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Endurance Reports Strong Underlying Second Quarter 2016 Financial Results

PEMBROKE, Bermuda - August 1, 2016 - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $76.6 million and $1.14 per diluted common share for the second quarter of 2016 versus net income of $76.0 million and $1.68 per diluted common share for the second quarter of 2015.

For the six months ended June 30, 2016, Endurance reported net income available to common shareholders of $183.0 million and $2.72 per diluted common share versus net income of $176.3 million and $3.91 per diluted common share for the six months ended June 30, 2015. Book value per diluted common share was $68.20 at June 30, 2016, up 4.2% from December 31, 2015.

John R. Charman, Chairman and Chief Executive Officer, commented, "Endurance's second quarter results demonstrated strong underlying underwriting profitability as reflected by our combined ratio of 92.6%. Our embedded risk management practices aligned with our comprehensive reinsurance and retrocessional programs enabled us to achieve underwriting profitability in both business segments despite a number of severe global catastrophes and large risk losses across the industry. Our solid underwriting results benefited from our increased scalability and focused expense management resulting in a significantly improved general and administrative expense ratio." 

"Strategically, the second quarter reflected our continued focused and diversified core underwriting expansion as evidenced by the 32.0% growth in our gross written premiums. In addition to our targeted growth across our global businesses, our successful renewal of the Montpelier portfolio also helped drive our expansion. The quick, effective and successful integration of Montpelier has enabled us to exceed our expense and capital synergy objectives; those important benefits are now clearly visible in our financial results.  Endurance is well equipped and very well positioned to thrive in the current market, which is showing increasing signs of moderation."

Operating Highlights

Operating highlights for the quarter ended June 30, 2016 were as follows:

  • Gross premiums written of $1,136.9 million, an increase of 32.0% compared to the same period in 2015.
  • Net premiums written of $717.8 million, an increase of 28.4% compared to the same period in 2015.
  • Combined ratio of 92.6% compared to 85.5% for the same period in 2015.
  • An overall net negative financial impact from catastrophe losses in the second quarter of 2016, including the Fort McMurray wildfires in Canada, the convective storms in Texas and Europe and the Kumamoto earthquake in Japan of $55.5 million, consisting of net loss expenses of $73.6 million partially offset by $11.1 million in net reinstatement premiums and $7.0 million of amounts attributable to non-controlling interests.
  • Net loss ratio of 62.7% compared to 52.2% for the same period in 2015. The net loss ratio for the current quarter was impacted by 11.3 percentage points of catastrophe losses from second quarter 2016 events and also included favorable prior year loss reserve development of $58.6 million or 9.8 percentage points compared to $58.8 million or 12.8 percentage points for the second quarter of 2015.
  • Net investment income of $44.0 million, an increase of $11.7 million from the same period in 2015.
  • Net foreign exchange gains included in net income were $32.8 million, while foreign currency translation adjustments included in accumulated other comprehensive income (loss) were losses of $37.7 million for the second quarter of 2016.
  • Net income available to common shareholders of $76.6 million and $1.14 per diluted common share for the second quarter of 2016 versus net income of $76.0 million and $1.68 per diluted common share for the second quarter of 2015. Operating income of $54.8 million and $0.81 per diluted common share, a decrease of 31.1% and 54.0%, respectively, compared to the same period in 2015.
  • Net income return on average common equity for the quarter of 1.7% or 6.7% on an annualized basis. Operating income return on average common equity for the quarter of 1.2% or 4.8% on an annualized basis.

Operating highlights for the six months ended June 30, 2016 were as follows:

  • Gross premiums written of $2,748.6 million, an increase of 27.1% compared to the same period in 2015.
  • Net premiums written of $1,656.6 million, an increase of 25.1% compared to the same period in 2015.
  • Combined ratio of 85.5% compared to 84.1% for the same period in 2015.
  • An overall net negative financial impact from catastrophe losses in 2016 of $61.6 million, consisting of net loss expenses of $79.9 million partially offset by $11.2 million in net reinstatement premiums and $7.1 million of amounts attributable to non-controlling interests.       
  • Net loss ratio of 53.7% compared to 48.5% for the same period in 2015, which was impacted by 6.4 percentage points of catastrophe losses from 2016 events. The net loss ratio for the current period also included favorable prior year loss reserve development of $119.7 million or 10.4 percentage points compared to $116.0 million or 13.7 percentage points for the same period in 2015.
  • Net investment income of $55.2 million, a decrease of $19.0 million over the same period in 2015.
  • Net foreign exchange gains included in net income were $44.5 million, while foreign currency translation adjustments included in accumulated other comprehensive income (loss) were losses of $50.1 million for the six months ended June 30, 2016.
  • Net income available to common shareholders of $183.0 million and $2.72 per diluted common share versus net income of $176.3 million and $3.91 per diluted common share for the six months ended June 30, 2015. Operating income of $139.2 million and $2.07 per diluted common share, a decrease of 18.5% and 45.2% compared to the same period in 2015.

