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Endurance Specialty Holdings Ltd: Endurance Reports Second Quarter 2014 Financial Results

2014-08-04 22:16:00
Ticker Giełda ISIC Kraj Miasto
ENH XNYS U.S.A. Pembroke








PEMBROKE, Bermuda - August 4, 2014 - Endurance Specialty Holdings Ltd.

(NYSE:ENH) today reported net income available to common shareholders of $75.0

million and $1.68 per diluted common share for the second quarter of 2014 versus

net income of $52.8 million and $1.21 per diluted common share for the second

quarter of 2013.



For the six months ended June 30, 2014, Endurance reported net income available

to common shareholders of $171.3 million and $3.84 per diluted common share

versus net income of $144.9 million and $3.34 per diluted common share for the

six months ended June 30, 2013.  Book value per diluted share was $60.00 at June

30, 2014, an increase of 4.3% from March 31, 2014 and up 8.7% from December

31, 2013.



Operating highlights for the quarter ended June 30, 2014 were as follows:



* Gross premiums written of $689.4 million, an increase of 20.4% compared to

the same period in 2013;

* Net premiums written of $511.4 million, an increase of 10.1% compared to the

same period in 2013;

* Combined ratio of 88.1%, which included 11.3 percentage points of favorable

prior year loss reserve development, 5.6 percentage points of catastrophe

losses from 2014 events and 2.5 percentage points of expenses related to the

proposed acquisition of Aspen Insurance Holdings Limited ("Aspen");

* Net investment income of $39.3 million, an increase of $6.8 million from the

same period in 2013;

* Operating income, which excludes after-tax realized investment gains and

foreign exchange losses, of $71.9 million and $1.61 per diluted common

share;

* Operating return on average common equity for the quarter of 2.7% or 10.9%

on an annualized basis; and

* Excluding $12.8 million of expenses related to the proposed acquisition of

Aspen, operating income of $84.7 million and $1.90 per diluted common share

and operating return on average common equity of 3.2% for the quarter or

12.9% on an annualized basis.



Operating highlights for the six months ended June 30, 2014 were as follows:



* Gross premiums written of $1,846.9 million, an increase of 5.5% over the

same period in 2013;

* Net premiums written of $1,310.1 million, a decline of 4.6% over the same

period in 2013;

* Combined ratio of 85.0%, which included 11.9 percentage points of favorable

prior year loss reserve development, 3.3 percentage points of current year

catastrophe losses and 1.5 percentage points of expenses related the

proposed acquisition of Aspen;

* Net investment income of $80.3 million, a decrease of $1.5 million over the

same period in 2013;

* Operating income, which excludes after-tax realized investment gains and

foreign exchange losses, of $166.3 million and $3.73 per diluted common

share;

* Operating return on average common equity for the first six months of the

year of 6.5%, or 12.9% on an annualized basis; and

* Excluding $13.7 million of expenses related to the proposed acquisition of

Aspen, operating income of $180.0 million and $4.04 per diluted common share

and operating return on average common equity of 7.0% for the first six

months of 2014 or 14.0% on an annualized basis.



John R. Charman, Chairman and Chief Executive Officer, commented, "I am very

proud to report that Endurance has generated another solid quarter of financial

results, demonstrating not only continuing profitable premium growth and

broadly improved loss ratios across our expanded global businesses, but

importantly strong growth in our book value per share. The transformation of

Endurance that we began just over a year ago is clearly visible in our overall

operating and financial performance. With the core of our global underwriting

leadership team now firmly in place and coordinating well, I believe that these

positive, strategic improvements will continue to translate into stronger, more

consistent performance in the future."



Insurance Segment



Operating highlights for Endurance's Insurance segment for the quarter ended

June 30, 2014 were as follows:



* Gross premiums written of $321.5 million, an increase of 16.1% from the

second quarter of 2013;

* Net premiums written of $179.0 million, a decrease of 6.5% from the second

quarter of 2013; and

* Combined ratio of 97.0%, which included 10.1 percentage points of favorable

prior year loss reserve development and 2.3 percentage points of expenses

related to the proposed acquisition of Aspen.



Operating highlights for Endurance's Insurance segment for the six months ended

June 30, 2014 were as follows:



* Gross premiums written of $973.8 million, an increase of 4.7% from the same

period in 2013;

* Net premiums written of $522.1 million, a decrease of 12.4% from the same

period in 2013; and

* Combined ratio of 97.8%, which included favorable prior year loss reserve

development of 9.3 percentage points and 1.5 percentage points of expenses

related to the proposed acquisition of Aspen.



