Endurance Specialty Holdings Ltd.
1st Quarter 2008
Forward Looking Statements
Statements contained in this presentation that are not based on current or historical
fact are forward-looking in nature. Such forward-looking statements are based on
current plans, estimates and expectations and are made pursuant to the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are based on
known and unknown risks, assumptions, uncertainties and other factors. The
Company’s actual results, performance, or achievements may differ materially from
any future results, performance, or achievements expressed or implied by such
forward-looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statement.
2
Philosophy & Strategy
Focus on business segments that
reward our specialized knowledge
and relationships
Supported by investments in
enabling technology and
disciplined, technical
underwriting approach
Portfolio managed with key risk
management concepts –
diversification, value at risk and data
quality
Portfolio
Management
Technology
and
Discipline
OUR GOAL:
To become the best
specialty insurance
and reinsurance
company in the
world
Capital
Management
Specialization
Actively manage capital to maintain
efficient capital level and enhance
returns on equity
3
Our Book of Business is Well Diversified
Total Written Premiums of $1.81 Billion*
Insurance
41%
Reinsurance
59%
By Segment
* Includes deposit premiums, based on the year ended December 31, 2007
By Line of Business
Property - Insurance
Property - Reinsurance
Casualty -
Reinsurance
Casualty - Insurance
Healthcare Liability
Workers’
Compensation
Professional Lines
Catastrophe
Agriculture Reinsurance
Marine
Aerospace
Surety and Other Specialty
Agriculture Insurance
4
Reinsurance Segment
Reinsurance Total Written
Premiums of $1.1 billion*
By Line of Business
Catastrophe
Property
Casualty
Agriculture
Marine
Aerospace
Surety and
Other Specialty
Industry leading tools and
technology
Leader in Bermuda
Covers all perils
Highly specialized relationships
Auto liability, D&O, workers comp
and clash
Non-renewing business in a
highly competitive market
Multiple peril crop insurance
Industry leading tools and
technology
Covers brown and blue water hull
Provides aviation and space
coverages
Other unique opportunities
including growing surety business
* Includes deposit premiums, based on the year ended December 31, 2007
Catastrophe
32.3%
Property
21.4%
Agriculture
12.3%
Casualty
18.8%
Marine
5.0%
Aerospace
3.7%
Surety and
other specialty
6.5%
5
Reinsurance – Maintaining Discipline While Exploring Opportunities
Disciplined approach to the softening market
Active price monitoring and portfolio management
Proactive non renewals of business that does not meet standards
(casualty, proportional and international exposures)
Expanded catastrophe writings in 2007 to take advantage of attractive
market opportunities
Continuing to seek new opportunities
Opening new offices in Zurich and Singapore in 2008
6
Insurance Segment
Insurance Total Written
Premiums of $742 million*
By Line of Business
Casualty
Professional
Lines
Healthcare
Liability
Property
Workers’
Compensation
Agriculture
Large account excess
liability written in Bermuda
Small account casualty
written in US
Includes E&O and D&O
products
Leader in Bermuda
Hospital professional liability
Leader in Bermuda market
Written out of US and UK
Growing US specialty
business
Opportunistic strategy
Converted from reinsurance
in 2006
Acquired ARMtech in
December 2007
5th largest provider of U.S.
crop insurance
Casualty
16.9%
Professional
Lines
11.5%
Healthcare
Liability
12.5%
Property
18.1%
Workers’
Compensation
35.3%
* Based on the year ended December 31, 2007
Agriculture
5.7%
7
Worldwide Insurance
Independent
Agents
Regional Brokers
Major Brokers
Wholesale Brokers
Direct Marketing
Small Commercial
Market
Large Commercial
Market
Exposures
Middle Commercial
Market
US Wholesale
Property
&
Casualty
London
Prop
Specialty
Products
Large Retail
Bermuda HC
,
Cas
,
PL
Specialty
Agricultural
Reinsurance Market
International
Reins Brokers
Retail
US
Health
care
INCREASING COMPETITION
8
Insurance - Our Fastest Growing Segment
Continue to expand the U.S. insurance platform
Attract and retain experienced staff and teams with demonstrated underwriting
discipline, market knowledge, and broker relationships
Develop new business through organic growth and targeted acquisitions
Expand distribution
Added six underwriting teams in 2007
Cherry Hill NJ – Professional
Long Island, NY – E&S Package
Stamford, CT – E&S Package
Completed the ARMtech acquisition
Independent agent distribution
Technical underwriting expertise
Adds product and geographic diversification
Seattle, WA - Property
Atlanta, GA - Professional
St. Louis, MO - Healthcare
9
Strong Risk Management Focus -
Portfolio Expected Risk Curve (January 1, 2008)
Stated tolerance is to limit
our loss in a 1-in-100 year
to 25% of our capital or
less, our current level is
18.9% of capital
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. The operating income depicted excludes the effects of income tax (expenses) benefits, amortization of intangibles
and interest expense. 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, 2007.
10
Changes in Portfolio Expected Risk Curve
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, 2007.
11
Portfolio Management Has Generated Stable Premiums
Gross Written Premiums*
Net Earned Premiums*
(in millions)
(in millions)
* Includes deposit premiums
12
Overall Underwriting Has Been Strong
Inception to Date Underwriting Ratio*
* Underwriting ratio is defined as losses and acquisition expenses divided by earned
premium, as of 12/31/07 and is before deposit accounting adjustments.
Inception to Date Underwriting
Ratio is 82.0%*
13
Strong Financial Performance
Net Income and Combined Ratio
(in millions)
Annualized Operating
Return on Average Equity
Inception to 12/31/07 combined ratio of 91.9%
Inception to 12/31/07 ROE of 15.2%
14
Results of Capital Management
Strong and Flexible
Capital Structure
$, Millions
$1,409
$1,748
$2,254
$2,320
$2,745
$, Millions
$848 Million of
Capital Returned
to Shareholders
$100
$41
$142
$113
$76
$376
$3,111
15
High Quality Investment Portfolio
Total Investment Portfolio of $5.6 Billion*
Cash and
Other
10.2%
Mortgage-backed
45.4%
By Investment Type
* As of December 31, 2007
Fixed Maturity Ratings
$4.7 Billion*
U.S. Government
and agencies
8.2%
Corporate
16.5%
Foreign Government
3.5%
Asset-backed
8.2%
Alternatives
6.4%
U.S. Government
and agencies
9.8%
AAA/Aaa and
agency RMBS
73.3%
BBB or Below
1.6%
AA/Aa
7.3%
A/A
8.0%
Municipals
1.6%
16
2007 Loss Development Triangles
Comprehensive overview of reserves as of December 31,
2007 was disclosed with earnings release
Consistent with our goal of being an industry leader in transparency
Includes both triangles and summary exhibits highlighting gross,
ceded, and net reserves by accident year ..
Select observations
64% of gross loss and LAE reserves arise from long tail casualty
lines of business
Long tail casualty IBNR reserves represent over 81% of total gross
long tail reserves
Additional case reserves account for 32% of the reported claim
reserves within the casualty lines of business
Overall inception to date gross ultimate loss and LAE ratio is 61%
The complete report is available on Endurance’s web site
17
Conclusion
Maintaining discipline in an increasingly competitive
market
Shrinking our reinsurance business as we non-renew business
that no longer meets our price targets
Growing in areas where profit margins remain strong
Well positioned with strong management team,
diversified product portfolio, and excellent financial
strength
Creating shareholder value through active capital
management coupled with strong returns to generate
15%+ ROE through underwriting cycles
Achieved inception to date ROE of 15.2%
18