ENDURANCE SPECIALTY HOLDINGS LTD - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 27, 2011

Exhibit 99.1

		Contact
		Investor Relations
		Phone: (441) 278-0988
		Email: investorrelations@endurance.bm

ENDURANCE REPORTS SECOND QUARTER 2011 FINANCIAL RESULTS

PEMBROKE, Bermuda — July 26, 2011 — Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income of $41.1 million and $0.87 per diluted common share for the second quarter of 2011 versus net income of $58.6 million and $0.97 per diluted common share in the second quarter of 2010. For the six months ended June 30, 2011, Endurance reported a net loss of $46.3 million and $1.36 per diluted common share versus net income of $114.4 million and $1.88 per diluted common share for the six months ended June 30, 2010. Book value per diluted share was $52.20 at June 30, 2011, an increase of 1.3% for the quarter and 9.3% for the last twelve months.

Operating highlights for the quarter ended June 30, 2011 were as follows:

•

Net premiums written of $441.8 million, a decrease of 2.0% over the same period in 2010;

•

Combined ratio of 101.9%, which included 12.8 percentage points of catastrophe losses, offset in part by 9.2 percentage points of favorable prior year loss reserve development;

•

Net investment income of $39.8 million, an increase of $6.5 million over the same period in 2010;

•

Operating income, which excludes after-tax realized and unrealized investment gains and losses and foreign exchange gains and losses, of $24.5 million and $0.48 per diluted common share; and

•

Operating return on average common equity for the quarter of 0.9%, or 3.7% on an annualized basis.

Operating highlights for the six months ended June 30, 2011 were as follows:

•

Net premiums written of $1,240.6 million, an increase of 7.5% over the same period in 2010;

•

Combined ratio of 118.4%, which included 29.0 percentage points of catastrophe losses, offset in part by 10.8 percentage points of favorable prior year loss reserve development;

•

Net investment income of $92.3 million, an increase of $2.5 million over the same period in 2010;

•

Operating loss, which excludes after-tax realized and unrealized investment gains and losses and foreign exchange gains and losses, of $72.2 million and $2.00 per diluted common share; and

•

Operating return on average common equity for the first half of the year of negative 3.3%, or negative 6.5% on an annualized basis.

David Cash, Chief Executive Officer, commented, “I am pleased with how Endurance has performed in the face of low investment yields, continued frequency of severe catastrophe losses around the world, and severe drought conditions in the Southwest United States. Our well diversified portfolio, quality underwriting and risk management and prudent capital management have enabled us to maintain our capital strength and grow our book value per share 9.3% over the last 12 months.”

Insurance Segment

Operating highlights for Endurance’s Insurance segment for the quarter ended June 30, 2011 were as follows:

•

Net premiums written of $173.5 million, a decrease of 11.0% from the second quarter of 2010;

•

Combined ratio of 97.6%, an increase of 3.5 percentage points from the second quarter of 2010; and

•

Favorable prior year loss reserve development of 9.3 percentage points during the current period, compared to 3.6 percentage points of favorable prior year loss reserve development in the second quarter of 2010.

Operating highlights for Endurance’s Insurance segment for the six months ended June 30, 2011 were as follows:

•

Net premiums written of $605.8 million, an increase of 11.4% from the same period in 2010;

•

Combined ratio of 96.0%, an increase of 2.8 percentage points from the same period in 2010; and

•

Favorable prior year loss reserve development of 14.0 percentage points during the current period, compared to 6.9 percentage points of favorable prior year loss reserve development in the same period in 2010.

Second quarter net premiums written in the Insurance segment declined as lower premiums in the property, professional and healthcare lines of business were partially offset by increased premiums in the casualty line of business which benefited from growth in our recently launched Contract Binding Authority unit. The decline in net premiums written in the property, professional and healthcare lines of business was driven by increased competition in those lines of business, which led to either non-renewal of the business or a move to higher policy attachment points. For the six months ended June 30, 2011, net premiums written increased primarily as a result of increased commodity prices in the agriculture line and growth in casualty premiums, partially offset by declines in the property and professional lines of business.

