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Endurance Reports Third Quarter 2015 Financial Results

PEMBROKE, Bermuda - November 2, 2015 - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $43.6 million and $0.73 per diluted common share for the third quarter of 2015 versus net income of $68.0 million and $1.52 per diluted common share for the third quarter of 2014.

For the nine months ended September 30, 2015, Endurance reported net income available to common shareholders of $219.9 million and $4.39 per diluted common share versus net income of $239.3 million and $5.36 per diluted common share for the nine months ended September 30, 2014.  Book value per diluted share was $65.02 at September 30, 2015, up 6.0% from December 31, 2014.

Acquisition of Montpelier

Endurance completed its acquisition of Montpelier Re Holdings Ltd. ("Montpelier") on July 31, 2015. As a result of the acquisition, Endurance's consolidated results of operations for the third quarter of 2015 include those of Montpelier from August 1, 2015 through September 30, 2015.  Endurance's third quarter and year to date results include $64.0 million and $68.5 million of one-time transaction and integration expenses associated with the acquisition of Montpelier.  In addition, Endurance recognized $350.8 million of identifiable intangible assets and $87.6 million of goodwill in connection with the acquisition of Montpelier.

Operating Highlights

Operating highlights for the quarter ended September 30, 2015 were as follows:

  • Gross premiums written of $642.6 million, an increase of 2.6% compared to the same period in 2014;
  • Net premiums written of $336.7 million, a decrease of 13.7% compared to the same period in 2014;
  • Combined ratio of 87.9%, which included 12.1 percentage points of favorable prior year loss reserve development, 3.8 percentage points of net catastrophe losses from 2015 events, and 11.5 percentage points of one-time corporate expenses related to the acquisition of Montpelier;
  • Net investment income of $16.5 million, a decrease of $8.8 million from the same period in 2014;
  • Operating income, excluding $64.0 million of one-time expenses related to the acquisition of Montpelier, of $111.6 million and $1.87 per diluted common share; and
  • Operating return on average common equity for the quarter, excluding one-time expenses related to the acquisition of Montpelier, of 3.1% or 12.3% on an annualized basis.

Operating highlights for the nine months ended September 30, 2015 were as follows:

  • Gross premiums written of $2,805.2 million, an increase of 13.4% over the same period in 2014;
  • Net premiums written of $1,660.7 million, a decrease of 2.3% over the same period in 2014;
  • Combined ratio of 85.6%, which included 13.0 percentage points of favorable prior year loss reserve development, 2.9 percentage points of current year catastrophe losses, 1.3 percentage points of large property and energy losses, and 4.9 percentage points of one-time corporate expenses related to the acquisition of Montpelier;
  • Net investment income of $90.6 million, a decrease of $15.0 million over the same period in 2014;
  • Operating income, excluding $68.5 million of expenses related to the acquisition of Montpelier, of $286.8 million and $5.73 per diluted common share; and
  • Operating return on average common equity for the first nine months of the year, excluding expenses related to the acquisition of Montpelier, of 9.3% or 12.4% on an annualized basis.

John R. Charman, Chairman and Chief Executive Officer, commented, "Against a backdrop of relentless global competition coupled with extremely challenging investment market conditions, I am very pleased with our ability to generate an attractive third quarter annualized operating return on equity, excluding one-time transaction costs, of 12.3%.  Our strong results ably reflect the high quality of our underwriting and risk management, our ongoing expense discipline as well as the benefits arising from a globally diversified specialty Insurance and Reinsurance platform.

In the third quarter we also completely integrated Montpelier's global staff and operations into Endurance and we are highly confident in our ability to materially exceed our originally planned expense savings. With the powerful combination of our two companies, we are very well positioned within the global marketplace to better serve our valued clients and distribution partners with both increased capacity and a larger, more diversified product offering across our wide distribution network.  The absolute transformation of Endurance over the last three years uniquely positions us to generate continuous, superior value for our shareholders despite the challenging market conditions."