Gross premiums written in the Insurance segment increased $44.6 million and

$43.9 million for the quarter and six months ended June 30, 2014 compared to the

same periods in 2013.  Significant growth from our expanded underwriting

capabilities within professional lines and casualty and other specialty lines of

business, as well as a 5% increase in our agriculture insurance policy counts

was partially offset by commodity price driven declines in our agriculture

insurance line of business.  Net premiums written declined $12.5 million and

$74.1 million for the quarter and six months ended June 30, 2014, compared to

the same periods in 2013 as we strategically increased our purchases of

reinsurance, including a 10% global whole account quota share as well as stop

loss protection for the agriculture insurance business.  These increased

reinsurance purchases improve the risk reward characteristics of our retained

insurance portfolio and help mitigate the impact of the increasingly competitive

market conditions we are facing.



The 5.4 percentage point improvement in the Insurance segment combined ratio for

the quarter ended June 30, 2014 compared to the same period in 2013 was driven

by a lower net loss ratio, partially offset by higher acquisition and general

and administrative expense ratios.  The accident year net loss ratio in the

second quarter of 2014 improved by 4.1 percentage points compared to a year ago

driven by the talent expansion, portfolio rebalancing and improved risk

selection implemented over the last 18 months.  The general and administrative

expense ratio increased in the second quarter compared to the same period a year

ago reflecting a smaller earned premium base, higher corporate allocations,

which included $5.1 million or 2.3 percentage points of expenses related the

proposed acquisition of Aspen, and strategic investments within our Insurance

segment.  For the six months ended June 30, 2014, the combined ratio was 3.4

percentage points lower than the same period a year ago as a lower net loss

ratio was partially offset by higher acquisition and general and administrative

expense ratios.



Reinsurance Segment



Operating highlights for Endurance's Reinsurance segment for the quarter ended

June 30, 2014 were as follows:



* Gross premiums written of $367.9 million, an increase of 24.4% from the

second quarter of 2013;

* Net premiums written of $332.4 million, an increase of 21.7% from the second

quarter of 2013; and

* Combined ratio of 80.7%, which included favorable prior year loss reserve

development of 12.2 percentage points, net catastrophe losses from 2014

events of $26.5 million or 10.4 percentage points and 2.7 percentage points

of expenses related to the proposed acquisition of Aspen.



Operating highlights for Endurance's Reinsurance segment for the six months

ended June 30, 2014 were as follows:



* Gross premiums written of $873.1 million, an increase of 6.5% from the same

period in 2013;

* Net premiums written of $788.1 million, an increase of 1.4% from the same

period in 2013; and

* Combined ratio of 76.1%, which included favorable prior year loss reserve

development of 13.7 percentage points, net catastrophe losses from 2014

events of $28.6 million or 5.7 percentage points and 1.5 percentage points

of expenses related to the proposed acquisition of Aspen.



Gross premiums written in the Reinsurance segment increased $72.1 million and

$53.0 million for the quarter and six months ended June 30, 2014 compared to the

same periods in 2013.  For the second quarter 2014, the growth was driven by

increases within specialty and professional lines, partially offset by declines

within the property and casualty lines of business.  The professional lines

second quarter 2014 gross premiums written grew $71.6 million from a year ago

primarily as a result of a large quota share contract that was extended and to a

lesser extent from several new quota share contracts written.  Within the

specialty line of business, growth was generated by new underwriters within the

energy, agriculture and surety businesses.  The declines within the property and

casualty lines of business were due to the continued non-renewal and re-

underwriting of business that no longer met our profitability targets.  For the

quarter and six months ended June 30, 2014, net premium growth was impacted by

increased proportional and aggregate excess of loss retrocessional purchases in

the Company's catastrophe portfolio.  These strategic retrocessional purchases

improve the risk and reward characteristics of our net reinsurance portfolio and

help mitigate the impact of the increasingly competitive market conditions we

are facing.



