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Endurance Reports Fourth Quarter 2015 Financial Results

PEMBROKE, Bermuda - February 3, 2016 - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $91.4 million and $1.36 per diluted common share for the fourth quarter of 2015 versus net income of $76.4 million and $1.70 per diluted common share for the fourth quarter of 2014. 
For the year ended December 31, 2015, Endurance reported net income available to common shareholders of $311.3 million and $5.73 per diluted common share versus net income of $315.7 million and $7.06 per diluted common share for the year ended December 31, 2014.  Book value per diluted share was $65.48 at December 31, 2015, up 6.8% from December 31, 2014.

John R. Charman, Chairman and Chief Executive Officer, commented, "2015 marked another year of excellent strategic and financial progress in the transformation of Endurance into a leading global specialty insurance and reinsurance carrier.  Last year, we continued the strong organic expansion of our global underwriting capabilities that we began in 2013 by continuing to expand our underwriting expertise, our products and our geographies. We also completed the successful acquisition and smooth integration of Montpelier. Financially, our results were excellent, with a full year operating ROE of 12.0%, excluding expenses related to the acquisition and integration of Montpelier, and a full year combined ratio of 82.9%. Our greatly expanded global underwriting capabilities and substantially improved market relevance enabled our businesses to selectively grow our gross written premiums 14.7% to $3.3 billion in 2015 despite the significant headwinds we faced from an increasingly competitive global marketplace.

The actions we have taken over the last three years to increase our scale, expand our underwriting capabilities and improve our market presence globally have prepared us extremely well for the competitive conditions we face.  We are uniquely positioned to continue generating strong shareholder value as we reap the benefits of our transformation and we further leverage the investments we have made in our underwriting and risk management capabilities."

Operating Highlights

Operating highlights for the quarter ended December 31, 2015 were as follows:

  • Gross premiums written of $515.6 million, an increase of 22.5% compared to the same period in 2014.
  • Net premiums written of $289.7 million, an increase of 23.8% compared to the same period in 2014.
  • Combined ratio of 76.2% compared to 83.2% for the same period in 2014.  The current period's combined ratio included 10.5 percentage points of favorable prior year loss reserve development, 0.9 percentage points of net catastrophe losses from 2015 events, and 1.4 percentage points of corporate expenses related to the acquisition of Montpelier Re Holdings Ltd. ("Montpelier").
  • Net investment income of $23.2 million, a decrease of $2.7 million from the same period in 2014.
  • Operating income, excluding $8.1 million of expenses related to the acquisition of Montpelier, of $121.8 million and $1.82 per diluted common share, an increase of 54.8% and 4.0%, respectively, compared to the same period in 2014.
  • Operating return on average common equity for the quarter, excluding expenses related to the acquisition of Montpelier, of 2.8% or 11.1% on an annualized basis compared to 11.6% on an annualized basis in the same period in 2014.

Operating highlights for the year ended December 31, 2015:

  • Gross premiums written of $3,320.9 million, an increase of 14.7% over the same period in 2014.
  • Net premiums written of $1,950.5 million, an increase of 0.8% over the same period in 2014.
  • Combined ratio of 82.9% compared to 86.0% for the same period in 2014.  The current period's combined ratio included 12.3 percentage points of favorable prior year loss reserve development, 2.3 percentage points of current year catastrophe losses, 0.9 percentage points of large property and energy losses, and 3.9 percentage points of corporate expenses related to the acquisition of Montpelier.
  • Net investment income of $113.8 million, a decrease of $17.7 million over the same period in 2014.
  • Operating income, excluding $76.6 million of expenses related to the acquisition of Montpelier, of $408.6 million and $7.52 per diluted common share, an increase of 26.0% and 3.7% compared to the same period in 2014, which excludes $20.3 million of expenses related to the proposed acquisition of Aspen Insurance Holdings Limited ("Aspen").
  • Operating return on average common equity for the year, excluding expenses related to the acquisition of Montpelier, of 12.0% compared to 12.3% in the same period in 2014, excluding expenses related to the proposed acquisition of Aspen.