The increase in the Insurance segment combined ratios in the second quarter and first six months of 2011 compared to the same periods in 2010 resulted from higher net loss and general and administrative expense ratios, partially offset by an improvement in the acquisition expense ratios. The 2011 Insurance segment net loss ratios were higher than the net loss ratios in the corresponding 2010 periods primarily due to storm and flood losses in the property insurance line of business and from higher expected losses in our agriculture line of business due to the current drought in the Southwest United States and the excess moisture in the Midwest United States in the spring. These losses were partially offset by higher levels of favorable prior year reserve development. The current quarter combined ratio benefitted from 9.3 percentage points of favorable loss reserve development compared to 3.6 percentage points of favorable development in the second quarter of 2010. For the first six months of 2011, the combined ratio benefitted from 14.0 percentage points of favorable loss development compared to 6.9 percentage points for the first six months of 2010. Favorable development for both periods was driven primarily by the short tail and other lines of business, as claims did not occur as originally expected.

The current periods’ general and administrative expense ratios increased compared to 2010, as Endurance is investing in several new insurance lines of business, which requires higher initial expenses compared to revenues. The acquisition expense ratios in both periods in 2011 are lower than the same periods in 2010 as the agriculture line of business comprises a greater portion of earned premiums and has lower related acquisition costs.

Reinsurance Segment

Operating highlights for Endurance’s Reinsurance segment for the quarter ended June 30, 2011 were as follows:

•

Net premiums written of $268.3 million, an increase of 4.9% from the second quarter of 2010;

•

Combined ratio of 106.4%, an increase of 18.5 percentage points from the second quarter of 2010; and

•

Favorable prior year loss reserve development of 9.1 percentage points during the current period, compared to 9.4 percentage points of favorable prior year loss reserve development in the second quarter of 2010.

Operating highlights for Endurance’s Reinsurance segment for the six months ended June 30, 2011 were as follows:

•

Net premiums written of $634.8 million, an increase of 4.1% from the same period in 2010;

•

Combined ratio of 138.5%, an increase of 44.2 percentage points from the same period in 2010; and

•

Favorable prior year loss reserve development of 7.8 percentage points during the current period, compared to 9.4 percentage points of favorable prior year loss reserve development in the same period in 2010.

The increase in net premiums written in the Reinsurance segment in the second quarter of 2011 and first six months of 2011 resulted primarily from growth in the property, catastrophe, and aerospace and marine lines of business, partially offset by declines in the casualty and surety and other lines of business compared to 2010. Within the property line of business, growth primarily resulted from positive premiums adjustments and new business underwritten in our Singapore and Zurich offices. Growth in our catastrophe premiums was driven predominantly from price increases in our U.S. exposed business at mid-year renewals. Current quarter casualty net premiums written declined 19.7% due to several contracts that were not renewed due to pricing, terms and conditions.

The Reinsurance segment’s combined ratio in the second quarter of 2011 increased compared to the second quarter of 2010 primarily due to $61.8 million or 26.5 percentage points in net losses from the United States tornadoes that occurred in April and May. The current period’s loss ratio benefitted from 9.1 percentage points of favorable loss reserve development compared to 9.4 percentage points in the second quarter of 2010.

For the first six months of 2011, the Reinsurance segment reported a combined ratio of 138.5% compared to 94.3% for the same period in 2010. The increase in the combined ratio was largely attributable to a greater frequency of catastrophe events in 2011, including the Australian floods and cyclone, the Japan and New Zealand earthquakes, and the spring tornadoes in the United States, which resulted in net losses of $250.8 million or 55.2 percentage points to the combined ratio. For the six months ended June 30, 2011, the net loss ratio benefitted from 7.8 percentage points of favorable loss reserve development compared to 9.4 percentage points in the first six months of 2010.