Insurance Segment

Operating highlights for Endurance's Insurance segment for the quarter ended September 30, 2015 were as follows:

  • Gross premiums written of $448.6 million, an increase of 6.7% from the third quarter of 2014;
  • Net premiums written of $174.9 million, a decrease of 11.5% from the third quarter of 2014; and
  • Combined ratio of 83.5%, which included favorable prior year loss reserve development of 9.6 percentage points and net catastrophe losses from 2015 events of $5.1 million or 2.0 percentage points.

Operating highlights for Endurance's Insurance segment for the nine months ended September 30, 2015 were as follows:

  • Gross premiums written of $1,653.6 million, an increase of 18.6% from the same period in 2014;
  • Net premiums written of $669.3 million, a decrease of 7.0% from the same period in 2014; and
  • Combined ratio of 88.6%, which included favorable prior year loss reserve development of 10.8 percentage points, net catastrophe losses from 2015 events of $10.8 million or 1.8 percentage points and large property and energy losses of $16.0 million or 3.1 percentage points.

Gross premiums written in the Insurance segment increased $28.2 million and $259.5 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014 as underwriting investments made over the past 30 months continue to drive growth within casualty and other specialty, professional lines and property, marine and energy lines of business.  Partially offsetting this growth was a decline in the agriculture insurance line of business primarily due to lower commodity prices.

The non-agriculture insurance net premiums written increased $51.2 million and $125.8 million for the quarter and nine months ended September 30, 2015, compared to the same periods in 2014.  Net premiums written growth lagged that of gross premiums written due to greater levels of reinsurance purchased, which included quota share protection for individual lines of business as well as protection purchased across the entire portfolio of non-agriculture insurance business lines.  Within agriculture insurance, greater cessions to the federal government and increased purchases of third party reinsurance led to a decline in net premiums written of $73.9 million and $176.2 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014.

The Insurance segment combined ratio for the quarter ended September 30, 2015 improved 17.9 percentage points compared to the same period in 2014, driven by lower net loss and general and administrative expense ratios partially offset by a higher acquisition expense ratio.  The improvement in the net loss ratio largely reflects lower losses within agriculture insurance as the prior year was adversely impacted by significantly higher crop hail losses. The current quarter's net loss ratio also benefited from 9.6 percentage points of favorable loss reserve development compared to 8.0 percentage points in the third quarter of  2014. The current quarter's decline in the general and administrative expense ratio reflects higher ceding commissions received as a result of increased quota share reinsurance purchases.  The acquisition expense ratio increased in the current quarter as business lines with higher related acquisition costs accounted for a greater percentage of earned premiums than a year ago.  For the nine months ended September 30, 2015 compared to the same period in 2014, the combined ratio improved as lower net loss and general and administrative expense ratios were partially offset by a higher acquisition expense ratio.

Reinsurance Segment

Operating highlights for Endurance's Reinsurance segment for the quarter ended September 30, 2015 were as follows:

  • Gross premiums written of $194.0 million, a decrease of 5.7% from the third quarter of 2014;
  • Net premiums written of $161.8 million, a decrease of 16.0% from the third quarter of 2014; and
  • Combined ratio of 68.1%, which included favorable prior year loss reserve development of 13.9 percentage points and net catastrophe losses from 2015 events of $16.2 million or 5.1 percentage points.

Operating highlights for Endurance's Reinsurance segment for the nine months ended September 30, 2015 were as follows:

  • Gross premiums written of $1,151.6 million, an increase of 6.7% from the same period in 2014;
  • Net premiums written of $991.5 million, an increase of 1.1% from the same period in 2014; and
  • Combined ratio of 71.6%, which included favorable prior year loss reserve development of 14.6 percentage points and net catastrophe losses from 2015 events of $29.4 million or 3.6 percentage points.

Gross premiums written in the Reinsurance segment declined $11.7 million and grew $72.7 million for the quarter and nine months ended September 30, 2015 compared to the same periods in 2014.  For the third quarter of 2015, the decline was driven by reductions in property, catastrophe and specialty lines of business, partially offset by growth in casualty and professional lines.  The reduction in the catastrophe and property lines of business was driven by rate declines and by targeted non-renewals and line size reductions in response to the current competitive market.  Specialty lines declined due to targeted non-renewals and due to the timing of the recognition of premiums as the third quarter of 2014 included premium adjustments in agriculture with no similar premium adjustments in the third quarter of 2015.  Growth in the professional lines and casualty business lines predominantly resulted from new business, expansion of existing contracts at renewal and positive premium adjustments. For the nine months ended September 30, 2015, the growth in gross premiums was driven by growth in the casualty, specialty and professional lines of business, partially offset by declines in the catastrophe and property lines of business. 

