EX-99.2 3 file3.htm INVESTOR FINANCIAL SUPPLEMENT

Exhibit 99.2


Endurance Specialty Holdings Ltd.

 

 

INVESTOR FINANCIAL SUPPLEMENT

FIRST QUARTER 2007

Endurance Specialty Holdings Ltd.
Wellesley House, 90 Pitts Bay Rd.
Pembroke HM 08, Bermuda

Investor Relations
Phone: (441) 278-0988
Fax: (441) 278-0493
email: investorrelations@endurance.bm

This report is for information purposes only. It should be read in conjunction with other documents filed by Endurance Specialty Holdings Ltd. pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.

Financial Supplement Table of Contents

    Page 
i. Basis of Presentation    i 
ii. Organizational Chart of Corporate Structure    ii 
I. Financial Highlights    1 
II. Consolidated Financial Statements     
     a. Consolidated Statements of Income - Quarterly    2 
     b. Consolidated Statements of Income - Prior Years    3 
     c. Consolidated Balance Sheets    4 
     d. Annual Aggregate Risk Curve    5 
     e. Segment Distribution    7 
     f. Segment Data    8 
     g. Deposit Accounting Adjustment Impacts on Segment Data    14 
III. Other Financial Information     
     a. Return on Equity Analysis    15 
     b. ROE Component Analysis - Operating and Investment Leverage    16 
     c. Investment Portfolio Information    17 
IV. Loss Reserve Analysis     
     a. Activity in Reserve for Losses and Loss Expenses    18 
     b. Activity in Reserve for Losses and Loss Expenses by Segment    19 
     c. Activity in Reserve for Losses and Loss Expenses by Development Tail    20 
     d. Analysis of Unpaid Losses and Loss Expense    21 
V. Share Analysis     
     a. Weighted Average Dilutive Shares Outstanding    22 
     b. Operating Income Reconciliation    23 
     c. Dilutive Shares Sensitivity Analysis    24 
     d. Book Value Per Share Analysis    25 
     e. Growth in Book Value Per Share Analysis    26 
VI. Regulation G    27 

Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
Some of the statements in this financial supplement may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements may include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. Statements which include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” and similar statements of a future or forward-looking nature identify forward-looking statements in this financial supplement 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. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only to the date on which they are made. We undertake no obligation to publicly update or review any forward looking statement, when as a result of new information, future developments or otherwise.

All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or may be important factors that could cause actual results to differ from those indicated in the forward-looking statements. These factors include, but are not limited to, competition, possible terrorism or the outbreak of war, the frequency or severity of unpredictable catastrophic events, changes in demand for insurance or reinsurance, rating agency actions, uncertainties in our reserving process, a change in our tax status, acceptance of our products, the availability of reinsurance or retrocessional coverage, retention of key personnel, political conditions, the impact of current regulatory investigations, changes in accounting policies, changes in general economic conditions and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2006.

ENDURANCE SPECIALTY HOLDINGS LTD.
BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION
   
• All financial information contained herein is unaudited, except the balance sheet and income statement data for the years ended December 31, 2006, December 31, 2005 and December 31, 2004, which was derived from the Company's audited financial statements.
   
• Unless otherwise noted, all data is in thousands, except for per share, percentage and ratio information.
   
• As used in this financial supplement, “common shares” refers to our ordinary shares and class A shares, collectively.
   
• Endurance Specialty Holdings Ltd., along with others in the industry, uses underwriting ratios as measures of performance. The loss ratio is the ratio of claims and claims adjustment expense to earned premiums. The acquisition expense ratio is the ratio of underwriting expenses (commissions, taxes, licenses and fees, as well as other underwriting expenses) to earned premiums. The general and administrative expense ratio is the ratio of general and administrative expenses to earned premiums. The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. These ratios are relative measurements that describe for every $100 of net premiums earned, the cost of losses and expenses, respectively. The combined ratio presents the total cost per $100 of earned premium. A combined ratio below 100% demonstrates underwriting profit; a combined ratio above 100% demonstrates underwriting loss.
   
• GAAP combined ratios differ from statutory combined ratios primarily due to the deferral of certain third party acquisition expenses for GAAP reporting purposes and the use of net premiums earned rather than net premiums written in the denominator when calculating the acquisition expense and the general & administrative expense ratios.
   
• NM - Not meaningful; NA - Not Applicable; LTM - Latest twelve months.

i

ENDURANCE SPECIALTY HOLDINGS LTD.
CORPORATE ORGANIZATION CHART

ii

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL HIGHLIGHTS
 
          QUARTER ENDED
 MARCH 31,		   Previous
Quarter
Change		  
             
          2007      2006     
HIGHLIGHTS   Net income    $ 101,835   $ 107,036    (4.9 )% 
    Net income available to common shareholders      97,960     103,161    (5.0 )% 
    Operating income [a]     105,196     107,920    (2.5 )% 
    Operating income available to common shareholders [a]      101,321     104,045    (2.6 )% 
    Operating cash flow      122,757     174,844    (29.8 )% 
    Gross premiums written      573,291     571,381    0.3 % 
    Net premiums earned      377,045     420,206    (10.3 )% 
    Total assets      7,190,463     6,728,927    6.9 % 
    Total shareholders’ equity     2,366,546     1,923,988    23.0 % 
PER SHARE    Basic earnings per common share                   
AND SHARES DATA      Net income (as reported)   $ 1.47   $ 1.55    (5.3 )% 
       Operating income (as reported) [a]    $ 1.52   $ 1.57    (2.9 )% 
    Diluted earnings per common share                   
       Net income (as reported)    $ 1.36   $ 1.45    (6.1 )% 
       Operating income (as reported) [a]    $ 1.41   $ 1.46    (3.7 )% 
   As Reported    Weighted average common shares outstanding      66,613     66,445    0.3 % 
    Weighted average common shares outstanding                   
       and dilutive potential common shares      72,073     71,295    1.1 % 
   Book Value Per    Book value [b]    $ 32.77   $ 25.93    26.4 % 
   Common Share    Diluted book value (treasury stock method) [b]    $ 30.19   $ 23.96    26.0 % 
FINANCIAL RATIOS    Return on average common equity (ROAE), net income [c]      4.6 %    6.1 %  (1.5 ) 
    ROAE, operating income [a] [c]      4.8 %    6.1 %  (1.3 ) 
    Return on beg. common equity (ROBE), net income [c]      4.7 %    6.2 %  (1.5 ) 
    ROBE, operating income [a]      4.8 %    6.2 %  (1.4 ) 
 
    Annualized ROAE, net income [c]      18.4 %    24.3 %  (5.9 ) 
    Annualized ROAE, operating income [a] [c]      19.0 %    24.5 %  (5.5 ) 
    Annualized ROBE, net income      18.7 %    24.7 %  (6.0 ) 
    Annualized ROBE, operating income [a]      19.3 %    24.9 %  (5.6 ) 
    Annualized investment yield      5.5 %    4.9 %  0.6  
 
    Loss ratio      55.9 %    56.8 %  (0.9 ) 
 
   GAAP    Acquisition expense ratio      17.9 %    17.9 %  0.0  
    General and administrative expense ratio      12.9 %    10.5 %  2.4  
       Combined ratio      86.7 %    85.2 %  1.5  
 
   STAT    Acquisition expense ratio      15.9 %    15.9 %  0.0  
    General and administrative expense ratio      9.8 %    7.9 %  1.9  
       Combined ratio      81.6 %    80.6 %  1.0  

[a] 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. Please see page 23 for a reconciliation to net income.
[b] For detailed calculations please refer to page 25.
[c] Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the $200 million liquidation value of the preferred shares.

