Press Release

Email PagePrinter Friendly Version View printer-friendly versionDownload PDF Download PDF
Endurance Reports Third Quarter 2016 Financial Results

PEMBROKE, Bermuda - November 4, 2016 - Endurance Specialty Holdings Ltd. (NYSE:ENH) today reported net income available to common shareholders of $130.1 million and $1.92 per diluted common share for the third quarter of 2016 versus net income of $43.6 million and $0.73 per diluted common share for the third quarter of 2015.

For the nine months ended September 30, 2016, Endurance reported net income available to common shareholders of $313.1 million and $4.64 per diluted common share versus net income of $219.9 million and $4.39 per diluted common share for the nine months ended September 30, 2015. Book value per diluted common share was $70.00 at September 30, 2016, up 6.9% from December 31, 2015.

Operating Highlights

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

  • Gross premiums written of $760.7 million, an increase of 18.4% compared to the same period in 2015.
  • Net premiums written of $349.0 million, an increase of 3.7% compared to the same period in 2015.
  • Combined ratio of 87.3% compared to 87.9% for the same period in 2015.
  • Net loss ratio of 54.3% compared to 47.4% for the same period in 2015. The net loss ratio for the current quarter was impacted by favorable prior year loss reserve development of $54.3 million or 8.9 percentage points compared to $67.3 million or 12.1 percentage points for the third quarter of 2015.
  • Net investment income of $62.2 million, an increase of $45.7 million from the same period in 2015.
  • Net foreign exchange gains included in net income were $18.6 million, which were largely offset by foreign currency translation adjustments included in accumulated other comprehensive income (loss).
  • Net income available to common shareholders of $130.1 million and $1.92 per diluted common share versus net income of $43.6 million and $0.73 per diluted common share for the third quarter of 2015. Operating income of $102.8 million and $1.52 per diluted common share, an increase of 116.0% and 90.0%, respectively, compared to the same period in 2015.
  • Net income return on average common equity for the quarter of 2.8% or 11.1% on an annualized basis while operating income return on average common equity for the quarter was 2.2% or 8.8% on an annualized basis.

Operating highlights for the nine months ended September 30, 2016 were as follows:

  • Gross premiums written of $3,509.3 million, an increase of 25.1% compared to the same period in 2015.
  • Net premiums written of $2,005.6 million, an increase of 20.8% compared to the same period in 2015.
  • Combined ratio of 86.1% compared to 85.6% for the same period in 2015.
  • An overall net negative financial impact from catastrophe losses in 2016 of $67.6 million, consisting of net loss expenses of $85.0 million partially offset by $10.3 million in net reinstatement premiums and $7.1 million of amounts attributable to non-controlling interests.  
  • Net loss ratio of 53.9% compared to 48.1% for the same period in 2015, which was impacted by 4.5 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 $174.0 million or 9.9 percentage points compared to $183.3 million or 13.0 percentage points for the same period in 2015.
  • Net investment income of $117.4 million, an increase of $26.7 million over the same period in 2015.
  • Net foreign exchange gains included in net income were $63.1 million, which were offset by foreign currency translation adjustments included in accumulated other comprehensive income (loss).
  • Net income available to common shareholders of $313.1 million and $4.64 per diluted common share versus net income of $219.9 million and $4.39 per diluted common share for the nine months ended September 30, 2015. Operating income of $242.0 million and $3.59 per diluted common share, an increase of 10.8% and a decrease per share of 17.7% compared to the same period in 2015 due to the weighted average impact of common shares issued related to Endurance's acquisition of Montpelier. 

