Endurance Specialty (ENH) 8-K Results of Operations and Financial Condition

Table of Contents

Exhibit 99.2

Endurance Specialty Holdings Ltd.

INVESTOR FINANCIAL SUPPLEMENT        

SECOND QUARTER 2006        

Table of Contents

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.

Table of Contents

Financial Supplement Table of Contents

			Page
i. Basis of Presentation			i
ii. Organizational Chart of Executive Management			ii
iii. Organizational Chart of Corporate Structure			iii
I. Financial Highlights			1
II. Consolidated Financial Statements
a. Consolidated Statements of Income			2
b. Consolidated Balance Sheets			3
c. Segment Distribution			4
d. Consolidated Segment Data			5
e. Deposit Accounting Adjustment Impacts on Segment Data			9
III. Other Financial Information
a. Return on Equity Analysis			13
b. ROE Component Analysis – Operating and Investment Leverage			14
c. Investment Portfolio Information			15
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses			16
b. Activity in Reserve for Losses and Loss Expenses by Segment			17
c. Analysis of Unpaid Losses and Loss Expense			18
V. Share Analysis
a. Weighted Average Dilutive Shares Outstanding			19
b. Operating Income Reconciliation			20
c. Dilutive Shares Sensitivity Analysis			21
d. Book Value Per Share Analysis			22
e. Growth in Book Value Per Share Analysis			23
VI. Regulation G			24

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, 2005.

Table of Contents

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, 2005, December 31, 2004 and December 31, 2003, 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

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
ORGANIZATION CHART

ii

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CORPORATE ORGANIZATION CHART

iii

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL HIGHLIGHTS

						QUARTER ENDED JUNE 30,												SIX MONTHS ENDED JUNE 30,												Previous Quarter Change						Previous Year to Date Change
						2006						2005						2006						2005
HIGHLIGHTS			Net income				$	64,050					$	110,017					$	171,086					$	206,276						(41.8	)%					(17.1	)%
			Net income available to common shareholders					60,175						110,017						163,336						206,276						(45.3	)%					(20.8	)%
			Operating income [a]					62,195						111,787						170,116						214,459						(44.4	)%					(20.7	)%
			Operating income available to common shareholders [a]					58,320						111,787						162,366						214,459						(47.8	)%					(24.3	)%
			Operating cash flow					204,429						252,105						380,148						472,185						(18.9	)%					(19.5	)%
			Gross premiums written					451,253						403,189						1,022,634						1,105,680						11.9	%					(7.5	)%
			Net premiums earned					406,678						437,921						826,884						875,519						(7.1	)%					(5.6	)%
			Total assets					6,865,786						5,809,713						6,865,786						5,809,713						18.2	%					18.2	%
			Total shareholders' equity					1,936,535						1,987,125						1,936,535						1,987,125						(2.5	)%					(2.5	)%
PER SHARE			Basic earnings per common share
AND SHARES DATA			Net income (as reported)				$	0.91					$	1.81					$	2.46					$	3.38						(50.1	)%					(27.3	)%
			Operating income (as reported) [a]				$	0.88					$	1.84					$	2.44					$	3.52						(52.4	)%					(30.5	)%
			Diluted earnings per common share
			Net income (as reported)				$	0.85					$	1.67					$	2.29					$	3.11						(49.2	)%					(26.3	)%
			Operating income (as reported) [a]				$	0.82					$	1.69					$	2.28					$	3.24						(51.5	)%					(29.6	)%
As Reported			Weighted average common shares outstanding					66,398						60,632						66,421						60,960						9.5	%					9.0	%
			Weighted average common shares outstanding
			and dilutive potential common shares					71,109						66,063						71,243						66,276						7.6	%					7.5	%
Book Value Per			Book value [b]				$	26.19					$	33.01					$	26.19					$	33.01						(20.7	)%					(20.7	)%
Common Share			Diluted book value (treasury stock method) [b]				$	24.24					$	30.01					$	24.24					$	30.01						(19.2	)%					(19.2	)%
FINANCIAL RATIOS			Return on average common equity (ROAE), net income [c]					3.5	%					5.7	%					9.6	%					10.7	%					(2.2	)					(1.1	)
			ROAE, operating income [a] [c]					3.4	%					5.8	%					9.5	%					11.1	%					(2.4	)					(1.6	)
			Return on beg. common equity (ROBE), net income [c]					3.5	%					5.8	%					9.8	%					11.1	%					(2.4	)					(1.3	)
			ROBE, operating income [a]					3.4	%					5.9	%					9.7	%					11.5	%					(2.6	)					(1.8	)
			Annualized ROAE, net income [c]					13.9	%					22.7	%					19.2	%					21.4	%					(8.8	)					(2.3	)
			Annualized ROAE, operating income [a] [c]					13.5	%					23.1	%					19.1	%					22.3	%					(9.6	)					(3.2	)
			Annualized ROBE, net income					14.0	%					23.4	%					19.5	%					22.2	%					(9.4	)					(2.6	)
			Annualized ROBE, operating income [a]					13.5	%					23.8	%					19.4	%					23.0	%					(10.2	)					(3.6	)
			Annualized investment yield					4.6	%					3.8	%					4.8	%					3.8	%					0.8						1.0
			Loss ratio					66.3	%					52.3	%					61.5	%					54.8	%					14.0						6.7
																																0.0	%					0.0
GAAP			Acquisition expense ratio					18.9	%					20.4	%					18.2	%					20.1	%					(1.5	)					(1.9	)
			General and administrative expense ratio					11.6	%					9.2	%					11.1	%					8.5	%					2.4						2.6
			Combined ratio					96.8	%					81.9	%					90.8	%					83.4	%					14.9						7.4
STAT			Acquisition expense ratio					16.6	%					19.5	%					15.9	%					18.9	%					(2.9	)					(3.0	)
			General and administrative expense ratio					11.6	%					10.2	%					9.6	%					6.8	%					1.4						2.8
			Combined ratio					94.5	%					82.0	%					87.0	%					80.5	%					12.5						6.5

[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 18 for a reconciliation to net income.