1

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME - QUARTERLY

    QUARTER ENDED  
    MARCH 31, 2007   DEC. 31, 2006   SEPT. 30, 2006   JUNE 30, 2006   MARCH 31, 2006   MARCH 31, 2005  
UNDERWRITING REVENUES              
Gross premiums written    $ 573,291   $ 290,795   $ 476,213   $ 451,253   $ 571,381   $ 702,491  
Premiums ceded    (39,626 )  (42,340 )  (90,791 )  (42,575 )  (28,372 )  (3,313 ) 
 Net premiums written    $ 533,665   $ 248,455   $ 385,422   $ 408,678   $ 543,009   $ 699,178  
Change in unearned premiums    (156,620 )  155,260   22,553   (2,000 )  (122,803 )  (261,580 ) 
Net premiums earned    $ 377,045   $ 403,715   $ 407,975   $ 406,678   $ 420,206   $ 437,598  
Other underwriting (loss) income    (5,936 )  1,718   (1,837 )  (1,992 )  3,501   171  
 Total underwriting revenues    $ 371,109   $ 405,433   $ 406,138   $ 404,686   $ 423,707   $ 437,769  
UNDERWRITING EXPENSES               
Losses and loss expenses    $ 210,594   $ 131,420   $ 188,033   $ 269,445   $ 238,732   $ 251,059  
Acquisition expenses    67,530   81,187   81,857   79,197   75,248   86,775  
General and administrative expenses    48,829   51,879   48,535   46,068   43,891   33,546  
 Total underwriting expenses    $ 326,953   $ 264,486   $ 318,425   $ 394,710   $ 357,871   $ 371,380  
 Underwriting income    $ 44,156   $ 140,947   $ 87,713   $ 9,976   $ 65,836   $ 66,389  
OTHER OPERATING REVENUE/EXPENSES               
Net investment income    $ 74,813   $ 72,033   $ 63,581   $ 60,291   $ 61,544   $ 40,011  
Interest expense    (7,529 )  (7,528 )  (7,528 )  (7,459 )  (7,526 )  (5,471 ) 
Amortization of intangibles    (1,127 )  (1,126 )  (1,158 )  (1,158 )  (1,158 )  (1,220 ) 
Total other operating  revenue/expenses   $ 66,157   $ 63,379   $ 54,895   $ 51,674   $ 52,860   $ 33,320  
INCOME BEFORE OTHER ITEMS    $ 110,313   $ 204,326   $ 142,608   $ 61,650   $ 118,696   $ 99,709  
OTHER               
Net foreign exchange (losses) gains      ($2,613 )  $ 9,771     ($3,633 )  $ 11,997   $ 2,886     ($2,421 ) 
Net realized (losses) gains on investments    (2,084 )  (1,908 )  (6,375 )  (8,729 )  (3,330 )  (4,453 ) 
Income tax (expense) benefit    (3,781 )  (13,379 )  (4,370 )  (868 )  (11,216 )  3,424  
NET INCOME    $ 101,835   $ 198,810   $ 128,230   $ 64,050   $ 107,036   $ 96,259  
Preferred dividends    (3,875 )  (3,875 )  (3,875 )  (3,875 )  (3,875 )  —  
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS    $ 97,960   $ 194,935   $ 124,355   $ 60,175   $ 103,161   $ 96,259  
               
KEY RATIOS/PER SHARE DATA               
Loss ratio    55.9 % 32.6 % 46.1 % 66.3 % 56.8 % 57.4 %
Acquisition expense ratio    17.9 % 20.1 % 20.1 % 19.5 % 17.9 % 19.8 %
General and administrative expense ratio    12.9 % 12.8 % 11.9 % 11.3 % 10.5 % 7.7 %
Combined ratio    86.7 % 65.5 % 78.1 % 97.1 % 85.2 % 84.9 %
Weighted average basic shares outstanding    66,613   66,561   66,339   66,398   66,445   61,292  
Weighted average dilutive shares outstanding    72,073   72,261   71,487   71,109   71,295   66,166  
 
Basic earnings per common share    $ 1.47   $ 2.93   $ 1.87   $ 0.91   $ 1.55   $ 1.57  
Diluted earnings per common share    $ 1.36   $ 2.70   $ 1.74   $ 0.85   $ 1.45   $ 1.45  
 
ROAE, net income [a]    4.6 % 9.7 % 6.8 % 3.5 % 6.1 % 5.1 %

[a] Average common equity is calculated as the arithmetic average of the beginning and ending equity balances for the stated periods, which excludes the $200 million liquidation value of the preferred shares.

2

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME - PRIOR YEARS

    YEAR ENDED  
    DEC. 31, 2006   DEC. 31, 2005   DEC. 31, 2004  
UNDERWRITING REVENUES                     
Gross premiums written    $ 1,789,642   $ 1,668,877   $ 1,711,357  
Premiums ceded      (204,078 )    (49,528 )    (14,337 ) 
   Net premiums written    $ 1,585,564   $ 1,619,349   $ 1,697,020  
Change in unearned premiums      53,010     104,345     (64,420 ) 
Net premiums earned    $ 1,638,574   $ 1,723,694   $ 1,632,600  
Other underwriting (loss) income      1,390     (4,818 )    —  
   Total underwriting revenues    $ 1,639,964   $ 1,718,876   $ 1,632,600  
UNDERWRITING EXPENSES                     
Losses and loss expenses    $ 827,630   $ 1,650,943   $ 937,330  
Acquisition expenses      317,489     331,309     329,784  
General and administrative expenses      190,373     146,419     133,725  
 Total underwriting expenses    $ 1,335,492   $ 2,128,671   $ 1,400,839  
 Underwriting income (loss)    $ 304,472   ($409,795 )  $ 231,761  
OTHER OPERATING REVENUE/EXPENSES                     
Net investment income    $ 257,449   $ 180,451   $ 122,059  
Interest expense      (30,041 )    (24,210 )    (9,959 ) 
Amortization of intangibles      (4,600 )    (4,694 )    (3,990 ) 
 Total other operating revenue/expenses    $ 222,808   $ 151,547   $ 108,110  
INCOME (LOSS) BEFORE OTHER ITEMS    $ 527,280   ($258,248 )  $ 339,871  
OTHER                     
Net foreign exchange gains (losses)    $ 21,021     ($5,140 )    ($214 ) 
Net realized (losses) gains on investments      (20,342 )    (8,244 )    6,130  
Income tax (expense) benefit      (29,833 )    51,148     9,797  
NET INCOME (LOSS)    $ 498,126     ($220,484 )  $ 355,584  
Preferred dividends      (15,500 )    ($2,720 )    —  
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS    $ 482,626     ($223,204 )  $ 355,584  
                     
KEY RATIOS/PER SHARE DATA                     
Loss ratio      50.5 %   95.8 %   57.4 %
Acquisition expense ratio      19.4 %   19.2 %   20.2 %
General and administrative expense ratio      11.6 %   8.5 %   8.2 %
Combined ratio      81.5 %   123.5 %   85.8 %
                     
Weighted average basic shares outstanding      66,436     62,029     62,781  
Weighted average dilutive shares outstanding      71,755     62,029     67,283  
 
Basic earnings (loss) per common share    $ 7.26     ($3.60 )  $ 5.66  
Diluted earnings (loss) per common share    $ 6.73     ($3.60 )  $ 5.28  
 
ROAE, net income (loss) [a]      25.6 %   (12.6 )%   20.3 %

[a] Average common equity is calculated as the arithmetic average of the beginning and ending equity balances for the stated periods, which excludes the $200 million liquidation value of the preferred shares.