For the quarter ended September 30, 2015, net premiums written decreased $30.7 million from a year ago as greater levels of proportional and aggregate excess of loss retrocessional coverage were purchased for the Company's catastrophe line of business and a whole account quota share retrocession contract was purchased for the majority of the specialty line of business.  For the nine months ended September 30, 2015, net premiums written increased $10.9 million from a year ago as growth in the casualty, specialty and professional lines of business, was largely offset by declines in catastrophe and property lines of business. 

The combined ratio in the Reinsurance segment for the third quarter of 2015 improved by 6.7 percentage points compared to the same period in 2014, due to lower acquisition and general and administrative expense ratios partially offset by a higher net loss ratio.  The 7.5 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.  The general and administrative expense ratio improved 2.0 percentage points in the third quarter of 2015 primarily as a result of expenses remaining flat on a higher earned premium base.

The net loss ratio increased by 2.8 percentage points in the current quarter compared to a year ago due to lower levels of favorable reserve development as the current quarter benefited from 13.9 percentage points of favorable reserve development compared to 15.4 percentage points a year ago.  In addition the current quarter's net loss ratio included 5.1 percentage points of attritional catastrophe losses while the third quarter of 2014 included 4.7 percentage points of catastrophe losses.

Investments

Endurance's net investment income for the quarter and nine months ended September 30, 2015 was $16.5 million and $90.6 million, a decrease of $8.8 million and $15.0 million, respectively, compared to the same periods in 2014.  The total return of Endurance's investment portfolio was (0.22)% and 0.59% for the quarter and nine months ended September 30, 2015, compared to (0.39)% and 2.38% for the quarter and nine months ended September 30, 2014.  Investment income generated from Endurance's trading and available for sale investments increased by $8.0 million and $9.4 million for the three and nine months ended September 30, 2015, compared to the same periods in 2014 due to an increase in invested assets.  During the quarter and nine months ended September 30, 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 $17.7 million and $1.8 million, as compared to losses of $1.8 million and gains of $22.5 million in the third quarter and the first nine months of 2014.  The ending book yield on Endurance's fixed maturity investments at September 30, 2015 was 2.03%, down from 2.22% at September 30, 2014.

At September 30, 2015, 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 2.63 years.  Endurance's available for sale portfolio was in a net unrealized gain position of $13.7 million at September 30, 2015, a decrease of $72.4 million from December 31, 2014.  Endurance recorded net realized and unrealized investment gains, net of impairments, of $5.0 million and $31.8 million during the third quarter and first nine months of 2015, compared to $9.7 million and $17.7 million during the third quarter and first nine months of 2014. 

Endurance ended the third quarter of 2015 with cash and invested assets of $8.9 billion, which represents a 34.8% increase from December 31, 2014.  Net operating cash outflow was $74.0 million for the nine months ended September 30, 2015 versus an inflow of $52.2 million for the same period in 2014.

Capitalization and Shareholders' Equity

At September 30, 2015, Endurance's shareholders' equity was $5.06 billion or $65.02 per diluted common share versus $3.19 billion or $61.33 per diluted common share at December 31, 2014.  For the quarter and nine months ended September 30, 2015, Endurance declared and paid common dividends of $0.35 and $1.05 per share, respectively.  Subsequent to September 30, 2015, Endurance repaid $198.5 million in senior notes that matured on October 15, 2015.

Earnings Call

Endurance will host a conference call on November 3, 2015 at 9:00 a.m. Eastern time to discuss its financial results.  The conference call can be accessed via telephone by dialing (888) 220-8451 or (913) 312-1482 (international) and entering pass code: 1907382.  Those who intend to participate in the conference call should register at least ten minutes in advance to ensure access to the call.  A telephone replay of the conference call will be available through November 17, 2015 by dialing (888) 203-1112 or (719) 457-0820 (international) and entering the pass code: 1907382.