[b]	For detailed calculations please refer to page 20.

[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

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME

			QUARTER ENDED JUNE 30,												SIX MONTHS ENDED JUNE 30,												YEAR ENDED DEC. 31, 2005
			2006						2005						2006						2005
UNDERWRITING REVENUES
Gross premiums written				$	451,253					$	403,189					$	1,022,634					$	1,105,680					$	1,668,877
Premiums ceded					(42,575	)					(8,599	)					(70,947	)					(11,912	)					(49,528	)
Net premiums written				$	408,678					$	394,590					$	951,687					$	1,093,768					$	1,619,349
Change in unearned premiums					(2,000	)					43,331						(124,803	)					(218,249	)					104,345
Net premiums earned				$	406,678					$	437,921					$	826,884					$	875,519					$	1,723,694
Other underwriting (loss) income					(1,992	)					418						1,509						1,289						(4,819	)
Total underwriting revenues				$	404,686					$	438,339					$	828,393					$	876,808					$	1,718,875
UNDERWRITING EXPENSES
Losses and loss expenses				$	269,445					$	228,916					$	508,177					$	479,975					$	1,650,943
Acquisition expenses					76,758						89,334						150,529						176,109						329,692
General and administrative expenses					47,425						40,432						91,723						73,978						148,036
Total underwriting expenses				$	393,628					$	358,682					$	750,429					$	730,062					$	2,128,671
Underwriting income (loss)				$	11,058					$	79,657					$	77,964					$	146,746						($409,796	)
OTHER OPERATING REVENUE/EXPENSES
Net investment income				$	59,209					$	39,133					$	119,683					$	78,444					$	180,452
Interest expense					(7,459	)					(5,612	)					(14,985	)					(11,083	)					(24,210	)
Amortization of intangibles					(1,158	)					(1,158	)					(2,316	)					(2,378	)					(4,694	)
Total other operating revenue/expenses				$	50,592					$	32,363					$	102,382					$	64,983					$	151,548
INCOME (LOSS) BEFORE OTHER ITEMS				$	61,650					$	112,020					$	180,346					$	211,729						($258,248	)
OTHER
Net foreign exchange gains (losses)				$	11,997						($1,742	)				$	14,883						($4,163	)					($5,140	)
Net realized (losses) gains on investments					(8,729	)					592						(12,059	)					(3,861	)					(8,244	)
Income tax (expense) benefit					(868	)					(853	)					(12,084	)					2,571						51,148
NET INCOME (LOSS)				$	64,050					$	110,017					$	171,086					$	206,276						($220,484	)
Preferred dividends					(3,875	)					—						(7,750	)					—						($2,720	)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS				$	60,175					$	110,017					$	163,336					$	206,276						($223,204	)
KEY RATIOS/PER SHARE DATA
Loss ratio					66.3	%					52.3	%					61.5	%					54.8	%					95.8	%
Acquisition expense ratio					18.9	%					20.4	%					18.2	%					20.1	%					19.1	%
General and administrative expense ratio					11.6	%					9.2	%					11.1	%					8.5	%					8.6	%
Combined ratio					96.8	%					81.9	%					90.8	%					83.4	%					123.5	%
Weighted average basic shares outstanding					66,398						60,632						66,421						60,960						62,029
Weighted average dilutive shares outstanding					71,109						66,063						71,243						66,276						62,029
Basic earnings per common share				$	0.91					$	1.81					$	2.46					$	3.38						($3.60	)
Diluted earnings per common share				$	0.85					$	1.67					$	2.29					$	3.11						($3.60	)
ROAE [a]					3.5	%					5.7	%					9.6	%					10.7	%					(12.6	)%

[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

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS

						JUNE 30, 2006						DEC. 31, 2005
ASSETS
Cash and cash equivalents							$	669,583					$	468,015
Fixed maturity investments available for sale, at fair value								4,323,661						4,323,339
Investments in other ventures, under equity method								204,272						161,883
Premiums receivable, net								827,239						575,109
Deferred acquisition costs								175,717						166,720
Securities lending collateral								371,407						408,663
Prepaid reinsurance premiums								56,194						27,132
Losses recoverable								27,452						17,248
Accrued investment income								36,740						33,734
Intangible assets								71,436						65,633
Deferred tax assets								66,545						69,360
Other assets								35,540						35,701
TOTAL ASSETS							$	6,865,786					$	6,352,537
LIABILITIES
Reserve for losses and loss expenses							$	2,782,803					$	2,603,590
Reserve for unearned premiums								967,844						803,629
Deposit liabilities								173,527						92,523
Reinsurance balances payable								122,829						85,281
Securities lending payable								371,407						408,663
Debt								447,131						447,092
Other liabilities								63,710						39,216
TOTAL LIABILITIES							$	4,929,251					$	4,479,994
SHAREHOLDERS' EQUITY
Preferred shares
Series A, non-cumulative – 8,000 issued and outstanding (2005 - 8,000)							$	8,000					$	8,000
Common shares
66,096 issued and outstanding (2005 - 66,139)								66,096						66,139
Additional paid-in capital								1,450,435						1,453,722
Accumulated other comprehensive loss								(82,087	)					(19,672	)
Retained earnings								494,091						364,354
TOTAL SHAREHOLDERS' EQUITY							$	1,936,535					$	1,872,543
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY							$	6,865,786					$	6,352,537
Book value per common share							$	26.19					$	25.18
Diluted book value per common share (treasury stock method)							$	24.24					$	23.17
RATIOS
Debt-to-capital								18.8	%					19.3	%