Insurance Segment

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

  • Gross premiums written of $568.3 million, an increase of $119.7 million or 26.7% from the third 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 42.5% 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 3.0% compared to a year ago primarily as a result of lower commodity prices.
  • Net premiums written of $202.7 million, an increase of $27.8 million or 15.9% from the third quarter of 2015.
    • Non-agriculture lines of business increased 5.7% due to strong growth in gross premiums written partially offset by increased cessions through whole account quota shares as well as individual cessions by line of business.
    • The agriculture line of business increased $19.4 million or 65.6% due to the timing of third party reinsurance contract placements.
  • Combined ratio of 104.6% compared to 83.6% for the same period in 2015.
    • The net loss ratio increased 14.8 percentage points to 74.4% compared to 59.6% for the same period in 2015. The current accident year net loss ratio of 77.9% increased 8.7 percentage points due to increased attritional and large losses, primarily within the property, marine/energy and aviation line of business. Five large industry losses estimated at $2.0 billion in this line of business resulted in net losses of $16.4 million or 6.0 percentage points in the current period.  The current period's net loss ratio included favorable prior year loss reserve development of $9.6 millionor 3.5 percentage points.
    • The general and administrative expense ratio increased 1.3 percentage points, reflecting an increase of the Company's expense base as a result of added underwriting teams partially offset by a greater amount of ceding commissions received.
    • The acquisition expense ratio increased 4.9 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 nine months ended September 30, 2016:

  • Gross premiums written of $1,997.1 million, an increase of $343.5 million or 20.8% over the same period in 2015.
  • Net premiums written of $813.3 million, an increase of 21.5% over the same period in 2015.
  • Combined ratio of 95.6% compared to 88.7% for the same period in 2015. The combined ratio was impacted by higher net loss and acquisition expense ratios, partially offset by a lower general and administrative expense ratio. The current period's net loss ratio included $57.0 millionor 7.6 percentage points of favorable prior year loss reserve development and $3.7 million or 0.5 percentage points of catastrophe losses, net of reinsurance, from 2016 events.

Reinsurance Segment

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

  • Gross premiums written of $192.4 million, a decrease of $1.6 million or 0.8% from the third quarter of 2015.
    • The catastrophe line of business increased $10.4 million due to the targeted renewal of acquired Montpelier business. 
    • The specialty line of business increased $5.2 million largely due to growth in marine, agriculture and aviation, as global underwriting teams added over the past three years continue to identify attractive new opportunities.
    • The property line of business decreased $11.4 million, predominantly due to targeted non-renewals and reductions of signed lines, partially offset by new business and select renewal of business acquired from Montpelier.
    • The casualty line of business decreased $7.4 million, predominantly driven by a timing difference on its only two multi-year deals written in the third quarter of 2015, partially offset by new business written.
  • Net premiums written of $146.3 million, a decrease of $15.5 million or 9.6% from the third quarter of 2015. The decrease in net premiums written was driven by a decline in gross premiums as well as increased third party retrocessional protection purchased.
  • Combined ratio of 69.7% compared to 68.0% for the same period in 2015.
    • The current period's net loss ratio of 38.1% improved 0.4 percentage points compared to 2015. The decrease in the current quarter accident year net loss ratio of 1.1 percentage points was predominantly due to improvements within the casualty, property and specialty lines of business.  The current period's net loss ratio included favorable prior year loss reserve development of $44.6 million or 13.2 percentage points.
    • The 3.1 percentage point increase in the current quarter's acquisition expense ratio was largely due to the earning of premiums acquired from Montpelier that did not have related acquisition costs in the third quarter of 2015 and a higher percentage of premiums earned from the casualty and professional lines in the current quarter which have higher associated acquisition costs.
    • The general and administrative expense ratio declined 1.0 percentage point in the third quarter of 2016, primarily as a result of leveraging higher earned premiums with a declining expense base that benefited from increased ceding commissions received.

Operating highlights for Endurance's Reinsurance segment for the nine months ended September 30, 2016:

  • Gross premiums written of $1,512.2 million, an increase of $360.6 million or 31.3% over the same period in 2015 largely due to the targeted renewals of acquired Montpelier business.
  • Net premiums written of $1,192.3 million, an increase of 20.3% over the same period in 2015.
  • Combined ratio of 75.7%, compared to 71.5% 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 $117.0 millionor 11.5 percentage points of favorable prior year loss reserve development and 7.7 percentage points of net catastrophe losses from 2016 events, which amounted to $81.3 million before reinstatement premiums of $10.3 million.