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

A copy of Endurance's financial supplement for the third quarter of 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 one-time expenses related to the acquisition of Montpelier, 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 and energy 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 Quarterly Report on Form 10-Q for the quarter ended June 30, 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 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)

      September 30,   December 31,
      2015   2014
Assets      
Cash and cash equivalents $ 1,242,997     $ 745,472  
Fixed maturity investments, trading, at fair value 1,372,030     -  
Fixed maturity investments, available for sale, at fair value 4,656,145     5,092,581  
Short-term investments, trading, at fair value 348,582     -  
Short-term investments, available for sale, at fair value 16,356     9,014  
Equity securities, trading, at fair value 2,150     -  
Equity securities, available for sale, at fair value 496,035     331,368  
Other investments 842,446     541,454  
Premiums receivable, net 2,068,484     883,450  
Insurance and reinsurance balances receivable 115,047     122,214  
Deferred acquisition costs 282,975     207,368  
Prepaid reinsurance premiums 650,967     354,940  
Reinsurance recoverable on unpaid losses 830,116     670,795  
Reinsurance recoverable on paid losses 163,137     218,291  
Accrued investment income 31,057     27,183  
Goodwill and intangible assets 573,956     153,405  
Deferred tax asset 54,463     48,995  
Net receivable on sales of investments 85,911     38,877  
Other assets 195,981     199,375  
Total Assets $ 14,028,835     $ 9,644,782  
           
Liabilities      
Reserve for losses and loss expenses $ 4,489,836     $ 3,846,859  
Reserve for unearned premiums 2,230,552     1,254,519  
Deposit liabilities 13,489     15,136  
Reinsurance balances payable 794,935     375,711  
Debt 915,147     527,715  
Net payable on purchases of investments 157,671     151,682  
Deferred tax liability 18,346     -  
Other liabilities 352,515     287,978  
Total Liabilities 8,972,491   6,459,600
           
Shareholders' Equity      
Preferred shares      
  Series A, non-cumulative - 8,000,000 issued and outstanding (2014 - 8,000,000) 8,000     8,000  
  Series B, non-cumulative - 9,200,000 issued and outstanding (2014 - 9,200,000) 9,200     9,200  
Common shares      
  66,606,820 issued and outstanding (2014 - 44,765,153) 66,607     44,765  
Additional paid-in capital 2,108,447     598,226  
Accumulated other comprehensive (loss) income (8,544 )   76,706  
Retained earnings 2,613,160     2,448,285  
Total Shareholders' Equity Available to the Company 4,796,870   3,185,182
Non-controlling interests 259,474     -  
Total Shareholders' Equity 5,056,344     3,185,182  
           
Total Liabilities and Shareholders' Equity 14,028,835     9,644,782  
           
Book Value per Common Share      
Dilutive common shares outstanding 67,161,321     44,920,768  
Diluted book value per common share [a] $ 65.02     $ 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 $430 million liquidation value of the preferred shares.
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands of United States dollars, except share and per share amounts)

    Three Months Ended   Nine Months Ended
    September 30,   September 30,   September 30,   September 30,
    2015   2014   2015   2014
Revenues              
Gross premiums written $ 642,597     $ 626,110     $ 2,805,213     $ 2,473,050  
                 
Net premiums written $ 336,690     $ 390,106     $ 1,660,727     $ 1,700,238  
Change in unearned premiums 220,313     124,789     (255,730 )   (307,539 )
                 
Net premiums earned 557,003     514,895   1,404,997     1,392,699  
Other underwriting income (loss) 227     2,123     4,022     (3,939 )
Net investment income 16,533     25,357     90,646     105,649  
Net realized and unrealized gains 5,029     9,788     32,898     18,071  
Net impairment losses recognized in earnings (38 )   (102 )   (1,111 )   (411 )
                 
Total revenues 578,754   552,061   1,531,452     1,512,069  
                 
Expenses              
Net losses and loss expenses 263,993     290,269     675,051     726,361  
Acquisition expenses 90,457     93,392     257,521     244,150  
General and administrative expenses 60,793     68,946     170,648     186,759  
Corporate expenses [a] 74,308     11,969     99,210     53,817  
Amortization of intangibles 11,318     1,623     14,496     4,863  
Net foreign exchange losses 8,621     783     29,154     4,066  
Interest expense 12,324     13,127     30,445     31,910  
Total expenses 521,814   480,109   1,276,525     1,251,926  
                 