Insurance Segment

Operating highlights for Endurance's Insurance segment for the quarter ended June 30, 2016:

  • Gross premiums written of $593.7 million, an increase of $124.8 million or 26.6% from the second quarter of 2015.
    • Non-agriculture lines of business, which include casualty and other specialty, professional lines and property, marine/energy and aviation lines of business grew 47.6% from a year ago driven by the expansion of the Company's underwriting capabilities by product and geography over the last three years as well as from the renewal and expansion of business written within the Company's Lloyd's syndicate acquired from Montpelier in 2015.
    • The agriculture insurance line of business declined 40.3% compared to a year ago as a result of lower commodity prices and the timing of premiums written.
  • Net premiums written of $239.6 million, an increase of $49.3 million or 25.9% from the second quarter of 2015.
    • Non-agriculture lines of business increased 44.7% due to strong growth in gross premiums written combined with a similar percentage of premiums ceded to third party reinsurers compared to a year ago.
    • The agriculture line of business decreased 113.1% due to the timing of third party reinsurance contract placements year over year.
  • Combined ratio of 93.2% compared to 95.2% for the same period in 2015.
    • The net loss ratio improved 3.8 percentage points to 68.4% compared to 72.2% for the same period in 2015. The current period's net loss ratio included favorable prior year loss reserve development of $24.2 million or 9.5 percentage points and catastrophe losses of $4.4 million or 1.7 percentage points from second quarter 2016 events. The current accident year net loss ratio of 77.9% improved 3.5 percentage points as lower losses within the agriculture, professional lines, and the property, marine/energy and aviation lines of business were partially offset by a higher current accident year net loss ratio within the casualty and other specialty line of business.
    • The general and administrative expense ratio decreased 2.4 percentage points, reflecting earned premium growth that outpaced the increase of the Company's expense base as a result of improved scale in the Company's expanding insurance business and a greater amount of ceding commissions received.
    • The acquisition expense ratio increased 4.2 percentage points in the current quarter as non-agriculture lines of business with higher acquisition costs accounted for a greater percentage of earned premiums compared to a year ago.

Operating highlights for Endurance's Insurance segment for the six months ended June 30, 2016:

  • Gross premiums written of $1,428.8 million, an increase of $223.7 million or 18.6% over the same period in 2015.
  • Net premiums written of $610.5 million, an increase of 23.5% over the same period in 2015.
  • Combined ratio of 91.5% compared to 92.2% for the same period in 2015. The combined ratio was impacted by lower net loss and general and administrative expense ratios, partially offset by a higher acquisition expense ratio. The current period's net loss ratio included $47.4 million or 10.0 percentage points of favorable prior year loss reserve development and catastrophe losses, net of reinsurance, from 2016 events of $4.4 million or 0.9 percentage points.

Reinsurance Segment

Operating highlights for Endurance's Reinsurance segment for the quarter ended June 30, 2016:

  • Gross premiums written of $543.2 million, an increase of $150.9 million or 38.5% from the second quarter of 2015.
    • The catastrophe and property lines of business increased $97.2 million, predominantly due to the successful targeted renewals of acquired Montpelier business, partially offset by non-renewals and line size reductions.
    • The specialty line of business increased $18.1 million largely due to growth in marine, agriculture and aviation, as global underwriting teams added over the past three years continue to identify profitable new opportunities.
    • The casualty line of business increased $34.1 million, predominantly driven by new business within the Company's international and U.S. offices partially offset by select non-renewals.
  • Net premiums written of $478.2 million, an increase of $109.4 million or 29.7% from the second quarter of 2015. The increase in net premiums written was driven by increased gross written premiums, partially offset by greater third party retrocessional protection purchased for the catastrophe and  specialty lines of business.
  • Combined ratio of 88.7% compared to 73.0% for the same period in 2015.
    • The current period's net loss ratio of 58.5% increased 22.0 percentage points compared to 2015.  Net catastrophe losses from second quarter 2016 events impacted the net loss ratio by 18.7 percentage points and were $69.1 million before reinstatement premiums of $11.1 million.  The increase in the current quarter accident year net loss ratio of 16.3 percentage points was predominantly due to catastrophe losses being 14.8 percentage points higher in the current quarter compared to a year ago.  The current period's net loss ratio included favorable prior year loss reserve development of $34.4 million or 10.0 percentage points.
    • The 3.3 percentage point improvement in the current quarter's acquisition expense ratio was largely due to the earning of premiums acquired from Montpelier that do not have related acquisition costs as these costs were written off on the acquisition date.
    • The general and administrative expense ratio declined 3.0 percentage points in the second quarter of 2016 primarily as a result of leveraging increased earned premiums on an expense base that benefited from increased ceding commissions received.

Operating highlights for Endurance's Reinsurance segment for the six months ended June 30, 2016:

  • Gross premiums written of $1,319.8 million, an increase of $362.3 million or 37.8% over the same period in 2015.
  • Net premiums written of $1,046.1 million, an increase of 26.1% over the same period in 2015.
  • Combined ratio of 77.9%, compared to 73.8% for the same period in 2015. The combined ratio was impacted by a higher net loss ratio partially offset by lower acquisition and general and administrative expense ratios. The current period's net loss ratio included $72.4 million or 10.6 percentage points of favorable prior year loss reserve development and 10.4 percentage points of net catastrophe losses from 2016 events, which amounted to $75.5 million before reinstatement premiums of $11.2 million.

Investments

Endurance's net investment income for the quarter and six months ended June 30, 2016 was $44.0 million and $55.2 million, an increase of $11.7 million and decrease of $19.0 million, respectively, compared to the same periods in 2015. The total investment return of Endurance's investment portfolio was 1.14% and 2.07% for the quarter and six months ended June 30, 2016, respectively, compared to (0.39)% and 0.89% for the quarter and six months ended June 30, 2015, respectively.

Net investment income benefited from increases in investment income generated from Endurance's trading and available for sale investments for the quarter and six months ended June 30, 2016 compared to the same periods in 2015 due to an increase in invested assets. During the quarter and six months ended June 30, 2016, Endurance's net investment income on its alternative investment funds and high yield loan funds, which are included in other investments, included gains of $5.3 million and losses of $23.0 million, as compared to gains of $3.6 million and $16.0 million in the same periods in 2015. The ending book yield on Endurance's fixed maturity investments at June 30, 2016 was 2.27%, unchanged from June 30, 2015.

At June 30, 2016, Endurance's fixed maturity and short term investments, which comprises 82.7% of Endurance's investments, had an average credit quality of AA- and a duration of 2.57 years. Endurance's available for sale portfolio was in a net unrealized gain position of $104.0 million at June 30, 2016, an increase of $116.6 million from December 31, 2015. Endurance recorded net realized and unrealized investment losses, net of impairments, of $3.5 million and gains of $9.7 million during the quarter and six months ended June 30, 2016, compared to gains of $9.3 million and $26.8 million during the quarter and six months ended June 30, 2015.

Endurance ended the second quarter of 2016 with cash and invested assets of $8.6 billion, which represents a 3.0% decrease from December 31, 2015. Net operating cash inflow was $34.5 million for the six months ended June 30, 2016 versus $23.5 million for the same period in 2015.

Capitalization and Shareholders' Equity

At June 30, 2016, Endurance's shareholders' equity was $5.10 billion or $68.20 per diluted common share versus $5.12 billion or $65.48 per diluted common share at December 31, 2015. For the quarter and six months ended June 30, 2016, Endurance declared and paid common dividends of $0.38 and $0.76 per share, respectively.

On June 1, 2016, Endurance redeemed all 9,200,000 shares outstanding of its 7.5% Non-Cumulative Preferred Shares, Series B, for $230.0 million.

Earnings Call

Endurance will host a conference call on August 2, 2016 at 9:00 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (888) 417-8465 or (719) 325-2323 (international) and entering pass code: 181429. 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 16, 2016 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 181429.