Insurance Segment

Operating highlights for Endurance's Insurance segment for the quarter ended December 31, 2015:

  • Gross premiums written of $432.3 million, an increase of $110.3 million or 34.2% from the fourth quarter of 2014.
    • Non-agriculture lines of business, which include casualty and other specialty, professional lines and property, marine/energy and aviation lines of business grew 49.3% from a year ago driven by the underwriting and geographic expansion completed over the last three years as well as the addition of business written in the Company's Lloyd's syndicate acquired from Montpelier.
    • The agriculture insurance line of business declined 20.4% primarily as a result of reduced commodity prices.
  • Net premiums written of $211.1 million, an increase of $70.4 million or 50.0% from the fourth quarter of 2014.
    • Non-agriculture lines of business increased 75.9% due to strong growth in gross premiums written combined with a modestly lower percentage of premiums ceded to third party reinsurers.
    • The agriculture line of business decreased 53.4% due to reduced commodity prices, increased reinsurance purchases and higher cessions to the U.S. federal government.
  • Combined ratio of 85.9% compared to 97.8% for the same period in 2014.  The current quarter's combined ratio included 8.0 percentage points of favorable prior year loss reserve development and net catastrophe losses from 2015 events of $2.6 million or 0.5 percentage points.
    • The accident year net loss ratio improved 20.4 percentage points predominantly driven by lower losses within the agriculture and professional lines of business partially offset by a higher loss ratio within the casualty and other specialty line of business.
    • An increase in the general and administrative expense ratio of 3.7 percentage points reflecting a reduction in agriculture earned premiums on a slightly higher expense base partially offset by additional ceding commissions and increasing scale in our other insurance lines of business. 
    • The acquisition expense ratio increased 0.6 percentage points in the current quarter as business lines with higher acquisition costs accounted for a greater percentage of earned premiums than a year ago, partially offset by earned premiums acquired from Montpelier that do not have related acquisition costs, as these acquisition costs were written off on purchase.

Operating highlights for Endurance's Insurance segment for the year ended December 31, 2015:

  • Gross premiums written of $2,085.9 million, an increase of $369.8 million or 21.5% over the same period in 2014.
  • Net premiums written of $880.4 million, an increase of 2.3% over the same period in 2014.
  • Combined ratio of 87.8% compared to 96.9% for the same period in 2014. The current period's combined ratio included 9.9 percentage points of favorable prior year loss reserve development, net catastrophe losses from 2015 events of $13.4 million or 1.4 percentage points and large property and energy losses of $15.8 million or 2.1 percentage points.

Reinsurance Segment

Operating highlights for Endurance's Reinsurance segment for the quarter ended December 31, 2015:

  • Gross premiums written of $83.4 million, a decrease of $15.6 million or 15.8% from the fourth quarter of 2014.
    • The catastrophe and property lines of business declined by $8.5 million due to rate decreases, targeted non-renewals and line size reductions in response to the current competitive market, and negative premium adjustments, partially offset by the renewal of a Montpelier property contract.
    • The specialty line of business declined $9.7 million largely due to $20.5 million of premium adjustments reflecting a reduction in worldwide commodity prices, partially offset by several new contracts within the surety line of business.
    • Within professional lines, the $4.6 million decline in premiums was largely due to lower positive premium adjustments in the current quarter as compared to the fourth quarter of 2014.
    • Casualty lines increased $7.2 million, predominantly driven by new business and positive premium adjustments, partially offset by select non-renewals of business that no longer met our profit objectives.
  • Net premiums written of $78.6 million, a decrease of $14.6 million or 15.7% from the fourth quarter of 2014, consistent with the reduction in gross premiums written.
  • Combined ratio of 63.7% compared to 65.8% for the same period in 2014.  The current period's combined ratio included 12.5 percentage points of favorable prior year loss reserve development and net catastrophe losses from 2015 events of $4.1 million or 1.2 percentage points.
    • The accident year net loss ratio improved 6.8 percentage points in the current quarter due to improvements within the catastrophe and specialty lines of business on a higher earned premium base.
    • The 1.5 percentage point improvement in the current quarter's acquisition expense ratio was largely attributed to the earning of premiums acquired from Montpelier that do not have related acquisition costs as these were written off on purchase. 
    • The general and administrative expense ratio increased 2.0 percentage points in the fourth quarter of 2015 primarily as a result of higher incentive compensation.

Operating highlights for Endurance's Reinsurance segment for the year ended December 31, 2015:

  • Gross premiums written of $1,235.0 million, increased $57.0 million or 4.8% over the same period in 2014.
  • Net premiums written of $1,070.1 million, decreased 0.3% over the same period in 2014.
  • The combined ratio of 69.4% compared to 70.7% for the same period in 2014.  The current period's combined ratio included favorable prior year loss reserve development of 14.0 percentage points and net catastrophe losses from 2015 events of $33.5 million or 2.9 percentage points.

Investments

Endurance's net investment income for the quarter and year ended December 31, 2015 was $23.2 million and $113.8 million, a decrease of $2.7 million and $17.7 million, respectively, compared to the same periods in 2014.  The total return of Endurance's investment portfolio was (0.52)% and 0.06% for the quarter and year ended December 31, 2015, respectively, compared to 0.40% and 2.79% for the quarter and year ended December 31, 2014, respectively.  Investment income generated from Endurance's trading and available for sale investments increased by $7.8 million and $17.2 million for the quarter and year ended December 31, 2015 compared to the same periods in 2014 due to an increase in invested assets.  During the quarter and year ended December 31, 2015, Endurance's net investment income on its alternative investment funds and high yield loan funds, which are included in other investments, included losses of $11.8 million and $13.6 million, as compared to losses of $2.9 million and gains of $19.6 million in the quarter and year ended December 31, 2014, respectively.  The ending book yield on Endurance's fixed maturity investments at December 31, 2015 was 2.12%, down from 2.21% at December 31, 2014.