Income before income taxes 56,940   71,952   254,927     260,143  
Income tax (expense) benefit (2,410 )   4,282     (7,712 )   3,734  
Net income 54,530   76,234   247,215     263,877  
                 
Net income attributable to non-controlling interests (2,707 )   -     (2,707 )   -  
                 
Net income available to the Company 51,823     76,234     244,508     263,877  
                 
Preferred dividends (8,188 )   (8,188 )   (24,564 )   (24,564 )
                 
Net income available to common and participating common shareholders $ 43,635     $ 68,046     $ 219,944     $ 239,313  
               
Per share data              
Basic earnings per common share $ 0.73     $ 1.52     $ 4.41     $ 5.36  
Diluted earnings per common share $ 0.73     $ 1.52     $ 4.39     $ 5.36  

[a] The Company incurred $64.0 million and $68.5 million of corporate expenses in relation to the Company's acquisition of Montpelier for the quarter and nine months ended September 30, 2015.  For the quarter and nine months ended September 30, 2014, the Company incurred $2.3 million and $15.3 million of corporate expenses and $4.1 million and $4.8 million of interest expense, respectively, in relation to the Company's proposed acquisition of Aspen Insurance Holdings Limited.


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

      Three Months Ended September 30, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 448,563     $ 194,034     $ 642,597    
  Ceded premiums written   (273,626 )   (32,281 )   (305,907 )  
  Net premiums written   174,937     161,753     336,690    
  Net premiums earned   234,143     322,860     557,003    
  Other underwriting income   -     227     227    
  Total underwriting revenues   234,143     323,087     557,230    
                 
  Expenses              
  Net losses and loss expenses   139,141     124,852     263,993    
  Acquisition expenses   24,375     66,082     90,457    
  General and administrative expenses   31,880     28,913     60,793    
      195,396     219,847     415,243    
  Underwriting income   $ 38,747     $ 103,240     141,987    
                 
  Net investment income           16,533    
  Corporate expenses           (74,308 )  
  Interest expense           (12,324 )  
  Amortization of intangibles           (11,318 )  
  Net foreign exchange losses           (8,621 )  
  Net realized and unrealized gains           5,029    
  Net impairment losses recognized in earnings           (38 )  
  Income before income taxes           $ 56,940    
                 
  Net loss ratio   59.5 %   38.6 %   47.4 %  
  Acquisition expense ratio   10.4 %   20.5 %   16.2 %  
  General and administrative expense ratio   13.6 %   9.0 %   24.3 % [a]
  Combined ratio   83.5 %   68.1 %   87.9 %  

[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)

      Three Months Ended September 30, 2014  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 420,343     $ 205,767     $ 626,110    
  Ceded premiums written   (222,704 )   (13,300 )   (236,004 )  
  Net premiums written   197,639     192,467     390,106    
  Net premiums earned   253,583     261,312     514,895    
  Other underwriting income   -     2,123     2,123    
  Total underwriting revenues   253,583     263,435     517,018    
                 
  Expenses              
  Net losses and loss expenses   196,677     93,592     290,269    
  Acquisition expenses   20,170     73,222     93,392    
  General and administrative expenses   40,401     28,545     68,946    
      257,248     195,359     452,607    
  Underwriting (loss) income   $ (3,665 )   $ 68,076     64,411    
                 
  Net investment income           25,357    
  Corporate expenses           (11,969 )  
  Interest expense           (13,127 )  
  Amortization of intangibles           (1,623 )  
  Net foreign exchange losses           (783 )  
  Net realized and unrealized gains           9,788    
  Net impairment losses recognized in earnings           (102 )  
  Income before income taxes           $ 71,952    
                 
  Net loss ratio   77.5 %   35.8 %   56.4 %  
  Acquisition expense ratio   8.0 %   28.0 %   18.1 %  
  General and administrative expense ratio   15.9 %   11.0 %   15.7 % [a]
  Combined ratio   101.4 %   74.8 %   90.2 %  