The public may access a live broadcast of the conference call at the "Investor Relations" 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 2016 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, 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, 2015.

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 Annual report on Form 10-K 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.

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



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

      June 30,   December 31,
      2016   2015
Assets      
Cash and cash equivalents $ 1,092,977     $ 1,177,750  
Fixed maturity investments, trading, at fair value 2,126,600     1,587,160  
Fixed maturity investments, available for sale, at fair value 3,892,479     4,359,019  
Short-term investments, trading, at fair value 295,442     394,111  
Short-term investments, available for sale, at fair value 18,849     25,685  
Equity securities, trading, at fair value 36,332     15,229  
Equity securities, available for sale, at fair value 506,010     513,585  
Other investments 779,810     872,617  
Premiums receivable, net 2,291,117     1,376,328  
Insurance and reinsurance balances receivable 129,861     102,403  
Deferred acquisition costs 363,406     255,501  
Prepaid reinsurance premiums 885,892     498,574  
Reinsurance recoverable on unpaid losses 1,105,617     907,944  
Reinsurance recoverable on paid losses 348,219     288,026  
Accrued investment income 30,299     30,213  
Goodwill and intangible assets 511,649     553,960  
Deferred tax asset 52,722     64,164  
Net receivable on sales of investments 89,144     31,873  
Other assets 275,242     187,383  
Total Assets $ 14,831,667     $ 13,241,525  
           
Liabilities      
Reserve for losses and loss expenses $ 4,727,997     $ 4,510,415  
Reserve for unearned premiums 2,670,607     1,789,148  
Deposit liabilities 12,573     13,674  
Reinsurance balances payable 1,066,197     661,213  
Debt 705,261     717,650  
Net payable on purchases of investments 192,793     63,442  
Deferred tax liability 15,817     17,315  
Other liabilities 335,933     344,596  
Total Liabilities 9,727,178   8,117,453
           
Shareholders' Equity      
Preferred shares      
  Series B, non-cumulative - nil issued and outstanding (2015 - 9,200,000) -     9,200  
  Series C, non-cumulative - 9,200 issued and outstanding (2015 - 9,200) 9     9  
Common shares      
  67,565,483 issued and outstanding (2015 - 66,797,991) 67,565     66,798  
Additional paid-in capital 1,944,381     2,145,836  
Accumulated other comprehensive income (loss) 19,949     (46,634 )
Retained earnings 2,812,734     2,681,053  
Total Shareholders' Equity Available to the Company 4,844,638   4,856,262
Non-controlling interests 259,851     267,810  
Total Shareholders' Equity 5,104,489     5,124,072  
           
Total Liabilities and Shareholders' Equity $ 14,831,667     $ 13,241,525  
           
Book Value per Common Share      
Basic common shares outstanding 66,173,916     65,440,712  
Dilutive common shares outstanding 67,661,540     67,136,986  
Basic book value per common share [a] $ 69.73     $ 67.18  
Diluted book value per common share [a], [b] $ 68.20     $ 65.48  

Note: All financial information contained herein is unaudited, except the balance sheet data for the year ended December 31, 2015, which was derived from Endurance's audited financial statements.
[a] Excludes the $230.0 million at June 30, 2016 (December 31, 2015 - $460.0 million) liquidation value of the preferred shares.
[b] The Company has included diluted book value per common share because it takes into account the effect of dilutive securities; therefore, the Company believes it is a better measure of calculating shareholder returns than book value per common share.
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of United States dollars, except share and per share amounts)

    Three Months Ended   Six Months Ended
    June 30,   June 30,   June 30,   June 30,
    2016   2015   2016   2015
Revenues              
Gross premiums written $ 1,136,930     $ 861,184     $ 2,748,607     $ 2,162,616  
                 
Net premiums written $ 717,768     $ 559,083     $ 1,656,610     $ 1,324,037  
Change in unearned premiums (118,160 )   (100,948 )   (503,811 )   (476,043 )
                 
Net premiums earned 599,608   458,135   1,152,799     847,994  
Other underwriting income (loss) 930     1,389     (1,514 )   3,795  
Net investment income 43,977     32,252     55,158     74,113  
Net realized and unrealized gains 6,347     9,680     20,134     27,869  
Net impairment losses recognized in earnings (9,841 )   (424 )   (10,464 )   (1,073 )
Total revenues 641,021   501,032   1,216,113     952,698  
                 