3

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS

    MARCH 31, 2007   DEC. 31, 2006   SEPT. 30, 2006   JUNE 30, 2006   MARCH 31, 2006   DEC. 31, 2005  
ASSETS               
Cash and cash equivalents    $ 518,800   $ 547,772   $ 527,990   $ 669,583   $ 562,060   $ 468,015  
Fixed maturity investments available for sale, at fair value    4,838,405   4,714,204   4,652,163   4,323,661   4,310,088   4,323,339  
Investments in other ventures, under equity method    267,721   253,068   223,536   204,272   184,215   161,883  
Premiums receivable, net    808,064   660,570   769,462   827,239   798,008   575,109  
Deferred acquisition costs    186,374   168,809   189,110   169,190   174,358   162,592  
Securities lending collateral    217,698   226,762   349,630   371,407   439,652   408,663  
Prepaid reinsurance premiums    92,722   105,058   108,251   56,194   39,617   27,132  
Losses recoverable    55,579   44,244   37,447   27,452   26,442   17,248  
Accrued investment income    36,792   40,692   37,007   36,740   33,737   33,734  
Intangible assets    69,415   70,366   70,255   71,436   65,086   65,633  
Deferred tax assets    61,385   54,019   65,738   66,545   61,745   69,360  
Other assets    37,508   39,990   37,201   34,693   33,919   35,699  
TOTAL ASSETS    $ 7,190,463   $ 6,925,554   $ 7,067,790   $ 6,858,412   $ 6,728,927   $ 6,348,407  
               
LIABILITIES               
Reserve for losses and loss expenses    $ 2,790,183   $ 2,701,686   $ 2,769,418   $ 2,782,803   $ 2,688,986   $ 2,603,590  
Reserve for unearned premiums    987,748   843,202   997,478   967,844   939,165   803,629  
Deposit liabilities    155,380   161,024   173,992   173,527   151,418   92,523  
Reinsurance balances payable    147,745   172,328   147,218   122,829   102,726   85,281  
Securities lending payable    217,698   226,762   349,630   371,407   439,652   408,663  
Debt    447,192   447,172   447,151   447,131   447,112   447,092  
Other liabilities    77,971   75,506   65,729   56,336   35,880   35,086  
TOTAL LIABILITIES    $ 4,823,917   $ 4,627,680   $ 4,950,616   $ 4,921,877   $ 4,804,939   $ 4,475,864  
SHAREHOLDERS’ EQUITY               
Preferred shares               
     Series A, non-cumulative    $ 8,000   $ 8,000   $ 8,000   $ 8,000   $ 8,000   $ 8,000  
Common shares    65,968   66,480   66,196   66,096   66,256   66,139  
Additional paid-in capital    1,431,623   1,458,063   1,452,438   1,450,435   1,454,842   1,453,722  
Accumulated other comprehensive (loss) income    (131 )  (14,465 )  (11,123 )  (82,087 )  (55,815 )  (19,672 ) 
Retained earnings    861,086   779,796   601,663   494,091   450,705   364,354  
TOTAL SHAREHOLDERS’ EQUITY    $ 2,366,546   $ 2,297,874   $ 2,117,174   $ 1,936,535   $ 1,923,988   $ 1,872,543  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY    $ 7,190,463   $ 6,925,554   $ 7,067,790   $ 6,858,412   $ 6,728,927   $ 6,348,407  
                                       
Book value per common share    $ 32.77   $ 31.45   $ 28.87   $ 26.19   $ 25.93   $ 25.18  
Diluted book value per common share (treasury stock method)    $ 30.19   $ 28.87   $ 26.52   $ 24.24   $ 23.96   $ 23.17  
               
RATIOS               
Debt-to-capital    15.9 % 16.3 % 17.4 % 18.8 % 18.9 % 19.3 %

4

 

ENDURANCE SPECIALTY HOLDINGS LTD.
Annual Aggregate Risk Curve

Endurance Operating Income Profile

as of January 1, 2007


The above chart represents a cumulative analysis of our in-force underwriting portfolio on a full year basis based on thousands of potential scenarios. Loss years are driven largely by the occurrence of natural catastrophes and incorrect pricing of other property and casualty exposures. The operating income depicted includes net premiums earned plus net investment income, acquisition expenses and G&A expenses. Forecasted investment income, acquisition and G&A expenses are held constant across all scenarios. Losses included above are net of reinsurance including collateralized reinsurance and ILW purchases. Our stated objective is to maintain a risk management tolerance that limits our loss in a 1-in-100 year year to be no more than 25% of our equity capital. We base our budget and forecasts on the average result, although the nature of the curve places the median result further to the right.

Changes in Endurance’s underwriting portfolio, investment portfolio, risk control mechanisms, market conditions and other factors may cause actual results to vary considerably from those indicated by our value at risk curve. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10K for the year ended December 31, 2006.

5

ENDURANCE SPECIALTY HOLDINGS LTD.
Annual Aggregate Risk Curve

Annual Aggregate Risk Curve Comparison

 
July 1, 2006 to
January 1, 2007 to
$
  %
(in millions) 
June 30, 2007
December 31, 2007
Change
Change
Median Result  $400
$381
($19
)
 (5.0
%)
Average Result  342
341
(1
)
 (0.3
%)
   
 
 
 
1 in 10 year annual gain  64
91
27
29.7
%
1 in 25 year annual loss  (182
)
 (66
)
 116
(175.8
%)
1 in 50 year annual loss  (334
)
 (172
)
 162
(94.2
%)
1 in 100 year annual loss  (486
)
 (287
)
 199
(69.3
%)
1 in 250 year annual loss  (707
)
 (396
)
 311
(78.5
%)
1 in 500 year annual loss  (904
)
 (500
)
 404
(80.8
%)
   
 
 
 

 

Changes in Endurance’s underwriting portfolio, investment portfolio, risk control mechanisms, market conditions and other factors may cause actual results to vary considerably from those indicated by our value at risk curve. For a listing of risks related to Endurance and its future performance, please see “Risk Factors” in our Annual Report on Form 10K for the year ended December 31, 2006.

6

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT DISTRIBUTION

FOR THE QUARTER ENDED MARCH 31, 2007


[a]

Prior to deposit accounting adjustments.