[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)

      Nine Months Ended September 30, 2015  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,653,647     $ 1,151,566     $ 2,805,213    
  Ceded premiums written   (984,372 )   (160,114 )   (1,144,486 )  
  Net premiums written   669,275     991,452     1,660,727    
  Net premiums earned   571,467     833,530     1,404,997    
  Other underwriting income   -     4,022     4,022    
  Total underwriting revenues   571,467     837,552     1,409,019    
                 
  Expenses              
  Net losses and loss expenses   359,136     315,915     675,051    
  Acquisition expenses   57,960     199,561     257,521    
  General and administrative expenses   89,289     81,359     170,648    
      506,385     596,835     1,103,220    
  Underwriting income   $ 65,082     $ 240,717     305,799    
                 
  Net investment income           90,646    
  Corporate expenses           (99,210 )  
  Interest expense           (30,445 )  
  Amortization of intangibles           (14,496 )  
  Net foreign exchange losses           (29,154 )  
  Net realized and unrealized gains           32,898    
  Net impairment losses recognized in earnings           (1,111 )  
  Income before income taxes           $ 254,927    
                 
  Net loss ratio   62.9 %   37.9 %   48.1 %  
  Acquisition expense ratio   10.1 %   23.9 %   18.3 %  
  General and administrative expense ratio   15.6 %   9.8 %   19.2 % [a]
  Combined ratio   88.6 %   71.6 %   85.6 %  

[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)

      Nine Months Ended September 30, 2014  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,394,145     $ 1,078,905     $ 2,473,050    
  Ceded premiums written   (674,441 )   (98,371 )   (772,812 )  
  Net premiums written   719,704     980,534     1,700,238    
  Net premiums earned   616,167     776,532     1,392,699    
  Other underwriting loss   -     (3,939 )   (3,939 )  
  Total underwriting revenues   616,167     772,593     1,388,760    
                 
  Expenses              
  Net losses and loss expenses   434,777     291,584     726,361    
  Acquisition expenses   47,559     196,591     244,150    
  General and administrative expenses   113,069     73,690     186,759    
      595,405     561,865     1,157,270    
  Underwriting income   $ 20,762     $ 210,728     231,490    
                 
  Net investment income           105,649    
  Corporate expenses           (53,817 )  
  Interest expense           (31,910 )  
  Amortization of intangibles           (4,863 )  
  Net foreign exchange losses           (4,066 )  
  Net realized and unrealized gains           18,071    
  Net impairment losses recognized in earnings           (411 )  
  Income before income taxes           $ 260,143    
                 
  Net loss ratio   70.6 %   37.6 %   52.2 %  
  Acquisition expense ratio   7.7 %   25.3 %   17.5 %  
  General and administrative expense ratio   18.3 %   9.5 %   17.3 % [a]
  Combined ratio   96.6 %   72.4 %   87.0 %  

[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 September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   59.5 %   77.5 %   38.6 %   35.8 %   47.4 %   56.4 %  
  Acquisition expense ratio   10.4 %   8.0 %   20.5 %   28.0 %   16.2 %   18.1 %  
  General and administrative expense ratio   13.6 %   15.9 %   9.0 %   11.0 %   24.3 % [a] 15.7 % [a]
  Combined ratio [b]   83.5 %   101.4 %   68.1 %   74.8 %   87.9 %   90.2 %  
                               
Effect of Prior Year Net Loss Reserve Development                      
                               
Favorable / (Unfavorable)                          
                               
        Three Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   9.6 %   8.0 %   13.9 %   15.4 %   12.1 %   11.7 %  
                               
Net of Prior Year Net Loss Reserve Development                      
                               
        Three Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   69.1 %   85.5 %   52.5 %   51.2 %   59.5 %   68.1 %  
  Acquisition expense ratio   10.4 %   8.0 %   20.5 %   28.0 %   16.2 %   18.1 %  
  General and administrative expense ratio   13.6 %   15.9 %   9.0 %   11.0 %   24.3 % [a] 15.7 % [a]
  Combined ratio [b]   93.1 %   109.4 %   82.0 %   90.2 %   100.0 %   101.9 %  
                               