Expenses              
Net losses and loss expenses 376,112     239,122     619,440     411,058  
Acquisition expenses 111,961     84,971     215,803     167,064  
General and administrative expenses 55,079     54,965     127,304     109,855  
Corporate expenses 11,830     12,634     23,601     24,902  
Amortization of intangibles 20,943     1,579     42,317     3,178  
Net foreign exchange (gains) losses (32,751 )   12,981     (44,480 )   20,533  
Interest expense 11,357     9,062     22,227     18,121  
Total expenses 554,531   415,314   1,006,212     754,711  
                 
Income before income taxes 86,490   85,718   209,901     197,987  
Income tax benefit (expense) 1,138     (1,512 )   2,371     (5,302 )
Net income 87,628   84,206   212,272     192,685  
                 
Net income attributable to non-controlling interests (3,714 )   -     (12,777 )   -  
                 
Net income available to the Company 83,914     84,206     199,495     192,685  
                 
Preferred dividends (7,293 )   (8,188 )   (16,496 )   (16,376 )
                 
Net income available to common and participating common shareholders $ 76,621     $ 76,018     $ 182,999     $ 176,309  
               
Per share data              
Basic earnings per common share $ 1.14     $ 1.69     $ 2.72     $ 3.92  
Diluted earnings per common share $ 1.14     $ 1.68     $ 2.72     $ 3.91  




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

      Three Months Ended June 30, 2016  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 593,706     $ 543,224     $ 1,136,930    
  Ceded premiums written   (354,104 )   (65,058 )   (419,162 )  
  Net premiums written   239,602     478,166     717,768    
  Net premiums earned   253,784     345,824     599,608    
  Other underwriting income   -     930     930    
  Total underwriting revenues   253,784     346,754     600,538    
                 
  Expenses              
  Net losses and loss expenses   173,858     202,254     376,112    
  Acquisition expenses   32,868     79,093     111,961    
  General and administrative expenses   29,825     25,254     55,079    
      236,551     306,601     543,152    
  Underwriting income   $ 17,233     $ 40,153     57,386    
                 
  Net investment income           43,977    
  Corporate expenses           (11,830 )  
  Interest expense           (11,357 )  
  Amortization of intangibles           (20,943 )  
  Net foreign exchange gains           32,751    
  Net realized and unrealized gains           6,347    
  Net impairment losses recognized in earnings           (9,841 )  
  Income before income taxes           $ 86,490    
                 
  Net loss ratio   68.4 %   58.5 %   62.7 %  
  Acquisition expense ratio   13.0 %   22.9 %   18.7 %  
  General and administrative expense ratio   11.8 %   7.3 %   11.2 % [a]
  Combined ratio   93.2 %   88.7 %   92.6 %  

[a] The total 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)

      Three Months Ended June 30, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 468,866     $ 392,318     $ 861,184    
  Ceded premiums written   (278,567 )   (23,534 )   (302,101 )  
  Net premiums written   190,299     368,784     559,083    
  Net premiums earned   201,460     256,675     458,135    
  Other underwriting income   -     1,389     1,389    
  Total underwriting revenues   201,460     258,064     459,524    
                 
  Expenses              
  Net losses and loss expenses   145,483     93,639     239,122    
  Acquisition expenses   17,702     67,269     84,971    
  General and administrative expenses   28,567     26,398     54,965    
      191,752     187,306     379,058    
  Underwriting income   $ 9,708     $ 70,758     80,466    
                 
  Net investment income           32,252    
  Corporate expenses           (12,634 )  
  Interest expense           (9,062 )  
  Amortization of intangibles           (1,579 )  
  Net foreign exchange losses           (12,981 )  
  Net realized and unrealized gains           9,680    
  Net impairment losses recognized in earnings           (424 )  
  Income before income taxes           $ 85,718    
                 
  Net loss ratio   72.2 %   36.5 %   52.2 %  
  Acquisition expense ratio   8.8 %   26.2 %   18.5 %  
  General and administrative expense ratio   14.2 %   10.3 %   14.8 % [a]
  Combined ratio   95.2 %   73.0 %   85.5 %  

[a] The total 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)

