ 528,944
Fixed maturity investments, available for sale, at fair value 5,063,873 4,548,618
Short term investments, available for sale, at fair value 326,846 534,678
Preferred equity securities, available for sale, at fair value 12,773 11,023
Other investments 360,629 351,352
Premiums receivable, net 1,039,689 565,348
Deferred acquisition costs 192,194 146,979
Securities lending collateral 127,680 66,913
Prepaid reinsurance premiums 160,070 120,941
Losses recoverable 324,757 467,664
Accrued investment income 32,315 30,367
Goodwill and intangible assets 184,543 191,450
Deferred tax assets 29,130 17,252
Receivable on pending investment sales 372 632
Other assets 80,139 84,533
Total Assets $  8,535,237 $  7,666,694
     
Liabilities    
Reserve for losses and loss expenses $   3,401,312 $ 3,157,026
Reserve for unearned premiums 1,186,001 832,561
Net deposit liabilities 36,952 42,638
Securities lending payable 127,681 66,968
Reinsurance balances payable 209,651 220,435
Debt 528,425 447,664
Payable on pending investment purchases 17,042 25
Other liabilities 108,488 112,094
Total Liabilities 5,615,552 4,879,411
     
Shareholders' Equity    
Preferred shares    
Series A, non-cumulative – 8,000,000 issued and outstanding (2009 – 8,000,000) 8,000 8,000
Common shares    
49,685,295 issued and outstanding (2009 – 55,115,702) 49,685 55,116
Additional paid-in capital 715,834 929,577
Accumulated other comprehensive income 201,172 52,148
Retained earnings 1,944,994 1,742,442
Total Shareholders' Equity 2,919,685 2,787,283
     
Total Liabilities and Shareholders' Equity $   8,535,237 $ 7,666,694
     
Book Value per Common Share    
Dilutive common shares outstanding 52,469,401 57,996,331
Diluted book value per common share[a] $ 51.83 $  44.61
     
Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2009, which was derived from Endurance's audited financial statements.
[a] Excludes the $200 million liquidation value of the preferred shares.
 
ENDURANCE SPECIALTY HOLDINGS LTD.
 
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
 
(in thousands of United States dollars, except share and per share amounts)
         
  Quarter Ended For the Nine Months Ended
  September 30, 2010 September 30, 2009 September 30, 2010 September 30, 2009
Revenues        
Gross premiums written $ 555,574 $   469,622 $ 1,864,011 $ 1,812,083
         
Net premiums written $ 451,884 $   396,666 $ 1,605,629 $ 1,459,608
Change in unearned premiums 17,909 30,088 (314,252) (220,359)
         
Net premiums earned 469,793 426,754 1,291,377 1,239,249
Other underwriting income (loss) 322 5 (2,046) 4,198
Net investment income 53,654 71,559 143,484 224,943
Net realized gains on investment sales 8,973 1,396 15,174 3,137
         
Total other-than-temporary impairment losses (1,140) (497) (2,647) (50,432)
Portion of loss recognized in accumulated other comprehensive income (240) -- (586) 31,165
Net impairment losses recognized in earnings (1,380) (497) (3,233) (19,267)
         
Total revenues 531,362 499,217 1,444,756 1,452,260
         
Expenses        
Losses and loss expenses 266,132 211,683 791,676 702,635
Acquisition expenses 67,443 63,026 198,095 195,150
General and administrative expenses 59,523 64,436 174,164 179,222
Amortization of intangibles 2,588 2,588 7,764 7,764
Net foreign exchange gains (12,565) (2,963) (6,465) (30,748)
Interest expense 9,051 7,540 25,709 22,633
Total expenses 392,172 346,310 1,190,943 1,076,656
         
Income before income taxes 139,190 152,907 253,813 375,604
Income tax (expense) benefit (62) 935 (303) 5,675
Net income 139,128 153,842 253,510 381,279
Preferred dividends (3,875) (3,875) (11,625) (11,625)
Net income available to common and participating common shareholders $   135,253 $  149,967 $ 241,885 $   369,654
         
Per share data        
Basic earnings per common share $ 2.64 $  2.63 $  4.56  $   6.46
Diluted earnings per common share $  2.51 $  2.51 $  4.33 $   6.15
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
 