3

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT DISTRIBUTION
FOR THE SIX MONTHS ENDED JUNE 30, 2006

Gross Premiums Written = $1,168 million [a]

[a]	Prior to deposit accounting adjustments.

4

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE QUARTER ENDED JUNE 30, 2006

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company Sub-total						Deposit Accounting Adjustment [a]						Reported Totals
UNDERWRITING REVENUES
Gross premiums written				$	49,998					$	100,526					$	79,426					$	52,590					$	106,633					$	108,192					$	497,365						($46,112	)				$	451,253
Net premiums written				$	49,998					$	100,526					$	74,716					$	26,699					$	96,482					$	106,369					$	454,790						($46,112	)				$	408,678
Net premiums earned				$	89,861					$	57,380					$	119,731					$	18,384					$	69,969					$	101,524					$	456,849						($50,171	)				$	406,678
Other underwriting loss					—						—						—						—						—						—						—						(1,992	)					(1,992	)
Total underwriting revenues				$	89,861					$	57,380					$	119,731					$	18,384					$	69,969					$	101,524					$	456,849						($52,163	)				$	404,686
UNDERWRITING EXPENSES
Losses and loss expenses				$	83,117					$	27,668					$	59,224					$	23,347					$	46,821					$	70,267					$	310,444						($40,999	)				$	269,445
Acquisition expenses					26,506						7,670						32,995						729						3,364						19,200						90,464						(13,706	)					76,758
General and administrative expenses					6,019						8,470						7,847						5,753						10,195						9,141						47,425						—						47,425
Total expenses					115,642						43,808						100,066						29,829						60,380						98,608						448,333						(54,705	)					393,628
UNDERWRITING INCOME (LOSS)					($25,781	)				$	13,572					$	19,665						($11,445	)				$	9,589					$	2,916					$	8,516					$	2,542					$	11,058
GAAP RATIOS
Loss ratio					92.5	%					48.2	%					49.5	%					127.0	%					66.9	%					69.2	%					67.9	%					81.7	%					66.3	%
Acquisition expense ratio					29.5	%					13.4	%					27.6	%					4.0	%					4.8	%					18.9	%					19.8	%					27.3	%					18.9	%
General and administrative expense ratio					6.7	%					14.7	%					6.5	%					31.3	%					14.6	%					9.0	%					10.4	%					—						11.6	%
Combined ratio					128.7	%					76.3	%					83.6	%					162.3	%					86.3	%					97.1	%					98.1	%					109.0	%					96.8	%
STATUTORY RATIOS
Loss ratio					92.5	%					48.2	%					49.5	%					127.0	%					66.9	%					69.2	%					67.9	%					81.7	%					66.3	%
Acquisition expense ratio					31.7	%					11.5	%					33.7	%					(1.2	)%					6.4	%					21.1	%					17.8	%					28.3	%					16.6	%
General and administrative expense ratio					12.0	%					8.4	%					10.5	%					21.5	%					10.6	%					8.6	%					10.4	%					—						11.6	%
Combined ratio					136.2	%					68.1	%					93.7	%					147.3	%					83.9	%					98.9	%					96.1	%					110.0	%					94.5	%

[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 underwriting results by segment to the Company's financial statement presentation.

5

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
FOR THE QUARTER ENDED JUNE 30, 2006

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company Sub-total						Deposit Accounting Adjustment [a]						Reported Totals
AS REPORTED
GAAP RATIOS
Loss ratio					92.5	%					48.2	%					49.5	%					127.0	%					66.9	%					69.2	%					67.9	%					81.7	%					66.3	%
Acquisition expense ratio					29.5	%					13.4	%					27.6	%					4.0	%					4.8	%					18.9	%					19.8	%					27.3	%					18.9	%
General and administrative expense ratio					6.7	%					14.7	%					6.5	%					31.3	%					14.6	%					9.0	%					10.4	%					—						11.6	%
Combined ratio					128.7	%					76.3	%					83.6	%					162.3	%					86.3	%					97.1	%					98.1	%					109.0	%					96.8	%
EFFECT OF PRIOR PERIOD RESERVE DEVELOPMENT
FAVORABLE / (UNFAVORABLE)
GAAP RATIOS
Loss ratio					(22.9	)%					(46.1	)%					11.0	%					27.8	%					11.4	%					(7.5	)%					(6.2	)%					(13.7	)%					(5.3	)%
NET OF PRIOR PERIOD RESERVE DEVELOPMENT
GAAP RATIOS
Loss ratio					69.6	%					2.1	%					60.5	%					154.8	%					78.3	%					61.7	%					61.7	%					68.0	%					61.0	%
Acquisition expense ratio					29.5	%					13.4	%					27.6	%					4.0	%					4.8	%					18.9	%					19.8	%					27.3	%					18.9	%
General and administrative expense ratio					6.7	%					14.7	%					6.5	%					31.3	%					14.6	%					9.0	%					10.4	%					—						11.6	%
Combined ratio					105.8	%					30.2	%					94.6	%					190.1	%					97.7	%					89.6	%					91.9	%					95.3	%					91.5	%

[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 underwriting results by segment to the Company's financial statement presentation.