      Six Months Ended June 30, 2016  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,428,823     $ 1,319,784     $ 2,748,607    
  Ceded premiums written   (818,277 )   (273,720 )   (1,091,997 )  
  Net premiums written   610,546     1,046,064     1,656,610    
  Net premiums earned   473,353     679,446     1,152,799    
  Other underwriting loss   -     (1,514 )   (1,514 )  
  Total underwriting revenues   473,353     677,932     1,151,285    
                 
  Expenses              
  Net losses and loss expenses   301,661     317,779     619,440    
  Acquisition expenses   63,226     152,577     215,803    
  General and administrative expenses   68,254     59,050     127,304    
      433,141     529,406     962,547    
  Underwriting income   $ 40,212     $ 148,526     188,738    
                 
  Net investment income           55,158    
  Corporate expenses           (23,601 )  
  Interest expense           (22,227 )  
  Amortization of intangibles           (42,317 )  
  Net foreign exchange gains           44,480    
  Net realized and unrealized gains           20,134    
  Net impairment losses recognized in earnings           (10,464 )  
  Income before income taxes           $ 209,901    
                 
  Net loss ratio   63.7 %   46.7 %   53.7 %  
  Acquisition expense ratio   13.4 %   22.5 %   18.7 %  
  General and administrative expense ratio   14.4 %   8.7 %   13.1 % [a]
  Combined ratio   91.5 %   77.9 %   85.5 %  

[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)

      Six Months Ended June 30, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,205,084     $ 957,532     $ 2,162,616    
  Ceded premiums written   (710,746 )   (127,833 )   (838,579 )  
  Net premiums written   494,338     829,699     1,324,037    
  Net premiums earned   337,324     510,670     847,994    
  Other underwriting income   -     3,795     3,795    
  Total underwriting revenues   337,324     514,465     851,789    
                 
  Expenses              
  Net losses and loss expenses   219,995     191,063     411,058    
  Acquisition expenses   33,585     133,479     167,064    
  General and administrative expenses   57,409     52,446     109,855    
      310,989     376,988     687,977    
  Underwriting income   $ 26,335     $ 137,477     163,812    
                 
  Net investment income           74,113    
  Corporate expenses           (24,902 )  
  Interest expense           (18,121 )  
  Amortization of intangibles           (3,178 )  
  Net foreign exchange losses           (20,533 )  
  Net realized and unrealized gains           27,869    
  Net impairment losses recognized in earnings           (1,073 )  
  Income before income taxes           $ 197,987    
                 
  Net loss ratio   65.2 %   37.4 %   48.5 %  
  Acquisition expense ratio   10.0 %   26.1 %   19.7 %  
  General and administrative expense ratio   17.0 %   10.3 %   15.9 % [a]
  Combined ratio   92.2 %   73.8 %   84.1 %  

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



ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS

As Reported                          
                               
        Three Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   68.4 %   72.2 %   58.5 %   36.5 %   62.7 %   52.2 %  
  Acquisition expense ratio   13.0 %   8.8 %   22.9 %   26.2 %   18.7 %   18.5 %  
  General and administrative expense ratio   11.8 %   14.2 %   7.3 %   10.3 %   11.2 % [a] 14.8 % [a]
  Combined ratio [b]   93.2 %   95.2 %   88.7 %   73.0 %   92.6 %   85.5 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Three Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   9.5 %   9.2 %   10.0 %   15.7 %   9.8 %   12.8 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Three Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   77.9 %   81.4 %   68.5 %   52.2 %   72.5 %   65.0 %  
  Acquisition expense ratio   13.0 %   8.8 %   22.9 %   26.2 %   18.7 %   18.5 %  
  General and administrative expense ratio   11.8 %   14.2 %   7.3 %   10.3 %   11.2 % [a] 14.8 % [a]
  Combined ratio [b]   102.7 %   104.4 %   98.7 %   88.7 %   102.4 %   98.3 %  
                               