RESULTS BY SEGMENT
 
(in thousands of United States dollars)
       
  For the quarter ended September 30, 2010
       
  Insurance Reinsurance Totals
       
Revenues      
Gross premiums written $303,561 $252,013 $555,574
Ceded premiums written (99,268) (4,422) (103,690)
Net premiums written 204,293 247,591 451,884
Net premiums earned 242,766 227,027 469,793
Other underwriting income (loss) 473 (151) 322
Total underwriting revenues 243,239 226,876 470,115
       
Expenses      
Net losses and loss expenses 172,015 94,117 266,132
Acquisition expenses 17,356 50,087 67,443
General and administrative expenses 29,256 30,267 59,523
  218,627 174,471 393,098
Underwriting income $24,612 $52,405 $77,017
       
Net loss ratio 70.9% 41.5% 56.6%
Acquisition expense ratio 7.1% 22.1% 14.4%
General and administrative expense ratio 12.1% 13.3% 12.7%
Combined ratio 90.1% 76.9% 83.7%
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
 
RESULTS BY SEGMENT
 
(in thousands of United States dollars)
       
  For the quarter ended September 30, 2009
       
  Insurance Reinsurance Totals
       
Revenues      
Gross premiums written $248,673 $220,949 $469,622
Ceded premiums written (72,987) 31 (72,956)
Net premiums written 175,686 220,980 396,666
Net premiums earned 228,290 198,464 426,754
Other underwriting income (loss) 382 (377) 5
Total underwriting revenues 228,672 198,087 426,759
       
Expenses      
Net losses and loss expenses 168,861 42,822 211,683
Acquisition expenses 20,409 42,617 63,026
General and administrative expenses 36,015 28,421 64,436
  225,285 113,860 339,145
Underwriting income  $3,387 $84,227 $87,614
       
Net loss ratio 74.0% 21.6% 49.6%
Acquisition expense ratio 8.9% 21.5% 14.8%
General and administrative expense ratio 15.8% 14.3% 15.1%
Combined ratio 98.7% 57.4% 79.5%
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
 
RESULTS BY SEGMENT
 
(in thousands of United States dollars)
       
  For the nine months ended September 30, 2010
       
  Insurance Reinsurance Totals
       
Revenues      
Gross premiums written $999,528 $864,483 $1,864,011
Ceded premiums written (251,307) (7,075) (258,382)
Net premiums written 748,221 857,408 1,605,629
Net premiums earned 616,300 675,077 1,291,377
Other underwriting income (loss) 471 (2,517) (2,046)
Total underwriting revenues 616,771 672,560 1,289,331
       
Expenses      
Net losses and loss expenses 428,872 362,804 791,676
Acquisition expenses 51,336 146,759 198,095
General and administrative expenses 86,523 87,641 174,164
  566,731 597,204 1,163,935
Underwriting income  $50,040 $75,356 $125,396
       
Net loss ratio 69.6% 53.7% 61.3%
Acquisition expense ratio 8.4% 21.8% 15.3%
General and administrative expense ratio 14.0% 13.0% 13.5%
Combined ratio 92.0% 88.5% 90.1%
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
 
RESULTS BY SEGMENT
 
(in thousands of United States dollars)
       
       
  For the nine months ended September 30, 2009
       
  Insurance Reinsurance Totals
       
Revenues      
Gross premiums written $1,001,679 $810,404 $1,812,083
Ceded premiums written (349,801) (2,674) (352,475)
Net premiums written 651,878 807,730 1,459,608
Net premiums earned 632,552 606,697 1,239,249
Other underwriting income 3,444 754 4,198
Total underwriting revenues 635,996 607,451 1,243,447
       
Expenses      
Net losses and loss expenses 433,711 268,924 702,635
Acquisition expenses 66,105 129,045 195,150
General and administrative expenses 90,953 88,269 179,222
  590,769 486,238 1,077,007
Underwriting income $45,227 $121,213 $166,440
       
Net loss ratio 68.6% 44.3% 56.7%
Acquisition expense ratio 10.4% 21.3% 15.7%
General and administrative expense ratio 14.4% 14.5% 14.5%
Combined ratio 93.4% 80.1% 86.9%
 
 
ENDURANCE SPECIALTY HOLDINGS LTD. 
 