6

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE SIX MONTHS ENDED JUNE 30, 2006

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company Sub-total						Deposit Accounting Adjustment [a]						Reported Totals
UNDERWRITING REVENUES
Gross premiums written				$	172,478					$	201,330					$	284,895					$	81,164					$	158,216					$	269,812					$	1,167,895						($145,261	)				$	1,022,634
Net premiums written				$	172,478					$	201,330					$	278,182					$	37,389					$	142,484					$	265,085					$	1,096,948						($145,261	)				$	951,687
Net premiums earned				$	187,970					$	110,778					$	270,778					$	39,442					$	139,337					$	185,507					$	933,812						($106,928	)				$	826,884
Other underwriting income					—						—						—						—						—						—						—						1,509						1,509
Total underwriting revenues				$	187,970					$	110,778					$	270,778					$	39,442					$	139,337					$	185,507					$	933,812						($105,419	)				$	828,393
UNDERWRITING EXPENSES
Losses and loss expenses				$	123,552					$	60,373					$	145,184					$	17,886					$	93,889					$	139,565					$	580,449						($72,272	)				$	508,177
Acquisition expenses					46,601						15,481						75,517						2,018						6,721						38,467						184,805						(34,276	)					150,529
General and administrative expenses					13,468						15,043						19,683						9,530						15,726						18,273						91,723						—						91,723
Total expenses					183,621						90,897						240,384						29,434						116,336						196,305						856,977						(106,548	)					750,429
UNDERWRITING INCOME (LOSS)				$	4,349					$	19,881					$	30,394					$	10,008					$	23,001						($10,798	)				$	76,835					$	1,129					$	77,964
GAAP RATIOS
Loss ratio					65.7	%					54.5	%					53.6	%					45.3	%					67.4	%					75.2	%					62.2	%					67.6	%					61.5	%
Acquisition expense ratio					24.8	%					14.0	%					27.9	%					5.1	%					4.8	%					20.7	%					19.8	%					32.0	%					18.2	%
General and administrative expense ratio					7.2	%					13.6	%					7.3	%					24.2	%					11.3	%					9.9	%					9.8	%					—						11.1	%
Combined ratio					97.7	%					82.1	%					88.8	%					74.6	%					83.5	%					105.8	%					91.8	%					99.6	%					90.8	%
STATUTORY RATIOS
Loss ratio					65.7	%					54.5	%					53.6	%					45.3	%					67.4	%					75.2	%					62.2	%					67.6	%					61.5	%
Acquisition expense ratio					23.9	%					11.7	%					27.4	%					0.1	%					5.3	%					17.8	%					17.9	%					30.4	%					15.9	%
General and administrative expense ratio					7.8	%					7.5	%					7.1	%					25.5	%					11.0	%					6.9	%					8.4	%					—						9.6	%
Combined ratio					97.4	%					73.7	%					88.1	%					70.9	%					83.7	%					99.9	%					88.5	%					98.0	%					87.0	%

[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.

7

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL RATIOS
FOR THE SIX MONTHS ENDED JUNE 30, 2006

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company Sub-total						Deposit Accounting Adjustment [a]						Reported Totals
AS REPORTED
GAAP RATIOS
Loss ratio					65.7	%					54.5	%					53.6	%					45.3	%					67.4	%					75.2	%					62.2	%					67.6	%					61.5	%
Acquisition expense ratio					24.8	%					14.0	%					27.9	%					5.1	%					4.8	%					20.7	%					19.8	%					32.0	%					18.2	%
General and administrative expense ratio					7.2	%					13.6	%					7.3	%					24.2	%					11.3	%					9.9	%					9.8	%					—						11.1	%
Combined ratio					97.7	%					82.1	%					88.8	%					74.6	%					83.5	%					105.8	%					91.8	%					99.6	%					90.8	%
EFFECT OF PRIOR PERIOD RESERVE DEVELOPMENT
FAVORABLE / (UNFAVORABLE)
GAAP RATIOS
Loss ratio					5.4	%					(33.0	)%					7.9	%					73.1	%					8.7	%					(10.6	)%					1.7	%					4.3	%					2.5	%
NET OF PRIOR PERIOD RESERVE DEVELOPMENT
GAAP RATIOS
Loss ratio					71.1	%					21.5	%					61.5	%					118.4	%					76.1	%					64.6	%					63.9	%					71.9	%					64.0	%
Acquisition expense ratio					24.8	%					14.0	%					27.9	%					5.1	%					4.8	%					20.7	%					19.8	%					32.0	%					18.2	%
General and administrative expense ratio					7.2	%					13.6	%					7.3	%					24.2	%					11.3	%					9.9	%					9.8	%					—						11.1	%
Combined ratio					103.1	%					49.1	%					96.7	%					147.7	%					92.2	%					95.2	%					93.5	%					103.9	%					93.3	%