[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                          
                               
        Six Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   63.7 %   65.2 %   46.7 %   37.4 %   53.7 %   48.5 %  
  Acquisition expense ratio   13.4 %   10.0 %   22.5 %   26.1 %   18.7 %   19.7 %  
  General and administrative expense ratio   14.4 %   17.0 %   8.7 %   10.3 %   13.1 % [a] 15.9 % [a]
  Combined ratio [b]   91.5 %   92.2 %   77.9 %   73.8 %   85.5 %   84.1 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Six Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   10.0 %   11.6 %   10.6 %   15.0 %   10.4 %   13.7 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Six Months Ended June 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   73.7 %   76.8 %   57.3 %   52.4 %   64.1 %   62.2 %  
  Acquisition expense ratio   13.4 %   10.0 %   22.5 %   26.1 %   18.7 %   19.7 %  
  General and administrative expense ratio   14.4 %   17.0 %   8.7 %   10.3 %   13.1 % [a] 15.9 % [a]
  Combined ratio [b]   101.5 %   103.8 %   88.5 %   88.8 %   95.9 %   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.
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 June 30, 2016 and 2015:

    Three Months Ended   Three Months Ended
    June 30, 2016   June 30, 2015
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 66,922     $ (2,962 )   $ 112,012     $ 22,677  
  Casualty and other specialty 178,081     77,965     146,056     65,302  
  Professional lines 122,679     51,204     96,736     43,443  
  Property, marine/energy and
aviation
226,024     113,395     114,062     58,877  
  Subtotal Insurance $ 593,706     $ 239,602     $ 468,866     $ 190,299  
                 
Reinsurance              
  Catastrophe $ 236,995     $ 197,681     $ 139,833     $ 122,305  
  Property 30,646     31,304     30,560     30,118  
  Casualty 82,263     80,921     48,132     48,132  
  Professional lines 135,638     135,031     134,241     134,241  
  Specialty 57,682     33,229     39,552     33,988  
  Subtotal Reinsurance $ 543,224     $ 478,166     $ 392,318     $ 368,784  
                 
Total $ 1,136,930     $ 717,768     $ 861,184     $ 559,083  




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, 2016 and 2015:

    Six Months Ended   Six Months Ended
    June 30, 2016   June 30, 2015
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 563,138     $ 205,665     $ 628,928     $ 225,137  
  Casualty and other specialty 316,336     141,462     246,738     110,360  
  Professional lines 200,094     94,538     151,496     67,674  
  Property, marine and energy 349,255     168,881     177,922     91,167  
  Subtotal Insurance $ 1,428,823     $ 610,546     $ 1,205,084     $ 494,338  
                 
Reinsurance              
  Catastrophe $ 437,825     $ 286,549     $ 264,240     $ 175,765  
  Property 187,112     181,360     156,260     153,567  
  Casualty 180,983     179,640     106,230     106,230  
  Professional lines 184,187     183,251     178,098     178,098  
  Specialty 329,677     215,264     252,704     216,039  
  Subtotal Reinsurance $ 1,319,784     $ 1,046,064     $ 957,532     $ 829,699  
                 
Total $ 2,748,607     $ 1,656,610     $ 2,162,616     $ 1,324,037  




ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATIONS OF NON-GAAP MEASURES

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

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

Operating income per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income allocated to common shareholders (which 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.  Endurance believes that showing 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 per dilutive common share should not be viewed as substitutes for GAAP net income per dilutive common share.

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

ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATIONS OF NON-GAAP MEASURES

The following is a reconciliation of Endurance's net income, net income per diluted common share, net income allocated to common shareholders under the two-class method and annualized return on average common equity to operating income, operating income per diluted common share, operating income allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the three and six months ended June 30, 2016 and 2015:

(amounts expressed in thousands of United States dollars, except share, per share amounts and ratios) Quarter Ended   Six Months Ended
June 30,   June 30,
    2016   2015   2016   2015
Net income available to the Company $ 83,914     $ 84,206     $ 199,495     $ 192,685  
(Less) add items:              
  Net foreign exchange (gains) losses (32,751 )   12,981     (44,480 )   20,533  
  Net realized and unrealized gains (6,347 )   (9,680 )   (20,134 )   (27,869 )
  Net impairment losses recognized in earnings 9,841     424     10,464     1,073  
  Income tax expense (benefit) 7,434     (213 )   10,372     683  
Operating income before preferred dividends $ 62,091     $ 87,718     $ 155,717     $ 187,105  
  Preferred dividends (7,293 )   (8,188 )   (16,496 )   (16,376 )
Operating income allocated to common and              
  participating common shareholders $ 54,798     $ 79,530     $ 139,221     $ 170,729  
                 
Operating income allocated to common              
  shareholders under the two-class method $ 53,629     $ 77,152     $ 136,171     $ 165,657  
                 