The combined ratio in the Reinsurance segment for the second quarter of 2014

improved by 5.7 percentage points compared to the same period in 2013,

predominantly due to a lower net loss ratio that was partially offset by higher

acquisition and general and administrative expense ratios.  The accident year

loss ratio in the current quarter improved 18.9 percentage points from a year

ago due to a lower level of catastrophe losses and an increase in higher margin

specialty business generated by our expanded specialty underwriting teams that

replaced lower margin non-renewed property and casualty business.  The current

quarter's net loss ratio included 10.9 percentage points of catastrophe losses

mainly related to European Windstorm Ela and various tornadoes occurring in the

United States, while the second quarter of 2013 included 18.8 percentage points

of catastrophe losses relating to flooding in Canada and Europe and various

tornadoes occurring in the United States.  The net loss ratio in the second

quarter of 2014 benefited from $32.2 million, or 12.2 percentage points, of

favorable prior year loss reserve development, compared to $57.2 million, or

20.8 percentage points, for the same period a year ago.  The favorable

development in the current quarter was predominantly driven by short tail lines

of business as losses have developed better than original estimates.  The

increase in the acquisition expense ratio was due to reduced premiums written in

the catastrophe line of business, which have a lower related acquisition

expense, and a greater level of premiums being derived from professional and

specialty lines, which maintain higher acquisition expenses.  The higher general

and administrative expenses for the second quarter of 2014 were predominantly

due to greater allocated corporate expenses, which included $7.0 million or 2.7

percentage points of expenses related the proposed acquisition of Aspen, and

continued strategic investments within our global specialty reinsurance

operations.



For the first six months of 2014, the Reinsurance segment reported a combined

ratio of 76.1% compared to 81.8% for the same period in 2013 principally due to

a lower net loss ratio partially offset by higher acquisition and general and

administrative expense ratios.



Investments



Endurance's net investment income for the quarter and six months ended June

30, 2014 was $39.3 million and $80.3 million, an increase of $6.8 million and a

decrease of $1.5 million, respectively, compared to the same periods in 2013.

The total return of Endurance's investment portfolio was 1.52% and 2.78% for the

quarter and six months ended June 30, 2014, respectively, compared to (1.22%)

and (0.62%) for the quarter and six months ended June 30, 2013, respectively.

 Investment income generated from Endurance's available for sale investments

increased by $3.0 million and $3.8 million for the three and six months ended

June 30, 2014, respectively, compared to the same periods in 2013 due to an

increase in the available for sale investment base.  During the second quarter

and six months ended June 30, 2014, Endurance's net investment income included

gains of $10.8 million and $24.3 million, respectively, on its alternative

investment funds and high yield loan funds, which are included in other

investments, as compared to gains of $6.8 million and $29.8 million in the

second quarter and first six months of 2013, respectively.  The ending book

yield on Endurance's fixed maturity investments at June 30, 2014 was 2.15%,

unchanged from June 30, 2013.



At June 30, 2014, Endurance's fixed maturity portfolio, which comprises 87.3% of

Endurance's investments, had an average credit quality of AA- and a duration of

2.88 years.  Endurance's fixed maturity portfolio was in a net unrealized gain

position of $107.0 million at June 30, 2014, an increase of $61.0 million from

December 31, 2013.  Endurance recorded net realized investment gains net of

impairments of $3.2 million and $8.0 million during the second quarter and first

six months of 2014 compared to net realized investment gains of $9.8 million and

$15.2 million during the second quarter and first six months of 2013.



Endurance ended the second quarter of 2014 with cash and invested assets of $6.5

billion, which represents a 0.8% increase from December 31, 2013.  Net operating

cash flow was $19.7 million for the six months ended June 30, 2014 versus $42.7

million for the same period in 2013.  The decrease in net operating cash flows

was driven by higher ceded premiums and general expenditure outflows, partially

offset by lower gross loss payments.



Capitalization and Shareholders' Equity



At June 30, 2014, Endurance's shareholders' equity was $3.12 billion or $60.00

per diluted common share versus $2.89 billion or $55.18 per diluted common share

at December 31, 2013.  For the quarter and six months ended June 30, 2014,

Endurance declared and paid common dividends of $0.34 and $0.68 per share,

respectively.



Earnings Call



Endurance will host a conference call on August 5, 2014 at 8:30 a.m. Eastern

time to discuss its financial results.  The conference call can be accessed via

telephone by dialing (888) 523-1225 or (719) 325-2393 (international) and

entering pass code: 2379226.  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

August 19, 2014 by dialing (888) 203-1112 or (719) 457-0820 (international) and

entering the pass code: 2379226.