Investments

Endurance's net investment income for the quarter and nine months ended September 30, 2016 was $62.2 million and $117.4 million, an increase of $45.7 million and $26.7 million, respectively, compared to the same periods in 2015. The total investment return of Endurance's investment portfolio was 1.11% and 3.14% for the quarter and nine months ended September 30, 2016, respectively, compared to (0.11)% and 0.65% for the quarter and nine months ended September 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 nine months ended September 30, 2016 compared to the same periods in 2015 due to an increase in invested assets. During the quarter and nine months ended September 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 $22.8 million and losses of $0.2 million, as compared to gains of $17.7 million and $1.8 million in the same periods in 2015. The ending book yield on Endurance's fixed maturity investments at September 30, 2016 was 2.27%, up from 2.03% at September 30, 2015.

At September 30, 2016, Endurance's fixed maturity and short term investments, which comprises 83.9% of Endurance's investments, had an average credit quality of AA- and a duration of 2.66 years. Endurance's available for sale portfolio was in a net unrealized gain position of $125.1 million at September 30, 2016, an increase of $137.7 million from December 31, 2015. Endurance recorded net realized and unrealized investment gains, net of impairments, of $13.2 million and $22.9 million during the quarter and nine months ended September 30, 2016, compared to gains of $5.0 million and $31.8 million during the quarter and nine months ended September 30, 2015.

Endurance ended the third quarter of 2016 with cash and invested assets of $8.8 billion, which represents a 1.3% decrease from December 31, 2015. Net operating cash inflow was $59.4 million for the nine months ended September 30, 2016 versus an outflow of $74.0 million for the same period in 2015.

Capitalization and Shareholders' Equity

At September 30, 2016, Endurance's shareholders' equity was $5.22 billion or $70.00 per diluted common share versus $5.12 billion or $65.48 per diluted common share at December 31, 2015. For the quarter and nine months ended September 30, 2016, Endurance declared and paid common dividends of $0.38 and $1.14 per share, respectively.

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 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

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)

      September 30,   December 31,
      2016   2015
Assets      
Cash and cash equivalents $ 1,323,110     $ 1,177,750  
Fixed maturity investments, trading, at fair value 2,393,352     1,587,160  
Fixed maturity investments, available for sale, at fair value 3,596,720     4,359,019  
Short-term investments, trading, at fair value 226,454     394,111  
Short-term investments, available for sale, at fair value 34,934     25,685  
Equity securities, trading, at fair value 23,120     15,229  
Equity securities, available for sale, at fair value 496,402     513,585  
Other investments 679,007     872,617  
Securities pledged under repurchase agreements 124,303     -  
Premiums receivable, net 2,264,651     1,376,328  
Insurance and reinsurance balances receivable 127,849     102,403  
Deferred acquisition costs 311,894     255,501  
Prepaid reinsurance premiums 825,913     498,574  
Reinsurance recoverable on unpaid losses 1,124,976     907,944  
Reinsurance recoverable on paid losses 311,324     288,026  
Accrued investment income 30,073     30,213  
Goodwill and intangible assets 489,522     553,960  
Deferred tax asset 57,050     64,164  
Net receivable on sales of investments 106,305     31,873  
Other assets 283,474     187,383  
Total Assets $ 14,830,433     $ 13,241,525  
           