At December 31, 2015, Endurance's fixed maturity and short term investments, which comprises 82.0% of Endurance's investments, had an average credit quality of AA- and a duration of 2.74 years.  Endurance's available for sale portfolio was in a net unrealized loss position of $12.6 million at December 31, 2015, a decrease of $98.7 million from December 31, 2014.  Endurance recorded net realized and unrealized investment losses, net of impairments, of $22.8 million and gains of $8.9 million during the quarter and year ended December 31, 2015, compared to gains of $1.4 million and $19.1 million during the quarter and year ended December 31, 2014. 

Endurance ended the fourth quarter of 2015 with cash and invested assets of $8.9 billion, which represents a 34.9% increase from December 31, 2014.  Net cash flows provided by operating activities was $245.5 million for the year ended December 31, 2015 versus $266.3 million for the same period in 2014.

Capitalization and Shareholders' Equity

At December 31, 2015, Endurance's shareholders' equity was $5.12 billion or $65.48 per diluted common share versus $3.19 billion or $61.33 per diluted common share at December 31, 2014.  For the quarter and year ended December 31, 2015, Endurance declared and paid common dividends of $0.35 and $1.40 per share, respectively. Endurance repaid $198.5 million in senior notes upon maturity on October 15, 2015.

On November 24, 2015, Endurance issued 9,200,000 Depositary Shares, each of which represents a 1/1,000th interest in a share of Endurance's 6.350% Non-Cumulative Preferred Shares, Series C, $1.00 par value and $25,000 liquidation preference per share (equivalent to $25 per Depositary Share). The $230.0 million offering included the exercise in full of the underwriters' overallotment option.  Endurance received approximately $222.0 million from the offering, after deducting the underwriting discount and estimated offering expenses.  On December 24, 2015, Endurance redeemed all 8,000,000 shares outstanding of its 7.75% Non-Cumulative Series A Preferred Shares for $200.0 million, or $25.00 per share. In the third quarter of 2015, the Company issued 21.5 million Endurance common shares and restricted share units valued at $1.47 billion as part of its acquisition of Montpelier.

Earnings Call

Endurance will host a conference call on February 4, 2016 at 9:00 a.m. Eastern time to discuss its financial results.  The conference call can be accessed via telephone by dialing (888) 337-8198 or (719) 325-2376  (international) and entering pass code: 2972174.  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 February 18, 2016 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 2972174.

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 fourth quarter of 2015 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 each of these operating metrics excluding expenses related to the acquisition of Montpelier and the proposed acquisition of Aspen, 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, marine/energy and aviation 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, 2014 and in our most recently filed Quarterly Report on Form 10-Q.

The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Endurance's most recent reports on Form 10-K and Form 10-Q and other documents of Endurance on file with the Securities and Exchange Commission.  Any forward-looking statements made in this material are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Endurance will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Endurance or its business or operations. Except as required by law, Endurance undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

The contents of any website referenced in this press release are not incorporated by reference herein.



ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands of United States dollars, except share and per share amounts)

      December 31,   December 31,
      2015   2014
Assets      
Cash and cash equivalents $ 1,177,750     $ 745,472  
Fixed maturity investments, trading, at fair value 1,587,160     -  
Fixed maturity investments, available for sale, at fair value 4,359,019     5,092,581  
Short-term investments, trading, at fair value 394,111     -  
Short-term investments, available for sale, at fair value 25,685     9,014  
Equity securities, trading, at fair value 15,229     -  
Equity securities, available for sale, at fair value 513,585     331,368  
Other investments 872,617     541,454  
Premiums receivable, net 1,376,328     883,450  
Insurance and reinsurance balances receivable 102,403     122,214  
Deferred acquisition costs 255,501     207,368  
Prepaid reinsurance premiums 498,574     354,940  
Reinsurance recoverable on unpaid losses 907,944     670,795  
Reinsurance recoverable on paid losses 288,026     218,291  
Accrued investment income 30,213     27,183  
Goodwill and intangible assets 553,960     153,405  
Deferred tax asset 64,164     48,995  
Net receivable on sales of investments 31,873     38,877  
Other assets 187,383     195,277  
Total Assets $ 13,241,525     $ 9,640,684  
           