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 second quarter of 2014 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 diluted common share, operating income allocated to common shareholders and

the 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 agriculture, casualty and other specialty, professional lines

and property lines of insurance and catastrophe, property, casualty,

professional lines and 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 Waterloo House,

100 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, 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 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 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 our Quarterly Report on Form 10-Q for the quarter ended March

31, 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.



CONSOLIDATED BALANCE SHEETS



 (In thousands of United States dollars, except share and per share amounts)







        June 30,     December 31,



        2014      2013

---------------- -------------------------------

Assets



Cash and cash equivalents $  801,028    $  845,851



Fixed maturity investments,

available for sale, at fair

value    4,993,099       4,823,964



Short-term investments,

available for sale, at fair

value    24,564       35,028



Equity securities, available

for sale, at fair value    287,642       252,466



Other investments    648,642       617,478



Premiums receivable, net    1,380,858       669,198



Insurance and reinsurance  134,750   127,722

balances receivable



Deferred acquisition costs    257,262       186,027



Prepaid reinsurance premiums    424,133       187,209



Reinsurance recoverable on  606,140   593,755

unpaid losses



Reinsurance recoverable on  145,694   164,220

paid losses



Accrued investment income    26,385       24,104



Goodwill and intangible assets    162,178       165,378



Deferred tax asset    45,782       51,703



Net receivable on sales of  67,578   54,910

investments



Other assets    172,912       179,109

---------------- -------------------------------

Total Assets $  10,178,647    $  8,978,122

---------------- -------------------------------





Liabilities



Reserve for losses and loss  3,963,393   4,002,259

expenses $   $



Reserve for unearned premiums    1,689,819       1,018,851



Deposit liabilities    21,987       19,458



Reinsurance balances payable    378,295       181,061



Debt    527,714       527,478



Net payable on purchases of  272,696   129,047

investments



Other liabilities    209,068       213,419

---------------- -------------------------------

Total Liabilities    7,062,972       6,091,573

---------------- -------------------------------





Shareholders' Equity



Preferred shares



Series A, non-cumulative -

8,000,000 issued and

outstanding (2013 -

  8,000,000)    8,000       8,000



Series B, non-cumulative -

9,200,000 issued and

outstanding (2013 -

  9,200,000)    9,200       9,200



Common shares



44,705,758 issued and

outstanding (2013 -

  44,368,742)    44,706       44,369



Additional paid-in capital    583,691       569,116



Accumulated other

comprehensive income    136,038       62,731



Retained earnings    2,334,040       2,193,133

---------------- -------------------------------

Total Shareholders' Equity    3,115,675       2,886,549

---------------- -------------------------------





Total Liabilities and

Shareholders' Equity $  10,178,647    $  8,978,122

---------------- -------------------------------





Book Value per Common Share



Dilutive common shares

outstanding    44,758,326       44,518,210



Diluted book value per common

share [a] $  60.00    $  55.18

---------------- -------------------------------









Note: All financial information contained herein is unaudited, except the

balance sheet data for the year ended December 31, 2013, which was derived

    from Endurance's audited financial statements.







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





ENDURANCE SPECIALTY HOLDINGS LTD.



CONSOLIDATED STATEMENTS OF INCOME



(In thousands of United States dollars, except share and per share amounts)







      Quarter Ended   For the Six Months Ended

--------------------------- ------------------------------

      June 30,   June 30,   June 30,   June 30,



      2014      2013    2014    2013

------------- ------------- --------------- --------------

Revenues



Gross premiums  572,710    $  1,846,940    $  1,750,072

written $  689,425    $

------------- ------------- --------------- --------------





Net premiums written $  511,427    $  464,621    $  1,310,132    $  1,373,536



Change in unearned    (29,889)      78,714       (432,328)      (410,084)

premiums

------------- ------------- --------------- --------------





Net premiums earned    481,538       543,335       877,804       963,452



Other underwriting

(loss) income    (4,824)      888     (6,062)    1,637



Net investment

income    39,302       32,468     80,292     81,773



Net realized and    3,411       10,372       8,283       16,607

unrealized

investment gains







Total other-than-    (198)      (579)      (309)      (1,385)

temporary

  impairment losses



Portion of loss    -       -       -       -

recognized in

other

comprehensive

  income (loss)