Liabilities      
Reserve for losses and loss expenses $ 4,807,868     $ 4,510,415  
Reserve for unearned premiums 2,348,566     1,789,148  
Reinsurance balances payable 1,018,618     661,213  
Payable under repurchase agreements 120,997     -  
Debt 705,179     717,650  
Net payable on purchases of investments 203,592     63,442  
Deferred tax liability 12,815     17,315  
Other liabilities 389,561     358,270  
Total Liabilities 9,607,196   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      
  67,594,088 issued and outstanding (2015 - 66,797,991) 67,594     66,798  
Additional paid-in capital 1,953,507     2,145,836  
Accumulated other comprehensive income (loss) 27,993     (46,634 )
Retained earnings 2,917,141     2,681,053  
Total Shareholders' Equity Available to the Company 4,966,244   4,856,262
Non-controlling interests 256,993     267,810  
Total Shareholders' Equity 5,223,237     5,124,072  
           
Total Liabilities and Shareholders' Equity $ 14,830,433     $ 13,241,525  
           
Book Value per Common Share      
Basic common shares outstanding 66,185,927     65,440,712  
Dilutive common shares outstanding 67,655,803     67,136,986  
Basic book value per common share [a] $ 71.56     $ 67.18  
Diluted book value per common share [a], [b] $ 70.00     $ 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 September 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   Nine Months Ended
    September 30,   September 30,   September 30,   September 30,
    2016   2015   2016   2015
Revenues              
Gross premiums written $ 760,687     $ 642,597     $ 3,509,294     $ 2,805,213  
                 
Net premiums written $ 348,986     $ 336,690     $ 2,005,596     $ 1,660,727  
Change in unearned premiums 261,170     220,313     (242,641 )   (255,730 )
                 
Net premiums earned 610,156   557,003   1,762,955     1,404,997  
Other underwriting (loss) income (466 )   227     (1,980 )   4,022  
Net investment income 62,236     16,533     117,394     90,646  
Net realized and unrealized gains 13,405     5,029     33,539     32,898  
Net impairment losses recognized in earnings (183 )   (38 )   (10,647 )   (1,111 )
Total revenues 685,148   578,754   1,901,261     1,531,452  
                 
Expenses              
Net losses and loss expenses 331,462     263,993     950,902     675,051  
Acquisition expenses 121,391     90,457     337,194     257,521  
General and administrative expenses 67,738     60,793     195,042     170,648  
Corporate expenses 11,952     74,308     35,553     99,210  
Amortization of intangibles 21,154     11,318     63,471     14,496  
Net foreign exchange (gains) losses (18,576 )   8,621     (63,056 )   29,154  
Interest expense 10,826     12,324     33,053     30,445  
Total expenses 545,947   521,814   1,552,159     1,276,525  
                 
Income before income taxes 139,201   56,940   349,102     254,927  
Income tax benefit (expense) 199     (2,410 )   2,570     (7,712 )
Net income 139,400   54,530   351,672     247,215  
                 
Net income attributable to non-controlling interests (5,679 )   (2,707 )   (18,456 )   (2,707 )
                 
Net income available to the Company 133,721     51,823     333,216     244,508  
                 
Preferred dividends (3,651 )   (8,188 )   (20,147 )   (24,564 )
                 
Net income available to common and participating common shareholders $ 130,070     $ 43,635     $ 313,069     $ 219,944  
               
Per share data              
Basic earnings per common share $ 1.93     $ 0.73     $ 4.65     $ 4.41  
Diluted earnings per common share $ 1.92     $ 0.73     $ 4.64     $ 4.39  

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

      Three Months Ended September 30, 2016  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 568,277     $ 192,410     $ 760,687    
  Ceded premiums written   (365,573 )   (46,128 )   (411,701 )  
  Net premiums written   202,704     146,282     348,986    
  Net premiums earned   272,603     337,553     610,156    
  Other underwriting loss   -     (466 )   (466 )  
  Total underwriting revenues   272,603     337,087     609,690    
                 
  Expenses              
  Net losses and loss expenses   202,717     128,745     331,462    
  Acquisition expenses   41,773     79,618     121,391    
  General and administrative expenses   40,658     27,080     67,738    
      285,148     235,443     520,591    
  Underwriting (loss) income   $ (12,545 )   $ 101,644     89,099    
                 