CONSOLIDATED FINANCIAL RATIOS
             
             
As Reported            
   
  For the quarter ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 70.9% 74.0% 41.5% 21.6% 56.6% 49.6%
Acquisition expense ratio 7.1% 8.9% 22.1% 21.5% 14.4% 14.8%
General and administrative expense ratio            
  12.1% 15.8% 13.3% 14.3% 12.7% 15.1%
Combined ratio 90.1% 98.7% 76.9% 57.4% 83.7% 79.5%
             
Effect of Prior Year Net Loss Reserve Development                
             
Favorable / (Unfavorable)            
   
  For the quarter ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 3.9% 6.1% 11.3% 10.3% 7.5% 8.1%
             
Net of Prior Year Net Loss Reserve Development                
   
  For the quarter ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 74.8% 80.1% 52.8% 31.9% 64.1% 57.7%
Acquisition expense ratio 7.1% 8.9% 22.1% 21.5% 14.4% 14.8%
General and administrative expense ratio            
  12.1% 15.8% 13.3% 14.3% 12.7% 15.1%
Combined ratio 94.0% 104.8% 88.2% 67.7% 91.2% 87.6%
             
             
The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance's results of underwriting activities in a manner similar to how management analyzes Endurance's underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio. 
 
 
ENDURANCE SPECIALTY HOLDINGS LTD. 
             
CONSOLIDATED FINANCIAL RATIOS
             
             
As Reported            
   
  For the nine months ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 69.6% 68.6% 53.7% 44.3% 61.3% 56.7%
Acquisition expense ratio 8.4% 10.4% 21.8% 21.3% 15.3% 15.7%
General and administrative expense ratio            
  14.0% 14.4% 13.0% 14.5% 13.5% 14.5%
Combined ratio 92.0% 93.4% 88.5% 80.1% 90.1% 86.9%
             
Effect of Prior Year Net Loss Reserve Development
             
Favorable / (Unfavorable)            
   
  For the nine months ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 5.7% 11.2% 10.1% 6.4% 8.0% 8.9%
             
Net of Prior Year Net Loss Reserve Development
   
  For the nine months ended September 30
  Insurance Reinsurance Total
  2010 2009 2010 2009 2010 2009
             
Net loss ratio 75.3% 79.8% 63.8% 50.7% 69.3% 65.6%
Acquisition expense ratio 8.4% 10.4% 21.8% 21.3% 15.3% 15.7%
General and administrative expense ratio            
  14.0% 14.4% 13.0% 14.5% 13.5% 14.5%
Combined ratio 97.7% 104.6% 98.6% 86.5% 98.1% 95.8%
             
             
The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance's results of underwriting activities in a manner similar to how management analyzes Endurance's underlying business performance. The combined ratio, excluding prior year net loss reserve development, should not be viewed as a substitute for the combined ratio. 
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
         
GROSS AND NET PREMIUMS WRITTEN BY SEGMENT
         
(in thousands of United States dollars)
         
The following tables show Endurance's gross and net premiums written for the quarters and nine months ended September 30, 2010 and 2009: 
         
  Quarter Ended September 30, 2010 Quarter Ended  September 30, 2009
  Gross Premiums Written Net Premiums Written  Gross Premiums Written Net Premiums Written 
         
Insurance        
Agriculture $156,162 $89,119 $104,021 $71,767
Professional lines 43,381 38,522 46,668 38,643
Casualty 40,538 23,700 39,671 25,025
Property 30,295 21,366 30,307 13,467
Healthcare liability 34,024 32,393 30,390 29,075
Workers' compensation (839) (807) (2,384) (2,291)
Subtotal Insurance $303,561 $204,293 $248,673 $175,686
         
Reinsurance        
Catastrophe  $45,513 $41,154 $31,637 $31,637
Casualty 81,167 81,163 61,394 61,387
Property 111,395 111,395 115,342 115,342
Aerospace and Marine  4,184 4,184 7,185 7,170
Surety and other specialty 9,754 9,695 5,391 5,444
Subtotal Reinsurance $252,013 $247,591 $220,949 $220,980
         