------------- ------------- --------------- --------------

Net impairment    (198)      (579)      (309)      (1,385)

losses recognized in

earnings

------------- ------------- --------------- --------------





Total revenues    519,229       586,484       960,008       1,062,084

------------- ------------- --------------- --------------





Expenses



Net losses and loss

expenses    259,196       359,058     436,092     578,028



Acquisition expenses    78,601       71,868       150,758       143,504



General and

administrative

expenses [a]    86,455       81,359     159,661     147,837



Amortization of

intangibles    1,623       1,625     3,240     3,726



Net foreign exchange

losses    319       3,368     3,283     6,295



Interest expense [b]    9,732       9,052       18,783       18,090

------------- ------------- --------------- --------------

Total expenses    435,926       526,330       771,817       897,480

------------- ------------- --------------- --------------





Income before income

taxes    83,303       60,154     188,191     164,604



Income tax (expense)

benefit    (140)      865       (548)      (3,286)

------------- ------------- --------------- --------------

Net income    83,163       61,019       187,643       161,318







Preferred dividends    (8,188)      (8,188)      (16,376)      (16,376)

------------- ------------- --------------- --------------





Net income available

to common and

participating common

shareholders [c] $  74,975    $  52,831    $  171,267    $  144,942

------------- ------------- --------------- --------------





Per share data



Basic earnings per

common share $  1.68  $  1.21  $  3.84  $  3.34

------------- ------------- --------------- --------------

Diluted earnings per

common share $  1.68  $  1.21    $  3.84  $  3.34

------------- ------------- --------------- --------------





[a] Includes $12,121 and $13,057 of general and administrative expenses for the

quarter and six months ended June 30, 2014, respectively, incurred in relation

to the Company' proposed acquisition of Aspen.



[b] Includes $679 of interest expenses for the quarter and six months ended June

30, 2014 incurred in relation to the Company' proposed acquisition of Aspen.



[c] Adding back the $12,800 and $13,736 of expenses incurred in relation to the

Company' proposed acquisition of Aspen for the quarter and six months ended June

30, 2014, respectively, net income available to common and participating common

shareholders would increase to $87,775 and $185,003, respectively, or $1.97 and

$4.15, respectively, per diluted common share.  See reconciliation on page 17.



    ENDURANCE SPECIALTY HOLDINGS LTD.



    RESULTS BY SEGMENT



    (in thousands of United States dollars, except ratios)







          For the quarter ended June 30, 2014

------------------------------------------

    Reported

      Insurance   Reinsurance   Totals

-------------- ------------- -------------





    Revenues



    Gross premiums written   $  321,526    $  367,899    $  689,425



    Ceded premiums written      (142,488)      (35,510)      (177,998)

-------------- ------------- -------------

    Net premiums written      179,038       332,389       511,427

-------------- ------------- -------------

    Net premiums earned      218,563       262,975       481,538



    Other underwriting loss      -       (4,824)      (4,824)

-------------- ------------- -------------

    Total underwriting revenues      218,563       258,151       476,714

-------------- ------------- -------------





    Expenses



    Net losses and loss expenses      149,567       109,629       259,196



    Acquisition expenses      15,128       63,473       78,601



General and administrative

    expenses  47,237     39,218     86,455

-------------- ------------- -------------

             211,932       212,320       424,252

-------------- ------------- -------------

    Underwriting income   $  6,631    $  45,831    $  52,462

-------------- ------------- -------------





    Net loss ratio     68.5  %     41.7  %     53.8  %



    Acquisition expense ratio     6.9  %     24.1  %     16.3  %



General and administrative

    expense ratio 21.6  %   14.9  %   18.0  %

-------------- ------------- -------------

    Combined ratio     97.0  %     80.7  %     88.1  %

-------------- ------------- -------------





    ENDURANCE SPECIALTY HOLDINGS LTD.



    RESULTS BY SEGMENT



    (in thousands of United States dollars, except ratios)







          For the quarter ended June 30, 2013

-----------------------------------------

    Reported

      Insurance   Reinsurance   Totals

------------- ------------- -------------





    Revenues



    Gross premiums written   $  276,941    $  295,769    $  572,710



    Ceded premiums written      (85,439)      (22,650)      (108,089)

------------- ------------- -------------

    Net premiums written      191,502       273,119       464,621

------------- ------------- -------------

    Net premiums earned      267,878       275,457       543,335



    Other underwriting income      -       888       888

------------- ------------- -------------

    Total underwriting revenues      267,878       276,345       544,223

------------- ------------- -------------





    Expenses



    Net losses and loss expenses      215,844       143,214       359,058



    Acquisition expenses      14,968       56,900       71,868



General and administrative

    expenses      43,524       37,835       81,359

------------- ------------- -------------

             274,336       237,949       512,285

------------- ------------- -------------

    Underwriting (loss) income   $  (6,458)   $  38,396    $  31,938

------------- ------------- -------------





    Net loss ratio     80.6  %     52.0  %     66.1  %



    Acquisition expense ratio     5.6  %     20.7  %     13.2  %



General and administrative

    expense ratio     16.2  %     13.7  %     15.0  %

------------- ------------- -------------

    Combined ratio     102.4  %     86.4  %     94.3  %

------------- ------------- -------------





    ENDURANCE SPECIALTY HOLDINGS LTD.