7

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE QUARTER ENDED MARCH 31, 2007

Insurance   Reinsurance   Total
Company
Sub-total		   Deposit
Accounting
Adjustment [a]		   Reported
Totals		  
UNDERWRITING REVENUES                              
Gross premiums written  $ 147,033   $ 429,473   $ 576,506     ($3,215 )  $ 573,291  
Net premiums written  $ 108,089   $ 428,791   $ 536,880     ($3,215 )  $ 533,665  
Net premiums earned  $ 110,324   $ 291,396   $ 401,720     ($24,675 )  $ 377,045  
Other underwriting loss    —     —     —     (5,936 )    (5,936 ) 
Total underwriting revenues  $ 110,324   $ 291,396   $ 401,720     ($30,611 )  $ 371,109  
                               
UNDERWRITING EXPENSES                               
Losses and loss expenses  $ 63,529   $ 169,699   $ 233,228     ($22,634 )  $ 210,594  
Acquisition expenses    13,826     61,417     75,243     (7,713 )    67,530  
General and administrative expenses  $ 22,217   $ 26,612     48,829     —     48,829  
Total expenses    99,572     257,728     357,300     (30,347 )    326,953  
                               
UNDERWRITING INCOME (LOSS)  $ 10,752   $ 33,668   $ 44,420     ($264 )  $ 44,156  
                               
GAAP RATIOS                               
Loss ratio    57.6 %    58.2 %    58.1 %    91.7 %    55.9 % 
Acquisition expense ratio    12.5 %    21.1 %    18.7 %    31.3 %    17.9 % 
General and administrative expense ratio    20.2 %    9.1 %    12.1 %    —     12.9 % 
Combined ratio    90.3 %    88.4 %    88.9 %    123.0 %    86.7 % 
                               
STATUTORY RATIOS                               
Loss ratio    57.6 %    58.2 %    58.1 %    91.7 %    55.9 % 
Acquisition expense ratio    19.2 %    15.4 %    16.2 %    62.4 %    15.9 % 
General and administrative expense ratio    23.9 %    6.2 %    9.8 %    —     9.8 % 
Combined ratio    100.7 %    79.8 %    84.1 %    154.1 %    81.6 % 

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company's underwriting results by segment to the Company’s financial statement presentation.

8

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
FOR THE QUARTER ENDED MARCH 31, 2007

  Insurance     Reinsurance     Total
Company
Sub-total		     Deposit
Accounting
Adjustment [a]		     Reported
Totals		  
AS REPORTED                             
 
GAAP RATIOS                             
Loss ratio  57.6 %    58.2 %    58.1 %    91.7 %    55.9 % 
Acquisition expense ratio  12.5 %    21.1 %    18.7 %    31.3 %    17.9 % 
General and administrative expense ratio  20.2 %    9.1 %    12.1 %    —     12.9 % 
Combined ratio  90.3 %    88.4 %    88.9 %    123.0 %    86.7 % 
                             
EFFECT OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT                          
FAVORABLE / (UNFAVORABLE)                             
 
GAAP RATIOS                             
Loss ratio  24.0 %    7.9 %    12.3 %    (25.6 )%    14.8 % 
                             
NET OF PRIOR ACCIDENT YEAR RESERVE DEVELOPMENT                          
 
GAAP RATIOS                             
Loss ratio  81.6 %    66.1 %    70.4 %    66.1 %    70.7 % 
Acquisition expense ratio  12.5 %    21.1 %    18.7 %    31.3 %    17.9 % 
General and administrative expense ratio  20.2 %    9.1 %    12.1 %    —     12.9 % 
Combined ratio  114.3 %    96.3 %    101.2 %    97.4 %    101.5 % 

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company’s loss ratio by segment to the Company's financial statement presentation.

9

ENDURANCE SPECIALTY HOLDINGS LTD.
INSURANCE SEGMENT DATA

  FOR THE QUARTERS ENDED  
  MARCH 31, 2007   DEC. 31, 2006   SEPT. 30, 2006   JUNE 30, 2006   MARCH 31, 2006   MARCH 31, 2005  
UNDERWRITING REVENUES                                     
Gross premiums written $ 147,033   $ 180,584   $ 156,781   $ 159,223   $ 80,157   $ 71,064  
Net premiums written $ 108,089   $ 138,436   $ 98,328   $ 123,181   $ 56,692   $ 70,930  
Net premiums earned $ 110,324   $ 102,921   $ 90,062   $ 88,353   $ 90,426   $ 87,661  
                                     
UNDERWRITING EXPENSES                                     
Losses and loss expenses $ 63,529   $ 83,370   $ 57,165   $ 70,168   $ 41,607   $ 76,782  
Acquisition expenses   13,826     11,382     8,492     6,532     6,123     8,094  
General and administrative expenses   22,217     13,983     13,760     13,823     7,959     5,317  
Total expenses   99,572     108,735     79,417     90,523     55,689     90,193  
                                     
UNDERWRITING INCOME (LOSS)   $ 10,752     ($5,814 ) $ 10,645     ($2,170 ) $ 34,737     ($2,532 )
                                     
GAAP RATIOS                                     
Loss ratio   57.6 %   81.0 %   63.5 %   79.4 %   46.0 %   87.6 %
Acquisition expense ratio   12.5 %   11.1 %   9.4 %   7.4 %   6.8 %   9.2 %
General and administrative expense ratio   20.2 %   13.5 %   15.3 %   15.7 %   8.8 %   6.1 %
Combined ratio   90.3 %   105.6 %   88.2 %   102.5 %   61.6 %   102.9 %
                                     
STATUTORY RATIOS                                     
Loss ratio   57.6 %   81.0 %   63.5 %   79.4 %   46.0 %   87.6 %
Acquisition expense ratio   19.2 %   18.9 %   17.0 %   8.6 %   7.7 %   4.9 %
General and administrative expense ratio   23.9 %   9.8 %   12.2 %   9.3 %   12.0 %   7.5 %
Combined ratio   100.7 %   109.7 %   92.7 %   97.3 %   65.7 %   100.0 %

10

ENDURANCE SPECIALTY HOLDINGS LTD.
REINSURANCE SEGMENT DATA

                FOR THE QUARTERS ENDED              
    MARCH 31, 2007     DEC. 31, 2006     SEPT. 30, 2006     JUNE 30, 2006     MARCH 31, 2006     MARCH 31, 2005  
UNDERWRITING REVENUES                                     
Gross premiums written  $ 429,473   $ 117,313   $ 326,061   $ 338,142   $ 590,373   $ 717,049  
Net premiums written  $ 428,791   $ 117,121   $ 293,723   $ 331,609   $ 585,466   $ 713,870  
Net premiums earned  $ 291,396   $ 338,266   $ 353,868   $ 368,496   $ 386,537   $ 360,593  
                                     
UNDERWRITING EXPENSES                                     
Losses and loss expenses  $ 169,699   $ 69,483   $ 158,804   $ 240,276   $ 228,398   $ 180,154  
Acquisition expenses    61,417     81,883     83,244     86,371     89,696     82,393  
General and administrative expenses    26,612     37,896     34,775     32,245     35,932     28,229  
Total expenses    257,728     189,262     276,823     358,892     354,026     290,776  
                                     
UNDERWRITING INCOME $ 33,668   $ 149,004   $ 77,045   $ 9,604   $ 32,511   $ 69,817  
                                     
GAAP RATIOS                                     
Loss ratio    58.2 %    20.6 %    44.9 %    65.2 %    59.1 %    50.0 % 
Acquisition expense ratio    21.1 %    24.2 %    23.5 %    23.4 %    23.2 %    22.8 % 
General and administrative expense ratio    9.1 %    11.2 %    9.8 %    8.8 %    9.3 %    7.8 % 
Combined ratio    88.4 %    56.0 %    78.2 %    97.4 %    91.6 %    80.6 % 
                                     
STATUTORY RATIOS                                     
Loss ratio    58.2 %    20.6 %    44.9 %    65.2 %    59.1 %    50.0 % 
Acquisition expense ratio    15.4 %    31.4 %    29.7 %    22.6 %    19.3 %    21.6 % 
General and administrative expense ratio    6.2 %    32.4 %    11.8 %    9.7 %    6.1 %    4.0 % 
Combined ratio   79.8 %    84.4 %    86.4 %    97.5 %    84.5 %    75.6 % 

Note: For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities.