Total $555,574 $451,884 $469,622 $396,666
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
         
GROSS AND NET PREMIUMS WRITTEN BY SEGMENT
         
(in thousands of United States dollars)
         
         
  Nine Months Ended  September 30, 2010 Nine Months Ended  September 30, 2009
  Gross Premiums Written Net Premiums Written  Gross Premiums Written Net Premiums Written 
         
Insurance        
 Agriculture  $560,531 $402,395 $538,666 $323,783
 Professional lines 133,456 115,546 143,884 122,635
 Casualty 130,172 82,265 120,900 71,196
 Property 99,976 76,404 98,142 53,079
 Healthcare liability 76,782 72,947 73,305 69,155
 Workers' compensation (1,389) (1,336) 26,782 12,030
 Subtotal Insurance $999,528 $748,221 $1,001,679 $651,878
         
Reinsurance        
 Catastrophe $291,990 $287,721 $289,465 $289,465
 Casualty 246,060 245,257 220,599 220,361
 Property 215,916 215,916 205,375 205,375
 Aerospace and Marine 46,381 44,316 42,980 40,840
 Surety and other specialty 64,136 64,198 51,985 51,689
 Subtotal Reinsurance $864,483 $857,408 $810,404 $807,730
         
Total $1,864,011 $1,605,629 $1,812,083 $1,459,608
 
 
ENDURANCE SPECIALTY HOLDINGS LTD.
         
RECONCILIATIONS 
         
(in thousands of United States dollars, except share and per share amounts)
         
The following is a reconciliation of Endurance's net income, net income per diluted common share, net income allocated to common shareholders under the two-class method and annualized return on average common equity to operating income, operating income per diluted common share, operating income allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the quarters and nine months ended September 30, 2010 and 2009: 
  Quarter Ended September 30, Nine Months Ended September 30,
  2010 2009 2010 2009
Net income  $139,128 $153,842 $253,510 $381,279
 (Less) Add after-tax items:        
Net foreign exchange gains  (12,433) (3,634) (6,463) (30,488)
Net realized gains on investment sales  (8,687) (2,641) (13,004) (3,019)
Net impairment losses recognized in earnings 1,380 497 3,233 19,267
Operating income before preferred dividends $119,388 $148,064 $237,276 $367,039
Preferred dividends (3,875) (3,875) (11,625) (11,625)
Operating income available to common and participating common shareholders $115,513 $144,189 $225,651 $355,414
         
Operating income allocated to common shareholders under the two-class method $113,404 $141,764 $221,390 $349,005
         
Weighted average dilutive common shares 52,997,120 58,781,987 54,851,248 59,019,716
         
Operating income per diluted common share $2.14 $2.41 $4.04 $5.91
         
Average common equity [a] $2,681,895 $2,391,974 $2,653,484 $2,257,817
         
Operating return on average common equity 4.3% 6.0% 8.5% 15.7%
Annualized operating return on average common equity 17.2% 24.1% 11.3% 21.0%
         
Net income  $139,128 $153,842 $253,510 $381,279
Preferred dividends (3,875) (3,875) (11,625) (11,625)
Net income available to common and participating common shareholders $135,253 $149,967 $241,885 $369,654
         
Net income allocated to common shareholders under the two-class method $132,785 $147,445 $237,320 $362,989
         
Net income per diluted common share $2.51 $2.51 $4.33 $6.15
         
Return on average common equity, Net income  5.0% 6.3% 9.1% 16.4%
Annualized return on average common equity, Net income  20.2% 25.1% 12.2% 21.8%
         
[a] Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated period, which excludes the $200 million liquidation value of the preferred shares.
         
Operating income and operating income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. 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. Endurance 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 and net income per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income and operating income per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance's results of operations in a manner similar to how management analyzes Endurance's underlying business performance. Operating income and operating income per dilutive common share should not be viewed as substitutes for GAAP net income and net income per dilutive common share, respectively. 
         
Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
CONTACT:  Endurance Specialty Holdings Ltd.          Investor Relations          (441) 278-0988          investorrelations@endurance.bm

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