Liabilities      
Reserve for losses and loss expenses $ 4,510,415     $ 3,846,859  
Reserve for unearned premiums 1,789,148     1,254,519  
Deposit liabilities 13,674     15,136  
Reinsurance balances payable 661,213     375,711  
Debt 717,650     523,617  
Net payable on purchases of investments 63,442     151,682  
Deferred tax liability 17,315     -  
Other liabilities 344,596     287,978  
Total Liabilities 8,117,453   6,455,502
           
Shareholders' Equity      
Preferred shares      
  Series A, non-cumulative - nil issued and outstanding (2014 - 8,000,000) -     8,000  
  Series B, non-cumulative - 9,200,000 issued and outstanding (2014 - 9,200,000) 9,200     9,200  
  Series C, non-cumulative - 9,200 issued and outstanding (2014 - nil) 9     -  
Common shares      
  66,797,991 issued and outstanding (2014 - 44,765,153) 66,798     44,765  
Additional paid-in capital 2,145,836     598,226  
Accumulated other comprehensive (loss) income (46,634 )   76,706  
Retained earnings 2,681,053     2,448,285  
Total Shareholders' Equity Available to the Company 4,856,262   3,185,182
Non-controlling interests 267,810     -  
Total Shareholders' Equity 5,124,072     3,185,182  
           
Total Liabilities and Shareholders' Equity $ 13,241,525     $ 9,640,684  
           
Book Value per Common Share      
Dilutive common shares outstanding 67,136,986     44,920,768  
Diluted book value per common share [a] $ 65.48     $ 61.33  

Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2014, which was derived from Endurance's audited financial statements.
[a] Excludes the $460 million (2014 - $430.0 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   Year Ended
    December 31,   December 31,   December 31,   December 31,
    2015   2014   2015   2014
Revenues              
Gross premiums written $ 515,648     $ 421,026     $ 3,320,861     $ 2,894,076  
                 
Net premiums written $ 289,743     $ 233,968     $ 1,950,470     $ 1,934,206  
Change in unearned premiums 283,713     237,311     27,983     (70,228 )
                 
Net premiums earned 573,456     471,279   1,978,453     1,863,978  
Other underwriting loss (7,716 )   (1,847 )   (3,694 )   (5,786 )
Net investment income 23,180     25,894     113,826     131,543  
Net realized and unrealized (losses) gains (20,238 )   (3,788 )   12,660     14,283  
Net impairment losses recognized in earnings (2,604 )   (214 )   (3,715 )   (625 )
Total revenues 566,078   491,324   2,097,530     2,003,393  
                 
Expenses              
Net losses and loss expenses 242,057     243,801     917,108     970,162  
Acquisition expenses 90,364     75,363     347,885     319,513  
General and administrative expenses 89,143     60,628     259,791     247,387  
Corporate expenses [a] 15,219     12,383     114,429     66,200  
Amortization of intangibles 16,124     1,621     30,620     6,484  
Net foreign exchange (gains) losses (2,190 )   (227 )   26,964     3,839  
Interest expense 10,815     9,058     41,260     40,968  
Total expenses 461,532   402,627   1,738,057     1,654,553  
                 
Income before income taxes 104,546   88,697   359,473     348,840  
Income tax benefit (expense) 3,350     (4,124 )   (4,362 )   (390 )
Net income 107,896   84,573   355,111   348,450
                 
Net income attributable to non-controlling interests (8,309 )   -     (11,016 )   -  
                 
Net income available to the Company 99,587     84,573     344,095     348,450  
                 
Preferred dividends (8,186 )   (8,186 )   (32,750 )   (32,750 )
                 
Net income available to common and participating common shareholders $ 91,401     $ 76,387     $ 311,345     $ 315,700  
               
Per share data              
Basic earnings per common share $ 1.36     $ 1.71     $ 5.74     $ 7.07  
Diluted earnings per common share $ 1.36     $ 1.70     $ 5.73     $ 7.06  

[a] The Company incurred $8.1 million and $76.6 million of corporate expenses in relation to the Company's acquisition of Montpelier for the quarter and year ended December 31, 2015.  For the quarter and year ended December 31, 2014, the Company incurred $0.2 million and $15.5 million of corporate expenses and nil and $4.8 million of interest expense, respectively, in relation to the Company's proposed acquisition of Aspen.



ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)

      Quarter Ended December 31, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 432,254     $ 83,394     $ 515,648    
  Ceded premiums written   (221,156 )   (4,749 )   (225,905 )  
  Net premiums written   211,098     78,645     289,743    
  Net premiums earned   253,085     320,371     573,456    
  Other underwriting loss   -     (7,716 )   (7,716 )  
  Total underwriting revenues   253,085     312,655     565,740    
                 
  Expenses              
  Net losses and loss expenses   144,425     97,632     242,057    
  Acquisition expenses   22,292     68,072     90,364    
  General and administrative expenses   50,723     38,420     89,143    
      217,440     204,124     421,564    
  Underwriting income   $ 35,645     $ 108,531     $ 144,176    
                 
  Net investment income           23,180    
  Corporate expenses           (15,219 )  
  Interest expense           (10,815 )  
  Amortization of intangibles           (16,124 )  
  Net foreign exchange gains           2,190    
  Net realized and unrealized losses           (20,238 )  
  Net impairment losses recognized in earnings           (2,604 )  
  Income before income taxes           $ 104,546    
                 
  Net loss ratio   57.1 %   30.5 %   42.2 %  
  Acquisition expense ratio   8.8 %   21.2 %   15.8 %  
  General and administrative expense ratio   20.0 %   12.0 %   18.2 % [a]
  Combined ratio   85.9 %   63.7 %   76.2 %  

[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.

ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)

      Quarter Ended December 31, 2014  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 321,983     $ 99,043     $ 421,026    
  Ceded premiums written   (181,281 )   (5,777 )   (187,058 )  
  Net premiums written   140,702     93,266     233,968    
  Net premiums earned   217,745     253,534     471,279    
  Other underwriting loss   -     (1,847 )   (1,847 )  
  Total underwriting revenues   217,745     251,687     469,432    
                 
  Expenses              
  Net losses and loss expenses   159,784     84,017     243,801    
  Acquisition expenses   17,809     57,554     75,363    
  General and administrative expenses   35,406     25,222     60,628    
      212,999     166,793     379,792    
  Underwriting income   $ 4,746     $ 84,894     $ 89,640    
                 
  Net investment income           25,894    
  Corporate expenses           (12,383 )  
  Interest expense           (9,058 )  
  Amortization of intangibles           (1,621 )  
  Net foreign exchange gains           227    
  Net realized and unrealized losses           (3,788 )  
  Net impairment losses recognized in earnings           (214 )  
  Income before income taxes           $ 88,697    
                 
  Net loss ratio   73.3 %   33.1 %   51.7 %  
  Acquisition expense ratio   8.2 %   22.7 %   16.0 %  
  General and administrative expense ratio   16.3 %   10.0 %   15.5 % [a]
  Combined ratio   97.8 %   65.8 %   83.2 %  

[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.

ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)

      Year Ended December 31, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 2,085,901     $ 1,234,960     $ 3,320,861    
  Ceded premiums written   (1,205,528 )   (164,863 )   (1,370,391 )  
  Net premiums written   880,373     1,070,097     1,950,470    
  Net premiums earned   824,552     1,153,901     1,978,453    
  Other underwriting loss   -     (3,694 )   (3,694 )  
  Total underwriting revenues   824,552     1,150,207     1,974,759    
                 
  Expenses              
  Net losses and loss expenses   503,561     413,547     917,108    
  Acquisition expenses   80,252     267,633     347,885    
  General and administrative expenses   140,012     119,779     259,791    
      723,825     800,959     1,524,784    
  Underwriting income   $ 100,727     $ 349,248     $ 449,975    
                 
  Net investment income           113,826    
  Corporate expenses           (114,429 )  
  Interest expense           (41,260 )  
  Amortization of intangibles           (30,620 )  
  Net foreign exchange losses           (26,964 )  
  Net realized and unrealized gains           12,660    
  Net impairment losses recognized in earnings           (3,715 )  
  Income before income taxes           $ 359,473    
                 
  Net loss ratio   61.1 %   35.8 %   46.4 %  
  Acquisition expense ratio   9.7 %   23.2 %   17.6 %  
  General and administrative expense ratio   17.0 %   10.4 %   18.9 % [a]
  Combined ratio   87.8 %   69.4 %   82.9 %  

[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.

ENDURANCE SPECIALTY HOLDINGS LTD.
RESULTS BY SEGMENT
(in thousands of United States dollars, except ratios)

      Year Ended December 31, 2014  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,716,128     $ 1,177,948     $ 2,894,076    
  Ceded premiums written   (855,722 )   (104,148 )   (959,870 )  
  Net premiums written   860,406     1,073,800     1,934,206    
  Net premiums earned   833,912     1,030,066     1,863,978    
  Other underwriting loss   -     (5,786 )   (5,786 )  
  Total underwriting revenues   833,912     1,024,280     1,858,192    
                 
  Expenses              
  Net losses and loss expenses   594,561     375,601     970,162    
  Acquisition expenses   65,368     254,145     319,513    
  General and administrative expenses   148,475     98,912     247,387    
      808,404     728,658     1,537,062    
  Underwriting income   $ 25,508     $ 295,622     $ 321,130    
                 
  Net investment income           131,543    
  Corporate expenses           (66,200 )  
  Interest expense           (40,968 )  
  Amortization of intangibles           (6,484 )  
  Net foreign exchange losses           (3,839 )  
  Net realized and unrealized gains           14,283    
  Net impairment losses recognized in earnings           (625 )  
  Income before income taxes           $ 348,840    
                 
  Net loss ratio   71.4 %   36.4 %   52.1 %  
  Acquisition expense ratio   7.8 %   24.7 %   17.1 %  
  General and administrative expense ratio   17.7 %   9.6 %   16.8 % [a]
  Combined ratio   96.9 %   70.7 %   86.0 %  

[a] General and administrative expense ratio includes general and administrative expenses and corporate expenses.



ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS

As Reported                          
                               
        Quarter Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   57.1 %   73.3 %   30.5 %   33.1 %   42.2 %   51.7 %  
  Acquisition expense ratio   8.8 %   8.2 %   21.2 %   22.7 %   15.8 %   16.0 %  
  General and administrative expense ratio   20.0 %   16.3 %   12.0 %   10.0 %   18.2 % [a] 15.5 % [a]
  Combined ratio [b]   85.9 %   97.8 %   63.7 %   65.8 %   76.2 %   83.2 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Quarter Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   8.0 %   12.2 %   12.5 %   16.7 %   10.5 %   14.6 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Quarter Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   65.1 %   85.5 %   43.0 %   49.8 %   52.7 %   66.3 %  
  Acquisition expense ratio   8.8 %   8.2 %   21.2 %   22.7 %   15.8 %   16.0 %  
  General and administrative expense ratio   20.0 %   16.3 %   12.0 %   10.0 %   18.2 % [a] 15.5 % [a]
  Combined ratio [b]   93.9 %   110.0 %   76.2 %   82.5 %   86.7 %   97.8 %  
                               
[a] The total general and administrative expense ratio includes general and administrative expenses and corporate expenses.  
[b] The combined ratio is the sum of the net loss, acquisition expense and general and administrative expense ratios, and the total combined ratio includes corporate expenses.  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                          
                               
        Year Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   61.1 %   71.4 %   35.8 %   36.4 %   46.4 %   52.1 %  
  Acquisition expense ratio   9.7 %   7.8 %   23.2 %   24.7 %   17.6 %   17.1 %  
  General and administrative expense ratio   17.0 %   17.7 %   10.4 %   9.6 %   18.9 % [a] 16.8 % [a]
  Combined ratio [b]   87.8 %   96.9 %   69.4 %   70.7 %   82.9 %   86.0 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Year Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   9.9 %   9.7 %   14.0 %   14.9 %   12.3 %   12.5 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Year Ended December 31,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   71.0 %   81.1 %   49.8 %   51.3 %   58.7 %   64.6 %  
  Acquisition expense ratio   9.7 %   7.8 %   23.2 %   24.7 %   17.6 %   17.1 %  
  General and administrative expense ratio   17.0 %   17.7 %   10.4 %   9.6 %   18.9 % [a] 16.8 % [a]
  Combined ratio [b]   97.7 %   106.6 %   83.4 %   85.6 %   95.2 %   98.5 %  
                               
[a] The total general and administrative expense ratio includes general and administrative expenses and corporate expenses.  
[b] The combined ratio is the sum of the net loss, acquisition expense and general and administrative expense ratios, and the total combined ratio includes corporate expenses.  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 quarter ended December 31, 2015 and 2014:

    Quarter Ended   Quarter Ended
    December 31, 2015   December 31, 2014
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 55,372     $ 13,119     $ 69,580     $ 28,142  
  Casualty and other specialty 138,956     73,704     104,535     51,889  
  Professional lines 112,917     51,765     87,477     29,008  
  Property, marine/energy and aviation 125,009     72,510     60,391     31,663  
  Subtotal Insurance $ 432,254     $ 211,098     $ 321,983     $ 140,702  
                 
Reinsurance              
  Catastrophe $ 7,014     $ 4,083     11,020     9,442  
  Property (291 )   (455 )   4,219     4,220  
  Casualty 27,474     27,455     20,267     20,278  
  Professional lines 38,807     38,807     43,400     43,400  
  Specialty 10,390     8,755     20,137     15,926  
  Subtotal Reinsurance $ 83,394     $ 78,645     $ 99,043     $ 93,266  
                 
Total $ 515,648     $ 289,743     $ 421,026     $ 233,968  

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 year ended December 31, 2015 and 2014:

    Year Ended   Year Ended
    December 31, 2015   December 31, 2014
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 840,445     $ 267,890     $ 866,025     $ 459,149  
  Casualty and other specialty 514,203     248,554     396,113     195,927  
  Professional lines 344,482     156,918     263,538     93,640  
  Property, marine/energy and aviation 386,771     207,011     190,452     111,690  
  Subtotal Insurance $ 2,085,901     $ 880,373     $ 1,716,128     $ 860,406  
                 