  Net investment income           62,236    
  Corporate expenses           (11,952 )  
  Interest expense           (10,826 )  
  Amortization of intangibles           (21,154 )  
  Net foreign exchange gains           18,576    
  Net realized and unrealized gains           13,405    
  Net impairment losses recognized in earnings           (183 )  
  Income before income taxes           $ 139,201    
                 
  Net loss ratio   74.4 %   38.1 %   54.3 %  
  Acquisition expense ratio   15.3 %   23.6 %   19.9 %  
  General and administrative expense ratio   14.9 %   8.0 %   13.1 % [a]
  Combined ratio   104.6 %   69.7 %   87.3 %  

[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 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   139,603     124,390     263,993    
  Acquisition expenses   24,375     66,082     90,457    
  General and administrative expenses   31,880     28,913     60,793    
      195,858     219,385     415,243    
  Underwriting income   $ 38,285     $ 103,702     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   59.6 %   38.5 %   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   83.6 %   68.0 %   87.9 %  

[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)

      Nine Months Ended September 30, 2016  
      Insurance   Reinsurance   Reported Totals  
                 
  Revenues              
  Gross premiums written   $ 1,997,100     $ 1,512,194     $ 3,509,294    
  Ceded premiums written   (1,183,850 )   (319,848 )   (1,503,698 )  
  Net premiums written   813,250     1,192,346     2,005,596    
  Net premiums earned   745,956     1,016,999     1,762,955    
  Other underwriting loss   -     (1,980 )   (1,980 )  
  Total underwriting revenues   745,956     1,015,019     1,760,975    
                 
  Expenses              
  Net losses and loss expenses   499,104     451,798     950,902    
  Acquisition expenses   104,999     232,195     337,194    
  General and administrative expenses   108,912     86,130     195,042    
      713,015     770,123     1,483,138    
  Underwriting income   $ 32,941     $ 244,896     277,837    
                 
  Net investment income           117,394    
  Corporate expenses           (35,553 )  
  Interest expense           (33,053 )  
  Amortization of intangibles           (63,471 )  
  Net foreign exchange gains           63,056    
  Net realized and unrealized gains           33,539    
  Net impairment losses recognized in earnings           (10,647 )  
  Income before income taxes           $ 349,102    
                 
  Net loss ratio   66.9 %   44.4 %   53.9 %  
  Acquisition expense ratio   14.1 %   22.8 %   19.1 %  
  General and administrative expense ratio   14.6 %   8.5 %   13.1 % [a]
  Combined ratio   95.6 %   75.7 %   86.1 %  

[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   359,598     315,453     675,051    
  Acquisition expenses   57,960     199,561     257,521    
  General and administrative expenses   89,289     81,359     170,648    
      506,847     596,373     1,103,220    
  Underwriting income   $ 64,620     $ 241,179     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   63.0 %   37.8 %   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   88.7 %   71.5 %   85.6 %  

[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  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   74.4 %   59.6 %   38.1 %   38.5 %   54.3 %   47.4 %  
  Acquisition expense ratio   15.3 %   10.4 %   23.6 %   20.5 %   19.9 %   16.2 %  
  General and administrative expense ratio   14.9 %   13.6 %   8.0 %   9.0 %   13.1 % [a] 24.3 % [a]
  Combined ratio [b]   104.6 %   83.6 %   69.7 %   68.0 %   87.3 %   87.9 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Three Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   3.5 %   9.6 %   13.2 %   13.9 %   8.9 %   12.1 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Three Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   77.9 %   69.2 %   51.3 %   52.4 %   63.2 %   59.5 %  
  Acquisition expense ratio   15.3 %   10.4 %   23.6 %   20.5 %   19.9 %   16.2 %  
  General and administrative expense ratio   14.9 %   13.6 %   8.0 %   9.0 %   13.1 % [a] 24.3 % [a]
  Combined ratio [b]   108.1 %   93.2 %   82.9 %   81.9 %   96.2 %   100.0 %  
                               