Investments

Endurance’s net investment income for the quarter ended June 30, 2011 was $39.8 million, an increase of $6.5 million or 19.5% as compared to the same period in 2010. Endurance’s net investment income for the six months ended June 30, 2011 was $92.3 million, an increase of $2.5 million or 2.8% as compared to the same period in 2010. During the second quarter and six months ended June 30, 2011, Endurance’s net investment income included mark to market gains of $1.2 million and $14.9 million, respectively, on its alternative investments and high yield loan funds included in other investments, as compared to mark to market losses of $7.0 million and gains of $10.0 million in the second quarter and first six months of 2010, respectively. Investment income generated from Endurance’s fixed maturity investments decreased by $1.9 million and $3.3 million for the three and six months ended June 30, 2011 compared to the same periods in 2010 due to lower reinvestment rates during the current periods and the short duration of the portfolio. The ending book yield on Endurance’s fixed maturity investments at June 30, 2011 was 2.93%, down from 3.13% at December 31, 2010.

Endurance’s fixed income investments, which comprised approximately 92.4% of Endurance’s investments as of June 30, 2011, maintained an average credit quality of AA as of June 30, 2011. Endurance recorded net realized investment gains of $21.5 million during the second quarter and $25.3 million of net realized gains for the first six months of 2011 compared to net realized investment gains of $2.7 million and $6.2 million during the second quarter and first six months of 2010.

Endurance ended the second quarter of 2011 with cash and invested assets of $6.4 billion, which represents a 2.9% increase from December 31, 2010. Net operating cash flow was $288.3 million for the six months ended June 30, 2011 versus $216.2 million for the same period in 2010.

Capitalization and Shareholders’ Equity

At June 30, 2011, Endurance’s shareholders’ equity was $2.67 billion or $52.20 per diluted common share versus $2.85 billion or $52.74 per diluted common share at December 31, 2010. During the second quarter, Endurance issued $230 million of 7.5% perpetual non-cumulative preferred shares.

Earnings Call

Endurance will host a conference call on July 27, 2011 at 8:30 a.m. Eastern time to discuss its financial results. The conference call can be accessed via telephone by dialing (800) 823-4842 (toll-free) or (913) 312-0852 (international) and entering pass code: 9424776. 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 10, 2011 by dialing (888) 203-1112 (toll-free) or (719) 457-0820 (international) and entering the pass code: 9424776.

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

A copy of Endurance’s financial supplement for the second quarter of 2011 will be available on Endurance’s website at www.endurance.bm shortly after the release of earnings.

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

About Endurance Specialty Holdings

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

Safe Harbor for Forward-Looking Statements

Some of the statements in this press release may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “should,” “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this press release for purposes of the U.S. federal securities laws or otherwise. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the Private Securities Litigation Reform Act of 1995.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, the effects of competitors’ pricing policies, greater frequency or severity of claims and loss activity, changes in market conditions in the agriculture insurance industry, termination of or changes in the terms of the U.S. multiple peril crop insurance program, a decreased demand for property and casualty insurance or reinsurance, changes in the availability, cost or quality of reinsurance or retrocessional coverage, our inability to renew business previously underwritten or acquired, our inability to maintain our applicable financial strength ratings, our inability to effectively integrate acquired operations, uncertainties in our reserving process, changes to our tax status, changes in insurance regulations, reduced acceptance of our existing or new products and services, a loss of business from and credit risk related to our broker counterparties, assessments for high risk or otherwise uninsured individuals, possible terrorism or the outbreak of war, a loss of key personnel, political conditions, changes in insurance regulation, changes in accounting policies, our investment performance, the valuation of our invested assets, a breach of our investment guidelines, the unavailability of capital in the future, developments in the world’s financial and capital markets and our access to such markets, government intervention in the insurance and reinsurance industry, illiquidity in the credit markets, changes in general economic conditions and other factors described in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.