Reinsurance              
  Catastrophe $ 311,914     $ 194,662     $ 343,213     $ 252,973  
  Property 209,392     205,999     287,326     287,235  
  Casualty 176,506     176,487     159,533     157,947  
  Professional lines 248,610     248,610     174,656     174,656  
  Specialty 288,538     244,339     213,220     200,989  
  Subtotal Reinsurance $ 1,234,960     $ 1,070,097     $ 1,177,948     $ 1,073,800  
                 
Total $ 3,320,861     $ 1,950,470     $ 2,894,076     $ 1,934,206  




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 quarters and years ended December 31, 2015 and 2014:

    Quarter Ended   Year Ended
    December 31,   December 31,
    2015   2014   2015   2014
Net income available to the Company $ 99,587     $ 84,573     $ 344,095     $ 348,450  
(Less) add after-tax items:              
  Net foreign exchange (gains) losses (354 )   (246 )   28,892     3,672  
  Net realized and unrealized losses (gains) 20,052     2,187     (11,807 )   (15,969 )
  Net impairment losses recognized in earnings 2,605     198     3,595     609  
Operating income before preferred dividends $ 121,890     $ 86,712     $ 364,775     $ 336,762  
  Preferred dividends (8,186 )   (8,186 )   (32,750 )   (32,750 )
Operating income allocated to common and              
  participating common shareholders $ 113,704     $ 78,526     $ 332,025     $ 304,012  
                 
Operating income allocated to common              
  shareholders under the two-class method $ 110,808     $ 76,252     $ 322,696     $ 295,232  
                 
Weighted average diluted common shares 65,404,645     43,557,332     52,828,503     43,415,244  
                 
Operating income per diluted common share [b] $ 1.69     $ 1.75     $ 6.11     $ 6.80  
                 
Average common equity [a] $ 4,381,566     $ 2,722,818     $ 3,415,086     $ 2,638,276  
                 
Operating return on average common equity 2.6 %   2.9 %   9.7 %   11.5 %
                 
Annualized operating return on average common equity 10.4 %   11.5 %   9.7 %   11.5 %
                 
Net income available to the Company $ 99,587     $ 84,573     $ 344,095     $ 348,450  
  Preferred dividends (8,186 )   (8,186 )   (32,750 )   (32,750 )
Net income available to common and              
  participating common shareholders $ 91,401     $ 76,387     $ 311,345     $ 315,700  
                 
Net income allocated to common shareholders              
  under the two-class method $ 89,073     $ 74,175     $ 302,596     $ 306,582  
                 
Net income per diluted common share [b] $ 1.36     $ 1.70     $ 5.73     $ 7.06  
                 
Return on average common equity, Net income 2.1 %   2.8 %   9.1 %   12.0 %
               
Annualized return on average common equity, Net income 8.3 %   11.2 %   9.1 %   12.0 %

[a] Average common equity is calculated as the quarterly weighted average of the beginning and ending common equity balances for the stated period, which excludes the $460 million (September 30, 2015 and December 31, 2014 - $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-class method.



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 available to common and participating common shareholders, 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 net income, operating income available to common and participating common shareholders, 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 excluding expenses incurred related to the acquisition of Montpelier (all non-GAAP measures) for the quarter and year ended December 31, 2015:

    Quarter Ended   Year Ended
    December 31, 2015   December 31, 2015
    As Reported   Expenses
Incurred
Related to the Acquisition of Montpelier [a]
  Excluding Expenses
Incurred
Related to the Acquisition of Montpelier
  As Reported   Expenses
Incurred
Related to the Acquisition of Montpelier [a]
  Excluding Expenses
Incurred
Related to the Acquisition of Montpelier
                         
Net income available to common and
  participating common shareholders
$ 91,401     $ 8,145     $ 99,546     $ 311,345     $ 76,585     $ 387,930  
  Less amount allocated to participating common shareholders [b] (2,328 )   (207 )   (2,535 )   (8,749 )   (2,150 )   (10,899 )
Net income allocated to common
  shareholders
$ 89,073     $ 7,938     $ 97,011     $ 302,596     $ 74,435     $ 377,031  
                       
Net income per diluted common share [c] $ 1.36     $ 0.12     $ 1.48     $ 5.73     $ 1.41     $ 7.14  
                       
Return on average common equity, 
  Net income [d]
2.1 %   0.2 %   2.3 %   9.1 %   2.3 %   11.4 %
                       
Annualized return on average
  common equity, Net income [d]
8.3 %   0.8 %   9.1 %   9.1 %   2.3 %   11.4 %
                       