Weighted average diluted common shares 66,057,210     43,896,721     65,875,270     43,792,626  
                 
Operating income per diluted common share [b] $ 0.81     $ 1.76     $ 2.07     $ 3.78  
                 
Average common equity [a] $ 4,568,998     $ 2,858,876     $ 4,514,404     $ 2,829,445  
                 
Operating return on average common equity 1.2 %   2.8 %   3.1 %   6.0 %
                 
Annualized operating return on average common equity 4.8 %   11.1 %   6.2 %   12.1 %
                 
Net income available to the Company $ 83,914     $ 84,206     $ 199,495     $ 192,685  
  Preferred dividends (7,293 )   (8,188 )   (16,496 )   (16,376 )
Net income available to common and              
  participating common shareholders $ 76,621     $ 76,018     $ 182,999     $ 176,309  
                 
Net income allocated to common shareholders              
  under the two-class method $ 74,987     $ 73,745     $ 178,991     $ 171,072  
                 
Net income per diluted common share [b] $ 1.14     $ 1.68     $ 2.72     $ 3.91  
                 
Return on average common equity, Net income 1.7 %   2.7 %   4.1 %   6.2 %
               
Annualized return on average common equity, Net income 6.7 %   10.6 %   8.1 %   12.5 %

[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 $230.0 million at June 30, 2016 (December 31, 2015 - $460.0 million; June 30, 2015 - $430.0 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 OF NON-GAAP MEASURES

Net negative financial impact includes the sum of net losses and loss expenses, reinstatement premiums assumed and ceded and non-controlling interests related to specific catastrophe events occurring in the current periods.  The Company believes that showing the net negative financial impact of the catastrophe related events enables investors, analysts, rating agencies and other users of its financial information to more easily analyze the Company's results of operations in a manner similar to that used by management to analyze the Company's underlying business performance.

The following is a reconciliation of Endurance's net losses and loss expenses, net reinstatement premiums and non-controlling interest related to catastrophe events occurring in the second quarter and six months ended June 30, 2016 to the net negative financial impact (non-GAAP measure) of these events on net income available to the Company for the three and six months ended June 30, 2016:

(amounts expressed in thousands of United States dollars, except ratio)   For the three months ended June 30, 2016 For the six months ended June 30, 2016
    Catastrophe Impact Net loss ratio impact Catastrophe Impact Net loss ratio impact
           
Net losses and loss expenses   $ 73,583     $ 79,907    
Less: net reinstatement premiums   11,051     11,155    
Net negative financial impact on net income   62,532   11.3 % 68,752   6.4 %
Less: net negative financial impact attributable to non-controlling interest   7,017     7,113    
Net negative financial impact on net income available to the Company   $ 55,515     $ 61,639    

Total investment return is calculated by dividing net investment income, net realized and unrealized gains, net impairment losses recognized in earnings, and net increase in unrealized gains included in other comprehensive income before deferred tax offsets by average invested assets at fair value. The Company utilizes and presents the total investment return in order to better disclose the performance of the Company's investments and to show the components of the Company's ROE.

The following is a reconciliation of Endurance's net investment income, net realized and unrealized gains, net impairment losses recognized in earnings and net increase in unrealized gains included in other comprehensive income before deferred tax offsets to total investment income and total investment return (non-GAAP measures) for the three and six months ended June 30, 2016:

(amounts expressed in thousands of United States dollars) Three Months Ended June 30,   Six Months Ended June 30,
2016   2015   2016   2015
   
Net investment income $ 43,977     $ 32,252     $ 55,158     $ 74,113  
Net realized and unrealized gains 6,347     9,680     20,134     27,869  
Net impairment losses recognized in earnings (9,841 )   (424 )   (10,464 )   (1,073 )
Net increase in unrealized gains included in other comprehensive income, before deferred tax offsets 58,837     (66,979 )   116,595     (42,490 )
Total investment income $ 99,320     $ (25,471 )   $ 181,423     $ 58,419  
               
Average invested assets and cash at fair value [a] 8,746,617     6,517,682     8,779,219     6,581,596  
               
Total investment return 1.14 %   (0.39 )%   2.07 %   0.89 %

[a] Average invested assets and cash at fair value includes total trading, available for sale and other investments, cash and cash equivalents, net receivable on sales of investments and net payable on purchase of investments.

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HUG#2032400