    RESULTS BY SEGMENT



    (in thousands of United States dollars, except ratios)







          For the six months ended June 30, 2014

-------------------------------------------

    Reported

      Insurance   Reinsurance   Totals

-------------- ------------- --------------





    Revenues



    Gross premiums written   $  973,802    $  873,138    $  1,846,940



    Ceded premiums written      (451,737)      (85,071)      (536,808)

-------------- ------------- --------------

    Net premiums written      522,065       788,067       1,310,132

-------------- ------------- --------------

    Net premiums earned      362,584       515,220       877,804



    Other underwriting loss      -       (6,062)      (6,062)

-------------- ------------- --------------

    Total underwriting revenues      362,584       509,158       871,742

-------------- ------------- --------------





    Expenses



    Net losses and loss expenses      238,100       197,992       436,092



    Acquisition expenses      27,389       123,369       150,758



General and administrative

    expenses  88,973     70,688     159,661

-------------- ------------- --------------

             354,462       392,049       746,511

-------------- ------------- --------------

    Underwriting income   $  8,122    $  117,109    $  125,231

-------------- ------------- --------------





    Net loss ratio     65.7  %     38.5  %     49.6  %



    Acquisition expense ratio     7.6  %     23.9  %     17.2  %



General and administrative

    expense ratio 24.5  %   13.7  %   18.2  %

-------------- ------------- --------------

    Combined ratio     97.8  %     76.1  %     85.0  %

-------------- ------------- --------------





    ENDURANCE SPECIALTY HOLDINGS LTD.



    RESULTS BY SEGMENT



    (in thousands of United States dollars, except ratios)







          For the six months ended June 30, 2013

-------------------------------------------

    Reported

      Insurance   Reinsurance   Totals

-------------- ------------- --------------





    Revenues



    Gross premiums written   $  929,884    $  820,188    $  1,750,072



    Ceded premiums written      (333,688)      (42,848)      (376,536)

-------------- ------------- --------------

    Net premiums written      596,196       777,340       1,373,536

-------------- ------------- --------------

    Net premiums earned      419,030       544,422       963,452



    Other underwriting income      -       1,637       1,637

-------------- ------------- --------------

    Total underwriting revenues      419,030       546,059       965,089

-------------- ------------- --------------





    Expenses



    Net losses and loss expenses      315,308       262,720       578,028



    Acquisition expenses      29,584       113,920       143,504



General and administrative

    expenses      79,151       68,686       147,837

-------------- ------------- --------------

             424,043       445,326       869,369

-------------- ------------- --------------

    Underwriting (loss) income   $  (5,013)   $  100,733    $  95,720

-------------- ------------- --------------





    Net loss ratio     75.2  %     48.3  %     60.0  %



    Acquisition expense ratio     7.1  %     20.9  %     14.9  %



General and administrative

    expense ratio     18.9  %     12.6  %     15.3  %

-------------- ------------- --------------

    Combined ratio     101.2  %     81.8  %     90.2  %

-------------- ------------- --------------



    ENDURANCE SPECIALTY HOLDINGS LTD.



    CONSOLIDATED FINANCIAL RATIOS











  As Reported





--------------------------------------------------------------

          For the quarter ended June 30,

--------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- -------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   68.5  %   80.6  %   41.7  %   52.0  %   53.8  %   66.1  %



Acquisition

    expense ratio 6.9  %   5.6  %   24.1  %   20.7  %   16.3  %   13.2  %



General and

administrative

    expense ratio 21.6  %   16.2  %   14.9  %   13.7  %   18.0  %   15.0  %

---------- ---------- --------- ---------- --------- ---------

    Combined ratio   97.0  %   102.4  %   80.7  %   86.4  %   88.1  %   94.3  %

---------- ---------- --------- ---------- --------- ---------









Effect of Prior Year Net

  Loss Reserve Development







Favorable /

  (Unfavorable)