Operating income available to common and participating common shareholders $ 113,704     $ 8,145     $ 121,849     $ 332,025     $ 76,585     $ 408,610  
  Less amount allocated to
  participating common shareholders [b]
(2,896 )   (207 )   (3,103 )   (9,329 )   (2,150 )   (11,479 )
Operating income allocated to
  common shareholders
$ 110,808     $ 7,938     $ 118,746     $ 322,696     $ 74,435     $ 397,131  
                       
Operating income per diluted common 
  share [c]
$ 1.69     $ 0.13     $ 1.82     $ 6.11     $ 1.41     $ 7.52  
                       
Return on average common equity, 
  Operating income [d]
2.6 %   0.2 %   2.8 %   9.7 %   2.3 %   12.0 %
                       
Annualized return on average
  common equity, Operating income [d]
10.4 %   0.7 %   11.1 %   9.7 %   2.3 %   12.0 %

[a] The Company incurred $8.1 million of transaction and integration expenses in relation to the Company's acquisition of Montpelier for the quarter ended December 31, 2015. For the year ended December 31, 2015, the Company incurred $76.6 million of transaction and integration expenses in relation to the Company's acquisition of Montpelier.
[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 income per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method.
[d] Average common equity is calculated as the quarterly weighted average of the beginning and ending common equity balances for the stated period, which excludes the $460 million (September 30, 2015 and December 31, 2014 - $430 million) liquidation value of the preferred shares.



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 available to common and participating common shareholders, 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 net income, operating income available to common and participating common shareholders, 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 excluding expenses incurred related to the proposed acquisition of Aspen (all non-GAAP measures) for the quarter and year ended December 31, 2014:

    Quarter Ended   Year Ended
    December 31, 2014   December 31, 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
$ 76,387     $ 171     $ 76,558     $ 315,700     $ 20,260     $ 335,960  
  Less amount allocated to participating common shareholders [b] (2,212 )   (5 )   (2,217 )   (9,118 )   (585 )   (9,703 )
Net income allocated to common
  shareholders
$ 74,175     $ 166     $ 74,341     $ 306,582     $ 19,675     $ 326,257  
                       
Net income per diluted common share [c] $ 1.70     $ 0.01     $ 1.71     $ 7.06     $ 0.45     $ 7.51  
                       
Return on average common equity, 
  Net income [d]
2.8 %   0.0 %   2.8 %   12.0 %   0.7 %   12.7 %
                       
Annualized return on average
  common equity, Net income [d]
11.2 %   0.0 %   11.2 %   12.0 %   0.7 %   12.7 %
                       
Operating income available to common and participating common shareholders $ 78,526     $ 171     $ 78,697     $ 304,012     $ 20,260     $ 324,272  
  Less amount allocated to
  participating common shareholders [b]
(2,274 )   (5 )   (2,279 )   (8,780 )   (585 )   (9,365 )
Operating income allocated to
  common shareholders
$ 76,252     $ 166     $ 76,418     $ 295,232     $ 19,675     $ 314,907  
                       
Operating income per diluted common 
  share [c]
$ 1.75     $ 0.00     $ 1.75     $ 6.80     $ 0.45     $ 7.25  
                       
Return on average common equity, 
  Operating income [d]
2.9 %   0.0 %   2.9 %   11.5 %   0.8 %   12.3 %
                       
Annualized return on average
  common equity, Operating income [d]
11.5 %   0.1 %   11.6 %   11.5 %   0.8 %   12.3 %

[a] The Company incurred $0.2 million and nil of corporate expenses and interest expense, respectively, in relation to the Company's proposed acquisition of Aspen for the quarter ended December 31, 2014. For the year ended December 31, 2014, the Company incurred $15.5 million and $4.8 million of corporate 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 income per share calculated under the two-class method which was the lower of the treasury stock method and the two-class method.
[d] Average common equity is calculated as the quarterly weighted average of the beginning and ending common equity balances for the stated period, which excludes the $430 million liquidation value of the preferred shares.



Net income available to common and participating common shareholders, excluding expenses incurred related to the acquisition of Montpelier or the proposed acquisition of Aspen, or net income per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier or the proposed acquisition of Aspen, reflect the current period impact of those 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 acquisition of Montpelier or the proposed acquisition of Aspen, or net income per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier or 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.

Operating income and operating income per basic or 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 that used by management to analyze the Company'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.

Operating income available to common and participating common shareholders, excluding expenses incurred related to the acquisition of Montpelier or the proposed acquisition of Aspen, or net operating per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier or the proposed acquisition of Aspen, reflect the current period impact of those 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.  Operating income available to common and participating common shareholders, excluding expenses incurred related to the acquisition of Montpelier or the proposed acquisition of Aspen, or net operating per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier or 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.

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:
Investor Relations
Phone: +1 441 278 0988
Email: investorrelations@endurance.bm

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HUG#1983555