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

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED BALANCE SHEETS

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

		June 30,				December 31,
		2011				2010
Assets
Cash and cash equivalents		$	750,844			$	609,852
Fixed maturity investments, available for sale, at fair value			4,961,948				5,116,702
Short term investments, available for sale, at fair value			303,895				70,444
Equity securities, available for sale, at fair value			32,322				13,565
Other investments			395,078				376,652
Premiums receivable, net			1,154,480				827,609
Deferred acquisition costs			182,870				154,484
Securities lending collateral			84,652				59,886
Prepaid reinsurance premiums			198,708				107,977
Losses recoverable			369,081				319,349
Accrued investment income			31,189				32,934
Goodwill and intangible assets			186,835				181,954
Deferred tax assets			38,144				33,684
Receivable on pending investment sales			3,685				602
Other assets			66,309				73,711
Total Assets		$	8,760,040			$	7,979,405
Liabilities
Reserve for losses and loss expenses		$	3,748,124			$	3,319,927
Reserve for unearned premiums			1,304,146				842,154
Net deposit liabilities			30,300				32,505
Securities lending payable			84,652				59,886
Reinsurance balances payable			209,548				228,860
Debt			528,540				528,411
Payable on pending investment purchases			80,532				—
Other liabilities			103,922				119,509
Total Liabilities			6,089,764				5,131,252
Shareholders’ Equity
Preferred shares
Series A, non-cumulative — 8,000,000 issued and outstanding (2010 — 8,000,000)			8,000				8,000
Series B, non-cumulative — 9,200,000 issued and outstanding (2010 — Nil)			9,200				—
Common shares
40,509,263 issued and outstanding (2010 — 47,218,468)			40,509				47,218
Additional paid-in capital			509,165				613,915
Accumulated other comprehensive income			141,140				138,571
Retained earnings			1,962,262				2,040,449
Total Shareholders’ Equity			2,670,276				2,848,153
Total Liabilities and Shareholders’ Equity		$	8,760,040			$	7,979,405
Book Value per Common Share
Dilutive common shares outstanding			42,917,394				50,210,614
Diluted book value per common share[a]		$	52.20			$	52.74

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED STATEMENTS OF INCOME

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

		Quarter Ended								For the Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2011				2010				2011				2010
Revenues
Gross premiums written		$	502,924			$	489,568			$	1,503,282			$	1,308,437
Net premiums written		$	441,758			$	450,803			$	1,240,630			$	1,153,745
Change in unearned premiums			44,820				5,592				(371,219	)			(332,161	)
Net premiums earned			486,578				456,395				869,411				821,584
Other underwriting income (loss)			1,088				(2,663	)			19				(2,368	)
Net investment income			39,842				33,351				92,343				89,830
Net realized and unrealized investment gains			21,532				2,657				25,307				6,201
Total other-than-temporary impairment losses			(484	)			(738	)			(1,740	)			(1,507	)
Portion of loss recognized in accumulated other comprehensive income			(448	)			(254	)			(839	)			(346	)
Net impairment losses recognized in earnings			(932	)			(992	)			(2,579	)			(1,853	)
Total revenues			548,108				488,748				984,501				913,394
Expenses
Losses and loss expenses			361,970				292,947				763,823				525,544
Acquisition expenses			67,887				66,708				133,505				130,652
General and administrative expenses			65,886				55,676				131,847				114,641
Amortization of intangibles			3,026				2,588				5,824				5,176
Net foreign exchange losses (gains)			3,348				129				(3,570	)			6,100
Interest expense			9,057				9,050				18,111				16,658
Total expenses			511,174				427,098				1,049,540				798,771
Income before income taxes			36,934				61,650				(65,039	)			114,623
Income tax benefit (expense)			4,143				(3,057	)			18,699				(241	)
Net income (loss)			41,077				58,593				(46,340	)			114,382
Preferred dividends			(3,875	)			(3,875	)			(7,750	)			(7,750	)
Net income (loss) available (attributable) to common and participating common shareholders		$	37,202			$	54,718			$	(54,090	)		$	106,632
Per share data
Basic earnings (losses) per common share		$	0.92			$	1.02			$	(1.36	)		$	1.97
Diluted earnings (losses) per common share		$	0.87			$	0.97			$	(1.36	)		$	1.88

ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

		For the quarter ended June 30, 2011
		Insurance				Reinsurance				Totals
Revenues
Gross premiums written		$	225,750			$	277,174			$	502,924
Ceded premiums written			(52,244	)			(8,922	)			(61,166	)
Net premiums written			173,506				268,252				441,578
Net premiums earned			249,397				237,181				486,578
Other underwriting income			—				1,088				1,088
Total underwriting revenues			249,397				238,269				487,666
Expenses
Net losses and loss expenses			191,396				170,574				361,970
Acquisition expenses			15,861				52,026				67,887
General and administrative expenses			36,227				29,659				65,886
			243,484				252,259				495,743
Underwriting income (loss)		$	5,913			$	(13,990	)		$	(8,077	)
Net loss ratio			76.7	%			71.9	%			74.4	%
Acquisition expense ratio			6.4	%			22.0	%			14.0	%
General and administrative expense ratio			14.5	%			12.5	%			13.5	%
Combined ratio			97.6	%			106.4	%			101.9	%

ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

		For the quarter ended June 30, 2010
		Insurance				Reinsurance				Totals
Revenues
Gross premiums written		$	231,626			$	257,942			$	489,568
Ceded premiums written			(36,639	)			(2,126	)			(38,765	)
Net premiums written			194,987				255,816				450,803
Net premiums earned			227,858				228,537				456,395
Other underwriting loss			—				(2,663	)			(2,663	)
Total underwriting revenues			227,858				225,874				453,732
Expenses
Net losses and loss expenses			170,773				122,174				292,947
Acquisition expenses			16,554				50,154				66,708
General and administrative expenses			27,146				28,530				55,676
			214,473				200,858				415,331
Underwriting income		$	13,385			$	25,016			$	38,401
Net loss ratio			74.9	%			53.5	%			64.2	%
Acquisition expense ratio			7.3	%			21.9	%			14.6	%
General and administrative expense ratio			11.9	%			12.5	%			12.2	%
Combined ratio			94.1	%			87.9	%			91.0	%

ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

		For the six months ended June 30, 2011
		Insurance				Reinsurance				Totals
Revenues
Gross premiums written		$	851,581			$	651,701			$	1,503,282
Ceded premiums written			(245,779	)			(16,873	)			(262,652	)
Net premiums written			605,802				634,828				1,240,630
Net premiums earned			411,889				457,522				869,411
Other underwriting income			—				19				19
Total underwriting revenues			411,889				457,541				869,430
Expenses
Net losses and loss expenses			290,232				473,591				763,823
Acquisition expenses			32,169				101,336				133,505
General and administrative expenses			73,033				58,814				131,847
			395,434				633,741				1,029,175
Underwriting income (loss)		$	16,455			$	(176,200	)		$	(159,745	)
Net loss ratio			70.5	%			103.5	%			87.9	%
Acquisition expense ratio			7.8	%			22.1	%			15.4	%
General and administrative expense ratio			17.7	%			12.9	%			15.1	%
Combined ratio			96.0	%			138.5	%			118.4	%

ENDURANCE SPECIALTY HOLDINGS LTD.

RESULTS BY SEGMENT

(in thousands of United States dollars)

		For the six months ended June 30, 2010
		Insurance				Reinsurance				Totals
Revenues
Gross premiums written		$	695,967			$	612,470			$	1,308,437
Ceded premiums written			(152,039	)			(2,653	)			(154,692	)
Net premiums written			543,928				609,817				1,153,745
Net premiums earned			373,534				448,050				821,584
Other underwriting loss			(2	)			(2,366	)			(2,368	)
Total underwriting revenues			373,532				445,684				819,216
Expenses
Net losses and loss expenses			256,857				268,687				525,544
Acquisition expenses			33,980				96,672				130,652
General and administrative expenses			57,267				57,374				114,641
			348,104				422,733				770,837
Underwriting income		$	25,428			$	22,951			$	48,379
Net loss ratio			68.8	%			59.9	%			64.0	%
Acquisition expense ratio			9.1	%			21.6	%			15.9	%
General and administrative expense ratio			15.3	%			12.8	%			13.9	%
Combined ratio			93.2	%			94.3	%			93.8	%

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

		For the quarter ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			76.7	%			74.9	%			71.9	%			53.5	%			74.4	%			64.2	%
Acquisition expense ratio			6.4	%			7.3	%			22.0	%			21.9	%			14.0	%			14.6	%
General and administrative expense ratio			14.5	%			11.9	%			12.5	%			12.5	%			13.5	%			12.2	%
Combined ratio			97.6	%			94.1	%			106.4	%			87.9	%			101.9	%			91.0	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