[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

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD
DEPOSIT ACCOUNTING ADJUSTMENT IMPACTS ON SEGMENT DATA
FOR THE QUARTER ENDED JUNE 30, 2006

INCLUDING DEPOSIT ACCOUNTING ADJUSTMENTS

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company
UNDERWRITING REVENUES
Gross premiums written				$	44,779					$	100,526					$	46,189					$	52,590					$	106,633					$	100,536					$	451,253
Net premiums written				$	44,779					$	100,526					$	41,479					$	26,699					$	96,482					$	98,713					$	408,678
Net premiums earned				$	78,265					$	54,795					$	89,547					$	18,384					$	69,969					$	95,718					$	406,678
Other underwriting (loss) income					(4,247	)					(1,317	)					3,024						—						—						548						(1,992	)
Total underwriting revenues					74,018						53,478						92,571						18,384						69,969						96,266						404,686
UNDERWRITING EXPENSES
Losses and loss expenses				$	67,765					$	24,347					$	41,094					$	23,347					$	46,821					$	66,071					$	269,445
Acquisition expenses					23,129						7,088						24,439						727						3,366						18,009						76,758
General and administrative expenses					6,019						8,470						7,847						5,753						10,195						9,141						47,425
Total expenses					96,913						39,905						73,380						29,827						60,382						93,221						393,628
UNDERWRITING INCOME (LOSS)					($22,895	)				$	13,573					$	19,191						($11,443	)				$	9,587					$	3,045					$	11,058
GAAP RATIOS
Loss ratio					86.6	%					44.4	%					45.9	%					127.0	%					66.9	%					69.0	%					66.3	%
Acquisition expense ratio					29.5	%					12.9	%					27.3	%					3.9	%					4.8	%					18.8	%					18.9	%
General and administrative expense ratio					7.7	%					15.5	%					8.7	%					31.3	%					14.6	%					9.6	%					11.6	%
Combined ratio					123.8	%					72.8	%					81.9	%					162.2	%					86.3	%					97.4	%					96.8	%

9

Table of Contents

EXCLUDING DEPOSIT ACCOUNTING ADJUSTMENTS

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company
UNDERWRITING REVENUES
Gross premiums written				$	49,998					$	100,526					$	79,426					$	52,590					$	106,633					$	108,192					$	497,365
Net premiums written				$	49,998					$	100,526					$	74,716					$	26,699					$	96,482					$	106,369					$	454,790
Net premiums earned				$	89,861					$	57,380					$	119,731					$	18,384					$	69,969					$	101,524					$	456,849
UNDERWRITING EXPENSES
Losses and loss expenses				$	83,117					$	27,668					$	59,224					$	23,347					$	46,821					$	70,267					$	310,444
Acquisition expenses					26,506						7,670						32,995						729						3,364						19,200						90,464
General and administrative expenses					6,019						8,470						7,847						5,753						10,195						9,141						47,425
Total expenses					115,642						43,808						100,066						29,829						60,380						98,608						448,333
UNDERWRITING INCOME (LOSS)					($25,781	)				$	13,572					$	19,665						($11,445	)				$	9,589					$	2,916					$	8,516
GAAP RATIOS
Loss ratio					92.5	%					48.2	%					49.5	%					127.0	%					66.9	%					69.2	%					67.9	%
Acquisition expense ratio					29.5	%					13.4	%					27.6	%					4.0	%					4.8	%					18.9	%					19.8	%
General and administrative expense ratio					6.7	%					14.7	%					6.5	%					31.3	%					14.6	%					9.0	%					10.4	%
Combined ratio					128.7	%					76.3	%					83.6	%					162.3	%					86.3	%					97.1	%					98.1	%

10

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD
DEPOSIT ACCOUNTING ADJUSTMENT IMPACTS ON SEGMENT DATA
FOR THE SIX MONTHS ENDED JUNE 30, 2006

INCLUDING DEPOSIT ACCOUNTING ADJUSTMENTS

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company
UNDERWRITING REVENUES
Gross premiums written				$	143,602					$	201,330					$	183,583					$	81,164					$	158,216					$	254,739					$	1,022,634
Net premiums written				$	143,602					$	201,330					$	176,870					$	37,389					$	142,484					$	250,012					$	951,687
Net premiums earned				$	166,131					$	105,557					$	197,946					$	39,442					$	139,337					$	178,471					$	826,884
Other underwriting (loss) income					(4,201	)					(1,108	)					6,124						—						—						694						1,509
Total underwriting revenues					161,930						104,449						204,070						39,442						139,337						179,165						828,393
UNDERWRITING EXPENSES
Losses and loss expenses				$	102,724					$	55,218					$	103,764					$	17,886					$	93,889					$	134,696					$	508,177
Acquisition expenses					39,055						14,306						51,536						2,018						6,721						36,893						150,529
General and administrative expenses					13,468						15,043						19,683						9,530						15,726						18,273						91,723
Total expenses					155,247						84,567						174,983						29,434						116,336						189,862						750,429
UNDERWRITING INCOME (LOSS)				$	6,683					$	19,882					$	29,087					$	10,008					$	23,001						($10,697	)				$	77,964
GAAP RATIOS
Loss ratio					61.8	%					52.3	%					52.4	%					45.3	%					67.4	%					75.5	%					61.5	%
Acquisition expense ratio					23.5	%					13.6	%					26.1	%					5.1	%					4.8	%					20.7	%					18.2	%
General and administrative expense ratio					8.1	%					14.2	%					9.9	%					24.2	%					11.3	%					10.2	%					11.1	%
Combined ratio					93.4	%					80.1	%					88.4	%					74.6	%					83.5	%					106.4	%					90.8	%