11

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT GROSS PREMIUMS WRITTEN BY LINE OF BUSINESS

                FOR THE QUARTERS ENDED              
    MARCH 31, 2007     DEC. 31, 2006     SEPT. 30, 2006     JUNE 30, 2006     MARCH 31, 2006     MARCH 31, 2005  
INSURANCE SEGMENT                                     
           Property  $ 27,042   $ 44,268   $ 47,860   $ 52,591   $ 28,573   $ 23,374  
           Casualty    26,796     35,976     28,294     42,877     21,786     19,965  
           Healthcare liability    18,790     17,067     37,812     31,047     21,062     18,606  
           Workers’ compensation    61,633     62,355     24,993     6,431     —     —  
           Professional lines    12,772     20,918     17,822     26,277     8,736     9,119  
           TOTAL INSURANCE  $ 147,033   $ 180,584   $ 156,781   $ 159,223   $ 80,157   $ 71,064  
                                     
REINSURANCE SEGMENT                                     
           Casualty  $ 91,936   $ 50,411   $ 86,933   $ 77,188   $ 185,578   $ 221,425  
           Property    36,701     22,170     124,235     49,998     122,480     171,290  
           Catastrophe    140,499     18,912     49,385     102,763     120,695     140,807  
           Agriculture    93,061     (2,124 )    16,324     42,373     50,531     25,899  
           Marine    33,080     15,344     16,237     14,560     57,246     48,763  
           Aerospace    6,480     10,795     17,761     25,560     22,700     74,289  
           Surety and other specialty    27,716     1,805     15,186     25,700     31,143     34,576  
           TOTAL REINSURANCE  $ 429,473   $ 117,313   $ 326,061   $ 338,142   $ 590,373   $ 717,049  
                                     
           TOTAL COMPANY SUBTOTAL  $ 576,506   $ 297,897   $ 482,842   $ 497,365   $ 670,530   $ 788,113  
           DEPOSIT ACCOUNTING                                    
           ADJUSTMENT [a]   (3,215 )   (7,102 )    (6,629 )    (46,112 )    (99,149 )    (85,622 ) 
                                     
           REPORTED TOTALS $ 573,291   $ 290,795   $ 476,213   $ 451,253   $ 571,381   $ 702,491  

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company's gross premiums written by segment to the Company’s financial statement presentation.

12

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT NET PREMIUMS WRITTEN BY LINE OF BUSINESS

                FOR THE QUARTERS ENDED                 
    MARCH 31, 2007     DEC. 31, 2006     SEPT. 30, 2006     JUNE 30, 2006     MARCH 31, 2006     MARCH 31, 2005  
INSURANCE SEGMENT                                     
           Property  $ 6,127   $ 19,504   $ 4,397   $ 26,699   $ 10,690   $ 23,150  
           Casualty    17,761     24,305     16,194     33,113     16,204     19,965  
           Healthcare liability    18,790     17,067     37,812     31,047     21,062     18,606  
           Workers’ compensation    54,810     58,607     22,215     6,045     —     —  
           Professional lines    10,601     18,953     17,710     26,277     8,736     9,209  
           TOTAL INSURANCE  $ 108,089   $ 138,436   $ 98,328   $ 123,181   $ 56,692   $ 70,930  
                                     
REINSURANCE SEGMENT                                     
           Casualty  $ 91,921   $ 50,367   $ 86,716   $ 76,004   $ 183,575   $ 219,665  
           Property    36,527     22,170     116,146     49,998     122,480     171,290  
           Catastrophe    140,183     18,912     31,282     99,238     120,695     140,807  
           Agriculture    93,061     (2,124 )    15,483     42,373     50,531     25,899  
           Marine    33,016     15,344     12,970     14,560     57,246     48,763  
           Aerospace    6,375     10,795     15,976     23,995     22,700     74,289  
           Surety and other specialty    27,708     1,657     15,150     25,441     28,239     33,157  
           TOTAL REINSURANCE  $ 428,791   $ 117,121   $ 293,723   $ 331,609   $ 585,466   $ 713,870  
                                     
           TOTAL COMPANY SUBTOTAL  $ 536,880   $ 255,557   $ 392,051   $ 454,790   $ 642,158   $ 784,800  
           DEPOSIT ACCOUNTING                                     
           ADJUSTMENT [a]    (3,215 )    (7,102 )    (6,629 )    (46,112 )    (99,149 )    (85,622 ) 
                                     
           REPORTED TOTALS  $ 533,665   $ 248,455   $ 385,422   $ 408,678   $ 543,009   $ 699,178  

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company's gross premiums written by segment to the Company’s financial statement presentation.

13

ENDURANCE SPECIALTY HOLDINGS LTD.
DEPOSIT ACCOUNTING ADJUSTMENT IMPACTS ON SEGMENT DATA
FOR THE QUARTER ENDED MARCH 31, 2007

      Includes Deposit Accounting Adjustments     Excludes Deposit Accounting Adjustments  
      Insurance     Reinsurance     Total
Company		     Insurance     Reinsurance     Total
Company		  
UNDERWRITING REVENUES                                      
Gross premiums written    $ 147,033   $ 426,258   $ 573,291   $ 147,033   $ 429,473   $ 576,506  
Net premiums written    $ 108,089   $ 425,576   $ 533,665   $ 108,089   $ 428,791   $ 536,880  
Net premiums earned    $ 110,324   $ 266,721   $ 377,045   $ 110,324   $ 291,396   $ 401,720  
Other underwriting loss      —     ($5,936 )    (5,936 )    —     —     —  
Total underwriting revenues      110,324     260,785     371,109     110,324     291,396     401,720  
               
UNDERWRITING EXPENSES                                       
Losses and loss expenses    $ 63,529   $ 147,065   $ 210,594   $ 63,529   $ 169,699   $ 233,228  
Acquisition expenses      13,826     53,704     67,530     13,826     61,417     75,243  
General and administrative expenses      22,217     26,612     48,829     22,217     26,612     48,829  
Total expenses      99,572     227,381     326,953     99,572     257,728     357,300  
                                       
UNDERWRITING INCOME    $ 10,752   $ 33,404   $ 44,156   $ 10,752   $ 33,668   $ 44,420  
                                       
GAAP RATIOS
Loss ratio      57.6 %    55.1 %    55.9 %    57.6 %    58.2 %    58.1 % 
Acquisition expense ratio      12.5 %    20.1 %    17.9 %    12.5 %    21.1 %    18.7 % 
General and administrative expense ratio      20.2 %    10.1 %    12.9 %    20.2 %    9.1 %    12.1 % 
Combined ratio      90.3 %    85.3 %    86.7 %    90.3 %    88.4 %    88.9 % 

14

ENDURANCE SPECIALTY HOLDINGS LTD.
RETURN ON EQUITY ANALYSIS

   

FOR THE THREE MONTHS ENDED
MARCH 31, 2007

 
Average common equity [a]   $ 2,132,210  
 
 
Net premiums earned   $ 377,045  
  Combined ratio      86.7 % 
  Operating margin     13.3 % 
  Premium leverage      0.18 x 
Implied ROAE from underwriting activity      2.4 % 
 
Average cash and invested assets at amortized cost    $ 5,596,675  
  Investment leverage      2.62 x 
  Year to date investment income yield, pretax      1.3 % 
Implied ROAE from investment activity      3.5 % 
 
Financing Costs [b]      (0.5 )% 
 
Implied Pre-tax Operating ROAE, for period      5.4 % 

[a] Average common equity is calculated as the arithmetic average of the beginning and ending common equity balances for the stated periods, which excludes the $200 million liquidation value of the preferred shares.
[b] Financing costs include interest expense and preferred dividends.