		For the quarter ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			9.3	%			3.6	%			9.1	%			9.4	%			9.2	%			6.5	%

Net of Prior Year Net Loss Reserve Development

		For the quarter ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			86.0	%			78.5	%			81.0	%			62.9	%			83.6	%			70.7	%
Acquisition expense ratio			6.4	%			7.3	%			22.0	%			21.9	%			14.0	%			14.6	%
General and administrative expense ratio			14.5	%			11.9	%			12.5	%			12.5	%			13.5	%			12.2	%
Combined ratio			106.9	%			97.7	%			115.5	%			97.3	%			111.1	%			97.5	%

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, net of prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

ENDURANCE SPECIALTY HOLDINGS LTD.

CONSOLIDATED FINANCIAL RATIOS

As Reported

		For the six months ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			70.5	%			68.8	%			103.5	%			59.9	%			87.9	%			64.0	%
Acquisition expense ratio			7.8	%			9.1	%			22.1	%			21.6	%			15.4	%			15.9	%
General and administrative expense ratio			17.7	%			15.3	%			12.9	%			12.8	%			15.1	%			13.9	%
Combined ratio			96.0	%			93.2	%			138.5	%			94.3	%			118.4	%			93.8	%

Effect of Prior Year Net Loss Reserve Development

Favorable / (Unfavorable)

		For the six months ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			14.0	%			6.9	%			7.8	%			9.4	%			10.8	%			8.3	%

Net of Prior Year Net Loss Reserve Development

		For the six months ended June 30
		Insurance								Reinsurance								Total
		2011				2010				2011				2010				2011				2010
Net loss ratio			84.5	%			75.7	%			111.3	%			69.3	%			98.7	%			72.3	%
Acquisition expense ratio			7.8	%			9.1	%			22.1	%			21.6	%			15.4	%			15.9	%
General and administrative expense ratio			17.7	%			15.3	%			12.9	%			12.8	%			15.1	%			13.9	%
Combined ratio			110.0	%			100.1	%			146.3	%			103.7	%			129.2	%			102.1	%

The combined ratio is the sum of the loss, acquisition expense and general and administrative expense ratios. Endurance presents the combined ratio as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information. The combined ratio, excluding prior year net loss reserve development, enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of underwriting activities in a manner similar to how management analyzes Endurance’s underlying business performance. The combined ratio, excluding prior year net loss reserve development, should not be viewed as a substitute for the combined ratio.

ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

The following tables show Endurance’s gross and net premiums written for the quarters and six months ended June 30, 2011 and 2010:

		Quarter Ended June 30, 2011								Quarter Ended June 30, 2010
		Gross Premiums				Net Premiums				Gross Premiums				Net Premiums
		Written				Written				Written				Written
Insurance
Agriculture		$	57,125			$	46,049			$	54,170			$	45,169
Professional lines			49,181				37,624				56,567				49,422
Casualty			63,178				43,811				55,406				37,527
Property			35,904				25,996				43,158				40,950
Healthcare liability			20,454				20,115				22,442				22,031
Workers’ compensation			(92	)			(89	)			(117	)			(112	)
Subtotal Insurance		$	225,750			$	173,506			$	231,626			$	194,987
Reinsurance
Catastrophe		$	146,249			$	139,337			$	123,808			$	123,808
Casualty			45,619				45,617				56,919				56,831
Property			52,185				52,185				39,999				39,999
Aerospace and Marine			26,743				24,726				24,131				22,101
Surety and other specialty			6,378				6,387				13,085				13,077
Subtotal Reinsurance		$	277,174			$	268,252			$	257,942			$	255,816
Total		$	502,924			$	441,758			$	489,568			$	450,803

ENDURANCE SPECIALTY HOLDINGS LTD.