[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  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   66.9 %   63.0 %   44.4 %   37.8 %   53.9 %   48.1 %  
  Acquisition expense ratio   14.1 %   10.1 %   22.8 %   23.9 %   19.1 %   18.3 %  
  General and administrative expense ratio   14.6 %   15.6 %   8.5 %   9.8 %   13.1 % [a] 19.2 % [a]
  Combined ratio [b]   95.6 %   88.7 %   75.7 %   71.5 %   86.1 %   85.6 %  
                               
Effect of Prior Year Net Loss Reserve Development                  
                               
Favorable / (Unfavorable)                          
                               
        Nine Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   7.6 %   10.8 %   11.5 %   14.6 %   9.9 %   13.0 %  
                               
Net of Prior Year Net Loss Reserve Development                  
                               
        Nine Months Ended September 30,  
        Insurance   Reinsurance   Total  
        2016   2015   2016   2015   2016   2015  
                               
  Net loss ratio   74.5 %   73.8 %   55.9 %   52.4 %   63.8 %   61.1 %  
  Acquisition expense ratio   14.1 %   10.1 %   22.8 %   23.9 %   19.1 %   18.3 %  
  General and administrative expense ratio   14.6 %   15.6 %   8.5 %   9.8 %   13.1 % [a] 19.2 % [a]
  Combined ratio [b]   103.2 %   99.5 %   87.2 %   86.1 %   96.0 %   98.6 %  
                               
[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 September 30, 2016 and 2015:

    Three Months Ended   Three Months Ended
    September 30, 2016   September 30, 2015
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 151,483     $ 49,062     $ 156,145     $ 29,634  
  Casualty and other specialty 168,644     68,211     128,509     64,490  
  Professional lines 97,432     30,328     80,069     37,479  
  Property, marine/energy and
aviation
150,718     55,103     83,840     43,334  
  Subtotal Insurance $ 568,277     $ 202,704     $ 448,563     $ 174,937  
                 
Reinsurance              
  Catastrophe $ 51,040     $ 32,696     $ 40,660     $ 14,814  
  Property 41,975     40,882     53,423     52,887  
  Casualty 35,438     35,772     42,802     42,802  
  Professional lines 33,289     31,883     31,705     31,705  
  Specialty 30,668     5,049     25,444     19,545  
  Subtotal Reinsurance $ 192,410     $ 146,282     $ 194,034     $ 161,753  
                 
Total $ 760,687     $ 348,986     $ 642,597     $ 336,690  

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, 2016 and 2015:

    Nine Months Ended   Nine Months Ended
    September 30, 2016   September 30, 2015
    Gross Premiums Written   Net Premiums Written   Gross Premiums Written   Net Premiums Written
Insurance              
  Agriculture $ 714,621     $ 254,727     $ 785,073     $ 254,771  
  Casualty and other specialty 484,980     209,673     375,247     174,850  
  Professional lines 297,526     124,866     231,565     105,153  
  Property, marine and energy 499,973     223,984     261,762     134,501  
  Subtotal Insurance $ 1,997,100     $ 813,250     $ 1,653,647     $ 669,275  
                 
Reinsurance              
  Catastrophe $ 488,865     $ 319,245     $ 304,900     $ 190,579  
  Property 229,087     222,242     209,683     206,454  
  Casualty 216,421     215,412     149,032     149,032  
  Professional lines 217,476     215,134     209,803     209,803  
  Specialty 360,345     220,313     278,148     235,584  
  Subtotal Reinsurance $ 1,512,194     $ 1,192,346     $ 1,151,566     $ 991,452  
                 
Total $ 3,509,294     $ 2,005,596     $ 2,805,213     $ 1,660,727  

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 nine months ended September 30, 2016 and 2015:

(amounts expressed in thousands of United States dollars, except share, per share amounts and ratios) Quarter Ended   Nine Months Ended
September 30,   September 30,
    2016   2015   2016   2015
Net income available to the Company $ 133,721     $ 51,823     $ 333,216     $ 244,508  
(Less) add items:              
  Net foreign exchange (gains) losses (18,576 )   8,621     (63,056 )   29,154  
  Net realized and unrealized gains (13,405 )   (5,029 )   (33,539 )   (32,898 )
  Net impairment losses recognized in earnings 183     38     10,647     1,111  
  Income tax expense (benefit) 4,508     326     14,880     1,010  
Operating income before preferred dividends $ 106,431     $ 55,779     $ 262,148     $ 242,885  
  Preferred dividends (3,651 )   (8,188 )   (20,147 )   (24,564 )
Operating income allocated to common and              
  participating common shareholders $ 102,780     $ 47,591     $ 242,001     $ 218,321  
                 
Operating income allocated to common              
  shareholders under the two-class method $ 100,720     $ 46,227     $ 236,851     $ 211,927  
                 
Weighted average diluted common shares 66,241,949     58,046,148     65,982,413     48,592,101  
                 
Operating income per diluted common share [b] $ 1.52     $ 0.80     $ 3.59     $ 4.36  
                 
Average common equity [a] $ 4,675,441     $ 3,619,888     $ 4,568,083     $ 2,829,445  
                 
Operating return on average common equity 2.2 %   1.3 %   5.3 %   7.1 %
                 
Annualized operating return on average common equity 8.8 %   5.3 %   7.1 %   9.4 %
                 
Net income available to the Company $ 133,721     $ 51,823     $ 333,216     $ 244,508  
  Preferred dividends (3,651 )   (8,188 )   (20,147 )   (24,564 )
Net income available to common and              
  participating common shareholders $ 130,070     $ 43,635     $ 313,069     $ 219,944  
                 
Net income allocated to common shareholders              
  under the two-class method $ 127,463     $ 42,384     $ 306,407     $ 213,502  
                 
Net income per diluted common share [b] $ 1.92     $ 0.73     $ 4.64     $ 4.39  
                 
Return on average common equity, Net income 2.8 %   1.2 %   6.9 %   7.1 %
               
Annualized return on average common equity, Net income 11.1 %   4.8 %   9.1 %   9.5 %

[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 September 30, 2016 (December 31, 2015 - $460.0 million; September 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 third quarter and nine months ended September 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 nine months ended September 30, 2016:

(amounts expressed in thousands of United States dollars, except ratio)   For the three months ended September 30, 2016 For the nine months ended September 30, 2016
    Catastrophe Impact Net loss ratio impact Catastrophe Impact Net loss ratio impact
           
Net losses and loss expenses   $ -     $ 85,037    
Less: net reinstatement premiums   -     10,333    
Net negative financial impact on net income   -   - % 74,704   4.5 %
Less: net negative financial impact attributable to non-controlling interest   -     7,126    
Net negative financial impact on net income available to the Company   $ -     $ 67,578    
            

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 nine months ended September 30, 2016:

  Three Months Ended September 30,   Nine Months Ended September 30,
(amounts expressed in thousands of United States dollars) 2016   2015   2016   2015
   
Net investment income $ 62,236     $ 16,533     $ 117,394     $ 90,646  
Net realized and unrealized gains 13,405     5,029     33,539     32,898  
Net impairment losses recognized in earnings (183 )   (38 )   (10,647 )   (1,111 )
Net increase in unrealized gains included in other comprehensive income, before deferred tax offsets 21,136     (29,906 )   137,730     (72,396 )
Total investment income $ 96,594     $ (8,382 )   $ 278,016     $ 50,037  
               
Average invested assets and cash at fair value [a] 8,722,483     7,730,545     8,856,851     7,756,033  
               
Total investment return 1.11 %   (0.11 )%   3.14 %   0.65 %

[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.

# # #