15

ENDURANCE SPECIALTY HOLDINGS LTD.
ANNUALIZED OPERATING & INVESTMENT LEVERAGE

    FOR THE QUARTERS ENDED     YEARS ENDED DECEMBER 31,  
      MARCH 31
2007		     DEC. 31,
2006		     SEPT. 30,
2006		     JUNE 30,
2006		     2006     2005  
Average common equity [a]    $ 2,132,210   $ 2,007,524   $ 1,826,855   $ 1,730,262   $ 1,885,209   $ 1,767,499  
Net premiums earned    $ 377,045   $ 403,715   $ 407,975   $ 406,678   $ 1,638,574   $ 1,723,694  
Operating leverage      0.18 x    0.20 x    0.22 x    0.24 x    0.87 x    0.98 x 
   Annualized operating leverage      0.71 x    0.80 x    0.89 x    0.94 x    0.87 x    0.98 x 
                                       
Avg. cash and invested assets at amortized  cost    $ 5,596,675   $ 5,496,389   $ 5,215,717   $ 5,219,192   $ 5,275,481   $ 4,463,908  
   Investment leverage      2.62 x    2.74 x    2.86 x    3.02 x    2.80 x    2.53 x 
   
[a] Average common equity is calculated as the arithmetic average of the beginning and ending equity balances for the stated periods and excludes the $200 million liquidation value of the preferred shares.

16

ENDURANCE SPECIALTY HOLDINGS LTD.
INVESTMENT PORTFOLIO
AS OF MARCH 31, 2007

Type of Investment          Fair Value    Percentage  
Cash and equivalents [a]              $ 504,352      9.0 % 
U.S. government and agencies                952,223      17.0 % 
Corporate securities                850,683      15.2 % 
Foreign government                249,315      4.4 % 
Municipals                7,452      0.1 % 
Asset-backed securities                579,944      10.3 % 
Mortgage-backed securities                2,198,788      39.2 % 
Investments in other ventures                267,721      4.8 % 
   Total              $ 5,610,478      100.0 % 
                 
Ratings          Fair Value    Percentage  
U.S. Government and agencies              $ 952,223      18.6 % 
AAA/Aaa                3,137,163      61.4 % 
AA/Aa                318,315      6.2 % 
A/A                359,236      7.0 % 
BBB                8,180      0.2 % 
Below BBB                62,880      1.2 % 
Not Rated                408      0.1 % 
Investments in other ventures                267,721      5.3 % 
   Total              $ 5,106,126      100.0 % 
                 
Performance              March 31, 2007  
Yield [b]                      5.5 % 
Duration [c]                      2.6  
                 
  Quarter Ended
March 31, 2007		   Quarter Ended
December 31, 2006		   Quarter Ended
September 30, 2006		   Quarter Ended
June 30, 2006		  
Investment Income         
Income from investments in other ventures  $ 12,153    $ 11,170    $ 4,014    $ 4,557  
   Total net investment income  $ 74,813    $ 72,033    $ 63,581    $ 60,291  

Note: [a] Cash and equivalents are shown net of investments pending settlement.
  [b] Annualized earned yield excludes realized and unrealized gains and losses on fixed maturity investments.
  [c] Duration excludes investments in other ventures.

17

ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES

  QUARTER
ENDED
MAR. 31, 2007		   QUARTER
ENDED
DEC. 31, 2006		   QUARTER
ENDED
SEPT. 30, 2006		   QUARTER
ENDED
JUNE 30, 2006		   QUARTER
ENDED
MARCH 31, 2006		  
           
           
           
Incurred related to:           
   Current year  $ 266,501   $ 158,160   $ 198,073   $ 247,863   $ 281,273  
   Prior years  (55,907 )  (26,740 )  (10,040 )  21,582   (42,541 ) 
Total incurred  $ 210,594   $ 131,420   $ 188,033   $ 269,445   $ 238,732  
           
Paid related to:           
   Current year    ($205 )    ($34,706 )    ($19,698 )    ($1,923 )    ($6,776 ) 
   Prior years  (138,492 )  (183,233 )  (194,221 )  (185,676 )  (156,623 ) 
Total paid    ($138,697 )    ($217,939 )    ($213,919 )    ($187,599 )    ($163,399 ) 

18

ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES BY SEGMENT

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE PERIOD ENDED MARCH 31, 2007

  Insurance   Reinsurance   Total
Company
Sub-total 		  Deposit
Accounting
Adjustment [a] 		  Total
Company 		 
Incurred related to prior years                               
   Quarter ended March 31, 2007    ($26,507 )    ($23,072 )    ($49,579 )  $ 6,328      ($55,907 ) 

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DECEMBER 31, 2006

  Insurance   Reinsurance   Total
Company
Sub-total 		  Deposit
Accounting
Adjustment [a] 		  Total
Company 		 
Incurred related to prior years                               
   Quarter ended March 31, 2006    ($27,855 )    ($16,946 )    ($44,801 )    ($2,260 )    ($42,541 ) 
   Quarter ended June 30, 2006    (13,068 )    41,537     28,469     6,887     21,582  
   Quarter ended September 30, 2006    (5,941 )    (7,376 )    (13,317 )    (3,277 )    (10,040 ) 
   Quarter ended December 31, 2006    (7,523 )    (22,204 )    (29,727 )    (2,987 )    (26,740 ) 
   Year ended December 31, 2006    ($54,387 )    ($4,989 )    ($59,376 )    ($1,637 )    ($57,739 ) 

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT DURING THE YEAR ENDED DECEMBER 31, 2005

  Insurance   Reinsurance   Total
Company
Sub-total 		  Deposit
Accounting
Adjustment [a] 		  Total
Company 		 
Incurred related to prior years                               
   Quarter ended March 31, 2005    ($9,788 )    ($36,213 )    ($46,001 )    —      ($46,001 ) 
   Quarter ended June 30, 2005    (16,149 )    (11,599 )    (27,748 )    —      (27,748 ) 
   Quarter ended September 30, 2005    (2,789 )    (21,087 )    (23,876 )    —      (23,876 ) 
   Quarter ended December 31, 2005    (29,270 )    (35,567 )    (64,837 )    —      (64,837 ) 
   Year ended December 31, 2005    ($57,996 )    ($104,466 )    ($162,462 )    —      ($162,462 ) 

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company’s underwriting results by segment to the Company’s financial statement presentation.

19

ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES BY DEVELOPMENT TAIL

(FAVORABLE) ADVERSE PRIOR ACCIDENT YEAR DEVELOPMENT

FOR THE QUARTERS ENDED
FOR THE YEAR ENDED
MAR. 31, 2007
DEC. 31, 2006
SEPT. 30, 2006
JUNE 30, 2006
MAR. 31, 2006
DEC. 31, 2006
INSURANCE SEGMENT                                       
     Short tail[a]      ($16,098 )  $ 6,508   $ 2,142     ($5,102 )    ($23,746 )    ($20,198 ) 
     Long Tail[b]      ($10,409 )    ($14,031 )    ($8,083 )    ($7,966 )    ($4,109 )    ($34,189 ) 
     TOTAL INSURANCE      ($26,507 )    ($7,523 )    ($5,941 )    ($13,068 )    ($27,855 )    ($54,387 ) 
                                       