11

Table of Contents

EXCLUDING DEPOSIT ACCOUNTING ADJUSTMENTS

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company
UNDERWRITING REVENUES
Gross premiums written				$	172,478					$	201,330					$	284,895					$	81,164					$	158,216					$	269,812					$	1,167,895
Net premiums written				$	172,478					$	201,330					$	278,182					$	37,389					$	142,484					$	265,085					$	1,096,948
Net premiums earned				$	187,970					$	110,778					$	270,778					$	39,442					$	139,337					$	185,507					$	933,812
UNDERWRITING EXPENSES
Losses and loss expenses				$	123,552					$	60,373					$	145,184					$	17,886					$	93,889					$	139,565					$	580,449
Acquisition expenses					46,601						15,481						75,517						2,018						6,721						38,467						184,805
General and administrative expenses					13,468						15,043						19,683						9,530						15,726						18,273						91,723
Total expenses					183,621						90,897						240,384						29,434						116,336						196,305						856,977
UNDERWRITING INCOME (LOSS)				$	4,349					$	19,881					$	30,394					$	10,008					$	23,001						($10,798	)				$	76,835
GAAP RATIOS
Loss ratio					65.7	%					54.5	%					53.6	%					45.3	%					67.4	%					75.2	%					62.2	%
Acquisition expense ratio					24.8	%					14.0	%					27.9	%					5.1	%					4.8	%					20.7	%					19.8	%
General and administrative expense ratio					7.2	%					13.6	%					7.3	%					24.2	%					11.3	%					9.9	%					9.8	%
Combined ratio					97.7	%					82.1	%					88.8	%					74.6	%					83.5	%					105.8	%					91.8	%

12

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
RETURN ON EQUITY ANALYSIS

			SIX MONTHS ENDED JUNE 30, 2006
Average common equity [a]				$	1,704,539
Net premiums earned				$	826,884
Combined ratio					90.8	%
Operating margin					9.2	%
Premium leverage					0.49x
Implied ROAE from underwriting activity					4.5	%
Average invested assets at amortized cost				$	5,149,212
Investment leverage					3.02x
Year to date investment income yield, pretax					2.3	%
Implied ROAE from investment activity					7.0	%
Implied Pre-tax Operating ROAE, for period					11.5	%
Implied Pre-tax Operating ROAE, annualized					23.0	%

[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.

13

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
ANNUALIZED OPERATING & INVESTMENT LEVERAGE

																											Year Ended December 31,
			3Q 2005						4Q 2005						1Q 2006						2Q 2006						2005						2004
Average common equity [a]				$	1,772,610					$	1,615,319					$	1,698,266					$	1,730,262					$	1,767,499					$	1,753,635
Net premiums earned				$	441,166						407,009					$	420,206					$	406,678					$	1,723,694					$	1,632,600
Operating leverage					0.25x						0.25x						0.25x						0.24x						0.98x						0.93x
Annualized operating leverage					1.00x						1.01x						0.99x						0.94x						0.98x						0.93x
Avg. invested assets at amortized cost				$	4,397,080					$	4,750,427					$	5,064,789					$	5,219,192					$	4,463,908					$	3,277,276
Investment leverage					2.48x						2.94x						2.98x						3.02x						2.53x						1.87x

[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.

14

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD
INVESTMENT PORTFOLIO
AS OF JUNE 30, 2006

Type of Investment															Fair Value						Percentage
Cash and equivalents [a]																$	662,125						12.8	%
U.S. government and agencies																	1,010,118						19.5	%
Corporate securities																	753,688						14.5	%
Foreign government																	206,356						4.0	%
Municipals																	6,961						0.1	%
Asset-backed securities																	593,732						11.4	%
Mortgage-backed securities																	1,752,806						33.8	%
Investments in other ventures																	204,272						3.9	%
Total																$	5,190,058						100.0	%
Ratings															Fair Value						Percentage
U.S. Government and agencies																$	1,010,118						19.5	%
AAA/Aaa																	3,367,054						64.9	%
AA/Aa																	242,035						4.6	%
A/A																	316,856						6.1	%
BBB and below																	49,723						1.0	%
Investments in other ventures/Not rated																	204,272						3.9	%
Total																$	5,190,058						100.0	%
Performance																					30-Jun-06
Annualized yield, year to date [b]																							4.8	%
Duration [c]																							2.64
Investment Income			Quarter Ended Sept. 30, 2005						Quarter Ended December 31, 2005						Quarter Ended March 31, 2006						Quarter Ended June 30, 2006
Income from investments in other ventures				$	6,611					$	2,818					$	9,332					$	4,557
Total net investment income				$	49,034					$	52,976					$	60,474					$	59,209

Note:    [a] Cash and equivalents are shown net of investments pending settlement.

[b] Annualized yield excludes realized and unrealized gains and losses on fixed maturity investments.

[c] Duration excludes investments in other ventures.