[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                          
                               
        Nine Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   62.9 %   70.6 %   37.9 %   37.6 %   48.1 %   52.2 %  
  Acquisition expense ratio   10.1 %   7.7 %   23.9 %   25.3 %   18.3 %   17.5 %  
  General and administrative expense ratio   15.6 %   18.3 %   9.8 %   9.5 %   19.2 % [a] 17.3 % [a]
  Combined ratio [b]   88.6 %   96.6 %   71.6 %   72.4 %   85.6 %   87.0 %  
                               
Effect of Prior Year Net Loss Reserve Development                      
                               
Favorable / (Unfavorable)                          
                               
        Nine Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   10.8 %   8.8 %   14.6 %   14.3 %   13.0 %   11.8 %  
                               
Net of Prior Year Net Loss Reserve Development                      
                               
        Nine Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2015   2014   2015   2014   2015   2014  
                               
  Net loss ratio   73.7 %   79.4 %   52.5 %   51.9 %   61.1 %   64.0 %  
  Acquisition expense ratio   10.1 %   7.7 %   23.9 %   25.3 %   18.3 %   17.5 %  
  General and administrative expense ratio   15.6 %   18.3 %   9.8 %   9.5 %   19.2 % [a] 17.3 % [a]
  Combined ratio [b]   99.4 %   105.4 %   86.2 %   86.7 %   98.6 %   98.8 %  
                               
[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 three months ended September 30, 2015 and 2014:

    Three Months Ended   Three Months Ended
    September 30, 2015   September 30, 2014
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 156,145     $ 29,634     $ 188,011     $ 103,536  
  Casualty and other specialty 128,509     64,490     115,895     50,750  
  Professional lines 80,069     37,479     62,631     20,216  
  Property, marine and energy 83,840     43,334     53,806     23,137  
  Subtotal Insurance 448,563     174,937     420,343     197,639  
                 
Reinsurance              
  Catastrophe 40,660     14,814     47,173     41,157  
  Property 53,423     52,887     73,807     73,807  
  Casualty 42,802     42,802     23,409     23,409  
  Professional lines 31,705     31,705     21,520     21,520  
  Specialty 25,444     19,545     39,858     32,574  
  Subtotal Reinsurance 194,034     161,753     205,767     192,467  
                 
Total $ 642,597     $ 336,690     $ 626,110     $ 390,106  

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 nine months ended September 30, 2015 and 2014:

    Nine Months Ended   Nine Months Ended
    September 30, 2015   September 30, 2014
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 785,073     $ 254,771     $ 796,445     $ 431,007  
  Casualty and other specialty 375,247     174,850     291,578     144,038  
  Professional lines 231,565     105,153     176,061     64,632  
  Property, marine and energy 261,762     134,501     130,061     80,027  
  Subtotal Insurance 1,653,647     669,275     1,394,145     719,704  
                 
Reinsurance              
  Catastrophe $ 304,900     $ 190,579     $ 332,193     $ 243,531  
  Property 209,683     206,454     283,107     283,015  
  Casualty 149,032     149,032     139,266     137,669  
  Professional lines 209,803     209,803     131,256     131,256  
  Specialty 278,148     235,584     193,083     185,063  
  Subtotal Reinsurance 1,151,566     991,452     1,078,905     980,534  
                 
Total $ 2,805,213     $ 1,660,727     $ 2,473,050     $ 1,700,238  

ENDURANCE SPECIALTY HOLDINGS LTD.
RECONCILIATIONS
(in thousands of United States dollars, except share, per share amounts and ratios)

The following is a reconciliation of Endurance's net income, net income per basic or diluted common share, net income allocated to common shareholders under the two-class method and annualized return on average common equity to operating income, operating income per basic or diluted common share, operating income allocated to common shareholders under the two-class method and annualized operating return on average common equity (all non-GAAP measures) for the three and nine months ended September 30, 2015 and 2014:

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2015   2014   2015   2014
Net income available to the Company $ 51,823     $ 76,234     $ 244,508     $ 263,877  
Add (less) after-tax items:              
  Net foreign exchange losses 8,762     641     29,246     3,918  
  Net realized and unrealized gains (4,839 )   (9,593 )   (31,860 )   (18,156 )
  Net impairment losses recognized in earnings 33     102     991     411  
Operating income before preferred dividends 55,779     67,384     $ 242,885     $ 250,050  
  Preferred dividends (8,188 )   (8,188 )   (24,564 )   (24,564 )
Operating income allocated to common and              
  participating common shareholders $ 47,591     $ 59,196     $ 218,321     $ 225,486  
                 
Operating income allocated to common              
  shareholders under the two-class method $ 46,227     $ 57,517     $ 211,927     $ 218,978  
                 
Weighted average diluted common shares 58,046,148     43,510,415     48,592,101     43,355,792  
                 
Operating income per diluted common share [b] $ 0.80     $ 1.32     $ 4.36     $ 5.05  
                 
Average common equity [a] $ 3,619,888     $ 2,688,065     $ 3,092,926     $ 2,610,095  
                 
Operating return on average common equity 1.3 %   2.2 %   7.1 %   8.6 %
                 
Annualized operating return on average common equity 5.3 %   8.8 %   9.4 %   11.5 %
                 
Net income available to the Company 51,823     76,234     244,508     263,877  
  Preferred dividends (8,188 )   (8,188 )   (24,564 )   (24,564 )
Net income available to common and              
  participating common shareholders $ 43,635     $ 68,046     $ 219,944     $ 239,313  
                 
Net income allocated to common shareholders              
  under the two-class method $ 42,384     $ 66,116     $ 213,502     $ 232,406  
                 
Net income per diluted common share [b] $ 0.73     $ 1.52     $ 4.39     $ 5.36  
                 
Return on average common equity, Net income 1.2 %   2.5 %   7.1 %   9.2 %
               
Annualized return on average common equity, Net income 4.8 %   10.1 %   9.5 %   12.2 %

[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 $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 three and nine months ended September 30, 2015:

    Three Months Ended   Nine Months Ended
    September 30, 2015   September 30, 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
$ 43,635     $ 64,022     $ 107,657     $ 219,944     $ 68,517     $ 288,461  
  Less amount allocated to participating common shareholders [b] (1,251 )   (1,834 )   (3,085 )   (6,442 )   (2,005 )   (8,447 )
Net income allocated to common
  shareholders
$ 42,384     $ 62,188     $ 104,572     $ 213,502     $ 66,512     $ 280,014  
                       
Net income per diluted common share [c] $ 0.73     $ 1.07     $ 1.80     $ 4.39     $ 1.37     $ 5.76  
                       
Return on average common equity, 
  Net income [d]
1.2 %   1.8 %   3.0 %   7.1 %   2.2 %   9.3 %
                       
Annualized return on average
  common equity, Net income [d]
4.8 %   7.1 %   11.9 %   9.5 %   2.9 %   12.4 %
                       
Operating income available to common and participating common shareholders $ 47,591     $ 64,022     $ 111,613     $ 218,321     $ 68,517     $ 286,838  
  Less amount allocated to
  participating common shareholders [b]
(1,364 )   (1,834 )   (3,198 )   (6,394 )   (2,005 )   (8,399 )
Operating income allocated to
  common shareholders
$ 46,227     $ 62,188     $ 108,415     $ 211,927     $ 66,512     $ 278,439  
                       
Operating income per diluted common 
  share [c]
$ 0.80     $ 1.07     $ 1.87     $ 4.36     $ 1.37     $ 5.73  
                       
Return on average common equity, 
  Operating income [d]
1.3 %   1.8 %   3.1 %   7.1 %   2.2 %   9.3 %
                       
Annualized return on average
  common equity, Operating income [d]
5.3 %   7.0 %   12.3 %   9.4 %   3.0 %   12.4 %

[a] The Company incurred $64.0 million of one time transaction and integration expenses in relation to the Company's acquisition of Montpelier for the three months ended September 30, 2015. For the nine months ended September 30, 2015, the Company incurred $68.5 million of one time 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 $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 net income per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier, 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 analyse 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 net income per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier, 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 net operating per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier, 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 analyse 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 net operating per basic or diluted common share, excluding expenses incurred related to the acquisition of Montpelier, 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


HUG#1963478