REINSURANCE SEGMENT                                       
     Short tail[a]      ($15,338 )    ($20,330 )    ($4,372 )  $ 58,523     ($4,412 )  $ 29,409  
     Long Tail[b]      ($5,036 )  $ 444     ($2,117 )    ($10,115 )    ($8,330 )    ($20,118 ) 
     Other[c]      ($2,698 )    ($2,318 )    ($887 )    ($6,871 )    ($4,204 )    ($14,280 ) 
     TOTAL REINSURANCE      ($23,072 )    ($22,204 )    ($7,376 )  $ 41,537     ($16,946 )    ($4,989 ) 
                                       
     TOTAL COMPANY
     SUBTOTAL		     ($49,579 )    ($29,727 )    ($13,317 )  $ 28,469     ($44,801 )    ($59,376 ) 
     DEPOSIT ACCOUNTING
     ADJUSTMENT [d]  		  $ 6,328     ($2,987 )    ($3,277 )  $ 6,887     ($2,260 )    ($1,637 ) 
 
     REPORTED TOTALS      ($55,907 )    ($26,740 )    ($10,040 )  $ 21,582     ($42,541 )    ($57,739 ) 

[a] Short tail business is that for which development typically emerges within a period of several quarters. The Company’s short tail line of business in the Insurance business segment includes its property line of business. The Company’s short tail lines in its Reinsurance business segment include property, catastrophe, marine, aerospace and surety.
[b] Long tail business is that for which development emerges over many years. The Company’s long tail lines of business in the Insurance business segment includes casualty, healthcare liability, workers’ compensation and professional lines. The Company’s long tail line of business in the Reinsurance business segment includes casualty.
[c] The Company writes certain specialty lines of business for which the loss emergence is considered to be unique in nature and thus, has been included as other. The Company’s other lines of business included in the Reinsurance business segment are agriculture, personal accident, and other.
[d] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company’s underwriting results by segment to the Company’s financial statement presentation.
 

20

ENDURANCE SPECIALTY HOLDINGS LTD.
ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSE

Deposit
Accounting
Adjustment [a]
Total
Company
Reported
Totals
Insurance
Reinsurance
Short Tail
Long Tail
Total
Short Tail
Long Tail
Other
Total
AT MAR. 31, 2007                                                             
Case reserves  $ 121,095   $ 32,998   $ 154,093   $ 645,790   $ 217,718   $ 9,760   $ 873,268   $ 1,027,361     ($58,030 )  $ 969,331  
Total reserves  $ 164,454   $ 754,080   $ 918,534   $ 1,029,414   $ 815,327   $ 165,376   $ 2,010,117   $ 2,928,651     ($138,468 )  $ 2,790,183  
Case reserves / Total reserves    73.6 %    4.4 %    16.8 %    62.7 %    26.7 %    5.9 %    43.4 %    35.1 %    41.9 %    34.7 % 
IBNR / Total reserves    26.4 %    95.6 %    83.2 %    37.3 %    73.3 %    94.1 %    56.6 %    64.9 %    58.1 %    65.3 % 
                                                             
AT DEC. 31, 2006                                                             
Case reserves  $ 146,138   $ 25,941   $ 172,079   $ 683,118   $ 211,940   $ 9,031   $ 904,089   $ 1,076,168     ($52,760 )  $ 1,023,408  
Total reserves  $ 182,196   $ 683,151   $ 865,347   $ 1,022,475   $ 793,556   $ 148,930   $ 1,964,961   $ 2,830,308     ($128,622 )  $ 2,701,686  
Case reserves / Total reserves    80.2 %    3.8 %    19.9 %    66.8 %    26.7 %    6.1 %    46.0 %    38.0 %    41.0 %    37.9 % 
IBNR / Total reserves    19.8 %    96.2 %    80.1 %    33.2 %    73.3 %    93.9 %    54.0 %    62.0 %    59.0 %    62.1 % 
                                                             
AT SEPT. 30, 2006                                                             
Case reserves  $ 152,447   $ 8,303   $ 160,750   $ 745,512   $ 205,928   $ 8,764   $ 960,204   $ 1,120,954     ($52,630 )  $ 1,068,324  
Total reserves  $ 193,275   $ 615,947   $ 809,222   $ 1,147,159   $ 796,003   $ 139,649   $ 2,082,811   $ 2,892,033     ($122,615 )  $ 2,769,418  
Case reserves / Total reserves    78.9 %    1.3 %    19.9 %    65.0 %    25.9 %    6.3 %    46.1 %    38.8 %    42.9 %    38.6 % 
IBNR / Total reserves    21.1 %    98.7 %    80.1 %    35.0 %    74.1 %    93.7 %    53.9 %    61.2 %    57.1 %    61.4 % 
                                                             
AT JUNE 30, 2006                                                             
Case reserves  $ 153,272   $ 9,127   $ 162,399   $ 773,818   $ 181,465   $ 8,287   $ 963,570   $ 1,125,969     ($31,308 )  $ 1,094,661  
Total reserves  $ 201,130   $ 560,380   $ 761,510   $ 1,233,673   $ 762,543   $ 125,362   $ 2,121,578   $ 2,883,088     ($100,285 )  $ 2,782,803  
Case reserves / Total reserves    76.2 %    1.6 %    21.3 %    62.7 %    23.8 %    6.6 %    45.4 %    39.1 %    31.2 %    39.3 % 
IBNR / Total reserves    23.8 %    98.4 %    78.7 %    37.3 %    76.2 %    93.4 %    54.6 %    60.9 %    68.8 %    60.7 % 
                                                             
AT MAR. 31, 2006                                                             
Case reserves  $ 142,150   $ 9,083   $ 151,233   $ 796,560   $ 170,810   $ 7,762   $ 975,132   $ 1,126,365     ($15,355 )  $ 1,111,010  
Total reserves  $ 196,312   $ 509,582   $ 705,894   $ 1,208,202   $ 725,752   $ 121,353   $ 2,055,307   $ 2,761,201     ($72,215 )  $ 2,688,986  
Case reserves / Total reserves    72.4 %    1.8 %    21.4 %    65.9 %    23.5 %    6.4 %    47.4 %    40.8 %    21.3 %    41.3 % 
IBNR / Total reserves    27.6 %    98.2 %    78.6 %    34.1 %    76.5 %    93.6 %    52.6 %    59.2 %    78.7 %    58.7 % 

[a] For internal management reporting purposes, underwriting results by segment are presented on the basis of applying reinsurance accounting to all reinsurance contracts written. However, for financial statement presentation purposes, management determined that certain reinsurance contracts written during the period were more appropriately accounted for under the deposit method of accounting specified by AICPA SOP 98-7 whereby net premiums due on such contracts were recorded as deposit liabilities. The adjustment herein reconciles the Company’s underwriting results by segment to the Company’s financial statement presentation.
 

21

ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES FOR EPS CALCULATION

        QUARTER ENDED  
        MARCH 31,  
          2007     2006  
DILUTIVE SHARES    Average market price per share    $ 35.14   $ 32.67  
OUTSTANDING:                   
AS REPORTED    Basic weighted average common shares outstanding      66,613     66,445  
                   
    Add: weighted avg. unvested restricted share units      738     705  
       Weighted average exercise price per share      —     —  
       Proceeds from unrecognized restricted share unit expense    $ 8,842   $ 16,750  
    Less: restricted share units bought back via treasury method      (252 )    (513 ) 
                   
    Add: weighted avg. dilutive warrants outstanding      7,202     7,202  
       Weighted average exercise price per share    $ 16.62   $ 17.62  
    Less: warrants bought back via treasury method      (3,407 )    (3,885 ) 
                   
    Add: weighted avg. dilutive options outstanding      2,469     3,051  
       Weighted average exercise price per share    $ 18.35   $ 18.21  
       Proceeds from unrecognized option expense    $ 58   $ 324  
    Less: options bought back via treasury method      (1,291 )    (1,710 ) 
    Weighted average dilutive shares outstanding      72,073     71,295  

Note:   Warrants, options and unvested restricted share units that are anti-dilutive are not included in the calculation of diluted shares outstanding. Warrants, options and unvested restricted share units are anti-dilutive for earnings per share in any period in which there is a net loss and the anti-dilution is reflected in the calculations above as additional treasury method repurchases. Restricted share units are included in the calculation of basic and diluted weighted shares outstanding. The treasury stock method assumes that the proceeds received from the exercise of options or warrants will be used to repurchase the Company’s common shares at the average market price during the period of calculation. SFAS No. 123R also requires that any unrecognized stock based compensation expense that will be recorded in future periods be included as proceeds for purposes of the treasury stock repurchases.