15

Table of Contents

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

			QUARTER ENDED SEPT. 30, 2005						QUARTER ENDED DEC. 31, 2005						QUARTER ENDED MARCH 31, 2006						QUARTER ENDED JUNE 30, 2006
Incurred related to:
Current year				$	808,484					$	451,197					$	281,273					$	247,863
Prior years					(23,876	)					(64,837	)					(42,541	)					21,582
Total incurred					784,608						386,360						238,732						269,445
Paid related to:
Current year					($26,678	)					($229,008	)					($6,776	)					($1,923	)
Prior years					(68,658	)					(57,124	)					(156,623	)					(185,676	)
Total paid					(95,336	)					(286,132	)					(163,399	)					(187,599	)

16

Table of Contents

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

FAVORABLE (ADVERSE) DEVELOPMENT DURING THE SIX MONTHS ENDED JUNE 30, 2006

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines
																																							Total Company
Incurred related to prior years
Quarter ended March 31, 2006				$	29,255						($10,100	)				$	7,635					$	23,746					$	4,109						($12,104	)				$	42,541
Quarter ended June 30, 2006					(13,862	)					(26,471	)					13,259						5,102						7,966						(7,576	)					(21,582	)
Six months ended June 30, 2006				$	15,393						($36,571	)				$	20,894					$	28,848					$	12,075						($19,680	)				$	20,959

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

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines
																																							Total Company
Incurred related to prior years
Quarter ended March 31, 2005				$	28,900					$	5,146					$	1,929						($2,477	)				$	12,265					$	238					$	46,001
Quarter ended June 30, 2005					11,994						2,117						(9,670	)					6,788						9,361						7,158						27,748
Quarter ended September 30, 2005					13,506						1,667						2,530						2,351						438						3,384						23,876
Quarter ended December 31, 2005					19,441						(4,694	)					11,971						12,299						16,971						8,849						64,837
Year ended December 31, 2005				$	73,841					$	4,236					$	6,760					$	18,961					$	39,035					$	19,629					$	162,462

FAVORABLE (ADVERSE) DEVELOPMENT DURING THE YEAR ENDED DECEMBER 31, 2004

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines
																																							Total Company
Incurred related to prior years
Quarter ended March 31, 2004				$	2,392					$	7,288					$	1,827					$	6,294					$	372					$	1,199					$	19,372
Quarter ended June 30, 2004					10,467						10,000						4,020						3,486						6,396						6,325						40,694
Quarter ended September 30, 2004					18,047						17,643						5,401						3,082						1,851						4,909						50,933
Quarter ended December 31, 2004					17,132						5,483						(11,170	)					2,881						6,491						4,864						25,681
Year ended December 31, 2004				$	48,038					$	40,414					$	78					$	15,743					$	15,110					$	17,297					$	136,680

17

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD
ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSE

			Property Per Risk Treaty Reinsurance						Property Catastrophe Reinsurance						Casualty Treaty Reinsurance						Property Individual Risk						Casualty Individual Risk						Aerospace and Other Specialty Lines						Total Company						Deposit Accounting Adjustment [a]						Reported Totals
AT JUNE 30, 2006
Case reserves				$	346,517					$	165,562					$	172,905					$	153,272					$	9,127					$	278,586					$	1,125,969						($31,308	)				$	1,094,661
Total reserves				$	527,290					$	213,445					$	803,130					$	200,810					$	560,700					$	577,713					$	2,883,088						($100,285	)				$	2,782,803
Case reserves / Total reserves					65.7	%					77.6	%					21.5	%					76.3	%					1.6	%					48.2	%					39.1	%					31.2	%					39.3	%
IBNR / Total reserves					34.3	%					22.4	%					78.5	%					23.7	%					98.4	%					51.8	%					60.9	%					68.8	%					60.7	%

Excluding total reserves related to Hurricanes Katrina, Rita and Wilma, IBNR as a percentage of total reserve is 73.6%.

[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.

18

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.

DILUTIVE SHARES FOR EPS CALCULATION

						QUARTER ENDED JUNE 30,												SIX MONTHS ENDED JUNE 30,
						2006						2005						2006						2005
DILUTIVE SHARES			Average market price per share				$	30.99					$	36.86					$	31.82					$	36.06
OUTSTANDING:
AS REPORTED			Basic weighted average common shares outstanding					66,398						60,632						66,421						60,960
			Add: weighted ave. unvested restricted     share units					833						593						769						592
			Weighted average exercise price per share					—						—						—						—
			Proceeds from unrecognized restricted share unit expense				$	14,818					$	14,000					$	14,818					$	14,000
			Less: restricted share units bought back via treasury method					(478	)					(380	)					(466	)					(388	)
			Add: weighted ave. dilutive warrants outstanding					7,202						7,202						7,202						7,202
			Weighted average exercise price per share				$	17.37					$	18.37					$	17.37					$	18.37
			Less: warrants bought back via treasury method					(4,037	)					(3,590	)					(3,931	)					(3,669	)
			Add: weighted ave. dilutive options outstanding					3,018						3,205						3,034						3,225
			Weighted average exercise price per share				$	18.69					$	18.14					$	18.67					$	18.14
			Proceeds from unrecognized option expense				$	219					$	815					$	219					$	815
			Less: options bought back via treasury method					(1,827	)					(1,599	)					(1,786	)					(1,646	)
			Weighted average dilutive shares outstanding					71,109						66,063						71,243						66,276

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.