--------------------------------------------------------------

          For the quarter ended June 30,

--------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- -------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   10.1  %   2.1  %   12.2  %   20.8  %   11.3  %   11.6  %

---------- ---------- --------- ---------- --------- ---------









Net of Prior Year Net Loss

  Reserve Development





--------------------------------------------------------------

          For the quarter ended June 30,

--------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- -------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   78.6  %   82.7  %   53.9  %   72.8  %   65.1  %   77.7  %



Acquisition

    expense ratio 6.9  %   5.6  %   24.1  %   20.7  %   16.3  %   13.2  %



General and

administrative

    expense ratio 21.6  %   16.2  %   14.9  %   13.7  %   18.0  %   15.0  %

---------- ---------- --------- ---------- --------- ---------

    Combined ratio   107.1  %   104.5  %   92.9  %   107.2  %   99.4  %   105.9  %

---------- ---------- --------- ---------- --------- ---------





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 six months ended June 30,

-------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- ------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   65.7  %   75.2  %   38.5  %   48.3  %   49.6  %   60.0  %



Acquisition

    expense ratio 7.6  %   7.1  %   23.9  %   20.9  %   17.2  %   14.9  %



General and

administrative

    expense ratio 24.5  %   18.9  %   13.7  %   12.6  %   18.2  %   15.3  %

---------- ---------- --------- --------- --------- ---------

    Combined ratio   97.8  %   101.2  %   76.1  %   81.8  %   85.0  %   90.2  %

---------- ---------- --------- --------- --------- ---------









Effect of Prior Year Net

  Loss Reserve Development







Favorable /

  (Unfavorable)





-------------------------------------------------------------

          For the six months ended June 30,

-------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- ------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   9.3  %   5.5  %   13.7  %   16.6  %   11.9  %   11.8  %

---------- ---------- --------- --------- --------- ---------









Net of Prior Year Net Loss

  Reserve Development





-------------------------------------------------------------

          For the six months ended June 30,

-------------------------------------------------------------

          Insurance   Reinsurance   Total

--------------------- ------------------- -------------------

          2014    2013    2014    2013    2014    2013







    Net loss ratio   75.0  %   80.7  %   52.2  %   64.9  %   61.5  %   71.8  %



Acquisition

    expense ratio 7.6  %   7.1  %   23.9  %   20.9  %   17.2  %   14.9  %



General and

administrative

    expense ratio 24.5  %   18.9  %   13.7  %   12.6  %   18.2  %   15.3  %

---------- ---------- --------- --------- --------- ---------

    Combined ratio   107.1  %   106.7  %   89.8  %   98.4  %   96.9  %   102.0  %

---------- ---------- --------- --------- --------- ---------





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.



  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 ended June 30, 2014 and 2013:











      Quarter Ended June 30, 2014   Quarter Ended June 30, 2013

----------------------------- -----------------------------

Gross Net Premiums Gross Net Premiums

Premiums   Written   Premiums   Written

      Written Written

----------------------------- -----------------------------

  Insurance



    Agriculture $  80,540    $  45,826    $  131,633    $  84,537



Casualty and    146,728       89,765       87,614       63,373

other

    specialty



Professional    74,650       29,846       38,296       27,788

    lines



    Property    19,608       13,601       19,398       15,804

-------------- -------------- -------------- --------------

Subtotal $  321,526    $  179,038    $  276,941    $  191,502

    Insurance

-------------- -------------- -------------- --------------





  Reinsurance



    Catastrophe $  158,372    $  123,411    $  155,431    $  138,041



    Property    42,887       42,886       48,384       44,516



    Casualty    30,875       30,868       54,417       54,419



Professional    84,117       84,117       12,528       12,528

    lines



    Specialty    51,648       51,107       25,009       23,615

-------------- -------------- -------------- --------------

Subtotal $  367,899    $  332,389    $  295,769    $  273,119

    Reinsurance

-------------- -------------- -------------- --------------





  Total $  689,425    $  511,427    $  572,710    $  464,621

-------------- -------------- -------------- --------------





  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

  six months ended June 30, 2014 and 2013:







      Six Months Ended   Six Months Ended



      June 30, 2014   June 30, 2013

------------------------------- -------------------------------

Gross Net Premiums Gross Net Premiums

Premiums   Written   Premiums   Written

      Written Written

------------------------------- -------------------------------

  Insurance



    Agriculture $  608,434    $  327,471    $  696,107    $  425,667



Casualty and    221,623       131,486       144,081       106,634

other

    specialty



Professional    113,430       44,416       59,260       41,991

    lines



    Property    30,315       18,692       30,436       21,904

--------------- --------------- --------------- ---------------

Subtotal $  973,802    $  522,065    $  929,884    $  596,196

    Insurance

--------------- --------------- --------------- ---------------





  Reinsurance



    Catastrophe $  285,020    $  202,374    $  303,297    $  269,439



    Property    209,300       209,208       196,795       192,927



    Casualty    115,857       114,260       183,809       182,382



Professional    109,736       109,736       24,835       24,835

    lines



    Specialty    153,225       152,489       111,452       107,757

--------------- --------------- --------------- ---------------

Subtotal $  873,138    $  788,067    $  820,188    $  777,340

    Reinsurance

--------------- --------------- --------------- ---------------





  Total $  1,846,940    $  1,310,132    $  1,750,072    $  1,373,536

--------------- --------------- --------------- ---------------



ENDURANCE SPECIALTY HOLDINGS LTD.



RECONCILIATIONS



(in thousands of United States dollars, except share, per share amounts and ratios)







The following is a reconciliation of Endurance's net income, net income per basic

or 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 basic or 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 three and six months ended June 30, 2014 and 2013:







      Quarter Ended   Six Months Ended



      June 30,   June 30,

--------------------------------- ---------------------------------

      2014      2013    2014    2013

---------------- ---------------- ---------------- ----------------

  Net income $  83,163    $  61,019    $  187,643    $  161,318



Add (less)

after-tax

  items:



Net foreign

exchange

    losses    305       3,341       3,277       6,250



Net realized

and

unrealized

    gains    (3,559)      (9,435)      (8,563)      (15,427)



Net

impairment

losses

recognized in

    earnings    198       579       309       1,351

---------------- ---------------- ---------------- ----------------

Operating

income before

preferred

  dividends $  80,107    $  55,504    $  182,666    $  153,492



Preferred

    dividends    (8,188)      (8,188)      (16,376)      (16,376)

---------------- ---------------- ---------------- ----------------

Operating

income

allocated to

  common and



participating

common

    shareholders $  71,919    $  47,316    $  166,290    $  137,116

---------------- ---------------- ---------------- ----------------





Operating

income

allocated to

common

  shareholders



under the

two-class

    method $  69,797    $  46,302    $  161,447    $  134,519

---------------- ---------------- ---------------- ----------------





Weighted

average diluted

  common    43,350,911       42,621,530       43,265,626       42,527,365

---------------- ---------------- ---------------- ----------------





Operating

income per

diluted common

  share [b] $  1.61    $  1.09    $  3.73    $  3.16

---------------- ---------------- ---------------- ----------------





Average common

  equity [a] $  2,628,392    $  2,321,152    $  2,571,112    $  2,293,326







Operating

return on

average common

  equity   2.7  %     2.0  %     6.5  %     6.0  %

---------------- ---------------- ---------------- ----------------





Annualized

operating

return on

average common

  equity   10.9  %     8.2  %     12.9  %     12.0  %

---------------- ---------------- ---------------- ----------------





  Net income $  83,163    $  61,019    $  187,643    $  161,318



Preferred

    dividends    (8,188)      (8,188)      (16,376)      (16,376)

---------------- ---------------- ---------------- ----------------

Net income

available to

common and

  participating



common

    shareholders $  74,975    $  52,831    $  171,267    $  144,942

---------------- ---------------- ---------------- ----------------





Net income

allocated to

common

shareholders

  under



the two-class

    method $  72,763    $  51,699    $  166,279    $  142,197

---------------- ---------------- ---------------- ----------------





Net income per

diluted common

  share $  1.68    $  1.21    $  3.84    $  3.34

---------------- ---------------- ---------------- ----------------









Return on

average common

equity, Net

  income    2.9  %      2.3  %      6.7  %      6.3  %

---------------- ---------------- ---------------- ----------------





Annualized

return on

average common

equity, Net

  income    11.4  %      9.1  %      13.3  %      12.6  %

---------------- ---------------- ---------------- ----------------





[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 $430 million liquidation value of the preferred shares.



[b] Represents diluted income per share calculated under the two-class method

  which was the lower of the treasury stock method and the two-cla
podstrony