22

ENDURANCE SPECIALTY HOLDINGS LTD.
OPERATING INCOME RECONCILIATION
EARNINGS PER SHARE INFORMATION - AS REPORTED, GAAP

  QUARTER ENDED
MARCH 31, 		 
    2007     2006  
Net income  $ 101,835   $ 107,036  
Add (Less) after-tax items:     
   Net foreign exchange losses (gains)  1,541   (2,140 ) 
   Net realized losses on investments  1,820   3,024  
Operating income before preferred dividends  $ 105,196   $ 107,920  
   Preferred dividends  (3,875 )  ($3,875 ) 
Operating income available to common shareholders  $ 101,321   $ 104,045  
     
Weighted average common shares outstanding     
Basic  66,613   66,445  
Dilutive  72,073   71,295  
     
Basic per common share data     
Net income available to common shareholders  $ 1.47   $ 1.55  
Add (Less) after-tax items:     
   Net foreign exchange losses (gains)  0.02   (0.03 ) 
   Net realized losses on investments  0.03   0.05  
Operating income available to common shareholders  $ 1.52   $ 1.57  
     
Diluted per common share data     
Net income available to common shareholders  $ 1.36   $ 1.45  
Add (Less) after-tax items:     
   Net foreign exchange losses (gains)  0.02   (0.03 ) 
   Net realized losses on investments  0.03   0.04  
Operating income available to common shareholders  $ 1.41   $ 1.46  

23

ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES SENSITIVITY ANALYSIS

DILUTIVE SHARES OUSTANDING
Market Price per Share
$ 30.00    $ 31.00    $ 32.00    $ 33.00    $ 34.00    $ 35.00    $ 36.00    $ 37.00    $ 38.00    $ 39.00    $ 40.00  
  70,878      71,054      71,219      71,374      71,520      71,657      71,787      71,910      72,026      72,136      72,241  

24

ENDURANCE SPECIALTY HOLDINGS LTD.
BOOK VALUE PER SHARE

      MARCH 31,   DECEMBER 31,
2006		  
      2007   2006    
DILUTIVE COMMON    Price per share at period end  $ 35.74   $ 32.55   $ 36.58  
SHARES OUTSTANDING:                       
AS-IF CONVERTED [a]    Basic common shares outstanding [b]    66,110     66,474     66,702  
    Add: unvested restricted share units    642     826     790  
    Add: dilutive warrants outstanding    7,202     7,202     7,202  
       Weighted average exercise price per share  $ 16.62   $ 17.62   $ 16.87  
    Add: dilutive options outstanding    2,377     3,053     2,591  
       Weighted average exercise price per share  $ 18.47   $ 18.23   $ 18.50  
    Book Value [c]  $ 2,166,546   $ 1,723,988   $ 2,097,874  
    Add: proceeds from converted warrants    119,703     126,905     121,504  
    Add: proceeds from converted options    43,897     55,650     47,937  
       Pro forma book value  $ 2,330,146   $ 1,906,543   $ 2,267,315  
    Dilutive shares outstanding    76,331     77,555     77,285  
    Basic book value per common share  $ 32.77   $ 25.93   $ 31.45  
    Diluted book value per common share  $ 30.53   $ 24.58   $ 29.34  
 
DILUTIVE COMMON    Price per share at period end  $ 35.74   $ 32.55   $ 36.58  
SHARES OUTSTANDING:                       
TREASURY STOCK    Basic common shares outstanding [b]    66,110     66,474     66,702  
METHOD                       
    Add: unvested restricted share units    642     826     790  
    Add: dilutive warrants outstanding    7,202     7,202     7,202  
       Weighted average exercise price per share  $ 16.62   $ 17.62   $ 16.87  
    Less: warrants bought back via treasury method    (3,349 )    (3,899 )    (3,322 ) 
    Add: dilutive options outstanding    2,377     3,053     2,591  
       Weighted average exercise price per share  $ 18.47   $ 18.23   $ 18.50  
    Less: options bought back via treasury method    (1,228 )    (1,710 )    (1,309 ) 
    Dilutive shares outstanding    71,754     71,946     72,654  
    Basic book value per common share  $ 32.77   $ 25.93   $ 31.45  
    Diluted book value per common share  $ 30.19   $ 23.96   $ 28.87  

[a] The as-if converted method assumes that the proceeds received upon exercise of options and warrants will be retained by the Company and the resulting common shares from exercise will remain outstanding.
[b] Basic common shares include vested restricted share units.
[c] Excludes the $200 million liquidation value of the preferred shares.

25

ENDURANCE SPECIALTY HOLDINGS LTD.
SHAREHOLDER RETURN ANALYSIS

  QUARTER ENDED
MAR. 31, 2007		   YEARS ENDED DECEMBER 31,  
  2006   2005   2004   2003  
Net income (loss) available to common shareholders  $ 97,960   $ 482,626     ($223,204 )  $ 355,584   $ 263,437  
Dividends paid to common shareholders    (16,564 )    (66,262 )    (61,695 )    (50,346 )    (20,505 ) 
Shareholders’ equity [a]    2,166,546     2,097,874     1,672,543     1,862,455     1,644,815  
     Return on beginning equity    4.7 %    28.9 %    (12.0 )%    21.6 %    21.6 % 
     Dividend payout ratio [b]    0.8 %    4.0 %    3.3 %    3.1 %    1.7 % 
                               
Dilutive common shares outstanding    71,754     72,654     72,173     66,729     68,445  
     Diluted book value per common share  $ 30.19   $ 28.87   $ 23.17   $ 27.91   $ 24.03  
     (treasury stock method)                               
Change in diluted book value per common share    4.6 %    24.6 %    (17.0 )%    16.1 %    10.6 % 
Total return to common shareholders [c]    5.4 %    28.6 %    (13.7 )%    19.2 %    12.3 % 

[a] Excludes the $200 million liquidation value of the preferred shares.
[b] Dividend payout ratio is calculated as dividends paid divided by beginning shareholders’ equity.
[c] Total return to common shareholders is calculated as the sum of the change in diluted book value per common share and the dividend payout ratio.

26

ENDURANCE SPECIALTY HOLDINGS LTD.
REGULATION G

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 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. 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 how management analyzes the Company’s underlying business performance. Operating income should not be view ed as a substitute for GAAP net income. Please see page 23 for a reconciliation of operating income to net income.

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 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.

Investment yield is provided by the Company’s investment managers and is calculated by dividing net investment income by average invested assets at amortized cost. The Company utilizes and presents the investment yield in order to better disclose the performance of the Company’s investments and to show the components of the Company’s ROE.

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. Please see page 25 for a reconciliation of diluted book value per common share to basic book value per common share.

27