19

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.

OPERATING INCOME RECONCILIATION

EARNINGS PER SHARE INFORMATION - AS REPORTED, GAAP

			QUARTER ENDED JUNE 30,												SIX MONTHS ENDED JUNE 30,
			2006						2005						2006						2005
Net income				$	64,050					$	110,017					$	171,086					$	206,276
Add (Less) after-tax items:
Net foreign exchange (gains) losses					(8,962	)					2,201						(11,101	)					4,492
Net realized losses (gains) on investments					7,107						(431	)					10,131						3,691
Operating income before preferred dividends				$	62,195					$	111,787					$	170,116					$	214,459
Preferred dividends					(3,875	)					—						(7,750	)					—
Operating income available to common shareholders				$	58,320					$	111,787					$	162,366					$	214,459
Weighted average common shares outstanding
Basic					66,398						60,632						66,421						60,960
Dilutive					71,109						66,063						71,243						66,276
Basic per common share data
Net income available to common shareholders				$	0.91					$	1.81					$	2.46					$	3.38
Add (Less) after-tax items:
Net foreign exchange (gains) losses					(0.13	)					0.04						(0.17	)					0.08
Net realized losses (gains) on investments					0.10						(0.01	)					0.15						0.06
Operating income available to common shareholders				$	0.88					$	1.84					$	2.44					$	3.52
Diluted per common share data
Net income available to common shareholders				$	0.85					$	1.67					$	2.29					$	3.11
Add (Less) after-tax items:
Net foreign exchange (gains) losses					(0.13	)					0.03						(0.15	)					0.07
Net realized losses (gains) on investments					0.10						(0.01	)					0.14						0.06
Operating income available to common shareholders				$	0.82					$	1.69					$	2.28					$	3.24

20

Table of Contents

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
71,269					71,462						71,643						71,813						71,973						72,123						72,266						72,400						72,528						72,649						72,764

21

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.
BOOK VALUE PER SHARE

						JUNE 30,
						2006						2005						DEC. 31, 2005
DILUTIVE COMMON			Price per share at period end				$	32.00					$	37.82					$	35.85
SHARES OUTSTANDING:
AS-IF CONVERTED [a]			Basic common shares outstanding [b]					66,314						60,205						66,413
			Add: unvested restricted share units					837						656						652
			Add: dilutive warrants outstanding					7,202						7,202						7,202
			Weighted average exercise price per share				$	17.37					$	18.37					$	17.87
			Add: dilutive options outstanding					2,893						3,185						3,082
			Weighted average exercise price per share				$	18.74					$	18.12					$	18.45
			Book Value [c]				$	1,736,535					$	1,987,125					$	1,672,543
			Add: proceeds from converted warrants					125,105						132,307						128,706
			Add: proceeds from converted options					54,209						57,720						56,845
			Pro forma book value				$	1,915,848					$	2,177,152					$	1,858,094
			Dilutive shares outstanding					77,246						71,248						77,349
			Basic book value per common share				$	26.19					$	33.01					$	25.18
			Diluted book value per common share				$	24.80					$	30.56					$	24.02
DILUTIVE COMMON			Price per share at period end				$	32.00					$	37.82					$	35.85
SHARES OUTSTANDING:
TREASURY STOCK			Basic common shares outstanding [b]					66,314						60,205						66,413
METHOD
			Add: unvested restricted share units					837						656						652
			Add: dilutive warrants outstanding					7,202						7,202						7,202
			Weighted average exercise price per share				$	17.37					$	18.37					$	17.87
			Less: warrants bought back via treasury method					(3,910	)					(3,498	)					(3,590	)
			Add: dilutive options outstanding					2,893						3,185						3,082
			Weighted average exercise price per share				$	18.74					$	18.12					$	18.45
			Less: options bought back via treasury method					(1,693	)					(1,526	)					(1,585	)
			Dilutive shares outstanding					71,643						66,224						72,173
			Basic book value per common share				$	26.19					$	33.01					$	25.18
			Diluted book value per common share				$	24.24					$	30.01					$	23.17

[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.

22

Table of Contents

ENDURANCE SPECIALTY HOLDINGS LTD.

SHAREHOLDER RETURN ANALYSIS

			SIX MONTHS ENDED JUNE 30, 2006						YEAR ENDED DECEMBER 31,
									2005						2004						2003						2002
Net income available to common shareholders				$	163,336						($223,204	)				$	355,584					$	263,437					$	102,066
Dividends paid to common shareholders					(33,105	)					(61,695	)					(50,346	)					(20,505	)					—
Shareholders' equity [a]					1,736,535						1,672,543						1,862,455						1,644,815						1,217,500
Return on beginning equity					9.8	%					(12.0	)%					21.6	%					21.6	%
Dividend payout ratio [b]					2.0	%					3.3	%					3.1	%					1.7	%
Dilutive common shares outstanding					71,643						72,173						66,729						68,445						56,017
Diluted book value per common share				$	24.24					$	23.17					$	27.91					$	24.03					$	21.73
(treasury stock method)
Change in diluted book value per common share					4.6	%					(17.0	)%					16.1	%					10.6	%
Total return to common shareholders [c]					6.6	%					(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.

23

Table of Contents

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 viewed as a substitute for GAAP net income. Please see page 18 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 20 for a reconciliation of diluted book value per common share to basic book value per common share.

24