GROSS AND NET PREMIUMS WRITTEN BY SEGMENT

(in thousands of United States dollars)

		Six Months Ended June 30, 2011								Six Months Ended June 30, 2010
		Gross Premiums				Net Premiums				Gross Premiums				Net Premiums
		Written				Written				Written				Written
Insurance
Agriculture		$	565,830			$	392,521			$	404,369			$	313,276
Professional lines			84,650				68,748				90,075				77,024
Casualty			102,060				69,570				89,634				58,565
Property			60,594				38,581				69,681				55,038
Healthcare liability			38,591				36,521				42,758				40,554
Workers’ compensation			(144	)			(139	)			(550	)			(529	)
Subtotal Insurance		$	851,581			$	605,802			$	695,967			$	543,928
Reinsurance
Catastrophe		$	284,496			$	270,460			$	246,477			$	246,567
Casualty			161,971				161,171				164,893				164,094
Property			122,272				122,272				104,521				104,521
Aerospace and Marine			47,581				45,565				42,197				40,132
Surety and other Specialty			35,381				35,360				54,382				54,503
Subtotal Reinsurance		$	651,701			$	634,828			$	612,470			$	609,817
Total		$	1,503,282			$	1,240,630			$	1,308,437			$	1,153,745

ENDURANCE SPECIALTY HOLDINGS LTD.

RECONCILIATIONS

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

The following is a reconciliation of Endurance’s net income (loss), net income (loss) per diluted common share, net income (loss) allocated to common shareholders under the two-class method and annualized return on average common equity to operating income (loss), operating income (loss) per diluted common share, operating income (loss) 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 six months ended June 30, 2011 and 2010:

		Quarter Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
Net income (loss)		$	41,077			$	58,593			$	(46,340	)		$	114,382
Add (Less) after-tax items:
Net foreign exchange losses (gains)			3,181				97				(3,670	)			5,969
Net realized and unrealized investment (gains) losses			(20,717	)			(1,967	)			(24,739	)			(4,317	)
Net impairment losses recognized in earnings			932				992				2,579				1,853
Operating income (loss) before preferred dividends			24,473				57,715				(72,170	)			117,887
Preferred dividends			(3,875	)			(3,875	)			(7,750	)			(7,750	)
Operating income (loss) available (attributable) to common and participating common shareholders		$	20,598			$	53,840			$	(79,920	)		$	110,137
Operating income (loss) allocated to common shareholders under the two-class method		$	20,199			$	52,738			$	(80,436	)		$	108,019
Weighted average dilutive common shares			42,155,890				55,209,516				40,227,173				55,764,486
Operating income (loss) per diluted common share [b]		$	0.48			$	0.96			$	(2.00	)		$	1.94
Average common equity [a]		$	2,224,270			$	2,632,596			$	2,444,215			$	2,615,694
Operating return on average common equity			0.9	%			2.0	%			(3.3	)%			4.2	%
Annualized operating return on average common equity			3.7	%			8.2	%			(6.5	)%			8.4	%
Net income (loss)		$	41,077			$	58,593			$	(46,340	)		$	114,382
Preferred dividends			(3,875	)			(3,875	)			(7,750	)			(7,750	)
Net income (loss) available (attributable) to common and participating common shareholders		$	37,202			$	54,718			$	(54,090	)		$	106,632
Net income (loss) allocated to common shareholders under the two-class method		$	36,492			$	53,598			$	(54,606	)		$	104,581
Net income (loss) per diluted common share		$	0.87			$	0.97			$	(1.36	)		$	1.88
Return on average common equity, Net income (loss)			1.7	%			2.1	%			(2.2	)%			4.1	%
Annualized return on average common equity, Net income (loss)			6.7	%			8.3	%			(4.4	)%			8.2	%

Operating income (loss) and operating income (loss) per diluted common share are internal performance measures used by Endurance in the management of its operations. Operating income (loss) allocated to common shareholders (excludes unvested restricted shares outstanding which are considered participating) per diluted common share represents operating income (loss) divided by weighted average dilutive common shares, which has been calculated in accordance with the two-class method under U.S. GAAP. Operating income (loss) 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 (loss) and net income (loss) per dilutive common share determined in accordance with the two-class method under GAAP, Endurance believes that showing operating income (loss) and operating income (loss) per dilutive common share enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Endurance’s results of operations in a manner similar to how management analyzes Endurance’s underlying business performance. Operating income (loss) and operating income (loss) per dilutive common share should not be viewed as substitutes for GAAP net income (loss) and net income (loss) per dilutive common share, respectively.

Endurance presents return on equity as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.

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